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Financial Accounting Reporting > 30 sets of MCQ That I'm getting Wrong > Flashcards

30 sets of MCQ That I'm getting Wrong Flashcards

Restudy and understand why I'm getting many questions wrong

1
Q

Long term obligations that are callable by the creditor because of the violation of provision of the debt agreement at the balance sheet should be classified by

A

current liability bc it’s being classified by the balance sheet date meaning in a year which would fall under the current liability

current liability unless the creditor has waived the right to demand repayment for more than 1 year from the balance sheet date

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2
Q

Calc, the deferred income tax expense?

A

Here we need to calc the deferred tax asset and the deferred tax liability

Deferred tax asset

                AR - 1,400 X 25% = 350  Profit from instal 2,600 x 25% 650

650 - 350 = 300

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3
Q

Calc, the debit to credit its capital accounts?

A

2000 shares x 25% x 50 par = 25,000

30,000 x 25% = 7,500

10,000 - 7500 = 2500 credit

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4
Q

Calc, the report as payable for consigned goods?

A

500 x 100 sales = 50,000
500 x 100 x 10% consigned goods = 5000

= 50,000 - 5000 = 45,000

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5
Q

Calc, the net income or loss for the 6 month interim period ended June 30?

A

100,000 net loss from disposal of a component

40,000 was paid for property taxes x 6/12 = 20,000

100,000 + 20,000 = 120,000

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6
Q

Does Group Depreciation & composite depreciation uses straight line depreciation method?

A

both group depreciation and composite depreciation uses straight line method

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7
Q

A gain or loss from a transaction that is unusual in nature or infrequent in occurrence should be reported separately as a component of income

A

before results of discontinued operations

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8
Q

What amount should be added as an adjustment to the numberator available to common shareholders?

A

Annual preferred Dividends

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9
Q

Does COGS go up or down when there is a decrease in ending inventory?

A

increase in COG’S

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10
Q

Does COGS go up or down when there is an increase in beginning inventory?

A

increase in COG’S

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11
Q

Calc, the AVG number of days to collect accounts receivable?

A

Net credit sales / AVG accounts receivable

net credit sale which is given 7200

next we need to calc the AVG Accounts receivable

1200 - 400 = 800
1200 + 800 = 2000 / 2 = 1000

Step 2 -

We need to subtract the 7200 credit / 1000 = 7.2

Final step -

365 days / 7.2 = 50.7 days

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12
Q

What amount should be reported as COGS?

A

Inventory for Year 1 - 290,000
Inventory for Year 2 - 260,000

Decrease on inventory shows us that COGS was 30,000 more than purchase so we would add that to COGS of 30,000

Step 2 -

AP for year 1 - 50,000
AP for Year 2 - 75,000

an increase in AP would be increase COGS purchase must have been 25,000 higher

Paid in supplies 490,000 + 25,000 + 30,000 = 545,000 COGS

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13
Q

Calc, the net carrying amount of Rose inventory?

A

Begin inventory 8000 x 8.20 = 65,600
12,000 - 10,000 = 2000 x 7.90 = 15,800

65,600 + 15,800 = 81,400 / 10,000 = 8.14 units

8.80 - 1.00 = 7.80 units

10,000 units x 8 replacements cost = 80,000

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14
Q

Calc, the bonds interest expense for year 2? uses the effective interest method of amortizing bond discounts?

A

Year 1 - 96,207 x 10% yield = 9620 interest expense - cash paid 9000
= 9620 - 9000 = 620.7

96,207 + 620.7 = 98,827.7

Year 2 - 98,827.7 x 10% yield = 9882.7 interest expense - cash paid 9000 9882.7 - 9000 = 882.77

9882.7 is the interest expense for Year 2

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15
Q

Calc, the depreciation expense on the consolidated income statement?

A

Pirn’s Dep Expense 40,000
Scrolls Dep Expense 10,000
Depre expense 12,000 / (3,000)

Consolidated depreciation expense 47,000

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16
Q

Calc, the COGS when beginning inventory was understated and ending merchandise is overstated?

A

Increase in beginning inventory and decrease in ending inventory will increase the overall COGS

COGS - 1,050,000 + 12,000 BEGIN INVENTORY + 20,000 ENDING INVENTORY

= 1,082,000 COGS

Remember just like the formula for COGS basically this is what it is

ex

begin inventory 100
purchase 500
ending inventory -300

which increases COGS 300 is still UP overall

(Think logical)

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17
Q

Calc, the consignment of inventory

A

Cost of merchandise to consignee 72,000
7,500 freight cost for shipping
2/3

= 53,000

Consignee 80,000 - 53,000 = 27,000

27,000 - 4,500 adverstsing cost - consignee cost 8000

= 14,500 net profit

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18
Q

Calc, the net income using the income operations and discontiniued operations?

A

Income operations 72,000
discontinued operations 70,000 (1-40) = (42,000)

income from operations 72,000 - 42,000 = 30,000 Net income

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19
Q

Calc, the realize net cash receipts for the bond issuance?

A

200 bonds x 1,000 face amount = 200,000 x 103% premium rate = 206,000

200,000 x 9% x 2/12 = 3000 accrued interest

206,000 bond proceeds + 3,000 accrued interest - 10,000 Bond issue costs

206,000 + 3000 - 10,000 = 199,000

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20
Q

Are gains or losses recognized for a nonmonetary asset in a nonreceiprocal transfer?

A

Another Entity and a shareholder of the entity are both recognized gains and losses

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21
Q

When the parent acquires 75% of the outstanding common stock and if the sub had RE should they include that as well?

A

No it would be 0 because the parent would be report not the sub so that would be 0

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22
Q

Earnings-per-share data must be reported on the face of the income statement for

A

the income from continuing operations but not for cumulative effect of a change in Accounting principle

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23
Q

What would be the total interest cost capitalized in year 4 equals the interest rate on the specific new borrowing?

A

AVG Accumulated expenditures for the asset in Year 3 and Year 4

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24
Q

Calc, the APIC for the business combination?

A

200,000 shares x 12 market value - 5 par value - 35,000 direct issuance costs = 1,365,000

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25
Q

Calc, the COGS beginning inventory was understated by 26,000 and ending inventory was overstated by 52,000

A

26,000 + 52,000 = 78,000 understated

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26
Q

Are consignee used as payable or receivables?

A

Accounts receivable

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27
Q

Calc, the diluted earnings per share (DEPS) for the year?

A

Net Income - 550,000
20,000 shares x 20 per share = 400,000

400,000 / 25 = 16,000 shares
20,000 - 16,000 = 4,000

100,000 shares x 10% = 10,000
100,000 + 10,000 + 4,000 = 114,000

550,000 / 114,000 = 4.82 DEPS

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28
Q

What are the characterizes the convertible debt?

A

No value is assigned to the conversion feature when the convertible debt is issued

not seperateable

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29
Q

When the recoverability of the building carrying is determined to be impaired, the building FV is the best measured as the

A

Price used is the principal market NOT FV or the advantageous market

Note : FV is for the asset is used at the exit price not the price to construct a similar asset

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30
Q
A

Cost and expense other than product costs should be either charged to the income in interim periods as incurred

Add the depreciation expense and the bonus

       Depre expense 60,000  bonus to employees  120,000

= 180,000 / 12 months x 6 months (interim income statement) = 90,000

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31
Q

Calc, the net loss securities that needs to be included in the income statement at year end?

A

Debt Security A COST 39,000 - Fair Value 36,000 = 3,000

Debt Security B COST 50,000 - Fair Value 55,000 = 5,000

Debt Security C COST 96,000 - FAIR VALUE 85,000 = 11,000 Loss on C

3000 - 5000 + 11,000 = 9,000

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32
Q

Calc, the trademark of asset recognition criteria and how the entity should recognize the asset?

A

Trademark Purchase Price 100,000 + 5000 value added taxes + 10,500 of legal costs

100,000 + 5000 + 10,500 = 115,500

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33
Q

When asset acquires the fair value bu discounting future cash flows of the asset which Fair value measurement approach?

A

The income approach deal with anything future cash flows

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34
Q

Calc, the decline balance method of depreciation for the tax purpose of the straight line method?

A

purchased 100,000 / 10 years = 10% straight line rate

100,000 x 10% = 10,000 depreciation expense

10,000 x 10% x 150% declining balance depreciation =.1500

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35
Q

Calc, the cash basis consulting revenue?

A

Consulting fee revenue 25,000
Consulting fees recei. (3,500)
Unearned consulting 2,000

Cash basis consulting revenue 23,500

The consulting revenue received is is earned however NOT received so we subtract it from consulting revenue

The unearned revenue fees is NOT earned but received so when there is cash basis of accounting revenue is received NOT earned

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36
Q

Should dividends arrears be disclosed or accrued liability account?

A

They are always DISCLOSED because we need to disclose them in the notes of the financial statements and face of the balance sheet

3,000 shares x 100 par x 5% x 2 years - 10,000 dividends paid

3000 x 100 par x 5% cumulative preferred stock outstanding 2 years - 10,000 dividends paid

= 20,000 disclosed

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37
Q

Calc, the sales for the consolidated

A

Remember we are just removing the entries

Revenues 400,000 + 280,000 = 680,000 - 616,000 = 64,000 sales from Mussel to Shel

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38
Q

The amount recorded intially by the lessee liability should normally

A

equal the present value of the lease payment at the beginning of the lease

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39
Q

Calc, the Cost of Goods available for Sales?

A

Net Sales 900,000
COGS rate 60%
540,000
Ending inve. 200,000
COGS 740,000

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40
Q

Calc, the depreciation expense should be financial statements?

A

a change in accounting estimated for prospectively 1-5 years

Purchased machine 48,000 / 12 years estimated useful life of machine = 4,000

4000 x 5 years = 20,000

Purchased machine 48,000 - 20,000 accumulated depreciation = 28,000 / 10 years = 2800

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41
Q

Calc, the bond liability?

A

1,000,000 x .99 = 990,000

1,000,000 - 990,000 = 10,000 discount on the bond and the bond issue costs 35,000

1,000,000 - 35,000 - 10,000 = 955,000 bond liability

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42
Q

Calc, the bonds liability?

A

1,000,000 bonds x .99 = 990,000

Next we calc the discount we we subtract the face value 1,000,000 -990,000 = 10,000 discount and the bond issued costs is given 35,000

Step 3 - 990,000 - 10,000 discount cost - 35,000 bond issue cost =

955,000 bond liability

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43
Q

Calc, the accrued interest receivable that should be included for December 31, year 4 balance sheet?

A

200,000 x 12% x 1 / 12% = 2,000 accrued interest receivable

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44
Q

Calc, the net income or loss for the 6 month interim period ending?

A

100,000 + 40,000 property tax x 6/12 = 120,000

Property taxes are allocated 6/12

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45
Q

Calc, the retained earnings reported?

A

remember that Retained earnings is increased by net income

decreased by net losses, dividends, and treasury stock

Total income incorporation 420,000
Total cash dividends paid
130,000
Total value of dividends distribution cost of treasury stock
30,000

420,000 - 130,000 - 30,000 = 260,000 retained earnings

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46
Q

Calc, the moving average method maintains a perpetual inventory system?

A

Bal begin 1000 x 1 = 1000
purchase 600 x 3 = 1800

= units 1600
= costs/units 1.75 (2800/1600)
= 900 sold x 1.75 = 1575

begin bal 1000 + purchase 1/7 1800 - COGS 1575 + purchased 2000

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47
Q

Calc, the purchase commitment at the current year?

A

200,000 units x 3 years = 600,000 - 80,000 units = 520,000 units x .10 = 52,000

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48
Q

For interim financial reporting following may be accrued or deferred to provide an appropriate cost in each period?

A

Interest and rent are both be accrued and deferred

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49
Q

What would create deferred tax asset?

A

requiring prepayment for service contracts

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50
Q

When a entity receives a donation of an asset how is that recorded on the financial statements? Nongovernmental entity

A

Credit to contributed capital accounts

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51
Q

Calc, the common stock outstanding for the retired by the board of diretors?

A

Board of directors canceled 50,000 shares x 2.50 par value = 125,000

Common Stock 540,000 - 125,000 = 415,000 common stock outstanding

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52
Q

Where are unrealized holding gains and losses recorded on the remeasurement to Fair Value of the investment in equity?

A

reported in income statement

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53
Q

Calc, the estimated cost of the June inventory?

A

Inventory June 1 - 18,000
Purchase of inventory - 16,000
Goods avail for sale - 34,000
COGS. (20,000)
Ending Inventory 14,000

COGS is calc by A/R 25,000 + A/R JUNE 30th 15,000 - A/R JUNE 1ST 10,000 = 30,000 / 1.5 = 20,000

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54
Q

Calc, LTTI report as loss related to purchase commitment at December 31?

A

Since the buyer signed a noncancelable contract the buyer gurantees least 200,00- units 200,000 units x 3 years = 600,000 - 80,000 units = 520,000 x .10 per unit = 52,000

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55
Q

Calc, the current sales tax payable?

A

800,000 retail sales x 5% state sales tax = 40,000 sales tax collected during the year

4500 beginning bal + 40,000 sales taxes collected during the year - 39,500 sales taxes remitted during the year

4500 + 40,000 - 39,500 = 5000 in sales tax payable

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56
Q

Following methods of inventory valuation is allowable at interim dates?

A

Estimated gross profit is allowable at interim but not at year end

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57
Q

Calc, pretax income for the year end?

A

Depreciation Expense which is understated 64,000 + 30,000 overstated = 94,000

Pretax income 152,500 - 94,000 = 58,500 pretax income

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58
Q

Calc, the welling pay bond?

A

1000 face value x .3855 = 385.50
80 interest payment x 6.1446 = 491.56

385.50 + 491.56 = 877.06

877.06 x 100 = 87,707

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59
Q

Calc, the other comprehensive reported for the current year?

A

Unrealized AFS - 8100
Foreign current translation- 3,400

8100 - 3400 = 4700
4700 x 0.30 = 1410
4700 - 1410 = 3290

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60
Q

Calc, pay the bonds?

A

1,000 x 8% = 80 interest payment
80 x 6.1446 = 491.56

1000 x 0.4632 = 463.2

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61
Q

Which depreciation method claims to provide the greatest amount of depreciation?

A

the double decline balance

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62
Q

Is goodwill amortized?

A

Goodwill is tested for impairment at the reporting unit level

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63
Q

Retirement of bonds and cash transferred to the sinking fund and subsequently used to purchase investments. What happens to bond sinking funds?

A

increase by revenue earned on the investments

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64
Q

Calc, the restriction of retained earnings as result of treasury stock?

A

Treasury Stock 20,000 shares x 12 per share = 240,000

15,000 reissurance x 12 per share = 180,000

240,000 - 180,000 = 60,000

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65
Q

In a periodic inventory systems uses the weighted avg cost flow method the beginning inventory is considered

A

Total goods available for sale minus the net purchase

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66
Q

What happens to quick and current ratio when cash is used and to reduce AP?

A

Current ratio goes up and Quick ratio decreases

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67
Q

Calc, the recognize as amortization expense of the right to use asset?

A

Present Value of the lease payment 240,000 - 20,000 salvage value / 8 years economic life

240,000 Present Value - 20,000 salvage value / 8 years useful life = 27,500

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68
Q

Payment of acquire debt instruments of other entires other than cash equivalent and debt instruments are what type of activity?

A

Investing activity bc it’s lending someone money

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69
Q

Calc, the investment in bonds by using the effective interest method?

A

946,000 bond
40,000 accrued interest

= 906,000 bond original balance

= 906,000 x 10% x 6/12 = 45,300

= 1,000,000 x 8% x 6/12 = 40,000

906,000 + 45,300 - 40,000 = 911,300

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70
Q

Calc, the accrued payable that should be reported for the balance sheet?

A

300,000 face amount x 12% rate x 6/12 = 18,000

semiannually on June 30 to December 31

18,000 x 3/6 = 9000

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71
Q

During the direct write off method to account for uncollected receivable, how are Accounts written off” & “Increase in Accounts receivable balance?

A

Accounts written off are deduction

Increase in Accounts receivable balance is also deduction

72
Q

Calc the inventory that should be reported at year end balance sheet? for the dollar value LIFO method inventory valuation?

A

Base Layer 50,000 x 1.0 = 50,000

Second layer 30,000 x 1.1 = 33,000

50,000 + 30,000 = 80,000
50,000 + 33,000 = 83,000

73
Q

when as asset is indebtedness associated with property how is that event presented in the financial statement?

A

When the event of such nature that nondisclosure causes the statements to be presented unfairly. Which means that pro forma financial statements is the best method

74
Q

When reporting for consolidated retained earnings in the consolidated statements of financial position how much is reported?

A

Parent for 600,000 Retained earnings while the sub retained earnings are removed

75
Q

Calc, the operating lease rent expense for the month?

A

Year 1 - 36,000
Year 2 - 54,000
Year 3 - 72,000
Year 4 - 72,000

234,000 / 4 years for the operating lease = 58,500 / 12 months

= 4,875 rent expense

76
Q

Calc, the supplement disclosures in the statement of cash flows prepared using the indirect method?

A

Income taxes paid 325,000 + Dividends paid 200,000

= 545,000

77
Q

Decommissioning liability to be recognized

A

The change in the liability is recognized in profit or loss

Remember Decommissioning liability is basicially ARO which is recognized right away

78
Q

What causes a decrease to current ratio of 2 to 1?

A

Borrows cash on a 6-month note

79
Q

Calc the revenue from the contract recognized by Year 1?

A

150 machines - 20 machine = 130 x 75 = 9,750

80
Q

When is the equity method not used?

A

classified the investment as held for sale

81
Q

Using the effective interest method of amortization for the bond held to maturity bonds?

A

Long term investment 500,000 x 8% = 40,000

Bond 456,200 x 10% = 45,620

45,620 - 40,000 = 5620

456,200 + 5620 = 461,820 Year 1

500,000 x 8% = 40,000

Bond 461,820 x 10% = 46,182

46,182 - 40,000 = 6182

461,820 + 6182 = 468,002 Year 2

82
Q

When an investor uses the equity method to account for investments in common stock, the investment account will be increased when the investor recognizes

A

A proportionate interest in the net income of the investee

83
Q

Calc, the lease liability after the first required payment?

A

13,000 annual payment x 4.240 annuity due = 55,120

10,000 x 0.650 Present value of $1 = 6500

55,120 + 6500 = 61,620 - 13,000 annual payment = 48,620 payment reduce the amount

84
Q

Calc, the weighted avg COGS using the weighted AVG cost and periodic inventory?

A

Total units
1250 Total costs
116.00 May 4th costs
440.00 May 17th costs

1806 total costs

Total units
200 units
20 May 4th units
80 May 17 units

300 units

1806 cost / 300 units = 6.02 x 10 units = 60.20

85
Q

Calc, the issue price for 1000 bonds?

A

1000 face amount x .422 (Present value of 1 for 10 periods) = 422

1000 face amount x 6% x 6.418 = 385.08

422 + 385 = 807 issued price

86
Q

Calc, the consolidated balance of equity?

A

Common Stock 1,000,000 + 250,000 Retained earnings

= 1,250,000

87
Q

Are periodic payment of interest and secured by collateral associated with payable classified as AP?

A

NO neither “Periodic payment of interest” & “Secured by collateral” are classified as AP

88
Q

What type of activity is bond discounted on long term debt?

A

it’s a noncash item which should be “In operating activities as an addition to income”

89
Q

Calc, report as income tax expense in its interim income?

A

1st Q Pre-tax income 10,000
2nd QPre-tax income 20,000

Total year to date income 30,000

30,000 x 25% = 7500 total tax expense

7500 tax expense - income tax expense for 1st Q (1,500)

Income tax expense for 2ndQ 7500 - 1500 = 6000

90
Q

Calc, the record sales revenue?

A

60,000 Cash received x 4.36 PV of an ordinary annuity of 1 at 10% for 6 periods

60,000 x 4.36 = 261,600 +60,000 = 321,600

91
Q

Calc, the consolidated financial statements for the subsidiares?

A

100,000 declared x 10% noncontrolling interest

only dividends declared by the subsidiaries are reported to noncontroling

92
Q

calc, the estimated cost of june inventory?

A

Begin inventory 18,000
Purchase. 16,000

Goods Avail 34,000
COGS 20,000

25,000 collection of AR + AR June 30th 15,000 - AR June 1 10,000

25,000 + 15,000 - 10,000

Ending inven 14,000

93
Q

What is correct considered in accounting for income whether a valuation allowance is needed?

A

the effects of a change in the opening balance of valuation allowance that results from a change of circumstances ordinary in income from operations

94
Q

If company wants to retain the most cash in a business which inventory method should they choose?

A

LIFO Last In First Out

95
Q

The interest receivable for notes are always equal to the face amount of note times the coupon or nominal rates times the fraction of the year?

A

Yes

96
Q

Amount that should be subtracted to calc consolidated net income?

A

Issue Costs of Debt & Direct Issue Costs of Equity are both not used to calc net income for consolidated statements

However the Issue Costs of Debt & Direct are used as a deduction from carrying amount of the debt and amortized

Direct costs of equity underwriting, legal fees, etc which are debited from carrying amount

97
Q

Are retained earnings for subsidiary reported fro the consolidated statement?

A

NO, they are eliminated during the consolidated process

98
Q

Calc, the liability for compensated absence required to be reported?

A

North’s employees earns an AVG of 100 per day x 150 vacation days = 15,000 liability

99
Q

When changes are made for decommissioning liability (ARO) how are they recognized?

A

They are recognized right away and on the profit and loss statements

100
Q

Calc, the gain on the condemnation of the property which had a Carrying amount of 575,000?

A

We start off with 575,000

we add appraisal fees to support of 2500

we also add the attorney fees for the closing with the state 3500

575,000 + 2500 + 3500 = 581,000 gain on condemnation

101
Q

Calc, the net adjustment to net income for the net cash operating activities?

A

Prepaid expenses Current year 10,000 - 20,000 = -10,000 which we would ADD

Account Payable 50,000 - 30,000 = 20,000 would be added as well

20,000 + 10,000 = 30,000
cash loss of 40,000 + 30,000 = 70,000

102
Q

Calc, the term bonds ?

A

We need to add both the term bonds which are registered bonds and collateral trust bonds are term bonds

700,000 + 600,000 = 1,300,000

103
Q

The most appropriate reason for new principals to be used?

A

improvement on financial reporting

104
Q

Calc, the net value of the investment?

A

Calc the purchased of shares and sold

Purchased 1,100 + 2,500 + 1,400 = 5000

Sold 4000 + 750 = 4750

Purchased 5000 - Sold 4750 = 250 x 10 per share = 2,500 net value of investment

105
Q

Which Inventory method causes a decrease in income?

A

FIFO

106
Q

Calc, the gain or loss before income taxes on redemption of bonds?

A

Step 1 - calc the carrying amount of the bonds

5,000,000 + 30,000 unamortized bonds - 50,000 bond issue costs = 4,980,000

Step 2 - 5,000,000 x 98 = 4,900,000

4,900,000 - 4,980,000 = 80,000 gain on taxes redemption

107
Q

Calc the gross profit to be recognized using the input method based on costs incurred

A

Step 1 - calc the percentage

Cost incurred 700,000 / estimated total cost 2,000,000 = 35%

step 2 - calc the gross profit

contract price 3,000,000 - estimated total cost 2,000,000 = 1,000,000 x 35% = 350,000

108
Q

Is equity decreased at the begin or end of the period?

A

when dividends are declared

109
Q

Calc, the carrying amount of the leasehold improvements?

A

Cost of the improvements 540,000 / estimated useful life of 15 years 36,000

540,000 - 36,000 = 504,000 carrying amount

110
Q

Calc, the probable loss from the purchase commitment that card should report on the income statement?

A

purchased 200,000 units x .01 = 20,000

200,000 x .02 = 4000

20,000 - 4000 = 16,000

111
Q

If NFP receives donation of free electricity from a local utility company. How is that recognized?

A

revenue without donor restrictions and an expense

112
Q

Calc, finance lease liability net for current portion?

A

Carrying amount 75,000 x 10% lessor’s implicit rate = 7,500

Cash 9000 - 7,500 = 1,500 principal component

75,000 non-current portion - 1500 = 73,500

113
Q

Calc, the computing diluted earnings per share (DEPS) for the year end Dec 31?

A

300,000 shares

July 1 50,000 shares x 6/12 = 25,000

40,000 shares x 15 per share = 600,000 / 20 = 30,000

40,000 - 30,000 = 10,000

300,000 + 25,000 + 10,000 = 335,000

114
Q

Calc, the loss reported in earnings for trading debt securties?

A

Trading securities are record at Fair Value and unrealized gains and losses are included in earnings

Investment Fair Value 575,000 - 530,000 at june 30th = 45,000 loss should be reported at earnings

115
Q

Calc, the amount Brad should credit Common Stock and APIC?

A

CASH 5000 shares x 110 per share 550,000 Common Stock
Preferred Stock 5000 shares x 100 par value 500,000
APIC Preferred Stock 50,000

Brad recorded the conversion as follows

Preferred Stock 500,000
APIC Preferred Balance 50,000

C/S 5000 X 3 X 25 PAR VALUE 375,000

APIC 175,000 DIFF FROM TOP

116
Q

Calc, the deferred revenue for the sales for the gift certifications sold?

A

Year 2 sales 500,000
Redemption of year 350,000

= 150,000 of cards are unredeemed at year end

150,000 x 10% = 50,000

150,000 - 50,000 = 100,000

117
Q

Calc, the interest payable for the bond?

A

800,000 bond x 8% x 3/12 = 16,000

118
Q

Calc, the inventory that should be reported for the manufacturing 1,000 units of products and sold 800 units?

A

Direct Material and Direct labor 7,000

Indirect materials and indirect labor 2000

Insurance on manufacturing equipment 3000

= 12,000

Units 1,000 - 800 = 200 units

12,000 x 200 / 1000 = 2400 should report at balance sheet

119
Q

Calc, the interest capitalized for the year end?

A

Interest incurred for Construction needs to be capitalized using the weighted AVG accumulated expenditures

purchase land 120,000 x 12 months / 12 months = 120,000

progress payments to contractors 150,000 x 9 / 12 = 50,000

= 120,000 + 50,000 = 170,000

170,000 10% = 17,000

120
Q

Calc, the bonus for the current year?

A

Since branch income over 100,000 he received a bonus of 25% of his income which was 160,000

160,000 x 25% = 40,000
100,000 x 25% = 25,000

60,000 - 25,000 = 15,000

15,000 / 1.25 = 12,000 bonus

121
Q

When AFS securties are remeasured to Fair Value and report as part of OCI, what amount is recorded for as unrealized gain or loss?

A

0

122
Q

What is bond sinking funds?

A

They ‘re are long term investment where revenue is earned on investments

123
Q

Calc, the retired Common Stock and the balance in APIC?

A

Step 1 - we need to calc the amount the common stock was repurchased for 20,000 shares x 24 a share = 480,000

Next we need to subtract the 400,000 (20,000 x 40 share)

480,000 - 400,000 = 80,000

APIC 2,550,00 - 80,000 = 2,470,000

124
Q

Calc, the Goodwill for considered statements?

A

cash 60,000
Inven 180,000
PPE. 380,000
liabilites (120,000)

Fair Value Net Assets 470,000

620,000 - 470,000 = 150,000 goodwill

125
Q

What amount is capitized for building?

A

the interest cost incurred on the construction is capitalized

126
Q

Calc, the amount that should be reported as credit loss expense on the income statement?

A

To start off first we

Allowance for credit card loss 30,000

Wrote off ( 40,000 )

Accounts receivable 300,000 x 8% = 24,000

Credit Loss expense is 24,000

my way to to subtract the allowance for Credit loss 30,000 - 40,000 wrote off = -10,000

Next we -10,000 - 24,000 which equals 34,000 credit loss expense

Good way to check is to

allowance CL 30,000
written off (40,000)
Credit loss 34,000
allowance for credit losses 24,000

127
Q

What causes a decrease in net income and no effect in noncurrent assets ?

A

When there is a decline in the fair value for AFS securities

128
Q

Calc, the APIC for the consulting services expense performed?

A

Step 1 - calc the consulting expense fee

1000 shares for the service compensation
Market value per shares is 40 per shares
40,000 - Debit Consulting expense

Step 2 - credit the common stock do we can the difference for APIC

1000 shares for the service compensation
10 par value common stock

10,000 Credit additional paid in capital

30,000 Difference

129
Q

Do subsidiaries report dividends on the financial statement?

A

No it’s always the parents who reports the dividends however, the only way subsidiaries report noncontroling interest is by those who paid to noncontroling interest

130
Q

Calc, the revenue on the contract recognized for income statement?

A

Year 1
Costs incurred each year 700,000

Year 2
Costs incurred each year
500,000

= 700,000 + 500,000 = 1,200,000

Year 1
Costs incurred each year 700,000

Year 2
Costs incurred each year
500,000

Year 3
Costs incurred each year
800,000

= 700,000 + 500,000 + 800,000 = 1,850,000

1,200,000 / 1,850,000 = 64%

Step 2 -

Contact of the bridge for the land 2,500,000 x 100% - 64% =
900,000

131
Q

for bonds what determines interest expense?

A

The carrying amount and the effective interest method

132
Q

for bonds what determines interest payable?

A

Fair Value of the bond at the beginning and the contractual interest rate

133
Q

When you have to calc the

A

First calc the NRV so that would be Selling price of 40,000 - further processing costs 12,000 = 28,000 which is the NRV

for the Lower of cost market rule we don’t use the NRV we however use to calc what needs to be reported

Selling price of 40,000 x 10% = 4000

28,000 NRV - 4000 = 24,000

134
Q

Calc, the balance amount that should be using the equity method?

A

Investment in Breva

To calc the percentage
10,000 shares / 40,000 shares outstanding = 0.25

Net Income 200,000 x25% = 50,000

Dividends is 160,000 x 25% = 40,000

balance on the income statement 150,000 + 50,000 - 40,000 = 160,000

135
Q

Calc, the oridinary gain or loss on transfer of real estate?

A

Fair Value 90,000
Carrying 100,000

= (10,000) ordinary loss

136
Q

When the par method of accounting is used what happens to acquisition of treasury stock and reissurance of treasury stock?

A

when the acqusition of treasury stock is treated as a resale as a new issuance of stock which causes a decrease in equity

reissuance of treasury stock is increased in equity

137
Q

Are gain or losses recognized for a nonreciprocal transfer of nonmonetary asset to shareholders?

A

Nonreciprocal transfer should be recorded of a nonmontary asset to shareholders or to another entity

138
Q

Are rights are issued and rights lapse increase common stock?

A

No

139
Q

A deferred tax liability resukts from

A

From expense or losses when they are deducted for tax purposes

140
Q

For the interim financial reporting, is interest and rent may be accrued or deferred as appropriate cost?

A

Yes both rent and interest are both may be accrued or deferred

141
Q

Calc, the historical cost, per unit effect on gross profit of measuring ending inventory?

A

Under FIFO measurement subsequent acqusition at LCM or NRV

Selling price 100 - 10 completion cost - 5 selling cost = 85 NRV

Historial cost is 91 - 86 NRV = reduction of $6

142
Q

According to the guidance for recognition of revenue from contracts with customers the incremental costs of obtaining a contract with customers?

A

recognized as an asset and amortized in subsequent periods

143
Q

The Weighted AVG cost for the year cost flow method reflects to which inventory system?

A

periodic

144
Q

The moving AVG cost for year cost flow method reflects to which inventory system?

A

perpetual

145
Q

Calc the paid in capital related in treasury stock on the balance sheet? using the cost method

A

using the cost method

500 shares x 6 per share = 3,000

500 shares x 10 per share = 5000

5000 - 3000 = 2000

146
Q

Is equipment purchased with a note payable posted in the statement of cash flows ?

A

No bc it’s a Non-cash financing and investing item

147
Q

Are all business combination acquisition method created via Fair Values exchange method?

A

Yes only Fair Value

148
Q

Calc, the book value per common shares dividends for the consolidated statement?

A

Step 1 - CALC THE LIQUIDATING VALUE

50,000 SHARES X 110 PER SHARES = 5,500,000 LIQUIDATING VALUE

STEP 2 - DIVIDENDS ARREARS

50,000 SHARES X 100 PAR X 6% CUMULATIVE PREFERRED STOCK = 300,000

ADD THE TOTAL = 5,500,000 + 300,000 = 5,800,000

STEP 3 - ADD ALL THE EQUITY TOGETHER

5,000,000 + 2,000,000 + 1,000,000 = 8,000,000

STEP 4 - SUBTRACT THE TOTAL EQUITY & DIVIDENDS ARREARS

8,000,000 - 5,800,000 = 2,200,000

STEP 5 - CALC THE BOOK VALUE FOR COMMON STOCK

2,200,000 / 400,000 SHARES OUTSTANDING = 5.50 BOOK VALUE

149
Q

adjustments are needed for statement of equity of the opening balance in retained earnings ?

A

correction of an error in previously issued financial statements

150
Q

When would a debtor recognize a liability?

A

1) When the debtor pays the creditor and relieves the liability

2) debtor is released from being a a primary obligor

151
Q

What happens when there is a temporary difference between depreciation for income tax purposes and financial statement purposes?

A

When the depreciation for income tax exceeds the financial statements reporting then we in result have a temporary difference

Once there is a temporary difference and the Deferred tax are classified as noncurrent amounts

152
Q

Entry to write off uncollectible account under the allowance method of recognizing credit loss?

A

allowance for credit losses is decreases while while Net income has no affect

Net income isn’t affected during the time of the write off an uncollected account

153
Q

Goods and sales required to be adjusted on the consolidated financial statements?

A

Yes the goods and sales are required to be adjusted because it reduces the intraentity sales

154
Q

do interest , dividends, capital gains increase net assets without restrictions?

A

No they don’t increase net asset with donor restriction because

155
Q

Calc, the long term liability for the bond that pays annually?

A

If a long term bond pays annually remember we need to use the “Ordinary annuity”

Step 1 - Calc interest payment using the present value

500,000 face value
0.71299 PV OF 1 5 PERIODS using the interest rate of 7%
500,000 x 0.71299 = 356,493

Step 2 - calc the present value of face amount
500,000 face value
8%
500,000 x 8% = 40,000

Step 3 -

40,000 x 4.100197 = 164,008

Step 4 -

Add the totals from Step 1 & step 3 which will 356,493 + 164,008 = 520,501

156
Q

Cost to calc the gain on condemnation?

A

Includes the Carrying amount of 575,000

Carrying amount 575,000
Appraisal fees 2,500
Attorney fees 3500

                        = 581,000

Note we don’t add the acquire replacement property

157
Q

When we get the straight line depreciation problem where we have the total cash payment and equivalent price of machinery of 110,000

A

we would use the cash equivalent price of machinery present value bc they reduce the salvage value

158
Q

Calc, the accumulated depreciation for the equipment using the double decline method?

A

First we need to calc the rate so 100% / 5 years = 0.20 x 2 = 0.40 40%

50,000
40%

20,000 YEAR 1

50,000
20,000
40%

30,000
12,000 YEAR 2

50,000
20,000
12,000
3

18,000
6,000 YEAR 3

ACCUMULATED DEPRECIATION
38,000

159
Q

For AFS debt securities acquired what are included in net income?

A

Impairment for credit loss is recognized in net income and

realized gains during the period when securities are sold at a higher amount than the cost

160
Q

When calc the lease liability do you need to subtract the initial payment?

A

Yes

161
Q

What is the formula of inventory turnover ratio?

A

COGS / AVG Inventory

162
Q

Which fund are restricted and benefits the government or it’s citizens?

A

Permanent funds

Ex- would be income to support local library and fund to support public cemetery

162
Q

Calc, the unamortized premium on the bond for year 4?

A

Step 1- 100,000 face value
x 7% stated rate

        =  7000

Step 2 - 105,000 carrying amount x 6% yield

         = 6,300 periodic interest
         =  700

Step 3 -

163
Q

Calc the total current assets?

A

PART 1 CALC THE INCOIME TAX EXPENSE

REVENUES 3,600,000
EXPENSES 2,600,000
TAX RATE 30%

NET INCOME 1,000,000
INCOME TAX EXPENSE 300,000

PART 2 CALC THE CURRENT ASSETS INCLUDING THE NON CURRENT

AR 1,650,000
NON CURRENT AR 250,000
CASH 550,000

CURRENT ASSETS 1,950,000

164
Q

Items included in OCI?

A

1) unrealized gains and losses on investments in debt securities

2) gains and losses on cash flows hedges

3) certain foreign current items

165
Q

Calc, the current year income tax expense?

A

STEP 1 - CALC THE CURRENT INCOME TAX EXPENSE

TAXABLE INCOME 120,000
TAX RATE 35%

CURRENT TAX EXPENSE 42,000

STEP 2 - CALC THE DIFF OF DEFERRED ASSETS & LIABILITIES

CURRENT TAX LIABILTIES ENDING 55,000
CURRENT TAX LIABILTIES BEGIN 50,000

CURRENT TAX LIABILTIES (INCREASE) 5,000

CURRENT TAX ASSETS ENDING 16,000
CURRENT TAX ASSETS BEGIN 10,000

CURRENT TAX ASSETS (INCREASE) 6,000

STEP 3 - CALC THE INCOME TAX EXPENSE

CURRENT TAX EXPENSE 42,000
CURRENT TAX LIABILTIES (INCREASE) 5,000
CURRENT TAX ASSETS (INCREASE) 6,000

INCOME TAX EXPENSE 42,000 + 5,000- 6000 = 41,000.00

166
Q

When are warranty costs recognized?

A

When the item is sold the warranty is recognized

167
Q

Are per share amount reported on the income statement from continuing operations?

A

both basic and diluted are reported on the income from continuing operations

168
Q

Calc, the notes payable by reducing the principal?

A

CALC THE NOTES PAYABLE

STEP 1 - CALC THE INTEREST COMPONENT

FACE AMOUNT 1,000,000
RATE 9%
90000
1
4 QUARTERS 4

                              0.25

INTEREST COMPONENT EQUALS 22500

STEP 2 - REDUCE THE PAYMENT BY INTEREST

QUARTERLY PAYMENT 264,200
INTEREST COMPONENT EQUALS 22,500

                                                      241,700

STEP 3 - CALC THE NOTES PAYABLE

PRINCIPAL 1,000,000
PRINCIPAL REDUCTION 241,700

NOTE PAYABLE 758,300

169
Q

Calc, the deferred tax expense?

A

STEP 1 - CALC THE DEFERRED TAX LIABILTIIES

CUMULATIVE TAX DIFF 70,000
TAX RATE 30%

DEFERRED TAX LIABILITIES 21,000

STEP 2 - ADD THE NET DEFERRED TAX ASSET

DEFERRED TAX LIABILITIES 21,000
DEFERRED TAX ASSET 9,000

DEFERRED TAX EXPENSE 30,000

170
Q

When there is current ratio greater than 1:1 and quick ratio is less than 1:1 and all cash is sued to pay AP how would that affect the ratios?

A

Current ratio would increase bc it’s a ratio greater than 1:1 while the quick ratio would decrease because the ratio which is 1:1

171
Q

Calc, the interest for the bond?

A

STEP 1 - CALC THE INTEREST OF THE BOND

100,000 FACE AMOUNT
9% RATE STATED RATE

9,000 INTEREST FOR THE BONDS

172
Q
A

STEP 1 - CALC THE DISCOUNT FOR THE NOTE

200,000 MATURITY
10% DISCOUNT RATE
6 JULY 1ST
12

10,000 DISCOUNT RATE

STEP 2 - SUBTRACT THE MAURITY AND THE DISCOUNT RATE

200,000 MATURITY
10,000 DISCOUNT RATE

190,000 DISCOUNT FOR THE NOTE

173
Q

When should a nongovernmental NFP entity should recognize a conditional promise to give?

A

when the barrier is overcome bc in order to receive the donation they need to overcome the donor imposed condition

174
Q

Calc, the compensation expense for the year end?

A

Step 1 - calc the compensation expense which is given and add bonus, and officers salaries

490,000 COMPENSATION EXPENSE
18000 SALARY ACCRUAL
75,000 BONUS

583,000 OFFICERS COMPENSATION EXPENSE

175
Q
A
176
Q
A

Financial Accounting Reporting (24 decks)

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