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Financial Acct Systems 2 > Exam 2 Wrong Answers > Flashcards

Exam 2 Wrong Answers Flashcards

0
Q

What is the journal entry to record a fair value adjustment for an a unrealized gain of an available for sale investment in a stock?

A

Fair Value Adjustment-Available for sale. Xxx

Unrealized holding gain - equity. Xxx

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1
Q

What is the journal entry to record the purchase of common stock as an available for sale investment?

A

Equity investments. Xxx

Cash. Xxx

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2
Q

Your company purchases a 30% stake in Murphy inc. How do you record the journal entry for this purchase?

A

Investments in Murphy Inc. 300,000

Cash. 300,000

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3
Q

During the year Murphy Inc. earned net income of $180,000. If you own a 30% stake in this company, how do you record a journal entry for this transaction?

A

Investment in Murphy Inc. Xxx

Income from Investments. Xxx

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4
Q

During the year the company Murphy Inc. which you own 30% of, pays a dividend. How do you record a journal entry for this transaction?

A

Cash. Xxx

Investment in Murphy inc. Xxx

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5
Q

How do you record the journal entry for purchase of 12% bonds that will be held to maturity?

A

Debt investments. Xxx

Cash. Xxx

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6
Q

What is the heading and bond amortization schedule setup for held to maturity securities of 12% bonds purchased at a premium where they have a 10% yield, when the company uses the effective interest method?

A

Schedule of interest revenue and bond premium amortization
Effective Interest Method
12% bonds sold to yield 10%

Date Cash received. Interest revenue. Premium amortized
(furthest right): Carrying Amount of Bonds

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7
Q

How do you record a journal entry for interest received and amortization of a premium?

A

Cash. Xxx
Debt investments. Xxx
Interest Revenue. Xxx

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8
Q

A company owns a bond that is available for sale. Record the journal entry for interest received?

A

Cash. Xxx
Debt investments (available for sale). Xxx
Interest Revenue. Xxx

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9
Q

A company owns a bond that is available for sale. Record the journal entry for recognition of fair value, If fair value were to increase.

A

Fair value adjustment
(available for sale). Xxx
Unrealized Holding Gain Or Loss - Equity. Xxx

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10
Q

A company owns a bond that is available for sale. Record the journal entry for recognition of fair value, where it decreases.

A

Unrealized Holding Gain or Loss-Equity. Xxx
Fair Value Adjustment
(available for sale). Xxx

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11
Q

When recording the recognition of fair value for available for sale bond investments, what must you do with a previous fair value adjustment you debited the period before?

A

Credit it towards the fair value adjustment account

Makes fair value decrease further

Ex. Available for sale bonds. $(5,920)
Previous FV adj. dr. 1,401
Fair Value adj. cr. $(7,401)

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12
Q

What is the journal entry for the sale of an equity stock (trading), you sold for $9,400 and cost $10,000?

A

Cash. 9,400
Loss on Sale of Investments. 600
Equity Investments (trading). 10,000

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13
Q

How do you record a gain on a sale from a trading equity investment?

A

Cash. Xxx
Gain on sale of investments. Xxx
Equity investments (trading). Xxx

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14
Q

What are the 4 journal entries used under the percentage completion method for a construction contract?

A

Construction in Process. Xxx
Cash. Xxx

A/R. Xxx
Billings on Construction in Process. Xxx

Cash. Xxx
A/R. Xxx

Construction Expenses. Xxx
Construction in Process. Xxx
Construction Revenue. Xxx

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15
Q

How are details from a percentage completion contract disclosed on an income statement?

A 
Income statement (20xx)
      Gross profit on Long term Construction Contract.   Xxx
16
Q

How are details from a percentage completion contract disclosed on the Balance Sheet?

A

Balance Sheet (12/31/XX)
Current Assets:
Receivables-Construction in Process. Xxx
Inventories-Construction in Process totaling
$900,000 less billings of $500,000. Xxx

17
Q

Grupo sells goods to Magnus for $500,000, payment due in 2 installments: the 1st payable in 6 months and the 2nd payment due 3 months later.

How is this transaction reported?

A

recognize revenue by discounting payments using an

Imputed interest rate

18
Q

When there is a high rate of return of 12%, how should revenue be recognized if terms are FOB shipping point

A

Report revenue at gross amount less 12% normal

return factor

19
Q

Uddin shipped books invoiced at $15,000,000. Prepare the journal entry for revenue recognition assuming the normal return rate is 12%.

A 
Accounts receivable.                       15,000,000
   Sales Revenue (texts).                                     15,000,000

Sales Returns and Allowances. 1,800,000
Allowance for Sales returns and
allowances. 1,800,000

20
Q

What is the journal entry if returns are $2,000,000 or $200,000 higher than anticipated? Note sales in July were $15,000,000.

A

Sales returns and allowances. 200,000
Allowance for sales returns and allowances. 1,800,000
Accounts Receivable. 2,000,000

Cash. 13,000,000
Accounts Receivable. 13,000,000

21
Q

How does a company record the journal entry for a loss carry back?

A

Income tax refund receivable. Xxx

Benefit due to loss carry back Xxx

22
Q

Prepare the income tax expense section of the income statement beginning with line “income before income taxes”

A

Income before income taxes. Xxx
Income tax expense
Current. Xxx
Deferred. Xxx. Xxx
Net income. Xxx

23
Q

What does the income tax expense portion of the income statement look like if there was a loss carry back and carry forward benefit?

A

Operating loss before income taxes. $(xxx)
Income tax benefit.
Benefit due to loss carry back Xxx
Benefit due to loss carry forward. Xxx. Xxx
Net loss. (xxx)

24
Q

How do you record a journal entry for a deferred tax asset in the year of loss?

A

Deferred tax asset. Xxx
Benefit due to loss carry forward Xxx

25
Q

What is the journal entry for applying a capital loss carry forward to a profitable year?

A

Income tax expense. Xxx

Deferred tax asset. Xxx

26
Q

Held to maturity securities ate reported at…

A

Acquisition cost + amortization of discount

27
Q

Assuming a $10,000 debit balance for fair value adjustment available for sale account and fair value $20,000 lower for the portfolio cost:
what would be reported for unrealized loss of comprehensive income? 2) for stockholder’s equity section of balance sheet?

A

$30,000

2) $20,000

28
Q

Which of the following differences would result in future taxable amounts?

A

Expenses or losses that are tax deductible before

recognized in financial income

29
Q

If a company buys 400 shares of stock and gets paid a dividend during the year, what is the journal entry?

A

Cash. Xxx

Dividend revenue. Xxx

Financial Acct Systems 2 (22 decks)

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