Sim 9A, 21 Wrong Answers

Question 0

How do you calculate the denominator for sum of years digits?

Answer 0

[n x (n+1)]/2

Question 1

Change from fair value of accounting for an investment to equity method for accounting for an investment is…

Answer 1

Not a change in accounting principle

Question 2

When a balance is asked for in a depreciation SIM, give…

Answer 2

The historical cost of the equipment instead of the book value

Question 3

On April 1st 20X3, Patent sold in exchange for $100,000 no interest bearing note due April 1st 20X5. Prevailing interest rate is 10%. Present value of $1 for 2 periods at 10% is 0.8264. What is the calculation for interest revenue in 20X3?

Answer 3

Interest revenue = present value of note x rate x months in 20X3

Question 4

On July 1 20X3, land was sold for $400,000 under an installment sale contract, in which $120,000 cash down payment was made and a 4 year 10% note for $280,000. The equal annual interest payments of principal and interest on the note will be $88,332 payable on July 1 20X4. What is the interest revenue in 20X3?

Answer 4

Interest revenue = (face amount - down payment) x rate x months 20X3

Question 5

Under the sum of years digits method, the calculation for depreciation includes the historical cost…

Answer 5

Less the salvage value

Question 6

How do you calculate amortization of a franchise in 2 steps? Assume franchise has a 10 year useful life.

Answer 6

Cost of Franchise = down payment + present value of installments

Amortization = cost of franchise/useful life

Question 7

What is the journal entry to reverse fair value method and apply the equity method retroactively to an investment in DP stock:

Dividends of 3,400 paid over the period

Answer 7

Retained earnings. 3,400

Investment in DP stock. 3,400

Question 8

What is the journal entry to reverse fair value method and apply the equity method retroactively to an investment in DP stock:

Investment revenue in period of $15,300.

Answer 8

Investment in DP stock. 15,300

Retained Earnings. 15,300

Question 9

What is the journal entry to reverse fair value method and apply the equity method retroactively to an investment in DP stock:

Under the fair value method, unrealized holding gains of 15,000 affected the security valuation account. How is this entry reversed?

Answer 9

Unrealized holding gain/loss. 15,000

Security fair value adjustment. 15,000