Acc422 Intermediate Accounting: Final Study Guide (30 Problems)_November 2013

Important Notice: There are other versions of the Finals questions (the amounts and other information could have been changed). Please make sure you compare your questions to the tutorial questions carefully. You can study this tutorial and use it as a guide in answering your questions as the answering format will be the same; You can refer to the worksheet cells for the links and formula as well as the supporting calculations and explanations in this tutorial.

Acc422 Intermediate Accounting
Final Study Guide (November 2013)

Question 1
Kraft Enterprises owns the following assets at December 31, 2012.
Cash in bank-savings account 70,130
Cash on hand 9,454
Cash refund due from IRS 32,199
Checking account balance 26,135
Postdated checks 845
Certificates of deposit (180-day) 91,718

What amount should be reported as cash?

Question 2
Presented below is information related to Rembrandt Inc.'s inventory.
(per unit) Skis Boots Parkas
Historical cost 275.31 153.59 76.80
Selling price 314.43 210.11 106.86
Cost to distribute 27.53 11.59 3.62
Current replacement cost 294.15 152.15 73.90
Normal profit margin 46.37 42.02 30.79

Determine the following:
a. the two limits to market value (e.g., the ceiling and the floor) that should be used in the lower of cost or market computation for skis; (Round answers to 2 decimal places, e.g. 20.25.)
b. the cost amount that should be used in the lower of cost or market comparison of boots; (Round answer to 2 decimal places, e.g. 20.25.)
c. the market amount that should be used to value parkas on the basis of the lower of cost or market. (Round answer to 2 decimal places, e.g. 20.25.)

Question 3
Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 54 units that cost $32 each. During June, the company purchased 161 units at $32 each, returned 6 units for credit, and sold 134 units at $54 each.
Journalize the June transactions.

Question 4
Amsterdam Company uses a periodic inventory system. For April, when the company sold 700 units, the following information is available.
Units Unit Cost Total Cost
April 1 inventory 250 14 3,500
April 15 purchase 400 16 6,400
April 23 purchase 350 18 6,300
1,000 16,200
Compute the April 30 inventory and the April cost of goods sold using the average cost method. (Round computations for cost per unit to 2 decimal places, e.g. 10.25 and answers to 0 decimal places, e.g. 2,250.)

Question 5
Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available.
Units Unit Cost Total Cost
April 1 inventory 250 15 3,750
April 15 purchase 400 18 7,200
April 23 purchase 350 19 6,650
1,000 17,600
Compute the April 30 inventory and the April cost of goods sold using the FIFO method.

Question 6 (FIFO, LIFO, Average Cost Inventory)
Esplanade Company was formed on December 1, 2011. The following information is available from Esplanade's inventory records for Product BAP.
Units Unit Cost
January 1, 2012 (beginning inventory) 768 8
Purchases:
January 5, 2012 1,536 9
January 25, 2012 1,664 10
February 16, 2012 1,024 11
March 26, 2012 768 12
A physical inventory on March 31, 2012, shows 2,048 units on hand.

Prepare schedules to compute the ending inventory at March 31, 2012, under each of the following inventory methods. Assume Esplanade Company uses the periodic inventory method.
a) FIFO
b) LIFO
c) Weighted average (Round weighted average cost to 2 decimal places, e.g. 2.25 and use this rounded amount for future calculations. Round the inventory on March to 0 decimal places, e.g. 1,250.)

Question 7
Floyd Corporation has the following four items in its ending inventory.
Item Cost Replacement Cost Net Realizable Value (NRV) NRV Less Normal Profit Margin
Jokers 2,684 2,751 2,818 2,147
Penguins 6,710 6,844 6,643 5,502
Riddlers 5,905 6,106 6,207 4,965
Scarecrows 4,294 4,013 5,140 4,120

Determine the final lower of cost or market inventory value for each item.

Question 8
Kumar Inc. uses a perpetual inventory system. At January 1, 2013, inventory was $262,150 at both cost and market value. At December 31, 2013, the inventory was $350,350 at cost and $329,525 at market value.
Prepare the necessary December 31 entry under:
a. the cost of goods sold method
b. the loss method

Question 9
Boyne Inc. had beginning inventory of $14,760 at cost and $24,600 at retail. Net purchases were $147,600 at cost and $209,100 at retail. Net markups were $12,300; net markdowns were $8,610; and sales were $193,110.
Compute ending inventory at cost using the conventional retail method. (Round computation for cost-to-retail ratio percentage and answer to 0 decimal places, e.g. 25,250.)

Question 10 (Gross Profit Method)
Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
Inventory, May 1 201,600
Purchases (gross) 806,400
Freight-in 37,800
Sales 1,260,000
Sales returns 88,200
Purchase discounts 15,120

a. Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.
b. Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.

Question 11
Previn Brothers Inc. purchased land at a price of $27,350. Closing costs were $2,450. An old building was removed at a cost of $10,420. What amount should be recorded as the cost of the land?

Question 12
Garcia Corporation purchased a truck by issuing an $95,200, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%.

Prepare the journal entry to record the purchase of this truck. (Round answers to 0 decimal places, e.g. 15,510. List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. Hint: Use tables in text.)

Question 13
Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $343,350. The estimated fair values of the assets are land $65,400, building $239,800, and equipment $87,200. At what amounts should each of the three assets be recorded? (Note: Do not round the computation of the % of total.)

Question 14
Fielder Company obtained land by issuing 2,000 shares of its $15 par value common stock. The land was recently appraised at $125,800. The common stock is actively traded at $61 per share.
Prepare the journal entry to record the acquisition of the land. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Question 15
Navajo Corporation traded a used truck (cost $24,000, accumulated depreciation $21,600) for a small computer worth $4,440. Navajo also paid $1,200 in the transaction.

Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Question 16
Mehta Company traded a used welding machine (cost $11,880, accumulated depreciation $3,960) for office equipment with an estimated fair value of $6,600. Mehta also paid $3,960 cash in the transaction.

Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Question 17
Depreciation is normally computed on the basis of the nearest
full month and to the nearest cent.
day and to the nearest dollar.
full month and to the nearest dollar.
day and to the nearest cent.

Question 18
Fernandez Corporation purchased a truck at the beginning of 2012 for $51,660. The truck is estimated to have a salvage value of $2,460 and a useful life of 196,800 miles. It was driven 28,290 miles in 2012 and 38,130 miles in 2013.

Compute depreciation expense for 2012 and 2013.(Round answers to 0 decimal places, i.e. 2,250.)

Question 19
Lockhard Company purchased machinery on January 1, 2012, for $74,400. The machinery is estimated to have a salvage value of $7,440 after a useful life of 8 years.
a. Compute 2012 depreciation expense using the double-declining balance method.
b. Compute 2012 depreciation expense using the double-declining balance method assuming the machinery was purchased on October 1, 2012.(Round answer to 0 decimal places, i.e. 2,250.)

Question 20
Jurassic Company owns machinery that cost $1,186,200 and has accumulated depreciation of $474,480. The expected future net cash flows from the use of the asset are expected to be $659,000. The fair value of the equipment is $527,200.
Prepare the journal entry, if any, to record the impairment loss.

Question 21
Everly Corporation acquires a coal mine at a cost of $417,600. Intangible development costs total $104,400. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $83,520), after which it can be sold for $167,040. Everly estimates that 4,176 tons of coal can be extracted.
If 731 tons are extracted the first year, prepare the journal entry to record depletion.

Question 22
Francis Corporation purchased an asset at a cost of $44,300 on March 1, 2012. The asset has a useful life of 8 years and a salvage value of $4,430.
For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2012-2017. (Round answers to 0 decimal places.)

Question 23
Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2012, for $54,920. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10 years.
Prepare Celine Dion's journal entries to record the purchase of the patent and 2012 amortization.

Question 24
Karen Austin Corporation has capitalized software costs of $877,600, and sales of this product the first year totaled $407,400. Karen Austin anticipates earning $950,600 in additional future revenues from this product, which is estimated to have an economic life of 4 years.
Compute the amount of software cost amortization for the first year.
a. Compute the amount of software cost amortization for the first year using the percent of revenue approach.
b. Compute the amount of software cost amortization for the first year using the straight-line approach.

Question 25
Jeff Beck is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2012, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Beck had had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Beck in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Beck appears inclined to accept the Railroad's offer. The Railroad's 2012 financial statements should include the following related to the incident:
disclosure in note form only.
recognition of a loss and creation of a liability for the value of the land.
recognition of a loss only.
creation of a liability only.

Question 26
Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased $76,000 of inventory, terms 2/10, n/30, FOB shipping point. Roley paid freight costs of $1,420. On July 3, Roley returned damaged goods and received credit of $7,600. On July 10, Roley paid for the goods.
Prepare all necessary journal entries for Roley. (For multiple debit/credit entries, list amounts from largest to smallest, e.g. 10, 8, 6.)

Question 27
Takemoto Corporation borrowed $89,400 on November 1, 2012, by signing a $91,412, 3-month, zero-interest-bearing note.
Prepare Takemoto's November 1, 2012, entry; the December 31, 2012, annual adjusting entry; and the February 1, 2013, entry. (For multiple debit/credit en tries, list amounts from largest to smallest, e.g. 10, 8, 6. Round all answers to 0 decimal places, e.g. 11,150.)

Question 28
Whiteside Corporation issues $701,000 of 9% bonds, due in 11 years, with interest payable semiannually. At the time of issue, the annual market rate for such bonds is 10%.
Compute the issue price of the bonds. (Use the present value tables in the text. Round your answer to zero decimal places, e.g. 2,510.)

Question 29
Indiana Jones Company enters into a 6-year lease of equipment on January 1, 2012, which requires 6 annual payments of $35,660 each, beginning January 1, 2012. In addition, the lessee guarantees a residual value of $19,740 at lease-end. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the carrying amount of the machinery is $174,207.
Prepare Lost Ark's January 1, 2012, journal entries.

Question 30
On January 1, 2012, Irwin Animation sold a truck to Peete Finance for $27,750 and immediately leased it back. The truck was carried on Irwin's books at $21,600. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requires five equal rental payments of $7,698 at the end of each year. The appropriate rate of interest is 12%, and the truck has a useful life of 5 years with no salvage value.
Prepare Irwin's 2012 journal entries. (Round your answer to the nearest dollar eg 58,591. For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
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