ACCT 304 Intermediate Accounting I Complete Class
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ACCT 304 Intermediate Accounting I Complete Class
week 1 Development of Accounting Standards (graded)
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Hello Class, Welcome to week 1 Discussion Topic 1. Generally Accepted Accounting Principles (GAAP) are guidelines for companies to follow as they prepare and issue financial statements. Let’s start by getting an understanding of why the guidelines were developed in the first place? a) Who relies on the financial statements (external users) and why, what are they using the statements for? b) What happens if an External User relies on financial statements that are inaccurate? (what could happen to the corporaton) c) What negative consequences can arise from relying on inaccurate financial statements? (what could happen to the external user) Remember, these discussion threads are supposed to be stimulating conversation, a back and forth discussion among students and teacher. After the first person responds, he or she can respond to the first item, the next person can add a point that maybe the previous discussions failed to point out or answer the second item.. I don’t want to see everybody repeating the same answer. You wouldn’t do that if you were in class and I asked a question. You need to respond to each of the two separate discussion topics by Wednesday the latest. And, including Wednesday, you need to respond to each of the 2 discussion threads on 3 different days. For example, you could come in as late as Wednesday and respond to topic one and two. Then do the same for both topics on Thursday and Sunday. They need to be of quality responses. Not “I agree with what you said John.” or Not “Yes, John, you are correct in saying that…..” Prof. Marnell
Accounting Conceptual Framework (graded)
Hello Class, Welcome to week 1 Discussion Topic 2. A sound foundation is necessary for success in any task from building a house to putting on make-up.
In terms of U.S. Accounting Standards, it is also necessary to have a sound foundation, referred to as the conceptual framework.
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a)What is the conceptual framework, and why is it important? Once students have answered the above thoroughly, lets move on and… b) discuss it step by step starting with the objective. What is the objective of accounting standards? Remember, these discussion threads are supposed to be stimulating conversation, a back and forth discussion among students and teacher. After the first person responds, he or she can respond to the first item, the next person can add a point that maybe the previous discussions failed to point out or answer the second item.. I don’t want to see everybody repeating the same answer. You wouldn’t do that if you were in class and I asked a question. You need to respond to each of the two separate discussion topics by Wednesday the latest. And, including Wednesday, you need to respond to each of the 2 discussion threads on 3 different days. For example, you could come in as late as Wednesday and respond to topic one and two. Then do the same for both topics on Thursday and Sunday. They need to be of quality responses. Not “I agree with what you said John.” or Not “Yes, John, you are correct in saying that…..” Prof. Marnellweek 2
Balance Sheet: Purpose and Uses (graded)
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Hello class; The balance sheet is one of the first financial statements I turn to when reviewing a company. You can learn a lot about a company by looking at its balance sheet. The balance sheet is also called the statement of financial position. Why is this? What is the purpose of the balance sheet? Hello Class; Disclosures are required to elaborate on certain items that are presented in summarized form in the financial statements. There are specific disclosure notes that are required to be present in all financial statements, while others may be unique to the disclosure needs of a particular company. Let’s start by discussing the three required disclosures. Please pick one and explain what information is to be included in the note: a) Summary of Significant Accounting Policies b) Subsequent Events c) Third Party Transactions
ACCT 304 week 4
Revenue Recognition (graded)
Hello Class; When a company sells a product for cash, it generally recognizes the revenue. However, there are situations when it is not always clear when a company should recognize the revenue.
1) How do you handle a car dealership that sells a warranty contract to its customers for $650 that will cover the next 5 years?
Time Value of Money Concepts (graded) Hello Class; You might think of the “time value of money” to be a topic for Finance class, but accountants need an understanding of this topic as well. Let’s discuss where/why an accountant may need to use these skills/calculations.
ACCT 304 week 3
Income Statement (graded)
Hello Class; Students often refer to an income statement as the statement that shows how much money a company has made. Money, by definition, is something that is generally accepted as a medium of exchange or means or payment. Keeping that definition in mind, an income statement is not a measure of money, but rather it is a measure of net income (or loss) also known as profit (or loss). Select a publicly held company like Apple, Microsoft, IBM, Hewlett Packard, Home Depot (Note: do not select a company already chosen by your classmate). Go to their website and select Investor Relations and there you will find the company’s annual report. Provide the link to that annual report and based on what you have read about income statements in this chapter and in the Becker materials,tell us what you have learned about the company from reviewing its income statement. Prof. Marnell
Cash-Flow Statement (graded)
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Hello Class; The Statement of Cash Flows has historically given students a lot of heartburn, but it really isn’t that scary. A cashflow statement, simply stated, reports the uses (where the cash was spent) and the sources (where the cash came from) of cash during a period. Let’s start with a very simplistic set of facts. I run a CPA firm, and I billed my clients $50K during the month of February. To earn that $50K, I incurred $20K of wage expense and another $10K of overhead (rent, utilities, insurance, etc.). So I made $20K profit, right? So I am sitting pretty? Not necessarily. What if I now tell you that $40K of my billings have yet to be collected? And my E&O insurance carrier increased my premium and I had to pre-pay $10K of premiums this month. a) How does my cash flow differ from my profit? b) Will these transactions appear on my income statement? c) My cash-flow statement? Prof. Marnell
ACCT 304 week 5 Cash (graded)
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Hello Class; Cash is listed first on the balance sheet because it is the asset most readily available to pay off debt or use in operations. Cash is also one of the assets that most often “grows legs” and walks away. Therefore, it is important that any business protect its cash; it does so through Internal Control Procedures. a) Please start by defining Internal Control, b) then discuss specific procedures related to cash.
Receivables (graded)
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Hello Class; When a business extends credit to its customers, we call this Accounts Receivable. Often a business will grant its customers a discount. a)What are the two types of discounts, and b) how does the journal entry to record the sale change when there is a discount granted?
ACCT 304 week 7
Inventories—LCM (graded)
Hello Class; The lower-of-cost-or-market (LCM) approach was developed to avoid reporting inventory at an amount greater than the benefits it can provide. The LCM approach records losses in the period the value of the inventory drops below its cost instead of later in the period that the goods are ultimately sold. Is this a conservative or an aggressive approach? What does GAAP say about LCM?
Inventory Errors (graded)
Hello Class; It is discovered in 2013 that ending inventory from 2011 is understated. What accounts will be affected by this understatement, and how will they be affected? This is a situation that really happens. Start with the 2011 inventory being understated, and track the changes through the inventory account to 2013.
ACCT 304 week 6
Inventory Classification and Systems (graded)
Hello Class; Merchandise Inventory is assets held for sale in the ordinary course of business of wholesale and retail companies.
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Manufacturing inventories are raw materials or WIP (Work In Process) that will be used or consumed in the production of finished goods to be sold. iscussion topic #1 explain how inventory is presented on the balance sheet, and what further information you found in the footnote disclosures about the inventory method and “Impairment of Inventory”, if any.
Inventoriable Costs/Cost-Flow Assumptions (graded)
Hello Class; We read about the Perpetual and the Periodic Inventory System. Regardless of which system is used, under both, we need to assign dollar amounts to the Ending Inventory and Cost of Goods Sold so that we can trace how costs flow through the system. 1) Start by identifying what is included in inventory and then 2) discuss how each item might be treated differently in the Perpetual vs. the Periodic Inventory System.
quizesQuestion 1. Question : (TCO 1) Which of the following has the authority to set accounting standards in the United States? FASB IRS SEC AICPA :1 Question 2. Question : (TCO 2) SFAC No.5 focuses on: objectives of financial reporting. qualitative characteristics of accounting information. Recognition and measurement concepts in accounting, including assumptions and principles. elements of financial statements. :1 5 of 5
Question 3. Question : (TCO 3) Mary Parker Co. invested $15,000 in ABC Corporation and received capital stock in exchange. Mary Parker Co.’s journal entry to record this transaction would include a: debit to investments. credit to retained earnings. credit to capital stock. debit to expense. :2 5 of 5
Question 4. Question : (TCO 3) The adjusting entry required to record accrued expenses includes:
a credit to cash. a debit to an asset. a credit to an asset. a credit to liability. :2 5 of 5 Question 5. Question : (TCO 3) Temporary accounts would not include: salaries payable. depreciation expense. supplies expense. cost of goods sold. :2 5 of 5
Question 6. Question : (TCO 4) Notes payable: is a current liability account. usually has a debit balance. is a non-current liability account. cannot determine its classification without additional information. :2 5 of 5
Question 7. Question : (TCO 4) The current ratio is given by: current assets divided by non-current assets. current assets divided by total assets. current assets divided by current liabilities. current assets divided by total liabilities. :3 5 of 5
Question 8. Question : (TCO 5) The distinction between operating and non-operating income relates to: continuity of income. principal activities of the reporting entity. consistency of income stream. reliability of measurements. :4 5 of 5
Question 9. Question : (TCO 5) A voluntary change in accounting principle is accounted for by: a cumulative effect on income in the year of the change. a retrospective reporting of all comparative financial statements shown. a prior period adjustment. a separate line component of income. :4
5 of 5
Question 10. Question : (TCO 5) Cash flows from investing activities do not include: proceeds from issuing bonds. payment for the purchase of equipment. proceeds from the sale of marketable securities. cash outflows from acquiring land. :4 5 of 5
Question 11. Question : (TCO 5) The Maytag Corporation’s income statement includes income from continuing operations, a loss from discontinued operations, and extraordinary items. Earnings per share information would be provided for: net income only. income from continuing operations and net income only. income from continuing operations, loss from discontinued operations, and net income only. income from continuing operations, loss from discontinued operations, extraordinary items, and net income. :4 5 of 5
Question 12. Question : (TCO 5) In a statement of cash flows prepared under International Financial Reporting Standards, each of the following items is typically classified as a financing cash flow except: interest paid. dividends paid. proceeds from the issuance of long-term debt. dividends received. :4 5 of 5
Question 13. Question : (TCO 4) Which is a shareholders’ equity account in the balance sheet? Accumulated depreciation Paid-in capital Dividends payable Marketable securities :3 5 of 5
Question 14. Question : (TCO 4) Which of the following groups is not among the external users for whom financial statements are prepared? Customers Suppliers Employees All of the above are external users of financial statements.
(TCO 5) Misty Company reported the following before-tax items during the current year: Misty’s effective tax rate is 40% and there were 1,000 shares of common stock outstanding. What would be Misty’s income before extraordinary item(s)? Question 2. Question : (TCO 4) Listed below are account balances (in $millions) taken from the records of Symphony Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment receivables are current. Symphony uses a perpetual inventory system. What would Symphony report as total assets? Hint: Don’t forget to deduct the contra assets. (TCO 4) Explain how management’s discussion and analysis of its operations and liquidity may be helpful to investors. Question 2. Question : (TCO 2) What are the key provisions of the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002? Question 3. Question : (TCO 5) Give an example of a non-cash financing and investing activity and explain when and how it would be reported in the financial statements. Question 4. Question : (TCO 3) What is the purpose of the closing process?
(TCO 1) The SEC issues accounting standards in the form of accounting research bulletins. financial reporting releases. financial accounting standards. financial technical bulletins. : Question 2. Question : (TCO 2) Enhancing qualitative characteristics of accounting information include each of the following, except timeliness. materiality. comparability. verifiability. Comments: Question 3. Question : (TCO 3) Hughes Aircraft sold a four-passenger airplane for $380,000, receiving a $50,000 down payment and a 12% note for the balance. The journal entry to record this sale would include a credit to cash. debit to cash discount. debit to note receivable. credit to note receivable. Comments: Question 4. Question : (TCO 3) When a tenant makes an end-of-period adjusting entry credit to the prepaid rent account he or she usually debits cash. he or she usually debits an expense account. he or she debits a liability account. he or she does none of the above. Comments:
Question 5. Question : (TCO 3) Permanent accounts would not include interest expense. wages payable. prepaid rent. unearned revenues. Question 1. Question : (TCO 4) Cash equivalents would not include cash not available for current operations. money market funds. United States Treasury bills. bank drafts. Question 2. Question : (TCO 4) Which is a shareholders’ equity account in the balance sheet? Accumulated depreciation Paid-in capital Dividends payable Marketable securities Instructor Explanation: See Chapter 3. Points Received: 4 of 4 Comments: Question 3. Question : (TCO 4) Janson Corporation Co.’s trial balance included the following account balances at December 31, 2011: Investments consist of treasury bills that were purchased in November and mature in January. Prepaid insurance is for the next 2 years. What amount should be included in the current asset section of Janson’s December 31, 2011 balance sheet? $88.000 $85,000 $55,000 $135,000 Question 4. Question : (TCO 4) Which of the following would be disclosed in the summary of significant accounting policies disclosure note? Option A Option B Option C Option D Question 5. Question : (TCO 4) Below is the partial balance sheet ($ in thousands) for Paisano Seafood Inc. The current ratio (rounded) is 1.98. 1.58.
1.17. 0.66. quiz 3 <pstyle=”font-size: 11.8181819915771px;”=””>TCO 5) The distinction between operating and non-operating income relates to continuity of income. principal activities of the reporting entity. consistency of income stream. reliability of measurements. Instructor Explanation: See Chapter 4. Points Received: 4 of 4 Comments: Question 2. Question : (TCO 5) Major Co. reported a 2011 income of $300,000 from continuing operations before income taxes and a before-tax extraordinary loss of $80,000. All income is subject to a 30% tax rate. In the 2011 income statement, Major Co. would show the following line-item amounts for income tax expense and net income. $66,000 and $210,000 $90,000 and $154,000 $90,000 and $276,000 $66,000 and $220,000 Instructor Explanation: Points Received: 4 of 4 Comments: Question 3. Question : (TCO 5) The financial statement presentation of a change in depreciation method is most similar to that of reporting changes in accounting estimates. prior period adjustments. ion of errors. extraordinary items. Instructor Explanation: See Chapter 4. Points Received: 4 of 4 Comments: Question 4. Question : (TCO 5) Cash flows from investing activities do not include proceeds from issuing bonds. payment for the purchase of equipment. proceeds from the sale of marketable securities. cash outflows from acquiring land. Instructor Explanation: See Chapter 4. Points Received: 4 of 4 Comments: Question 5. Question : (TCO 5) Review Rowdy’s Restaurants cash flow (in millions): Rowdy’s would report net cash inflows (outflows) from financing activities in the amount of
$1,100. $(1,100). $820. $900. Instructor Explanation: Points Received: 4 of 4 Comments: 4 <pstyle=”font-size: 11.8181819915771px;”=””>(TCO 5) For a typical manufacturing company, the most common critical point for recognizing revenue is the date an order is received. production is completed. the product is delivered. payment is received. Question 2. Question : (TCO 5) On December 15, 2011, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigsby appropriately uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal, annual installments, payable on December 15, 2012 and December 15, 2013. Ignore interest charges. Rigsby has a December 31 year-end. In 2011, Rigsby would recognize the realized gross profit of $500,000. $0. $900,000. $100,000. Question 3. Question : (TCO 6) Present and future value tables of $1 at 3% are presented below: Carol wants to invest money in a 6% CD account that compounds semiannually. Carol would like the account to have a balance of $50,000 5 years from now. How much must Carol deposit to accomplish her goal? $35,069 $43,131 $37,205 $35,000 Comments: Question 4. Question : (TCO 6) Sondra deposits $2,000 in an IRA account on April 15, 2011. Assume the account will earn 3% annually. If she repeats this for the next 9 years, how much will she have on deposit on April 14, 2020? $20,600 $20,928 $23,616 $24,715 Question 5. Question : (TCO 6) Jose wants to cash in his winning lottery ticket. He can either receive five, $5,000 annual payments starting today, or he can receive a lump-sum payment now based on a 3% annual interest rate. What is the present value of the installments if he opts for the lump sum payment?
$22,899 $21,565 $23,000 5 <pstyle=”font-size: 11.8181819915771px;”=””>(TCO 7) Cash may not include foreign currency. money orders. restricted cash. undeposited customer checks. Question 2. Question : (TCO 7) On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit term 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date? Option a Option b Option c Option d Question 3. Question : (TCO 7) Which of the following does not change the balance in accounts receivable? Returns on credit sales Collections from customers Bad debts expense adjusting entry Write-offs Question 4. Question : (TCO 7) Brockton Carpet Cleaning prepares a bank reconciliation at the end of every month. At the end of July, the balance in the general ledger checking account was $2,750, and the bank balance on the bank statement was $2,980. Outstanding checks totaled $680, and deposits in transit were $400. The bank statement revealed that a check written for $120 was incorrectly recorded by Brockton as a $220 disbursement. The bank statement listed service charges and NSF check charges totaling $150. The corrected cash balance is $2,270. $2,550. $2,470. $2,700. Question 5. Question : (TCO 7) Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2010. During 2011, Calistoga’s credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off. Calistoga’s adjusted allowance for uncollectible accounts at December 31, 2011 is $1,575. $1,505. $1,650. $1,720. quiz 7
<pstyle=”font-size: 11.8181819915771px;”=””>(TCO 8) In applying LCM, market cannot be less than net realizable value minus a normal profit margin. net realizable value less reasonable completion and disposal costs. greater than net realizable value reduced by an allowance for normal profit margin. less than cost. Question 2. Question : (TCO 8) Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows: What should be the carrying value of Montana’s inventory? $600,000 $520,000 $590,000 $510,000 Question 3. Question : (TCO 8) Howard’s Supply Co. suffered a fire loss on April 20, 2011. The company’s last physical inventory was taken on January 30, 2011, at which time the inventory totaled $220,000. Sales from January 30 to April 20 were $600,000, and purchases during that time were $450,000. Howard’s consistently reports a 30% gross profit. The estimated inventory loss is $490,000. $238,000. $250,000. None of the above Question 4. Question : (TCO 8) When computing the cost-to-retail percentage for the conventional retail method, included in the denominator are net markups and net markdowns. neither net markups nor net markdowns. net markups, but not net markdowns. net markdowns, but not net markups. Question 5. Question : (TCO 8) Retrospective treatment of prior years’ financial statements is required when there is a change from average cost to FIFO. FIFO to average cost. LIFO to average cost. All of the above
ACCT 304 Week 6
Annual Report Analysis
1.
Your annual report analysis is due at the end of Week 6. Obtain an annual report from a corporation that is interesting to you. Using techniques that you have learned of in the previous weeks, respond to the following questions. Who are the firm’s auditors? Do they provide a clean opinion on the financial statements?
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9. 10. 11. 12. 13.
Have there been any subsequent events, errors and irregularities, illegal acts, or related-party transactions that have a material effect on the financial statements? Describe the trend in total assets and total liabilities for the years presented. What are the company’s three largest assets for the most recent year presented? What are the company’s three largest liabilities for the most recent year presented? What types of stock does the company have? How many outstanding shares are there for each type of stock for the most recent year presented? Does the company use the single-step income statement, multiple-step income statement, or a variation of both? Does the income statement contain any separately reported items, including discontinued operations or extraordinary items, in any year presented? If it does, describe the event that caused the item. (Hint: There should be a related footnote.) Describe the trend in net income over the years presented. Does the company have other comprehensive income? If yes, what is the nature of the transaction(s)? Does the company use the indirect or direct method of the cash-flow statement? What is the trend in cash from operations for the years presented? What are the two largest items included in cash from investing activities? Please see grading rubric for guidelines. Please submit the completed project by Sunday at the end of Week 6. Submit your Course Project to the Dropbox located on the silver tab at the top of this page. For instructions on how to use the Dropbox, read these midterm <pstyle=”font-size: 11.8181819915771px;”=””>Question 1. Question : (TCO 1) Which of the following has the authority to set accounting standards in the United States? FASB IRS SEC AICPA :1 Question 2. Question : (TCO 2) SFAC No.5 focuses on: objectives of financial reporting. qualitative characteristics of accounting information. Recognition and measurement concepts in accounting, including assumptions and principles. elements of financial statements. :1 5 of 5 Question 3. Question : (TCO 3) Mary Parker Co. invested $15,000 in ABC Corporation and received capital stock in exchange. Mary Parker Co.’s journal entry to record this transaction would include a: debit to investments. credit to retained earnings. credit to capital stock. debit to expense. :2 5 of 5 Question 4. Question : (TCO 3) The adjusting entry required to record accrued expenses includes: a credit to cash. a debit to an asset. a credit to an asset.
a credit to liability. :2 5 of 5 Question 5. Question : (TCO 3) Temporary accounts would not include: salaries payable. depreciation expense. supplies expense. cost of goods sold. :2 5 of 5 Question 6. Question : (TCO 4) Notes payable: is a current liability account. usually has a debit balance. is a non-current liability account. cannot determine its classification without additional information. :2 5 of 5 Question 7. Question : (TCO 4) The current ratio is given by: current assets divided by non-current assets. current assets divided by total assets. current assets divided by current liabilities. current assets divided by total liabilities. :3 5 of 5 Question 8. Question : (TCO 5) The distinction between operating and non-operating income relates to: continuity of income. principal activities of the reporting entity. consistency of income stream. reliability of measurements. :4 5 of 5 Question 9. Question : (TCO 5) A voluntary change in accounting principle is accounted for by: a cumulative effect on income in the year of the change. a retrospective reporting of all comparative financial statements shown. a prior period adjustment. a separate line component of income. :4 5 of 5 Question 10. Question : (TCO 5) Cash flows from investing activities do not include: proceeds from issuing bonds. payment for the purchase of equipment. proceeds from the sale of marketable securities. cash outflows from acquiring land. :4 5 of 5 Question 11. Question : (TCO 5) The Maytag Corporationâ&#x20AC;&#x2122;s income statement includes income from continuing operations, a loss from discontinued operations, and extraordinary items. Earnings per share information would be provided for:
net income only. income from continuing operations and net income only. income from continuing operations, loss from discontinued operations, and net income only. income from continuing operations, loss from discontinued operations, extraordinary items, and net income. :4 5 of 5 Question 12. Question : (TCO 5) In a statement of cash flows prepared under International Financial Reporting Standards, each of the following items is typically classified as a financing cash flow except: interest paid. dividends paid. proceeds from the issuance of long-term debt. dividends received. :4 5 of 5 Question 13. Question : (TCO 4) Which is a shareholders’ equity account in the balance sheet? Accumulated depreciation Paid-in capital Dividends payable Marketable securities :3 5 of 5 Question 14. Question : (TCO 4) Which of the following groups is not among the external users for whom financial statements are prepared? Customers Suppliers Employees All of the above are external users of financial statements. (TCO 5) Misty Company reported the following before-tax items during the current year: Misty’s effective tax rate is 40% and there were 1,000 shares of common stock outstanding. What would be Misty’s income before extraordinary item(s)? Question 2. Question : (TCO 4) Listed below are account balances (in $millions) taken from the records of Symphony Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment receivables are current. Symphony uses a perpetual inventory system. What would Symphony report as total assets? Hint: Don’t forget to deduct the contra assets. (TCO 4) Explain how management’s discussion and analysis of its operations and liquidity may be helpful to investors. Question 2. Question : (TCO 2) What are the key provisions of the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002? Question 3. Question : (TCO 5) Give an example of a non-cash financing and investing activity and explain when and how it would be reported in the financial statements. Question 4. Question : (TCO 3) What is the purpose of the closing process? final acct304 final exam Question 1.1. (TCO 1) The SEC issues accounting standards in the form of (Points : 6) accounting research bulletins. financial reporting releases. financial accounting standards. financial technical bulletins.
Question 2.2. (TCO 1) When a registrant company submits its annual filing to the SEC, it uses (Points : 6) Form 10-A. Form 10-K. Form 10-Q. Form S-1. Question 3.3. (TCO 2) The conceptual framework’s qualitative characteristic of relevance includes (Points : 6) predictive value. verifiability. completeness. neutrality. Question 4.4. (TCO 2) Enhancing qualitative characteristics of accounting information include each of the following, except (Points : 6) timeliness. materiality. comparability. verifiability. Question 5.5. (TCO 3) A sale on account would be recorded by (Points : 6) debiting revenue. crediting assets. crediting liabilities. debiting assets. Question 6.6. (TCO 3) Prepayments occur when (Points : 6) cash flow precedes expense recognition. sales are delayed pending credit approval. customers are unable to pay the full amount due when goods are delivered. manufactured goods await quality control inspections. Question 7.7. (TCO 4) An asset that is not expected to be converted to cash or consumed within 1 year or the operating cycle is (Points : 6) goodwill. accounts receivable. inventory. supplies. Question 8.8. (TCO 4) Which of the following is never a current liability account? (Points : 6) Accrued payroll Dividends payable Prepaid rent Subscriptions collected in advance Question 9.9. (TCO 5) The distinction between operating and nonoperating income relates to (Points : 6) continuity of income. principal activities of the reporting entity. consistency of income stream. reliability of measurements. Question 10.10. (TCO 5) On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was completed on December 31, 2012. The following additional facts pertain to the transaction: The Footwear Division qualifies as a component of the entity, according to GAAP, regarding discontinued operations. The book value of Footwear’s assets totaled $48 million on the date of the sale. Footwear’s operating income was a pre-tax loss of $10 million in 2012. Foxtrot’s income tax rate is 40%.
In the 2012 income statement for Foxtrot Co., it would report (Points : 6) income (loss) on its total operations for the year without separation. income (loss) on its continuing operation only. income (loss) from its continuing and discontinued operations separately. income and gains separately from losses. Question 11.11. (TCO 5) Operating cash outflows would include (Points : 6) purchase of investments. purchase of equipment. payment of cash dividends. purchases of inventory. Question 12.12. (TCO 5) The FASB’s stated preference for reporting operating cash flows is the (Points : 6) indirect method. direct method. working capital method. all financial resources method. Question 13.13. (TCO 5) Merchandise sold FOB shipping point indicates that (Points : 6) the seller pays the freight. the buyer holds title after the merchandise leaves the seller’s location. the common carrier holds title until the merchandise is delivered. the sale is not consummated until the merchandise reaches the point to which it is being shipped. Question 14.14. (TCO 5) Todd Sweeney is an artist who sells his work under consignment. (He displays his work in local barbershops, and customers buy the work there.) Sweeney recently transferred a painting to a local barbershop. After Sweeney has transferred a painting to a barbershop, the painting (Points : 6) should be counted in Sweeney’s inventory until the barbershop sells it. should be counted in the barbershop’s inventory, as they now possess it. should be counted in either Sweeney’s or the barbershop’s inventory, depending on which incurred the cost of preparing the painting for display. None of the above Question 15.15. (TCO 6) Reba wishes to know how much money would be in her savings account if she deposits a given sum in an account and leaves it there at 6% interest for 5 years. She should use a table for the (Points : 6) future value of an ordinary annuity of 1. future value of 1. future value of an annuity of 1. present value of an annuity due of 1. Question 16.16. (TCO 6) Loan A has the same original principal, interest rate, and payment amount as Loan B. However, Loan A is structured as an annuity due, while Loan B is structured as an ordinary annuity. The maturity date of Loan A will be (Points : 6) earlier than Loan B. later than Loan B. the same as Loan B. indeterminate with respect to Loan B. Question 17.17. (TCO 7) Compensating balances represent (Points : 6) funds in a bank account that cannot be spent. balances in a payroll checking account. accounts that are subject to bank service charges. accounts on which banks pay interest, such as NOW accounts.
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Question 18.18. (TCO 7) Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on April 23, assuming the customer made the correct payment on that date? (Points : 6) Option a Option b Option c Option d Question 19.19. (TCO 8) In a periodic inventory system, the cost of purchases is debited to (Points : 6) purchases. cost of goods sold. inventory. accounts payable. Question 20.20. (TCO 8) During periods when costs are rising and inventory quantities are stable, cost of goods sold will be (Points : 6) higher under FIFO than LIFO. higher under FIFO than average cost. lower under average cost than LIFO. lower under LIFO than FIFO. Question 21.21. (TCO 8) In applying LCM, market cannot be (Points : 6) less than net realizable value. greater than the normal profit. less than the normal profit margin. greater than net realizable value. Question 22.22. (TCO 8) In calculating the cost-to-retail percentage for the retail method, the retail column will not include (Points : 6) purchases. purchase returns. abnormal shortages. freight-in. Question 1. 1. (TCO 8) Fulbright Corp. uses the periodic inventory system. During its first year of operation, Fulbright made the following purchases (listed in chronological order of acquisition): 40 units at $100 70 units at $80 170 units at $60 Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. What is the ending inventory using the average cost method (rounded)? (Points : 15) Question 2. 2. (TCO 5) Describe what is meant by unearned revenues, and give two examples. (Points : 28) Question 3. 3. (TCO 7) Briefly compare and contrast the two allowance estimation approaches to estimating bad debt expense. In your answer, indicate which approach, if either, is superior and explain your reasoning. (Points : 25) (TCO 8) Briefly explain when there would be a tax benefit from electing LIFO rather than FIFO. (Points : 25) Question 2. 2. (TCO 4) You are the independent accountant assigned to the audit of Neophyte Company. The company’s accountant, a graduate of Rival State University, has prepared financial statements that contained the following questionable items: The balance sheet reports land at $100,000. Included in this amount is a piece of property held for speculation at a cost of $30,000. Current liabilities include $50,000 for long-term debt that comes due in 3 months. The company has received a suitable firm commitment to refinance the debt for 5 years and intends to do so.
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Long-term Investments (non-current) in marketable securities include $20,000 in short-term, high-grade commercial paper. Please discuss how the above items should be correctly classified and accounted for. (Points : 25)