ACC 304 Week 5 Midterm Part 1 (Set 3)

ACC 304 Week 5 Midterm Part 1 (Set 3)

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ACC 304 Week 5 Midterm Part 1 (Set 3)

 

 

 

1)      Tongas Company applies revaluation accounting to plant assets with a carrying value of $1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of $1,500,000.

 

The journal entry to adjust the plant assets to fair value and record revaluation surplus in year one will include a

 

2)      Tongas Company applies revaluation accounting to plant assets with a carrying value of $1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of $1,500,000.

 

The journal entry to adjust the plant assets to fair value and record revaluation surplus in year one will include a

 

3)      A major objective of MACRS for tax depreciation is to

 

4)       Sifton Company reported the following data:

              2014                 2015

   Sales     $3,000,000                 $3,900,000

   Net Income     300,000             400,000

   Assets at year end        1,800,000                      2,500,000

    Liabilities at year end  1,100,000                      1,500,000

 

    What is Sifton’s asset turnover for 2015?

 

 

5)      Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

 

6)      Slotkin Products purchased a machine for $39,000 on July 1, 2014. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $3,000. Depreciation for 2014 is

 

7)      Tongas Company applies revaluation accounting to plant assets with a carrying value of $1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of $1,500,000.

 

The financial statements for year one will include the following information

 

8)      Tongas Company applies revaluation accounting to plant assets with a carrying value of $1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of $1,500,000.

 

9)      Which of the following is not an acceptable approach in applying the lower-of-cost-or-market method to inventory?

 

 

10)   The following data concerning the retail inventory method are taken from the financial records of Welch Company.

                        Cost                  Retail

Beginning inventory                   $ 147,000                      $ 210,000

Purchases                      672,000             960,000

Freight-in                      18,000              —

Net markups                  —                     60,000

Net markdowns              —                     42,000

Sales                 —                     1,008,000

 

If the foregoing figures are verified and a count of the ending inventory reveals that merchandise actually on hand amounts to $108,000 at retail, the business has

 

11)   Muckenthaler Company sells product 2005WSC for $40 per unit. The cost of one unit of 2005WSC is $36, and the replacement cost is $35. The estimated cost to dispose of a unit is $8, and the normal profit is 40%. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?

 

12)   Muckenthaler Company sells product 2005WSC for $40 per unit. The cost of one unit of 2005WSC is $36, and the replacement cost is $35. The estimated cost to dispose of a unit is $8, and the normal profit is 40%. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?

 

13)   Barker Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $531,200 ($653,800), purchases during the current year at cost (retail) were $2,137,200 ($2,772,200), freight-in on these purchases totaled $127,800, sales during the current year totaled $2,704,000, and net markups (markdowns) were $4,000 ($192,600). What is the ending inventory value at cost?

 

 

14)   Barker Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $531,200 ($653,800), purchases during the current year at cost (retail) were $2,137,200 ($2,772,200), freight-in on these purchases totaled $127,800, sales during the current year totaled $2,704,000, and net markups (markdowns) were $4,000 ($192,600). What is the ending inventory value at cost?

 

15)   Under the lower-of-cost-or-market method, the replacement cost of an inventory item would be used as the designated market value

 

16)   Under the lower-of-cost-or-market method, the replacement cost of an inventory item would be used as the designated market value

 

17)   During 2014, Larue Co., a manufacturer of chocolate candies, contracted to purchase 200,000 pounds of cocoa beans at $4.00 per pound, delivery to be made in the spring of 2015. Because a record harvest is predicted for 2015, the price per pound for cocoa beans had fallen to $3.30 by December 31, 2014.

 

Of the following journal entries, the one which would properly reflect in 2014 the            effect of the commitment of Larue Co. to purchase the 200,000 pounds of cocoa is

 

18)   During 2014, Larue Co., a manufacturer of chocolate candies, contracted to purchase 200,000 pounds of cocoa beans at $4.00 per pound, delivery to be made in the spring of 2015. Because a record harvest is predicted for 2015, the price per pound for cocoa beans had fallen to $3.30 by December 31, 2014.

 

19)   Which method of inventory pricing best approximates specific identification of the actual flow of costs and units in most manufacturing situations?

 

20)   Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 4,800 units that cost $12 each. During the month, the company made two purchases: 2,000 units at $13 each and 8,000 units at $13.50 each. Checkers also sold 8,600 units during the month. Using the FIFO method, what is the ending inventory?

 

21)   Groh Co. recorded the following data pertaining to raw material X during January 2014:

            Units

Date                                          Received                       Cost                  Issued               On Hand

1/1/14               Inventory                                                          $6.00                                        3,200

1/11/14              Issue                                                                             1,600                1,600

1/22/14             Purchase                        4,000                            $7.05                                        5,600

 

The moving-average unit cost of X inventory at January 31, 2014 is

 

22)   Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2013. Its inventory at that date was $550,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:

         Date                     Inventory at

     Current Prices                       Current

    Price Index

     December 31, 2014                           $642,000                                   107

     December 31, 2015                           725,000                         125

      December 31, 2016                          812,500                         130

 

    What is the cost of the ending inventory at December 31, 2014 under dollar-value LIFO?

 

23)   Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2013. Its inventory at that date was $550,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:

      Date                        Inventory at

     Current Prices                       Current

     Price Index

      December 31, 2014                          $642,000                                   107

     December 31, 2015                           725,000                         125

     December 31, 2016                           812,500                         130

 

 What is the cost of the ending inventory at December 31, 2014 under dollar-value LIFO?

 

 

24)Goods in transit which are shipped f.o.b. destination should be

 

 

24)   Milford Company had 400 units of “Tank” in its inventory at a cost of $6 each. It purchased 600 more units of “Tank” at a cost of $9 each. Milford then sold 700 units at a selling price of $15 each. The LIFO liquidation overstated normal gross profit by

 

 

26) Milford Company had 400 units of “Tank” in its inventory at a cost of $6 each. It purchased 600 more units of “Tank” at a cost of $9 each. Milford then sold 700 units at a selling price of $15 each. The LIFO liquidation overstated normal gross profit by

 

27)Huff Co. exchanged nonmonetary assets with Sayler Co. No cash was exchanged and the exchange had no commercial substance. The carrying amount of the asset surrendered by Huff exceeded both the fair value of the asset received and Sayler's carrying amount of that asset. Huff should recognize the difference between the carrying amount of the asset it surrendered and

 

28) A machine cost $600,000, has annual depreciation of $100,000, and has accumulated depreciation of $450,000 on December 31, 2014. On April 1, 2015, when the machine has a fair value of $137,500, it is exchanged for a machine with a fair value of $675,000 and the proper amount of cash is paid. The exchange had commercial substance.

 

The gain to be recorded on the exchange is

 

29) Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of $36,000 and a fair value of $45,000. The asset given up by Armstrong Co. has a book value of $60,000 and a fair value of $57,000. Boot of $12,000 is received by Armstrong Co.

 

What amount should Glen Inc. record for the asset received?

 

30) Glen Inc. and Armstrong Co. have an exchange with no commercial substance. The asset given up by Glen Inc. has a book value of $36,000 and a fair value of $45,000. The asset given up by Armstrong Co. has a book value of $60,000 and a fair value of $57,000. Boot of $12,000 is received by Armstrong Co.

 

What amount should Glen Inc. record for the asset received?

           

31) Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $4,800,000 on March 1, $3,960,000 on June 1, and $6,000,000 on December 31. Arlington Company borrowed $2,400,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $4,800,000 note payable and an 11%, 4-year, $9,000,000 note payable.

 

What is the weighted-average interest rate used for interest capitalization purposes?

 

32) Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $4,800,000 on March 1, $3,960,000 on June 1, and $6,000,000 on December 31. Arlington Company borrowed $2,400,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $4,800,000 note payable and an 11%, 4-year, $9,000,000 note payable.

 

What is the weighted-average interest rate used for interest capitalization purposes?

 

33) Assets that qualify for interest cost capitalization include

 

           

34) Arlington Company is constructing a building. Construction began on January 1 and was completed on December 31. Expenditures were $4,800,000 on March 1, $3,960,000 on June 1, and $6,000,000 on December 31. Arlington Company borrowed $2,400,000 on January 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 3-year, $4,800,000 note payable and an 11%, 4-year, $9,000,000 note payable.

 

What are the weighted-average accumulated expenditures?

           

35) Which of the following is a capital expenditure?

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