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Wiley CPA Examination Review Outlines And Study Guides Volume 1 - 2012-2013 39th Edition Patrick R. Delaney, O. Ray Whittington - Solutions
Rago Company takes a full year’s depreciation expense in the year of an asset’s acquisition, and no depreciation expense in the year of disposition. Data relating to one of Rago’s depreciable assets at December 31, 2011, are as follows:Acquisition year 2008 Cost $110,000 Residual value 20,000
Turtle Co. purchased equipment on January 2, 2008, for$50,000. The equipment had an estimated five-year service life. Turtle’s policy for five-year assets is to use the 200%double-declining depreciation method for the first two years of the asset’s life, and then switch to the straight-line
On January 2, 2010, Lem Corp. bought machinery under a contract that required a down payment of $10,000, plus twenty-four monthly payments of $5,000 each, for total cash payments of $130,000. The cash equivalent price of the machinery was $110,000. The machinery has an estimated useful life of ten
Derby Co. incurred costs to modify its building and to rearrange its production line. As a result, an overall reduction in production costs is expected. However, the modifications did not increase the building’s market value, and the rearrangement did not extend the production line’s
A building suffered uninsured fire damage. The damaged portion of the building was refurbished with higher quality materials. The cost and related accumulated depreciation of the damaged portion are identifiable. To account for these events, the owner shoulda. Reduce accumulated depreciation equal
On June 18, 2010, Dell Printing Co. incurred the following costs for one of its printing presses:Purchase of collating and stapling attachment $84,000 Installation of attachment 36,000 Replacement parts for overhaul of press 26,000 Labor and overhead in connection with overhaul 14,000 The overhaul
During 2010, King Company made the following expenditures relating to its plant building:Continuing and frequent repairs $40,000 Repainted the plant building 10,000 Major improvements to the electrical wiring system 32,000 Partial replacement of roof tiles 14,000 How much should be charged to
On July 1, 2010, Town Company purchased for$540,000 a warehouse building and the land on which it is located. The following data were available concerning the property:Current appraised value Seller’s original cost Land $200,000 $140,000 Warehouse building 300,000 280,000$500,000 $420,000 Town
Lano Corp.’s forest land was condemned for use as a national park. Compensation for the condemnation exceeded the forest land’s carrying amount. Lano purchased similar, but larger, replacement forest land for an amount greater than the condemnation award. As a result of the condemnation and
On July 1, 2010, one of Rudd Co.’s delivery vans was destroyed in an accident. On that date, the van’s carrying value was $2,500. On July 15, 2010, Rudd received and recorded a $700 invoice for a new engine installed in the van in May 2010, and another $500 invoice for various repairs.In
An entity disposes of a nonmonetary asset in a nonreciprocal transfer. A gain or loss should be recognized on the disposition of the asset when the fair value of the asset transferred is determinable and the nonreciprocal transfer is to Another entity A stockholder of the entitya. No Yesb. No Noc.
Yola Co. and Zaro Co. are fuel oil distributors. To facilitate the delivery of oil to their customers, Yola and Zaro exchanged ownership of 1,200 barrels of oil without physically moving the oil. Yola paid Zaro $20,000 to compensate for a difference in the grade of oil. On the date of the exchange,
Vik Auto and King Clothier exchanged goods, held for resale, with equal fair values. Each will use the other’s goods to promote their own products. The retail price of the car that Vik gave up is less than the retail price of the clothes received. Assuming the transaction has commercial
May Co. and Sty Co. exchanged nonmonetary assets.The exchange did not result in the expected cash flows of the assets being significantly different for either May or Sty.May paid cash to Sty in connection with the exchange. To the extent that the amount of cash exceeds a proportionate share of the
In an exchange of assets that is deemed to lack commercial substance, Transit Co. received equipment with a fair value equal to the carrying amount of equipment given up. Transit also contributed cash. As a result of the exchange, Transit recognizeda. A loss equal to the cash given up.b. A loss
Amble, Inc. exchanged a truck with a carrying amount of $12,000 and a fair value of $20,000 for a truck and $2,500 cash. The cash flows from the new truck are not expected to be significantly different from the cash flows of the old truck.The fair value of the truck received was $17,500. At what
On March 31, 2010, Winn Company traded in an old machine having a carrying amount of $16,800, and paid a cash difference of $6,000 for a new machine having a total cash price of $20,500. The cash flows from the new machine are expected to be significantly different than the cash flows from the old
When determining the commercial substance of the exchange, which of the following items is not considered?a. Cash flow of exchanged asset.b. Cash flow of new asset.c. Cash flow from tax effects on the exchange to avoid taxes.d. Cash flow from potential sale of new equipment at a later date.
For purposes of nonmonetary exchanges, the configuration of cash flows includes which of the following?a. The implicit rate, maturity date of loan, and amount of loan.b. The risk, timing, and amount of cash flows of the assets.c. The entity-specific value of the asset which is equal to the fair
In a nonmonetary exchange, which of the following situations will require the asset to be recognized at the recorded value of the asset relinquished?a. A delivery truck exchanged for a delivery van that can deliver four times the quantity of goods to customers.b. The exchanged item is intended to
A nonmonetary exchange is recognized at fair value of the assets exchanged unlessa. Exchange has commercial substance.b. Fair value is not determinable.c. The assets are similar in nature.d. The assets are dissimilar.
On July 1, 2010, Balt Co. exchanged a truck for twentyfive shares of Ace Corp.’s common stock. On that date, the truck’s carrying amount was $2,500, and its fair value was$3,000. Also, the book value of Ace’s stock was $60 per share. On December 31, 2010, Ace had 250 shares of common stock
During 2010, Bay Co. constructed machinery for its own use and for sale to customers. Bank loans financed these assets both during construction and after construction was complete. How much of the interest incurred should be reported as interest expense in the 2010 income statement?Interest
Clay Company started construction of a new office building on January 1, 2010, and moved into the finished building on July 1, 2011. Of the building’s $2,500,000 total cost, $2,000,000 was incurred in 2010 evenly throughout the year. Clay’s incremental borrowing rate was 12% throughout 2010,
Cole Co. began constructing a building for its own use in January 2010. During 2010, Cole incurred interest of$50,000 on specific construction debt, and $20,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during 2010 was
On December 1, 2010, Boyd Co. purchased a $400,000 tract of land for a factory site. Boyd razed an old building on the property and sold the materials it salvaged from the demolition.Boyd incurred additional costs and realized salvage proceeds during December 2010 as follows:Demolition of old
Merry Co. purchased a machine costing $125,000 for its manufacturing operations and paid shipping costs of $20,000.Merry spent an additional $10,000 testing and preparing the machine for use. What amount should Merry record as the cost of the machine?a. $155,000b. $145,000c. $135,000d. $125,000
Which of the following methods of accounting for inventory is not allowed under IFRS?a. LIFO.b. Specific identification.c. FIFO.d. Weighted-average.
Which of the following is not true about accounting for inventory under IFRS?a. FIFO is allowed.b. Interest costs may be capitalized if there is a lengthy production period to prepare goods for sale.c. The weighted-average method is acceptable.d. Inventories are always valued at net realizable
The information provided below is for an item in Harris Corporation’s inventory at year end. Harris presents its financial statements in accordance with IFRS:Historical cost $1,200 Estimated selling price 1,300 Estimated completion and selling costs 150 Replacement cost 1,100 What should be the
Under IFRS, the specific identification method of accounting for inventory is required fora. All inventory items.b. Inventory items which are interchangeable.c. Inventory items that are not interchangeable and goods that are produced and segregated for specific projects.d. Biological (agricultural)
Under IFRS, which of the following inventory items are not valued at the lower of cost or net realizable value?a. Manufactured inventory items.b. Retail inventory items.c. Biological inventory items.d. Industrial inventory items.
A company determined the following values for its inventory as of the end of its fiscal year:Historical cost $100,000 Current replacement cost 70,000 Net realizable value 90,000 Net realizable value less a normal profit margin 85,000 Fair value 95,000 Under IFRS, what amount should the company
Brady Corporation values its inventory at the lower of cost or net realizable value as required by IFRS. Brady has the following information regarding its inventory:Historical cost $1,000 Estimated selling price 900 Estimated costs to complete and sell 50 Replacement cost 800 What is the amount for
In accounting for a long-term construction contract using the percentage-of-completion method, the progress billings on contracts account is aa. Contra current asset account.b. Contra noncurrent asset account.c. Noncurrent liability account.d. Revenue account.H. International Financial Reporting
When should an anticipated loss on a long-term contract be recognized under the percentage-of-completion method and the completed-contract method, respectively?Percentage-of-completion Completed-contracta. Over life of project Contract completeb. Immediately Contract completec. Over life of project
The calculation of the income recognized in the third year of a five-year construction contract accounted for using the percentage-of-completion method includes the ratio ofa. Total costs incurred to date to total estimated costs.b. Total costs incurred to date to total billings to date.c. Cost
A company used the percentage-of-completion method of accounting for a five-year construction contract. Which of the following items will the company use to calculate the income recognized in the third year?Progress billings to date Income previously recognizeda. Yes Nob. No Yesc. No Nod. Yes Yes
Which of the following is used in calculating the income recognized in the fourth and final year of a contract accounted for by the percentage-of-completion method?Actual total costs Income previously recognizeda. Yes Yesb. Yes Noc. No Yesd. No No
If Pell used the percentage-of-completion method, what amount of gross profit (loss) would Pell report in its 2011 income statement?a. $(20,000)b. $ 20,000c. $ 22,500d. $ 40,000
If Pell used the completed contract method, what amount of gross profit (loss) would Pell report in its 2011 income statement?a. $ (20,000)b. $ 0c. $ 340,000d. $ 420,000
Hansen Construction, Inc. has consistently used the percentage-of-completion method of recognizing income.During 2011, Hansen started work on a $3,000,000 fixedprice construction contract. The accounting records disclosed the following data for the year ended December 31, 2011:Costs incurred $
Lake Construction Company has consistently used the percentage-of-completion method of recognizing income.During 2010, Lake entered into a fixed-price contract to construct an office building for $10,000,000. Information relating to the contract is as follows:At December 31, 2010 2011 Percentage of
State Co. recognizes construction revenue and expenses using the percentage-of-completion method. During 2010, a single long-term project was begun, which continued through 2011. Information on the project follows:2010 2011 Accounts receivable from construction contract $100,000 $300,000
Cord Builders, Inc. has consistently used the percentage-of-completion method of accounting for construction-type contracts. During 2010 Cord started work on a $9,000,000 fixed-price construction contract that was completed in 2012. Cord’s accounting records disclosed the following:December 31
Selected data pertaining to Lore Co. for the calendar year 2011 is as follows:Net cash sales $ 3,000 Cost of goods sold 18,000 Inventory at beginning of year 6,000 Purchases 24,000 Accounts receivable at beginning of year 20,000 Accounts receivable at end of year 22,000 Lore would use which of the
In a comparison of 2011 to 2010, Neir Co.’s inventory turnover ratio increased substantially although sales and inventory amounts were essentially unchanged. Which of the following statements explains the increased inventory turnover ratio?a. Cost of goods sold decreased.b. Accounts receivable
During 2011, Rand Co. purchased $960,000 of inventory.The cost of goods sold for 2011 was $900,000, and the ending inventory at December 31, 2011, was $180,000.What was the inventory turnover for 2011?a. 6.4b. 6.0c. 5.3d. 5.0
Heath Co.’s current ratio is 4:1. Which of the following transactions would normally increase its current ratio?a. Purchasing inventory on account.b. Selling inventory on account.c. Collecting an account receivable.d. Purchasing machinery for cash.
Jel Co., a consignee, paid the freight costs for goods shipped from Dale Co., a consignor. These freight costs are to be deducted from Jel’s payment to Dale when the consignment goods are sold. Until Jel sells the goods, the freight costs should be included in Jel’sa. Cost of goods sold.b.
Southgate Co. paid the in-transit insurance premium for consignment goods shipped to Hendon Co., the consignee.In addition, Southgate advanced part of the commissions that will be due when Hendon sells the goods. Should Southgate include the in-transit insurance premium and the advanced commissions
On December 1, 2011, Alt Department Store received 505 sweaters on consignment from Todd. Todd’s cost for the sweaters was $80 each, and they were priced to sell at$100. Alt’s commission on consigned goods is 10%. At December 31, 2011, five sweaters remained. In its December 31, 2011 balance
The following items were included in Opal Co.’s inventory account at December 31, 2011:Merchandise out on consignment, at sales price, including 40% markup on selling price$40,000 Goods purchased, in transit, shipped FOB shipping point 36,000 Goods held on consignment by Opal 27,000 By what
On October 20, 2011, Grimm Co. consigned forty freezers to Holden Co. for sale at $1,000 each and paid $800 in transportation costs. On December 30, 2011, Holden reported the sale of ten freezers and remitted $8,500. The remittance was net of the agreed 15% commission. What amount should Grimm
On January 1, 2011, Dell, Inc. contracted with the city of Little to provide custom built desks for the city schools.The contract made Dell the city’s sole supplier and required Dell to supply no less than 4,000 desks and no more than 5,500 desks per year for two years. In turn, Little agreed to
Lewis Company’s usual sales terms are net sixty days, FOB shipping point. Sales, net of returns and allowances, totaled $2,300,000 for the year ended December 31, 2011, before year-end adjustments. Additional data are as follows:• On December 27, 2011, Lewis authorized a customer to return, for
Kew Co.’s accounts payable balance at December 31, 2011, was $2,200,000 before considering the following data:• Goods shipped to Kew FOB shipping point on December 22, 2011, were lost in transit. The invoice cost of $40,000 was not recorded by Kew. On January 7, 2012, Kew filed a $40,000 claim
Herc Co.’s inventory at December 31, 2011, was$1,500,000 based on a physical count priced at cost, and before any necessary adjustment for the following:• Merchandise costing $90,000, shipped FOB shipping point from a vendor on December 30, 2011, was received and recorded on January 5, 2012.•
On July 1, 2011, Casa Development Co. purchased a tract of land for $1,200,000. Casa incurred additional cost of $300,000 during the remainder of 2011 in preparing the land for sale. The tract was subdivided into residential lots as follows:Lot class Number of lots Sales price per lot A 100 $24,000
Dart Company’s accounting records indicated the following information:Inventory, 1/1/11 $ 500,000 Purchases during 2011 2,500,000 Sales during 2011 3,200,000 A physical inventory taken on December 31, 2011, resulted in an ending inventory of $575,000. Dart’s gross profit on sales has remained
Jones Wholesalers stocks a changing variety of products.Which inventory costing method will be most likely to give Jones the lowest ending inventory when its product lines are subject to specific price increases?a. Specific identification.b. Weighted-average.c. Dollar-value LIFO.d. FIFO periodic.
When the double-extension approach to the dollar-value LIFO inventory method is used, the inventory layer added in the current year is multiplied by an index number. Which of the following correctly states how components are used in the calculation of this index number?a. In the numerator, the
Estimates of price-level changes for specific inventories are required for which of the following inventory methods?a. Conventional retail.b. Dollar-value LIFO.c. Weighted-average cost.d. Average cost retail.
Brock Co. adopted the dollar-value LIFO inventory method as of January 1, 2010. A single inventory pool and an internally computed price index are used to compute Brock’s LIFO inventory layers. Information about Brock’s dollar-value inventory follows:Inventory Date At base year cost At current
On January 1, 2010, Poe Company adopted the dollarvalue LIFO inventory method. Poe’s entire inventory constitutes a single pool. Inventory data for 2010 and 2011 are as follows:Date Inventory at current year cost Inventory at base year cost Relevant price index 1/1/10 $150,000 $150,000 1.00
During periods of rising prices, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system under which of the following inventory cost flow methods?FIFO LIFOa. Yes Nob. Yes Yesc. No Yesd. No No
Generally, which inventory costing method approximates most closely the current cost for each of the following?Cost of goods sold Ending inventorya. LIFO FIFOb. LIFO LIFOc. FIFO FIFOd. FIFO LIFO
A company decided to change its inventory valuation method from FIFO to LIFO in a period of rising prices.What was the result of the change on ending inventory and net income in the year of the change?Ending inventory Net incomea. Increase Increaseb. Increase Decreasec. Decrease Decreased. Decrease
Drew Co. uses the average cost inventory method for internal reporting purposes and LIFO for financial statement and income tax reporting. At December 31, 2011, the inventory was $375,000 using average cost and $320,000 using LIFO. The unadjusted credit balance in the LIFO Reserve account on
During January 2011, Metro Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:Units Unit cost Total cost Units on hand Balance on 1/1/11 1,000 $1 $1,000 1,000 Purchased on 1/7/11 600 3 1,800 1,600 Sold on 1/20/11 900 700 Purchased on
Marsh Company had 150 units of product A on hand at January 1, 2011, costing $21 each. Purchases of product A during the month of January were as follows:Units Unit cost Jan. 10 200 $22 18 250 23 28 100 24 A physical count on January 31, 2011, shows 250 units of product A on hand. The cost of the
Thread Co. is selecting its inventory system in preparation for its first year of operations. Thread intends to use either the periodic weighted-average method or the perpetual moving-average method, and to apply the lower of cost or market rule either to individual items or to the total
On January 1, 2011, Card Corp. signed a three-year noncancelable purchase contract, which allows Card to purchase up to 500,000 units of a computer part annually from Hart Supply Co. at $.10 per unit and guarantees a minimum annual purchase of 100,000 units. During 2011, the part unexpectedly
The original cost of an inventory item is above the replacement cost and the net realizable value. The replacement cost is below the net realizable value less the normal profit margin. As a result, under the lower of cost or market method, the inventory item should be reported at thea. Net
Which of the following statements are correct when a company applying the lower of cost or market method reports its inventory at replacement cost?I. The original cost is less than replacement cost.II. The net realizable value is greater than replacement cost.a. I only.b. II only.c. Both I and
The original cost of an inventory item is below both replacement cost and net realizable value. The net realizable value less normal profit margin is below the original cost.Under the lower of cost or market method, the inventory item should be valued ata. Replacement cost.b. Net realizable
Reporting inventory at the lower of cost or market is a departure from the accounting principle ofa. Historical cost.b. Consistency.c. Conservatism.d. Full disclosure.
Based on a physical inventory taken on December 31, 2011, Chewy Co. determined its chocolate inventory on a FIFO basis at $26,000 with a replacement cost of $20,000.Chewy estimated that, after further processing costs of$12,000, the chocolate could be sold as finished candy bars for $40,000.
During January 2011, Metro Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:Units Unit cost Total cost Units on hand Balance on 1/1/11 1,000 $1 $1,000 1,000 Purchased on 1/7/11 600 3 1,800 1,600 Sold on 1/20/11 900 700 Purchased on
The weighted-average for the year inventory cost flow method is applicable to which of the following inventory systems?Periodic Perpetuala. Yes Yesb. Yes Noc. No Yesd. No No
Nest Co. recorded the following inventory information during the month of January:Units Unit cost Total cost Units on hand Balance on 1/1 2,000 $1 $2,000 2,000 Purchased on 1/8 1,200 3 3,600 3,200 Sold on 1/23 1,800 1,400 Purchased on 1/28 800 5 4,000 2,200 Nest uses the LIFO method to cost
Bach Co. adopted the dollar-value LIFO inventory method as of January 1, 2011. A single inventory pool and an internally computed price index are used to compute Bach’s LIFO inventory layers. Information about Bach’s dollar value inventory follows:Inventory Date At base year cost At dollar
On December 15, 2011, Flanagan purchased goods costing $100,000. The terms were FOB shipping point.Costs incurred by Flanagan in connection with the purchase and delivery of the goods were as follows:Normal freight charges $3,000 Handling costs 2,000 Insurance on shipment 500 Abnormal freight
When manufacturing inventory, what is the accounting treatment for abnormal freight-in costs?a. Charge to expense for the period.b. Charge to the finished goods inventory.c. Charge to raw materials inventory.d. Allocate to raw materials, work in process, and finished goods.
How should unallocated fixed overhead costs be treated?a. Allocated to finished goods and cost of goods sold based on ending balances in the accounts.b. Allocated to raw materials, work in process, and finished goods, based on the ending balances in the accounts.c. Recognized as an expense in the
Per the Codification, what is considered the normal capacity of production facilities?a. The average production over the previous five-year period.b. Actual production for the period.c. Actual production for the period plus loss of capacity for planned maintenance.d. A range that may vary based on
When allocating costs to inventory produced for the period, fixed overhead should be based upona. The actual amounts of goods produced during the period.b. The normal capacity of production facilities.c. The highest production levels in the last three periods.d. The lowest production level in the
The following information pertained to Azur Co. for the year:Purchases $102,800 Purchase discounts 10,280 Freight in 15,420 Freight out 5,140 Beginning inventory 30,840 Ending inventory 20,560 What amount should Azur report as cost of goods sold for the year?a. $102,800b. $118,220c. $123,360d.
According to the net method, which of the following items should be included in the cost of inventory?Freight costs Purchase discounts not takena. Yes Nob. Yes Yesc. No Yesd. No No
How should the following costs affect a retailer’s inventory?Freight-in Interest on inventory loana. Increase No effectb. Increase Increasec. No effect Increased. No effect No effect
The following information pertains to Deal Corp.’s 2011 cost of goods sold:Inventory, 12/31/10 $ 90,000 2011 purchases 124,000 2011 write-off of obsolete inventory 34,000 Inventory, 12/31/11 30,000 The inventory written off became obsolete due to an unexpected and unusual technological advance by
The following information was taken from Cody Co.’s accounting records for the year ended December 31, 2011:Decrease in raw materials inventory $ 15,000 Increase in finished goods inventory 35,000 Raw material purchased 430,000 Direct labor payroll 200,000 Factory overhead 300,000 Freight-out
On June 1, 2011, Pitt Corp. sold merchandise with a list price of $5,000 to Burr on account. Pitt allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made FOB shipping point. Pitt prepaid $200 of delivery costs for Burr as an accommodation. On June 12, 2011, Pitt
On December 28, 2011, Kerr Manufacturing Co. purchased goods costing $50,000. The terms were FOB destination.Some of the costs incurred in connection with the sale and delivery of the goods were as follows:Packaging for shipment $1,000 Shipping 1,500 Special handling charges 2,000 These goods were
The following information applied to Fenn, Inc. for 2011:Merchandise purchased for resale $400,000 Freight-in 10,000 Freight-out 5,000 Purchase returns 2,000 Fenn’s 2011 inventoriable cost wasa. $400,000b. $404,000c. $408,000d. $413,000
Under IFRS, the statement of cash flows may be presented on the Direct Basis Indirect Basisa. Yes Yesb. Yes Noc. No Yesd. No No
Under IFRS, operating expenses on the income statement may be classified by Nature Functiona. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following is true about financial statement requirements under IFRS?a. Prior year comparative financial statements are required.b. Income statements for three years are required.c. Balance sheets for three years are required.d. There are no specific requirements regarding comparative
Which of the following are acceptable methods for reporting comprehensive income under IFRS?I. One comprehensive income statement.II. Two statements: an income statement and a comprehensive income statement.III. In the statement of owner’s equity.a. I only.b. I and II only.c. I, II, and III.d. I
For IFRS purposes, cash advances and loans from bank overdrafts should be reported on the statement of cash flows asa. Operating activities.b. Investing activities.c. Financing activities.d. Other significant noncash activities.
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