Antonio’s Car Services provides maintenance services for motorized vehicles. In March
2016, Rick placed an order for a new set of tires for $350. When a customer purchases
goods and services in excess of $300, Antonio’s gives the customer a 25% discount
coupon for future purchases made in the next three months. Antonio’s estimates that
approximately 80% of customers utilize the coupon and that on average those
customers will purchase goods and services that typically sell for $75. Required:
(a) How many performance obligations are in Rick’s contract? Explain the reasons for
your answer.
(b) Prepare a journal entry to record revenue for this transaction, assuming that
Antonio’s uses the residual method to estimate the stand-alone selling price of new tires
sold without the discount coupon.
Archie Co. purchased a framing machine for $45,000 on January 1, 2016. The machine
is expected to have a four-year life, with a residual value of $5,000 at the end of four
years. Using the sum-of-the-years’-digits method, depreciation for 2016 and book value
at December 31, 2016, would be:
a. $18,000 and $27,000.
b. $16,000 and $29,000.
c. $16,000 and $24,000.
d. $18,000 and $22,000.
A 10% stock dividend is reported in connection with a statement of cash flows as:
a. A financing activity.
b. An investing activity.
c. A noncash activity.
d. Not reported in the statement of cash flows.
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:
a. Credit to cash.
b. Debit to cash discount.
c. Debit to note receivable.
d. Credit to note receivable.
On January 2, 2016, L Co. issued at face value $20,000 of 4% bonds convertible in total
into 1,000 shares of L’s common stock. No bonds were converted during 2016.
Throughout 2016, L had 1,000 shares of common stock outstanding. L’s 2016 net
income was $2,000. L’s income tax rate is 50%.
No potential common shares other than the convertible bonds were outstanding during
2016.
L’s diluted earnings per share for 2016 would be:
a. $1.00.
b. $1.20.
c. $1.40.
d. $2.00.
The FASB’s conceptual framework’s qualitative characteristics of accounting
information include:
a. Full disclosure.
b. Relevance.
c. Going concern.
d. Historical cost.
The primary focus for financial accounting information is to provide information useful
for:
In a defined benefit pension plan, the journal entry to record benefits paid to retired
employees will include:
a. a debit to projected benefit obligation
b. a debit to plan assets
c. a credit to retiree benefits
d. a credit to cash
Which of the following creates a deferred tax asset?
a. An unrealized loss from recording investments at fair value.
b. Prepaid insurance.
c. An unrealized gain from recording investments at fair value.
d. Accelerated depreciation in the tax return.
Primecoat Corporation could disseminate its annual financial statements two days
earlier if it shifted substantial human resources from other operations to the annual
report project. Management decided the value of the earlier report was not worth the
added commitment of resources. The concept demonstrated is:
a. Timeliness.
b. Materiality.
c. Relevance.
d. Cost-effectiveness.
The following information pertains to Havana Corporation’s defined benefit pension
plan:
At the end of 2016, Havana contributed $696 thousand to the pension fund and benefit
payments of $624 thousand were made to retirees. The expected rate of return on plan
assets was 10%, and the actuary’s discount rate is 8%. There were no changes in
actuarial estimates and assumptions regarding the PBO.
What is Havana’s 2016 actual return on plan assets?
a. $504 thousand.
b. $618 thousand.
c. $1,128 thousand.
d. None of these answer choices is correct.
Dublin Inc. had the following common stock record during the current calendar year:
A 10% stock dividend was paid on December 1. What is the number of shares to be
used in computing basic EPS?
a. 2,075,000.
b. 2,282,500.
c. 2,475,000.
d. 2,620,000.
Comprehensive income is the change in equity from:
a. Owner transactions.
b. Nonowner transactions.
c. Owner or nonowner transactions.
d. Capital transactions.
The shareholders’ ‘equity of Red Corporation includes $200,000 of $1 par common
stock and $400,000 par value of 6% cumulative preferred stock. The board of directors
of Red declared cash dividends of $50,000 in 2016 after paying $20,000 cash dividends
in 2015 and $40,000 in 2014. What is the amount of dividends common shareholders
will receive in 2016?
a. $18,000.
b. $22,000.
c. $26,000.
d. $28,000.
The quick ratio is:
a. The liquidity ratio divided by the equity ratio.
b. Current assets minus inventory divided by current liabilities minus accounts payable.
c. Current assets minus inventory and prepaid items divided by current liabilities.
d. Cash divided by accounts payable.
If a company has declared bankruptcy, its financial statements likely violate:
a. The fair value measurement approach.
b. The present value measurement approach.
c. The stable monetary unit assumption.
d. The going concern assumption.
The Racquet Store (RS) sells franchise agreements in which it charges an up-front fee
of $50,000 for assistance in setting up a store, and then a monthly fee of $1,000 for
national advertising and administrative assistance. Steffi Hingis signs a franchise
agreement with RS.
Assume that Steffi paid the $50,000 in cash when she signed the agreement. RS can
recognize revenue associated with the $50,000:
a. When Steffi signs the agreement and pays the cash.
b. As soon as RS has assisted Steffi in setting up the store.
c. Gradually as RS provides advertising and administration services.
d. Only after the store has operated long enough for the chance of business failure to be
remote.
The following information is taken from the accounting records of Madeline Inc. for the
year 2016. Missing information has been left blank. Inventory is the only supply that
Madeline purchases on credit. Required: Compute the missing amounts.
What amount will Dharma Initiative report in its 2016 balance sheet as a net pension
asset or net pension liability?
Listed below are five terms followed by a list of phrases that describe or characterize
each of the terms. Match each phrase with the number for the correct term.
Briefly describe the difference between simple interest and compound interest.
Partial balance sheets and additional information are listed below for Funk Company.
Additional information for 2016:
Net income was $170,000.
Depreciation expense was $30,000.
Sales totaled $800,000.
Cost of goods sold totaled $325,000.
Required:
Prepare the summary entry for the amount of cash received from customers during
2016.
The table below contains data on depreciation for equipment.
Required: Fill in the missing data in the table.
() Compensation expense ($45 / 3) 15
Paid-in capital-restricted stock 15