Sneed Corporation reported balances in the following accounts for the current year:
Income tax expense was $230 for the year. What was the amount paid for taxes?
a. $280.
b. $220.
c. $210.
d. $190.
Information for Kent Corp. for the year 2016:
Reconciliation of pretax accounting income and taxable income:
Cumulative future taxable amounts all from depreciation temporary differences:
As of December 31, 2015 $13,000
As of December 31, 2016 $25,000
The enacted tax rate was 30% for 2015 and thereafter.
What would Kent’s income tax expense be in the year 2016?
a. $42,300.
b. $45,900.
c. $49,500.
d. None of these answer choices are correct.
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 signed a $50,000 installment note when she signed the franchise
agreement. RS can recognize revenue associated with the $50,000:
a. When Steffi signs the agreement, so long as RS has sufficient experience with similar
arrangements to estimate uncollectible accounts.
b. As soon as RS has assisted Steffi in setting up the store, so long as RS has sufficient
experience with similar arrangements to estimate uncollectible accounts.
c. Gradually as RS provides advertising and administration services.
d. When RS receives installment payments from Steffi, so long as RS has sufficient
experience with similar arrangements to estimate uncollectible accounts.
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, 2016. 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 2016.
– Foxtrot’s income tax rate is 40%.
In the 2016 income statement for FoxtrotCo., it would report income from discontinued
operations of:
a. $ 9.2 million.
b. $13.2 million.
c. $ 22 million.
d. $ 26 million.
Eligibility for postretirement health care benefits usually is based on the employee’s:
a. Job title.
b. Number of years in the profession.
c. Number of years in the current position.
d. Age and/or years of service.
Bria Furniture sells bed frames and mattresses. One of its products is a premium
therapeutic bed set produced by OmniSleep, which comes with a mattress and a bed
frame. Bria offers a package consisting of the mattress, the frame, and on-site
installation by its staff. All of these components can be sold separately, as often done by
other vendors, so Bria concludes that these are separate performance obligations. Bria
sells the OmniSleep package for $3,000. The mattress and the frame are sold separately
for $2,000 and $900, respectively. Other vendors in the same area typically charge $200
for on-site installation. Bria does not sell on-site installation separately. On average, the
prices charged by Bria are 10% higher than those of its competitors. Bria estimates that
it incurs about $100 of compensation and other costs to provide the installation service.
The profit margin over cost is estimated to be approximately 35%. Required: Estimate
the stand-alone selling price of the installation service using (a) the adjusted market
assessment approach, (b) the expected cost plus margin approach, and (3) the residual
approach.
In 2016, internal auditors discovered that Fay, Inc., had debited an expense account for
the $700,000 cost of a machine purchased on January 1, 2013. The machine’s useful life
was expected to be five years with no residual value. Straight-line depreciation is used
by Fay. The journal entry to correct the error will include a credit to accumulated
depreciation of:
a. $140,000.
b. $280,000.
c. $420,000.
d. $700,000.
A company failed to record unrealized gains of $20 million on its trading security
investments. Its tax rate is 30%. As a result of this error, total shareholders’ equity
would be:
a. Understated by $14 million.
b. Understated by $7 million.
c. Understated by $20 million
d. Unaffected.
Sullivan Corporation has determined its year-end inventory on a FIFO basis to be
$500,000. Information pertaining to that inventory is as follows:
What should be the reported value of Sullivan’s inventory if the company prepares its
financial statements according to International Financial Reporting Standards (IFRS)?
a. $500,000.
b. $440,000.
c. $470,000.
d. $490,000.
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 signed a $50,000 installment note when she signed the franchise
agreement. RS has no experience estimating uncollectible accounts associated with
these sorts of notes. RS can recognize:
a. $50,000 of revenue when Steffi signs the agreement.
b. $50,000 of revenue as soon as it has assisted Steffi in setting up the store.
c. Revenue under the installment sales method, starting when Steffi signs the
agreement.
d. Revenue under the installment sales method, as soon as it has assisted Steffi in
setting up the store.
Below are excerpts from time value of money tables for the 8% rate.
Column 5 is an interest table for the:
a. Present value of 1.
b. Future value of 1.
c. Present value of an ordinary annuity of 1.
d. Present value of an annuity due of 1.
Under the LIFO retail method, the denominator in the cost-to-retail percentage
includes:
a. Net markups and net markdowns.
b. Neither net markups nor net markdowns.
c. Net markups, but not net markdowns.
d. Net markdowns, but not net markups.
In its first year of operations Acme Corp. had income before tax of $400,000. Acme
made income tax payments totaling $150,000 during the year and has an income tax
rate of 40%. What is the balance in income tax payable at the end of the year?
a. $160,000 credit.
b. $150,000 credit.
c. $ 10,000 credit.
d. $ 10,000 debit.
Bird Brain Co. reported net income of $45,000 for the year ended December 31, 2016.
January 1 balances in accounts receivable and accounts payable were $23,000 and
$26,000 respectively. Year-end balances in these accounts were $22,000 and $28,000,
respectively. Assuming that all relevant information has been presented, Bird Brain’s
cash flows from operating activities would be:
a. $48,000.
b. $44,000.
c. $46,000.
d. $45,000.
On January 1, 2016, Ouachita Airlines issued $400,000 of its 20-year, 8% bonds. The
bonds were priced to yield 10%. Interest is payable semiannually on June 30 and
December 31. Ouachita Airlines records interest at the effective rate and elected the
option to report these bonds at their fair value. On December 31, 2016, the fair value of
the bonds was $335,000 as determined by their fair value in the over-the-counter
market. None of the change in fair value was due to a change in the general (risk-free)
rate of interest.
Required:
1> Determine the price of the bonds at January 1, 2016, and prepare the journal entry to
record their issuance. Show calculations.
2> Prepare the journal entry to record interest on June 30, 2016 (the first interest
payment). Show calculations.
3> Prepare the journal entry to record interest on December 31, 2016 (the second
interest payment). Show calculations.
4> Prepare the journal entry to adjust the bonds to their fair value for presentation in the
December 31, 2016, balance sheet. Show calculations.
Briefly differentiate between activity-based and time-based allocation methods.
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.
Listed below are 10 terms followed by a list of phrases that describe or characterize the
terms. Match each phrase with the number for the correct term.
Briefly explain how R&D is reported in financial statements.
The following information is taken from the 2013 annual report to shareholders of
Hewlett-Packard (HP) Co.
How could a company with receivables like HP be able to manage earnings in applying
generally accepted accounting principles?