Nevada Boot Co. reported net income of $216,000 for its year ended December 31,
2016. Purchases totaled $152,000. Accounts payable balances at the beginning and end
of the year were $36,000 and $33,000, respectively. Beginning and ending inventory
balances were $44,000 and $46,000, respectively. Assuming that all relevant
information has been presented, Nevada Boot would report operating cash flows of:
a. $155,000.
b. $221,000.
c. $211,000.
d. $151,000.
Poodle Corporation was organized on January 3, 2016. The firm was authorized to issue
100,000 shares of $5 par common stock. During 2016, Poodle had the following
transactions relating to shareholders’ equity:
Issued 30,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
What is total paid-in capital at the end of 2016?
a. $420,000.
b. $370,000.
c. $470,000.
d. $320,000.
The following data are for Guava Company’s retiree health care plan for the current
calendar year.
What is the service cost to be included in the current year’s postretirement benefit
expense?
a. $3,000.
b. $3,180.
c. $3,200.
d. $4,000.
Data below for the year ended December 31, 2016, relates to Houdini Inc. Houdini
started business January 1, 2016, and uses the LIFO retail method to estimate ending
inventory.
Estimated ending inventory at cost is:
a. $90,720.
b. $83,500.
c. $91,600.
d. None of these answer choices are correct.
On April 1st, Bob the Builder entered into a contract of one-month duration to build a
barn for Nolan. Bob is guaranteed to receive a base fee of $5,000 for his services in
addition to a bonus depending on when the project is completed. Nolan created
incentives for Bob to finish the barn as soon as he can without jeopardizing the
structural integrity of the barn. Nolan offered to pay an additional 30% of the base fee if
the project finished 2 weeks early and 10% if the project finished a week early. The
probability of finishing 2 weeks early is 30% and the probability of finishing a week
early is 60%. What is the expected transaction price with variable consideration
estimated as the expected value?
a. $4,750
b. $5,000
c. $5,500
d. $5,750
Simpson and Homer Corporation acquired an office building on three acres of land for a
lump-sum price of $2,400,000. The building was completely furnished. According to
independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for
the building, land, and furniture and fixtures, respectively. The initial values of the
building, land, and furniture and fixtures would be:
a. $1,300,000 $ 780,000 $520,000
b. $1,200,000 $ 720,000 $480,000
c. $ 720,000 $1,200,000 $480,000
d. None of these answer choices are correct.
Prepayments occur when:
a. Cash flow precedes expense recognition.
b. Sales are delayed pending credit approval.
c. Customers are unable to pay the full amount due when goods are delivered.
d. Manufactured goods await quality control inspections.
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star
Company on January 1, 2016. The manufacturing cost of the computers was $12
million.
This noncancelable lease had the following terms:
-Lease payments: $2,466,754 semiannually; first payment at January 1, 2016;
remaining payments at –June 30 and December 31 each year through June 30, 2020.
-Lease term: five years (10 semiannual payments).
-No residual value; no bargain purchase option.
-Economic life of equipment: five years.
-Implicit interest rate and lessee’s incremental borrowing rate: 5% semiannually.
-Fair value of the computers at January 1, 2016: $20 million.
Collectibility of the rental payments is reasonably assured, and there are no lessor costs
yet to be incurred.
Technoid would account for this as:
a. A capital lease.
b. A direct financing lease.
c. A sales-type lease.
d. An operating lease.
Corporations issue their shares to the investing public in the:
Goodfellow Corporation reported insurance expense of $477 for the current year. The
beginning and ending balances in the prepaid insurance account were $50 and $30,
respectively. What was the amount of cash paid for insurance?
a. $477.
b. $457.
c. $497.
d. None of these answer choices is correct.
JRE2 Inc. entered into a contract to install a pipeline for a fixed price of $2,200,000.
JRE2 recognizes revenue upon contract completion.
In 2016, JRE2 would report (rounded to the nearest thousand) gross profit (loss) of:
a. $(223,000).
b. $(150,000).
c. $(206,000).
d. $0.
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 12?
Partial balance sheets and additional information are listed below for Rickey Company.
Additional information for 2016:
Net income was $160,000.
Depreciation expense was $20,000.
Required:
Prepare the operating activities section of the statement of cash flows for 2016 using the
indirect method.
On January 1, 2016, Morton Sales Co. issued zero-coupon bonds with a face value of
$6 million for cash. The bonds mature in 10 years and were issued at a price of
$3,050,100. Required: What total interest expense will Morton Sales Co. report over
the 10-year life of these bonds?
On September 30, 2016, Truckee Garbage leased equipment from a supplier and agreed
to pay $125,000 annually for 15 years beginning September 30, 2017. Generally
accepted accounting principles require that a liability be recorded for this lease
agreement for the present value of scheduled payments. Accordingly, at inception of the
lease, Truckee recorded a $1,214,031 lease liability
Required:
Determine the interest rate implicit in the lease agreement.
Boston Dollar Store uses the gross method to record purchase discounts and uses a
perpetual inventory system. Boston engaged in the following transactions during April:
4/12 Purchased $15,000 in merchandise subject to terms of 2/10, n/30. The goods were
shipped f.o.b. shipping point.
4/13 Received a billing from Orange Freight Lines for $300 for the 4/12 purchase.
4/15 Returned $1,000 of merchandise from the 4/12 purchase.
4/20 Paid balances due from 4/12 purchase.
Required:
Prepare journal entries to record the above transactions.
On December 31, 2015, Brisbane Company had 100,000 shares of common stock
outstanding and 30,000 shares of 7%, $50 par, cumulative preferred stock outstanding.
On February 28, 2016, Brisbane purchased 24,000 shares of common stock on the open
market as treasury stock paying $40 per share. Brisbane sold 6,000 treasury shares on
September 30, 2016, for $45 per share. Net income for 2016 was $180,905. Also
outstanding during the year were fully vested incentive stock options giving key
personnel the option to buy 50,000 common shares at $40. The market price of the
common shares averaged $50 during 2016.
Required:
Compute Brisbane’s basic and diluted earnings per share (rounded to 2 decimal places)
for 2016.
The December 31, 2016, balance sheet of Springer Company included the following:
Springer completed the following transactions in 2016 relating to treasury stock:
March 17: Reacquired 5 million shares at $10.
May 17: Reacquired 3 million shares at $9.
August 10: Sold 6 million shares at $12.
Required:
Assuming Springer uses the cost method, prepare journal entries to record the foregoing
transactions on a FIFO basis.
Listed below are reporting classifications for a statement of cash flows using the
indirect method for reporting operating cash flows. Indicate the reporting classification
that would apply to each of the five transactions described below by placing the letter of
the reporting classification in the space provided by each transaction.
Listed below are eight terms followed by a list of phrases that describe or characterize
each of the terms. Match each phrase with the number for the most correct term.
