Test Bank For Intermediate Accounting, 15th Edition

Preview (16 of 1193 Pages)

100%

Test Bank For Intermediate Accounting, 15th Edition - Page 1 preview image

Loading page ...

COMPREHENSIVE EXAMINATION APART 1(Chapters 1-6)Problem A-I—Multiple Choice.Choose thebestanswer for each of the following questions and enter the identifyingletter in the space provided.____1.How does failure to record accrued revenue distort the financial reports?a.It understates revenue, net income, and current assets.b.It understates net income, stockholders’ equity, and current liabilities.c.It overstates revenue, stockholders’ equity, and current liabilities.d.It understates current assets and overstates stockholders’ equity.____2.A contingent liability which is normally accrued isa.notes receivable discounted.b.accommodation endorsements on customer notes.c.additional compensation that may be payable on a dispute now beingarbitrated.d.estimated claims under a service warranty on new products sold.____3.Which of the following items is a current liability?a.Bonds due in three months (for which there is an adequate sinking fundclassified as a long-term investment).b.Bonds due in three years.c.Bonds (for which there is an adequate appropriation of retained earnings)due in eleven months.d.Bonds to be refunded when due in eight months, there being no doubtabout the marketability of the refunding issue.____4.On June 15, 2014 Stine Corporation accepted delivery of merchandise whichitpurchasedonaccount.AsofJune30Stinehadnotrecordedthetransaction or included the merchandise in its inventory. The effect of thiserror on its balance sheet for June 30, 2014 would bea.assets and stockholders’ equity were overstated but liabilities were notaffected.b.stockholders’ equity was the only item affected by the omission.c.assets and liabilities were understated but stockholders’ equity was notaffected.d.assets and stockholders’ equity were understated but liabilities were notaffected.____5.Reversing entries are most commonly used in relation to year-end adjustingentries thata.allocate the expired portion of a depreciable asset to expense.b.amortize intangible assets.c.provide for bad debt expense.d.accrue interest revenue on notes receivable.

Test Bank For Intermediate Accounting, 15th Edition - Page 2 preview image

Loading page ...

Test Bank For Intermediate Accounting, 15th Edition - Page 3 preview image

Loading page ...

Comprehensive Exam AA-2____6.Of the following adjusting entries, which one would cause an increase inassets at the end of the period?a.The entry to record the earned portion of rent received in advance.b.The entry to accrue unrecorded interest expense.c.The entry to accrue unrecorded interest revenue.d.The entry to record expiration of prepaid insurance.____7.Why is it necessary to make adjusting entries?a.The accountant has made errors in recording external transactions.b.Certain facts about the affairs of the business are not included in theledger as built up from external transactions.c.The accountant wants to show the largest possible net income for theperiod.d.The accountant wants to show the net cash flow for the year.____8.Notes to financial statements shouldnotbe used toa.describe the nature and effect of a change in accounting principles.b.identify substantial differences between book and tax income.c.correct an improper financial statement presentation.d.indicate basis for asset valuation.____9.Consistency is best demonstrated whena.expenses are reported as charges against the period in which incurred.b.the effect of changes in accounting methods is properly disclosed.c.extraordinary gains and losses are not reported on the income statement.d.accounting procedures are adopted which give a consistent rate of netincome.____ 10.The current assets section of a balance sheet shouldneverincludea.a receivable from a customer not collectible for over one year.b.the premium paid on short-term bond investment.c.goodwill arising from the purchase of a going business.d.customers' accounts with credit balances.

Test Bank For Intermediate Accounting, 15th Edition - Page 4 preview image

Loading page ...

Comprehensive Exam AA-3Problem A-II—Adjusting and Reversing Entries.The following list of accounts and their balances represents the unadjusted trial balanceof Alt Company at December 31, 2014:Cash$ 27,290Equity Investments (trading)60,000Accounts Receivable69,000Allowance for Doubtful Accounts$500Inventory54,720Prepaid Rent36,000Plant Assets160,000Accumulated Depreciation-Plant Assets14,740Accounts Payable11,370Bonds Payable90,000Common Stock170,000Retained Earnings97,180Sales Revenue214,800Cost of Goods Sold154,400Freight-Out11,000Salaries and Wages Expense32,000Interest Expense2,040Rent Revenue21,600Miscellaneous Expense890Insurance Expense12,850$620,190$620,190Additional Data:Problem A-II—(cont.)1.The balance in the Insurance Expense account contains the premium costs of threepolicies:Policy 1, remaining cost of $2,550, 1-yr. term, taken out on May 1, 2013;Policy 2, original cost of $9,000, 3-yr. term, taken out on Oct. 1, 2014;Policy 3, original cost of $1,300, 1-yr. term, taken out on Jan. 1, 2014.2.On September 30, 2014, Alt received $21,600 rent from its lessee for an eighteenmonth lease beginning on that date.3.The regular rate of depreciation is 10% per year. Acquisitions and retirements duringa year are depreciated at half this rate. There were no purchases during the year. OnDecember 31, 2013, the balance of the Plant and Equipment account was $220,000.4.On December 28, 2014, the bookkeeper incorrectly credited Sales Revenue for areceipt on account in the amount of $20,000.5.At December 31, 2014, salaries and wages accrued but unpaid were $4,200.6.Alt estimates that 1% of sales will become uncollectible.7.On August 1, 2014, Alt purchased, as a short-term investment, 60 $1,000, 6% bondsof Allen Corp. at par. The bonds mature on August 1, 2015. Interest payment datesare July 31 and January 31.

Test Bank For Intermediate Accounting, 15th Edition - Page 5 preview image

Loading page ...

Comprehensive Exam AA-48.On April 30, 2014, Alt rented a warehouse for $3,000 per month, paying $36,000 inadvance.Instructions(a)Record the necessary correcting and adjusting entries.(b)Indicate which of the adjusting entries may be reversed at the beginning of the nextaccounting period.

Test Bank For Intermediate Accounting, 15th Edition - Page 6 preview image

Loading page ...

Comprehensive Exam AA-5Problem A-III—Key Conceptual Terms.Various accounting assumptions, principles, constraints, and characteristics are listedbelow. Select those which best justify the following accounting procedures and indicatethe corresponding letter(s) in the space(s) provided. A letter may be used more thanonce or not at all.a.Historical costf.Economic entityk.Revenue recognitionb.Relevanceg.Cost constraintl.Full disclosurec.Monetary unith.Conservatismm. Faithfuld.Going concerni.Periodicityrepresentatione.Consistencyj.Expense recognition____1. Chose the solution that will be least likely to overstate assets or income.____2. Describing the depreciation methods used in the financial statements.____3. Applying the same accounting treatment to similar accounting events.____4. The quality which helps users make predictions about present, past, andfuture events.____5. Recording a transaction when goods or services are exchanged for cash orclaims to cash.____6. Preparing consolidated statements.____7. Information must make a difference or a company need not disclose it.____8. Provides the figure at which to record a liability.____9. The preparation of timely reports on continuing operations.____ 10. Accrual accounting (do not use "going concern").____ 11. Reporting those items which are significant enough to affect decisions. Selecttwo.____ 12. Additivity of financial statement figures relating to different time periods.____ 13. Ignoring the phenomenon of price-level changes (do not use "historical cost").____ 14. Not reporting assets at liquidation prices (do not use "historical cost").____ 15. Characterized by completeness, neutrality, and being free from error.____ 16. Establishment of an allowance for doubtful accounts.____ 17. Use of estimating procedures for amortization policies. Select two (do not use"periodicity") (17 and 18).____ 18. See item 17 above.

Test Bank For Intermediate Accounting, 15th Edition - Page 7 preview image

Loading page ...

Comprehensive Exam AA-6Problem A-IV—Balance Sheet Form.List the corrections needed to present in good form the balance sheet below. Errorsinclude misclassifications, lack of adequate disclosure, and poor terminology. Do notconcern yourself with the arithmetic. If an item can be classified in more than onecategory, select the category most favored by the authors of your textbook.Tanner CorporationBalance SheetFor the year ended December 31, 2014AssetsCurrent Assets:Cash$ 18,000Equity investmentstrading (fair value, $32,000)27,000Accounts receivable75,000Inventory60,000Supplies inventory3,000Investment in subsidiary company60,000$243,000Investments:Treasury stock78,000Tangible Fixed Assets:Buildings and land213,000Less: Reserve for depreciation60,000153,000Deferred Charges:Discount on bonds payable3,000Other Assets:Cash surrender value of life insurance54,000$531,000Liabilities and CapitalCurrent Liabilities:Accounts payable$45,000Reserve for income taxes42,000Customer's accounts with credit balances3$87,003Long-Term Liabilities:Bonds payable120,000Total Liabilities207,003Capital Stock:Capital stock225,000Earned surplus74,997Cash dividends declared24,000323,997$531,000

Test Bank For Intermediate Accounting, 15th Edition - Page 8 preview image

Loading page ...

Comprehensive Exam AA-7Problem A-V—Balance Sheet and Income Statement Classifications.Specify, to the left of each account, the letter of the financial statement classification theaccount would appear in. Use only the classifications shown.Balance SheetIncome and Retained EarningsStatementa.Current Assetsj.Sales Revenueb.Investmentsk.Cost of Goods Soldc.Property, Plant, and Equipmentl.Operating Expensesd.Intangible Assetsm. Other Revenues and Gainse.Other Assetsn.Other Expenses and Lossesf.Current Liabilitieso.Extraordinary Itemg.Long-term Debtp.Retained Earnings Sectionh.Capital Stockq.Not on the Statementsi.Retained EarningsAccount balances taken from the ledger of Morin Company on December 31, 2014follow:____1. Common Stock, $10 par_____ 16. Inventory____2. Loss on Disposal of Equipment_____ 17. Salaries and Wages Expense____3. Buildings_____ 18. Merchandise on order with supplier____4. Office Expense_____ 19. Interest Revenue____5. Allowance for Doubtful Accounts_____ 20. Selling Expenses____6. Notes Payable (Short Term)_____ 21. Interest Expense____7. Accum. Depreciation—Buildings_____ 22. Income Taxes Payable____8. Mortgage Payable due 2016_____ 23. Insurance Expense____9. Depletion Expense_____ 24. Advertising Expense____ 10. Freight-Out_____ 25. Equity Investments____ 11. Sales Revenue_____ 26. Accounts Receivable____ 12. Dividends_____ 27. Land____ 13. Retained Earnings Dec. 31,_____ 28. Accounts Payable2013_____ 29. Error made in computing 2012____ 14. Cashdepreciation expense____ 15. Sales Discounts_____ 30. Gain on Redemption ofDebt

Test Bank For Intermediate Accounting, 15th Edition - Page 9 preview image

Loading page ...

Comprehensive Exam AA-8Problem A-VI—Future Value and Present Value.In computing your answers to the cases below, you can round your answer to thenearest dollar. Present value tables are provided on the next page.Use the following information in answering Cases 1 and 2 below:On January 1, 2008, Gray Company sold $900,000 of 10% bonds, due January 1, 2018.Interest on these bonds is paid on July 1 and January 1 each year. According to theterms of the bond contract, Gray must establish a sinking fund for the retirement of thebond principal starting no later than January 1, 2016. Since Gray was in a tight cashposition during the years 2008 through 2013, the first contribution into the fund wasmade on January 1, 2014.Case 1: Assume that, starting with the January 1, 2014 contribution, Gray desires tomake a total of four equal annual contributions into this fund. Compute theamountofeachofthesecontributionsassumingtheinterestrateis8%compounded annually.Case 2: Assume, instead, that starting with the January 1, 2016 contribution, Graydesires to make a total of five equal semiannual contributions into this fund.Compute the amount of each of these contributions assuming the annualinterest rate is 12%, compounded semiannually.Case 3: On January 2, 2014, Nelson Company loaned $100,000 to Holt Company. Theterms of this loan agreement stipulate that Holt is to make 5 equal annualpaymentstoNelsonat10%interestcompoundedannually.Assumethepayments are to begin on December 31, 2014. Compute the amount of each ofthese payments.Case 4: Jim Marsh, a lawyer contemplating retirement on his 65th birthday, decides tocreate a fund on an 8% basis which will enable him to withdraw $60,000 peryear beginning June 30, 2017, and ending June 30, 2021. To provide this fund,he intends to make equal contributions on June 30 of each of the years 2012through 2016.(a)How much must the balance of the fund equal after the last contribution onJune 30, 2016 in order for him to satisfy his objective?(b)What are each of his contributions to the fund?

Test Bank For Intermediate Accounting, 15th Edition - Page 10 preview image

Loading page ...

Comprehensive Exam AA-9Table 1Future Value of 1Periods6%8%9%10%12%11.060001.080001.090001.100001.120021.123601.166401.188101.210001.254431.191021.259711.295031.331001.404941.262481.360491.411581.464101.573551.338231.469331.538621.610511.7623Table 2Present Value of 1Periods6%8%9%10%12%10.943400.925930.917430.909090.892820.890000.857340.841680.826450.797130.839620.793830.772180.751320.711740.792090.735030.708430.683010.635550.747260.680580.649930.620920.5674Table 3Future Value of an Ordinary Annuity of 1Periods6%8%9%10%12%11.000001.000001.000001.000001.000022.060002.080002.090002.100002.120033.183603.246403.278103.310003.374444.374624.506114.573134.641004.779355.637095.866605.984716.105106.3528Table 4Present Value of an Ordinary Annuity of 1Periods6%8%9%10%12%10.943400.925930.917430.909090.892821.833391.783261.759111.735541.690032.673012.577102.531302.486852.401843.465113.312133.239723.169863.037354.212363.992713.889653.790793.6047Table 5Present Value of an Annuity Due of 1Periods6%8%9%10%12%11.000001.000001.000001.000001.000021.943401.925931.917431.909091.892832.833392.783262.759112.735542.690043.673013.577103.531303.486853.401854.465114.312134.239724.169864.0373

Test Bank For Intermediate Accounting, 15th Edition - Page 11 preview image

Loading page ...

Comprehensive Exam AA-10Solutions—Comprehensive Examination AProblem A-I—Solution.1.a4.c7.b10.c2.d5.d8.c3.c6.c9.bProblem A-II—Solution.(a)1. Prepaid Insurance .......................................................................8,250Insurance Expense .........................................................8,250(Both Policies 1 and 3 have expired and their costsbelong in Insurance Expense. The monthly premiumon Policy 2 is $9,000 ÷ 36 = $250. At 12/31/14, 33 mos.of insurance, or $8,250, remains unexpired)2. Rent Revenue .............................................................................18,000Unearned Rent ................................................................18,000(Monthly rent is $21,600 ÷ 18 = $1,200. At 12/31/14,15 mos. of rent, or $18,000, remains unearned)3. Depreciation Expense .................................................................19,000Accumulated Depreciation ..............................................19,000[(Equipment retired during 2014 =$220,000–$160,000 = $60,000)10% of $160,000 =$16,0005% of $60,000 =3,000Total depreciation =$19,000]4. Sales Revenue ............................................................................20,000Accounts Receivable .......................................................20,000(To correct the entry made in error)5. Salaries and Wages Expense . ....................................................4,200Salaries and Wages Payable ..........................................4,2006. Bad Debt Expense ......................................................................1,948Allowance for Doubtful Accounts .....................................1,948(Corrected Sales Revenue balance is $214,800–$20,000= $194,800. 1% of $194,800 is $1,948.)7. Interest Receivable .....................................................................1,500Interest Revenue .............................................................1,500(Monthly interest is $60,000 × .06 × 1/12 = $300.5 months' accrued interest is $1,500)8. Rent Expense ..........................................................................24,000Prepaid Rent ................................................................24,000(To record 8 months' of rent expired at $3,000 per month)(b)1, 2, 5, and 7. Items No. 1 and No. 2 represent prepaid items that were initiallyrecorded in nominal accounts. Items No. 5 and No. 7 represent accrued items.

Test Bank For Intermediate Accounting, 15th Edition - Page 12 preview image

Loading page ...

Comprehensive Exam AA-11Problem A-III—Solution.1.h6.f11.l16.j2.l7.g12.c17.d3.e8.a13.c18.j4.b9.i14.d5.k10.j or k15.mProblem A-IV—Solution.1."For the year ended" in the title should be deleted.2.Equity investments should be reported at their fair value.3.TheamountofAllowanceforDoubtfulAccountsshouldbedisclosedanddeducted from Accounts Receivable.4.The inventory costing method (cost, lower of cost or market) and the basis forpricing the inventory (LIFO, FIFO, etc.) should be disclosed.5.Investment in Subsidiary should be classified as an investment.6.TreasuryStockismisclassifiedunderInvestments.Itshouldappearasadeduction from the Stockholders' Equity section.7.Buildings and Land should be separated.8."Reserve for" Depreciation should be "Accumulated" Depreciation.9.Discount on Bonds Payable should be classified with and deducted from BondsPayable.10.Cash Surrender Value of Life Insurance should be classified among Investments.11."Reserve" for Income Taxes should be titled Income Taxes Payable.12.The small balance of $3 for customer's accounts with credit balances, while noterroneouslyclassified,mightbeoffsetagainstandburiedintheAccountsReceivable account because it is so small in amount.13.The maturity date and the interest rate should be disclosed for the BondsPayable.14."Capital Stock" listed as a title should be "Stockholders' Equity;" "Capital stock"listed as an account should be “Common stock.”

Test Bank For Intermediate Accounting, 15th Edition - Page 13 preview image

Loading page ...

Comprehensive Exam AA-1215.More information relative to the capital stock, such as par value and the numberof shares authorized, issued, and outstanding should be disclosed.16."Earned surplus" should not be used; Retained Earnings is the preferred title.17.Cash dividends declared is actually Dividends Payable and should be classifiedas a current liability.Problem A-V—Solution.1.h7.c13.p19.m25.b2.n8.g14.a20.l26.a3.c9.k15.j21.n27.c4.l10.l16.a, k22.f28.f5.a11.j17.l23.l29.p6.f12.p18.q24.l30.mProblem A-VI—Solution.Case 1.$900,000 is the amount of an 8% annuity due for 4 periods. Use the tablefactor for the future value of an 8% ordinary annuity for 4 periods, and multiplyby (1.08):4.50611 × (1.08) = 4.86660.Periodic payments = $900,000 ÷ 4.86660 = $184,934Case 2.Since interest is compounded semiannually, divide the 12% annual interestrate by 2, and use the table factor for the future value of a 6% ordinary annuityfor 5 periods.Periodic payments = $900,000 ÷ 5.63709 = $159,657Case 3.$100,000 is the present value of a 10% ordinary annuity for 5 periods.Periodic payments = $100,000 ÷ 3.79079 = $26,380Case 4.(a) At June 30, 2016, the balance in the fund is the present value of an 8%ordinary annuity of $60,000 for 5 periods.Balance in the fund = $60,000 × 3.99271 = $239,563(b) At June 30, 2016, $239,563 is the future value of an 8% ordinary annuityfor five periods.Periodic payments = $239,563 ÷ 5.8666 = $40,835

Test Bank For Intermediate Accounting, 15th Edition - Page 14 preview image

Loading page ...

COMPREHENSIVE EXAMINATION BPART 2(Chapters 7–9)Problem B-I—Multiple Choice—Cash and Receivables.Choose thebestanswer for each of the following questions and enter the identifyingletter in the space provided.____1.When should the loss on an uncollectible account receivable be recorded asan expense for accrual accounting purposes?a.When it is determined that an account cannot be collected.b.In the same period in which the sale on account occurs.c.When the balance is past due for more than 3 months.d.When a lawyer indicates that collection efforts would cost more than theaccount is worth.____2.How should unearned discounts, finance charges, and interest included in theface amount of installment accounts receivable be presented in the balancesheet?a.As a current liability.b.As a deduction from the related installment accounts receivable.c.Within the net amount of installment accounts receivable.d.As an addition to the related installment accounts receivable.____3.DurlerCompany'saccountbalancesatDecember31forAccountsReceivable and the related Allowance for Doubtful Accounts are $1,200,000and $19,500, respectively. From an analysis of accounts receivable, it isestimated that $42,000 of the December 31 receivables will be uncollectible.After adjustment for the above facts, the net realizable value of accountsreceivable would bea.$1,200,000.b.$1,180,500.c.$1,138,500.d.$1,158,000.____4.Which group of items listed below should be included in the cash account?a.Silver coins, postage stamps, demand deposits, personal checks.b.Promissory notes, demand deposits, money orders, silver coins.c.Money orders, postdated checks, personal checks, time deposits.d.Silver coins, money orders, demand deposits, personal checks.____5.Which of the following methods of accounting for uncollectible accounts doesnot properly match costs with revenues?a.Percentage of salesb.Percentage of receivablesc.Direct write-offd.Aging schedule

Test Bank For Intermediate Accounting, 15th Edition - Page 15 preview image

Loading page ...

Comprehensive Exam BB-2____6.Certain information relative to the 2014 operations of Ball Co. follows:Accounts receivable, January 1, 2014$96,000Accounts receivable collected during 2014184,000Cash sales during 201448,000Inventory, January 1, 201472,000Inventory, December 31, 201466,000Purchases of inventory during 2014160,000Gross profit on sales54,000What is Ball's accounts receivable balance at December 31, 2014?a.$72,000.b.$84,000.c.$96,000.d.$132,000.Problem B-II—Lower of Cost or MarketPresented below is data relative to the 12/31/14 inventory of Lance Company:Number UnitsOriginal CostTotalCurrentItemIn InventoryPer UnitOriginal CostReplacement CostA5,000$1.09$5,450$1.08B5,0001.306,5001.25C5,0001.507,5001.05D5,0001.608,0001.65E5,0001.809,0001.50Total25,000$36,450AppropriateUpperLowerInventoryLimitLimitDesignatedValuationItem("Ceiling")("Floor")Market(Totals)ABCDETotalAdditional Data:Selling price is $2.00/unit for all items. Disposal costs amount to 10% of selling price anda "normal" profit is 35% of selling price.InstructionsComplete the last four columns above.

Test Bank For Intermediate Accounting, 15th Edition - Page 16 preview image

Loading page ...

Comprehensive Exam BB-3Problem B-III—Notes Receivable.On December 31, 2013 Berry Corporation sold some of its product to Flynn Company,accepting a 3%, four-year promissory note having a maturity value of $800,000 (interestpayable annually on December 31). Berry Corporation pays 6% for its borrowed funds.Flynn Company, however, pays 8% for its borrowed funds. The product sold is carriedon the books of Berry at a manufactured cost of $495,000. Assume Berry uses aperpetual inventory system.Instructions(a)PreparethejournalentriestorecordthetransactiononthebooksofBerryCorporation at December 31, 2013. (Assume that the effective interest method isused. Use the interest tables below and round to the nearest dollar.)(b)Make all appropriate entries for 2014 on the books of Berry Corporation.(c)Make all appropriate entries for 2015 on the books of Berry Corporation.For Use on Problem B-IIITable 1Future Value of 1Periods2%3%4%6%8%11.020001.030001.040001.060001.0800021.040401.060901.081601.123601.1664031.061211.092731.124861.191021.2597141.082431.125511.169861.262481.3604951.104081.159271.216651.338231.46933Table 2Present Value of 1Periods2%3%4%6%8%10.980390.970870.961540.943400.9259320.961170.942600.924560.890000.8573430.942320.915140.889000.839620.7938340.923850.888490.854800.792090.7350350.905730.862610.821930.747260.68058Table 3Future Value of Ordinary Annuity of 1Periodic Rents2%3%4%6%8%11.000001.000001.000001.000001.0000022.020002.030002.040002.060002.0800033.060403.090903.121603.183603.2464044.121614.183634.246464.374624.5061155.204045.309145.416325.637095.86660

Preview Mode

This document has 1193 pages. Sign in to access the full document!

Report

Study Now!

Document Details

Related Documents

Intermediate Accounting, Volume 2, 10th Canadian Edition Solution Manual

Intermediate Accounting, Volume 2, 10th Canadian Edition Test Bank

Intermediate Accounting, Volume 2, 10th Canadian Edition Lecture Notes

Accounting Principles II – Traditional Cost Systems

Accounting Principles II – Statement of Cash Flows

Accounting Principles II – Partnerships

Accounting Principles II – Managerial and Cost Accounting Concepts

Accounting Principles II – Long-Term Liabilities

Accounting Principles II – Investments

Accounting Principles II – Incremental Analysis

Company

Explore

Study Tools