Assignment
Part 1
1. The LIFO retail method assumes that markups and markdowns apply only to the goods purchased during the period.
True
False
2. The method of recording inventory at net realizable cost that substitutes the net realizable cost for the historical cost and reports the loss as a part of cost of goods sold is the:
cost of goods sold method.
gross profit method.
loss method.
replacement method.
3. In applying Lower-of-Cost-or-Market, the designated market value is
the higher of replacement cost or net realizable value less a normal profit margin.
net realizable value less a normal profit margin.
the lower of net realizable value or replacement cost.
the middle value of replacement cost, net realizable value and net realizable value less a normal profit margin.
4. Which one of the following is deducted from both the cost and retail columns in computing the cost-to-retail ratio?
Abnormal shortages.
Normal shortages.
Sales returns.
Employee discounts.
5. Lagasse Corporation's computation of cost of goods sold is:
|
Beginning Inventory
|
$160,000
|
|
Add: Cost of goods purchased
|
605,000
|
|
Cost of goods available for sale
|
765,000
|
|
Ending inventory
|
180,000
|
|
Cost of goods sold
|
$585,000
|
The average days to sell inventory for Lagasse are
106.1 days.
112.3 days.
100.0 days.
53.0 days.
6. In no case can "market" in the lower-of-cost-or-market rule be more than
estimated selling price in the ordinary course of business.
estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible future losses.
estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal.
estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin.
7. Which of the following statements about IFRS for inventory accounting is not true?
IFRS allows reversals of write-downs up to the amount of the previous write-down.
IFRS provide less detailed guidelines than GAAP for inventory accounting.
IFRS defines market value as replacement cost subject to the constraints of a ceiling and floor.
IFRS prohibits the use of LIFO.
8. When net realizable value is lower than cost, and the loss method applying the lower-of-cost-and-net-realizable approach of recording the write-down is used, what account is credited?
Allowance to Reduce Inventory to Market.
Inventory.
Cost of Goods Sold.
A loss account.
9. The replacement cost of an inventory item is $90. Net realizable value is $97.50. Net realizable value less a normal profit margin is $88.50. The cost of the item is $93. The designated market value used in applying Lower-of-Cost-or-Market is
$90.
$93.
$88.50.
$97.50.
10. The following data concerning the retail inventory method are taken from the financial records of Quarry Company.
|
|
Cost
|
Retail
|
|
Beginning Inventory
|
$98,000
|
$140,000
|
|
Purchases
|
448,000
|
640,000
|
|
Freight-in
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12,000
|
0
|
|
Net markups
|
0
|
40,000
|
|
Net markdowns
|
0
|
28,000
|
|
Sales
|
0
|
672,000
|
If the foregoing figures are verified and a count of the ending inventory reveals that merchandise actually on hand amounts to $108,000 at retail, the business has
realized a windfall gain.
sustained a loss.
no gain or loss as there is close coincidence of the inventories.
none of these answer choices are correct.
Part 2
1. The entry to record the sale of a plant asset at a loss includes a credit to Accumulated Depreciation.
True
False
2. Property, plant, and equipment includes
deposits on machinery not yet received.
idle equipment awaiting sale.
land held for possible use as a future plant site.
none of these answer choices would be classified as Property, plant, and equipment.
3. Watauga Company purchased equipment on July 1, 2017 for $70,000. Sales tax on the purchase was $700. Other costs incurred were freight charges of $800, insurance during shipping of $ 150, repairs of $1,300 for damage during installation, and installation costs of $1, 050. What is the cost of the equipment?
$71,500
$74,000
$70,000
$72,700
4. In an exchange that lacks commercial substance in which a gain exists and cash is received, the asset received is recorded at the:
fair value of the asset given up less cash received.
book value of the asset given up less the deferred portion of the gain.
book value of the asset given up less cash received.
fair value of the asset received less the deferred portion of the gain.
5. Property received through a contribution is to be recognized at its fair market value and offset with a credit entry to a:
Contribution Revenue account.
Paid-in Capital account.
Additional Paid-in Capital account.
Miscellaneous Gain account.
6. In an exchange of nonmonetary assets that lacks commercial substance in which a gain exists and no cash is paid or received, the asset received is recorded at:
book value of the asset received less the gain deferred.
book value of the asset given up plus the deferred gain.
fair value of the asset received less the gain deferred.
fair value of the asset given up less the deferred gain.
7. Texarkana Company exchanged equipment that cost $66,000 and has accumulated depreciation of $30,000 for equipment with a fair value of $48,000 and received $12,000 cash. The exchange lacked commercial substance. The gain to be recognized from the exchange is
$24,000 gain.
$4,800 gain.
$18,000 gain.
$6,000 gain.
8. Bogle Company purchased machinery for $320,000 on January 1, 2014. Straight-line depreciation has been recorded based on a $20,000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2018 at a gain of $6,000. How much cash did Bogle receive from the sale of the machinery?
$86,000.
$66,000.
$46,000.
$54,000.
9. Avoidable interest is the lesser of actual interest cost incurred during a fiscal period or the amount of interest cost incurred during the construction period that a company could theoretically avoid if it had not made expenditures for the asset.
True
False
10. Which of the following statements is true regarding capitalization of interest?
When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized.
The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period.
Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account.
The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.
Part 3
1. All of the following statements regarding IFRS accounting treatments for intangibles are true except:
IFRS allows reversal of impairment losses when there has been a change in economic conditions.
Under IFRS, costs in the development phase of Research & Development costs are expensed once technological feasibility is achieved.
IFRS permits some capitalization of internally generated intangible assets.
IFRS permits revaluation on limited-life intangible assets.
2. The residual value of an intangible asset should be assumed to be zero unless, at the end of its useful life, the intangible asset has value to another company.
True
False
3. Production backlogs fall under which category of intangible assets?
Customer-related.
Technology-related.
Marketing-related.
Artistic-related.
4. Which of the following would not be amortized?
Customer List.
Copyright.
Patent.
Trade name.
5. On July 1, 2017, Adele Company bought a trademark from Robert, Inc. for $2,750,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Robert's books was $1,600,000. In Adele's 2017 income statement, what amount should be reported as amortization expense?
$275,000.
$137,500.
$80,000.
$160,000.
6. Capitalizing goodwill only when it is purchased in an arm's-length transaction, and not capitalizing any goodwill generated internally, is an example of
GAAP winning out over IFRS.
faithful representation winning out over relevance.
accrual accounting winning out over cash-basis accounting.
financial accounting winning out over managerial accounting.
7. Which of the following is considered a research activity?
All of these answer choices are correct.
Construction of a prototype.
Operation of a pilot plant.
Critical investigation aimed at discovery of new knowledge.
8. Lumberyard Inc. incurred the following costs during the year ended December 31, 2017:
|
Laboratory research aimed at discovery of new knowledge
|
$ 4,295,000
|
|
Costs of testing prototype and design modifications
|
712,500
|
|
Quality control during commercial production, including routine testing of products
|
485,000
|
|
On December 31, 2017, purchase of research facilities having an estimated useful life of 20 years with alternative future use in other research & development projects
|
7,360,000
|
The total amount to be classified and expensed as research and development in 2017 is
$12,367,500.
$5,007,500.
$5,492,500.
$4,780,000.
9. IFRS permits revaluation of
goodwill.
limited-life intangible assets.
indefinite-life intangible assets.
all of these answer choices are correct.
10. Oscar Company acquired a patent on a manufacturing process on January 1, 2015 for $5,100,000. It was expected to have a 12 year life and no residual value. Oscar uses straight-line amortization for patents. On December 31, 2016, the expected future cash flows from the patent are $387,500 per year for the next ten years. The present value of these cash flows, discounted at Oscar's market interest rate, is $3,050,000. At what amount should the patent be carried on the December 31, 2016 balance sheet?
$3,050,000
$5,100,000
$4,250,000
$3,875,000.