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72.The FASB established the use of the terms "probable," "reasonably possible," and "remote." It adopted these terms because a. the available statistical techniques are not exact enough. b. the likelihood of occurrence of future events can vary over a wide range. c. future gains are not easy to estimate. d. unnecessary estimates should not be recorded in the.
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135.What are the four alternative valuations used in the application of the Retail Inventory Method? 136.What is dollar value LIFO retail method? 137.A purchase on credit is omitted from the purchases account, but ending inventory is correct. What is the effect of this error on the balance sheet for the current year?.
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93.Vanity Dog Products had the following account balances. 2015 2016 Cash $  76,000 $  89,000 Marketable Securities 135,000 98,000 Account Receivables 67,800 99,500 Inventory 45,000 25,000 Plant Assets 145,000 155,000 Accounts Payable 145,600 199,500 Notes Payable, Short Term 25,000 45,000 Notes Payable, Long Term 100,000 55,000 Mortgage Payable 145,000 145,000 Common Stock 1,000,000 1,000,000 Retained Earnings $ 265,000 $ 297,500   Required: Compute the following: 1) The 2015 Quick Ratio 2) The 2015 Current Ratio 3) The 2016 Quick Ratio 4) The 2016 Current Ratio 5) What was net income for 2016, assuming no dividends were paid? 6) Did the.
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95.Culiver, Inc. is constructing a building that qualifies for interest capitalization. The following information is available:Capitalization period: January 1, 2016-December 31, 2017 Expenditures on project (incurred evenly): 2016 $20,000 2017 $60,000 Amounts borrowed and outstanding (all debt incurred January 1, 2016): $10,000 at 10% (specifically for the construction project) $18,000 at 12% (general debt) $30,000 at 14% (general debt) ? Required: a. Compute the amount.
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146.Careful valuation of the ending inventory is necessary because errors can result in inaccurate values on both the income statement and balance sheet. Assume that a company overstates its ending inventory for 2016. ? Required: ? Explain the effects of the error on the income statements and balance sheets for 2016 and 2017. .
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11.The FASB recommends that assets and liabilities with differing liquidities be arranged as separate items in the balance sheet. a.True b.False 12.Assets and liabilities with differing implications for financial flexibility should be reported together. a.True b.False 13.All of the following are examples of legal liabilities except a.notes payable. b.sales tax payable. c.sick pay payable (may be taken as time.
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21.On the balance sheet, liabilities are generally classified as a.current or long-term. b.legal or nonlegal. c.material or immaterial. d.probable or estimated. 22.Current liabilities are obligations of a company that it expects to liquidate within a.one year. b.the normal operating cycle. c.the normal operating cycle or one year, whichever is longer. d.the normal operating cycle or one year, whichever is.
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111.Costs that are incurred after acquiring a piece of property, plant, or equipment are for a variety of reasons, ranging from routine repairs to major overhauls and improvements. The accountant's problem is to determine how these costs should be recorded.Required:Identify the two categories of expenditures in which these costs can.
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113.List and describe the three characteristics of a liability. 114.Liabilities are defined as probable future sacrifices of economic benefits arising from present obligations. Explain what the FASB means by probable and by obligations. 115.How are current liabilities classified? Provide an example of each . 116.?Conceptually, how should current liabilities be valued? In practice, how.
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72.?On January 1, 2011, Barton Sinks purchased a metal-bending machine for $4,000,000 with an expected useful life of 10 years with no residual value. The machine is depreciated on a straight-line basis. On January 1, 2016, the company overhauled the machine at a cost of $1,000,000. This extended the expected.
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118.List five examples of liabilities whose amounts are determined by operating activities. 119.List five examples of liabilities that are based upon contingent obligations. ? 121.What are the FASB’s broad guidelines for reporting assets, liabilities, and equity on the balance sheet? 122.Under what conditions can a short-term obligation be classified as a long-term liability? .
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105.When a company constructs an asset for use in its operations there are two alternatives for a company to include overhead costs in the cost of the asset. What are the two alternatives? 106.Interest can be capitalized only for qualifying assets. Provide examples of assets that do notqualify for interest capitalization. 107.How.
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140.Draper Company's controller was explaining to the company's president, Dana Draper, that if the inventory's value should decrease below its original cost, the inventory must be written down and a loss must be recognized. The controller told the president that this is called the lower of cost or market rule..
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102.Mason Company makes sales on which an 6% sales tax is assessed. The following summary transactions were made during 2015: a. Cash sales of $900,000, excluding sales taxes. b. Credit sales of $2,150,000, including sales taxes. c. Sales taxes of $213,500 were paid to the state. ? Required:Prepare journal entries to record the preceding transactions. (Round to the.
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121.Guinea, Inc. adopted the dollar-value LIFO retail inventory method on January 1, 2016, when the price index was 100. The following information was taken from company records on December 31, 2016, when the price index was 110. Cost Retail Sales $190,000 Additional markups 18,000 Markup cancellations 6,000 Markdowns 8,000 Markdown cancellations 2,000 Inventory, January 1 $ 14,400 20,000 Purchases 158,000 199,000 Purchase returns 4,000 5,000   Required:Compute the cost of the December 31,.
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123.Donahue adopted the dollar-value LIFO retail inventory method on January 1, 2016. The following information for 2016 was taken from the company's records: Cost Retail Sales $189,000 Net markups 6,000 Inventory, January 1, 2016 $ 21,000 30,000 Purchases 147,000 200,000 Net markdowns 10,700 ? The price index on January 1, 2016, was 100. On December 31, 2016, it was 110. Round cost/retail percentages to the nearest.
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107.The Captain Company began operations on January 1, 2016. In 2016, Captain’s sales were $400,000, and payments arising out of warranty obligations were $18,000. Required: a. Assume that this is an assurance-type warranty and $0.10 of warranty cost will be incurred for each $1.00 of sales. Prepare the 2016 journal entry(ies) for warranty.
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124.Discuss how current GAAP requirements concerning accounting for compensated absences vary for vacation pay and sick pay. 125.Explain the deficiencies in accounting for warranty costs under the modified cash basis. 126.IFRS accounting for contingencies differs from U.S. GAAP in several details. Briefly describe three of those differences. 127.A client is involved in several.
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22.Which of the following terms is not a common alternative for the term “property, plant, and equipment?” a. fixed assets b. operational assets c. plant assets d. capital investments 23.Which of the following is a major difference between IFRS and GAAP regarding valuation of property, plant, and equipment? a. IFRS allow valuation increases to be recorded in certain circumstances, but GAAP.
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125.Information: ? Net Income Error in Year per Books Ending Inventory 2013 $75,000 $2,000 Overstatement 2014 54,000 2,800 Understatement 2015 96,000 1,900 Overstatement Required:Assuming that no corrections were made in any year, compute the correct income for each of the three years. 126.Certain errors are listed below. Effect on Error Cost ofGoods Sold AccountsPayable a. Ending inventory is overstated because of a miscount. ________ ________ b. Merchandise received was not recorded in the purchases account, but it was included in.
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11.An expenditure to improve an asset can be added to the depreciable basis of that asset if the expenditure extends the life of the asset. a.True b.False 12.Under IFRS, the costs of relocating property, plant, and equipment can be capitalized as assets and depreciated over the period of expected benefit. a.True b.False 13.Under the full-cost method,.
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78.During 2014, the Tidel Company completed the following transactions related to its property, plant, and equipment accounts: a. On March 18, Tidel paid $480,000 for land, buildings, and equipment in a lump-sum purchase. An appraisal that cost Tidel $10,000 revealed fair market values of $200,000 for the land, $150,000 for the buildings,.
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91.Mathison Company exchanged a worn-out tractor that had cost $30,000 and was half depreciated for a new tractor with a fair value of $12,000. Mathison paid an additional $4,500 cash. The transaction lacked commercial substance. ? Required: ? Compute the amount at which Mathison should record the new tractor. 92.Assuming that the effects of interest.
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111.Listed below are several types of contingencies for the Kellher Company: ? a. The company has signed as a guarantor of a loan that one of its key suppliers has taken out with a local bank. The probability of the supplier defaulting on the note is remote. b. The company is suing another firm for.
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80.Several expenditures are listed below: Yes No a. Landscaping ______ ______ b. Compensation for injury to construction worker ______ ______ c. Cost of overhaul before initial use ______ ______ d. Cost of tearing down a building on newly acquired land ______ ______ e. Land held as a plant site for future use ______ ______ f. Fully depreciated assets still being used ______ ______ g. Leasehold improvements ______ ______ h. Deposits on machinery not yet received ______ ______ Required:Indicate whether or not each expenditure would be.
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11.Assets sold on or before the 15th are not considered owned for the month based on the nearest whole month convention. a.True b.False 12.The nearest whole year depreciation convention considers assets acquired during the last 6 months of the year to have been owned for the entire year. a.True b.False 13.A requirement of GAAP is that.
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88.Wilhelm Company exchanged a piece of equipment with a cost of $300,000 and accumulated depreciation of $240,000 for land owned by James Corporation. No cash was exchanged. James' land had an original cost of $190,000. At the date of exchange, both assets had a fair market value of $180,000. Required: Prepare the.
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32.On December 1, 2015, Sons, Inc. borrowed money at the bank by signing a 90-day non-interest-bearing note for $40,000 that was discounted at 12%. Which of the following entries is not correct? a. December 31, 2015 ?Interest Expense 400 Discount on Note Payable    400 ? b. Feb. 1, 2016 ?Interest Expense 800 Discount on Note Payable    800 ? c. December.
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82.When selecting within a range of outcome estimates for probable contingencies, the requirements of IFRS and GAAP, respectively, are to accrue what amount in the range? IFRS GAAP I. minimum minimum II. midpoint minimum III. minimum midpoint IV. midpoint midpoint a. I b. II c. III d. IV 83.Which of the following is the most appropriate way to display liabilities on the balance sheet? a. nearness to maturity b. relative likelihood of payment c. alphabetically by payee d. All of the.
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1.Liabilities are defined as probable future sacrifices of economic benefits arising from present obligations of a company to provide services or assets in the future as defined by the FASB. a.True b.False 2.Vacation pay and year-end bonuses would be considered legal liabilities. a.True b.False 3.The ability to utilize financial resources and to adapt to changes in.
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61.Refer to Exhibit 9-3. What amount should John record as premium expense for 2016? a. $121,250 b. $450,000 c. $375,000 d. $500,000 62.Refer to Exhibit 9-3. What amount should John report as estimated premium claims outstanding at December 31, 2016? a. $121,250 b. $328,750 c. $450,000 d. $500,000 63.Barlo Lunch Snacks places a coupon in each box of its cracker product. Customers may send in five coupons and.
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21.Which one of the following statements is not true? a.Depreciation is the process of allocating the purchase price of an asset minus its residual value to expense for each period benefited by the asset. b.The cost of an asset includes all acquisition costs necessary to obtain the benefits to be derived from.
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42.Sick pay benefits that are related to an employee's services already rendered, whose payment is probable and whose amount can reasonably be estimated, must be accrued and recognized as a current liability if the obligation relates to rights that Accumulate Vest I. No No II. No Yes III. Yes No IV. Yes Yes a. I b. II c. III d. IV 43.Unearned revenue (also called deferred revenue) canoccur when a. services are provided prior to.
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1.One advantage of recording property, plant, and equipment at historical costs is that historical cost is equal to the fair value on the purchase date. a.True b.False 2.GAAP requires a company to report its property, plant, and equipment at fair value less accumulated depreciation. a.True b.False 3.Improvements made to a leased property should be capitalized over.
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130.Describe the lower of cost or market rule. 131.Replacement costs are measured based upon GAAP’s requirement of an upper and a lower constraint on the market value. What are the upper and lower constraints? 132.Under special circumstances GAAP allows a company to report its inventory above cost. How must this exception be.
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62.All of the following are arguments in favor of including only the incremental fixed overhead costs in the cost of a self-constructed asset, except that the a. cost of the asset is the additional cost incurred to produce it. b. overhead would be incurred whether or not the construction took place. c. asset cost will more.
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1.The service life of an asset can only be measured in units of activity or output. a.True b.False 2.GAAP allows companies to choose between time-based, activity, group, or composite cost allocation methods, but once the method is chosen it must be applied consistently over time. This ensures that financial information is comparable. a.True b.False 3.The depreciation.
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100.What three characteristics must an asset have in order for it to be classified as property, plant and equipment? 101.What are several advantages of recording property, plant, and equipment at historical cost? 102.List five acquisition costs that can be included in the cost of land. 103.List five costs that can be included as.
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97. The following events occurred for Rams Machinery during the second quarter of 2016: April 1 Trucks needed new brakes at a cost of $750. April 15 Replaced engine on large machine at a cost of $3,500, the replacement will improve capacity May 4 A freak hurricane damages some equipment. Repairs cost $1,850 June 30 Office improvements of carpet cost $1,500, painting cost.
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95.On March 1, 2016 Giant Jumbo Clown Costumes borrowed money from their bank Second Friendly National Bank by issuing a $125,000, 180 day, non-interestbearing note. The note was discounted to 13.5%. ? Compute the following: ? 1) How much money did Giant Jumbo receive? ? 2) What was the total amount of interest paid? ? 3) What is.
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32.The president of Christmas Corporation donated a building to Tuesday Corporation. The building had an original cost of $675,000, a book value of $255,000, and a fair market value of $475,000. The journal entry by Tuesday Corporation to record this donation will include a a. debit Building for $255,000 and credit Gain.
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42.Samos, Inc. purchased certain plant assets under a deferred payment contract. The agreement was to pay $75,000 at year-end for each of the next three years. The plant assets should be valued at a. present value of a $75,000 annuity for three years discounted at the bank prime interest rate. b. $225,000. c. present value of.
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31.Which of the following depreciation methods should be used when the expected benefits to be received from an asset will decline each period? a.straight-line method b.units-of-production method c.sum-of-the-years'-digits method d.compound-interest method 32.Which depreciation method calculates annual depreciation expense based on the book value of the asset? a.double-declining-balance method b.sum-of-the-years'-digits method c.inventory systems method d.group method 33.Many companies that use the.
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82.The Nathan Jacob’s Company paid $450,000 to acquire land, building, and equipment. At the time of the acquisition Nathan paid $15,000 to have the property appraised. The following values were determined from the appraisal: land, $125,000; building, $235,000; and equipment, $150,000. ? Required: 1) What cost should Nathan Jacob’s assign to the land,.
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