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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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111.After the auditors counted the inventory of the Cracker Jack Manufacturing Co. and reviewed the accounting records something appeared to be amiss. Inventory that was counted totaled $ 295,000. ? Inventory (1/16) $130,000 Purchases (2016) 760,000 Sales (2016) 1,020,000 Sales returns (2016) 60,000 Gross profit ratio 35% of sales ? Using the gross profit method, what did the auditors estimate as the amount.
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71.Laura’s Department Store uses the average cost retail inventory method to determine its ending inventory. The accounting records for the current year for Laura’s contained the following information: Cost Retail Purchases $71,200 $87,750 Beginning inventory 17,000 23,500 Sales 98,000 Net markups 6,500 Net markdowns 3,000 ? In addition, the accounting records for Laura’s disclosed that purchases returns at cost and retail were $1,950 and $4,250, respectively..
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82.The dollar-value LIFO retail method a. combinesthe principle of retail LIFO with dollar-value LIFO. b. does not really include retail LIFO in thecalculation process. c. is a new principle. d. is an interesting theoretical exercise that is rarely used in practice. 83.What is the effect on net income if a company fails to record a purchase in transit (FOB.
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32.The major criticism of the lower of cost or market rule for valuation of inventory is that. a. holding losses are recognized, but holding gains are not. b. holding gains are recognized, but holding losses are not. c. the total difference between selling price and cost is usually recognized in the period of the sale. d. the conservatism.
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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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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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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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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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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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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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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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103.The information below is provided for Sea Company: Ending Inventory Price Year End-of-Year Prices Index 2014 $ 90,000 100 2015 97,650 105 2016 103,550 109 2017 109,760 112   Required: a. Compute Sea Company’s 2016 ending inventory using dollar-value LIFO. b. Explain why a company would want to use dollar-value LIFO. .
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Exhibit 8-2The Dormer Company uses the gross profit method to estimate its inventory in interim financial statements. The markup on cost is 50%. The following information is available: January 1, 2016, inventory balance $12,500 Purchases 25,000 Sales during January 24,000 42.Refer to Exhibit 8-2. The estimated inventory at January 31, 2016, is a. $25,500 b. $21,500 c. $16,000 d. $12,000 43.Refer to Exhibit 8-2. The estimated.
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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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105.The following information for five products (A-E) was taken from the inventory records of the Walker Company: ? Product A B C D E # of Units 175 200 250 200 300 Unit cost $5.50 $10.00 $5.10 $5.10 $5.00 Replacement cost per unit $6.00 $9.00 $4.60 $4.50 $4.50 Net realizable value (NRV) per unit $5.20 $12.50 $7.00 $7.00 $7.00 NRV–Normal profit per unit $4.80 $10.30 $5.25 $4.00 $4.80 ? Required:Determine the valuation of the inventory at the lower of cost or market applied to: a. individual items b. the inventory as a whole .
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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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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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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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62.Barbara Co. presents the following information: Cost Retail Net markups $  785 Sales 2,850 Purchases $1,570 2,150 Net markdowns 50 Beginning inventory 300 350 The company uses the average cost retail inventory method. What is the cost of ending inventory? a. $233.55 b. $255.98 c. $275.80 d. $222.55 63.Which one of the following statements is false concerning the retail inventory method? a. Net markups and markdowns are always added and subtracted in order to compute the.
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92.The accountant for Lee Company made the following errors related to merchandise inventory in 2016: 1. The beginning inventory for 2016 was overstated by $750 due to an error in the physical count. 2. A $1,300 purchase of merchandise on credit was not recordedand was notincluded in the ending inventory. ? Assuming a periodic inventory system,.
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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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12.If a purchase on credit is omitted from the purchase account in error and ending inventory is correctly determined, net income for the period would be understated. a. True b. False 13.If ending inventory is overstated for the current period due to a costing error but purchases are correct, the balance sheet at the end.
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113.Yamachi Inc. incurred a loss from a flash flood on July 20, 2016. The following information was available from the company's accounting records: Gross profit on cost 20% Beginning inventory, 1/1/6 $18,000 Sales, 1/1/14-7/20/6 85,000 Sales returns 2,500 Cost of goods not destroyed 3,500 All purchases of merchandise are on account. The accounts payable balance on January 1, 2016, was $16,500,.
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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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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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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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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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105.Cabinets for Less uses FIFO for internal reporting purposes and LIFO for financial and income tax purposes. At the end of 2016, the following information was obtained from the inventory records: 2015 2016 Ending inventory, FIFO $78,650 $93,250 Ending inventory, LIFO 68,500 78,350   Required:Prepare the necessary entry to convert to LIFO at the end of 2016. 106.Richardson’s Flower Depot uses.
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121.One of the disadvantages of the LIFO cost flow assumption is the impact of the liquidation of LIFO layers.Required: a. Explain what is meant by inventory liquidation under the LIFO cost flow assumption. b. Discuss why this may be a serious problem for LIFO but not for FIFO. 122.Even though the LIFO cost flow assumption.
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117.What three difficulties does dollar-value LIFO overcome compared to applying simple LIFO? 118.What is the LIFO Valuation Allowance, also known as LIFO reserve? 119.There are many different methods available for costing inventory. Therefore, the decision on which method to select should involve some serious thought as to the consequences involved.Required: a. Discuss the objectives.
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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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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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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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1.Reporting inventory at the lower of cost or market provides a representationally faithful value of inventory; therefore, the application of the lower of cost or market rule is consistent with the materiality principle. a. True b. False 2.The Net Realizable Value is considered the ceiling that prevents inventory from being valued at amount higher than.
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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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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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115.The Brad’s Farm Company uses the retail inventory method to compute ending inventory. Information for last yearis as follows: Cost Retail Beginning inventory $12,000 $20,000 Net markups 8,000 Purchases 40,000 80,000 Freight-in 7,100 Purchase returns 3,000 6,000 Sales 50,000 Net markdowns 4,000 ? Required:Determine Brad’s Farm Company's ending inventory based on the retail lower of average cost or market method. 116.The Baby Super Store uses the average cost retail inventory method to.
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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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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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107.Given the following information for the Lawrence Company: ? ? ? NRV Minus Net ? ? ? Normal Realizable Replacement Item Cost Profit Value Cost a $ 3.40 $ 2.79 $ 4.14 $ 4.65 b 36.00 28.80 32.40 27.60 c 2.40 1.32 1.56 1.94 d 6.00 5.55 6.15 6.30 e 24.00 20.40 22.80 21.00 f 13.35 10.55 12.30 12.90 Required:Determine the lower of cost or market for each inventory item. .
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