ACC questions

Question 1

Kraft Enterprises owns the following assets at December 31, 2012.
Cash in bank–savings account 65,822 Checking account balance 24,927
Cash on hand 9,896 Postdated checks 939
Cash refund due from IRS 34,114 Certificates of deposit (180-day) 98,660
What amount should be reported as cash?

Question 2

Presented below is information related to Rembrandt Inc.'s inventory.
(per unit)                                             Skis                 Boots               Parkas
Historical cost                                     $261.25           $145.75           $72.88
Selling price                              298.38             199.38           101.41
Cost to distribute                       26.13                11.00              3.44
Current replacement cost         279.13              144.38            70.13
Normal profit margin                             44.00                39.88             29.22
Determine the following:
(a) the two limits to market value (e.g., the ceiling and the floor) that should be used in the lower of cost or market computation for skis; (Round answers to 2 decimal places, e.g. 20.25.)

(b) the cost amount that should be used in the lower of cost or market comparison of boots; (Round answer to 2 decimal places, e.g. 20.25.)

(c) the market amount that should be used to value parkas on the basis of the lower of cost or market. (Round answer to 2 decimal places, e.g. 20.25.)
Question 3

Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 63 units that cost $38 each. During June, the company purchased 189 units at $38 each, returned 8 units for credit, and sold 158 units at $63 each. Journalize the June transactions.

Question 4

Amsterdam Company uses a periodic inventory system. For April, when the company sold 700 units, the following information is available.
                                                Units               Unit Cost                    Total Cost
April 1 inventory                     250                  $14                              $3,500
April 15 purchase        400                    17                                6,800
April 23 purchase        350                   18                                 6,300
                                                1,000                                       $16,600
Compute the April 30 inventory and the April cost of goods sold using the average cost method. (Round computations for cost per unit to 2 decimal places, e.g. 10.25 and answers to 0 decimal places, e.g. 2,250.) 

Question 5

Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available.
                                                Units               Unit Cost                    Total Cost
April 1 inventory                     250                  $16                              $4,000
April 15 purchase        400                     19                              7,600
April 23 purchase        350                      21                              7,350
                                                1,000                                       $18,950
Compute the April 30 inventory and the April cost of goods sold using the FIFO method.

           Question 6

(FIFO, LIFO, Average Cost Inventory)
Esplanade Company was formed on December 1, 2011. The following information is available from Esplanade's inventory records for Product BAP.
                                                            Units               Unit                 Cost
January 1, 2012

   (beginning inventory)           756                  $8.00
Purchases:
January 5, 2012                                   1,512   9.00
January 25, 2012                     1,638   10.00
February 16, 2012                   1,008   11.00
March 26, 2012                                      756   12.00
A physical inventory on March 31, 2012, shows 2,016 units on hand.
Prepare schedules to compute the ending inventory at March 31, 2012, under each of the following inventory methods. Assume Esplanade Company uses the periodic inventory method.
Question 7

Floyd Corporation has the following four items in its ending inventory.
            Item     Cost                 Replacement Cost       Net Realizable Value (NRV) NRV Less Normal Profit Margin

Jokers             $2,508             $2,571             $2,633             $2,006
Penguins                      6,270               6,395   6,207             5,141
Riddlers                      5,518   5,706   5,800               4,640
Scarecrows      4,013   3,749               4,803  3,850

Determine the final lower of cost or market inventory value for each item.

Question 8

Kumar Inc. uses a perpetual inventory system. At January 1, 2013, inventory was $305,164 at both cost and market value. At December 31, 2013, the inventory was $407,836 at cost and $383,594 at market value. Prepare the necessary December 31 entry under:

(a) the cost of goods sold method

            Description/Account                           Debit               Credit
            Cost of goods sold                              24,242

                        Merchandise Inventory                                                           24,242

(b) the loss method

            Description/Account Debit Credit
            Abnormal stock loss                            24,242

                        Merchandise Inventory                                                           24,242
Question 9
Boyne Inc. had beginning inventory of $12,960 at cost and $21,600 at retail. Net purchases were $129,600 at cost and $183,600 at retail. Net markups were $10,800; net markdowns were $7,560; and sales were $169,560. Compute ending inventory at cost using the conventional retail method. (Round computation for cost-to-retail ratio percentage and answer to 0 decimal places, e.g. 25,250.)
Ending inventory $

 Question 10

(Gross Profit Method)
Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
            Inventory, May 1                                $200,000
            Purchases (gross)                       800,000
            Freight-in                                                37,500
            Sales                                        1,250,000
            Sales returns                                 87,500
            Purchase discounts                       15,000
(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.

Question 13

Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $387,450. The estimated fair values of the assets are land $73,800, building $270,600, and equipment $98,400. At what amounts should each of the three assets be recorded? (Note: Do not round the computation of the % of total.)
Question 14

Fielder Company obtained land by issuing 2,000 shares of its $13 par value common stock. The land was recently appraised at $113,900. The common stock is actively traded at $55 per share. Prepare the journal entry to record the acquisition of the land. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Question 15

Navajo Corporation traded a used truck (cost $22,200, accumulated depreciation $19,980) for a small computer worth $4,107. Navajo also paid $1,110 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

            
Question 16

Mehta Company traded a used welding machine (cost $11,070, accumulated depreciation $3,690) for office equipment with an estimated fair value of $6,150. Mehta also paid $3,690 cash in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

          Question 17

Depreciation is normally computed on the basis of the nearest

full month and to the nearest cent.
full month and to the nearest dollar.
day and to the nearest cent.
day and to the nearest dollar.
Question 18

Fernandez Corporation purchased a truck at the beginning of 2012 for $56,280. The truck is estimated to have a salvage value of $2,680 and a useful life of 214,400 miles. It was driven 30,820 miles in 2012 and 41,540 miles in 2013. Compute depreciation expense for 2012 and 2013.(Round answers to 0 decimal places, i.e. 2,250.)

Question 19

Lockhard Company purchased machinery on January 1, 2012, for $75,000. The machinery is estimated to have a salvage value of $7,500 after a useful life of 8 years.

(a) Compute 2012 depreciation expense using the double-declining balance method.

(b) Compute 2012 depreciation expense using the double-declining balance method assuming the machinery was purchased on October 1, 2012.(Round answer to 0 decimal places, i.e. 2,250.)

Question 20

Jurassic Company owns machinery that cost $1,013,400 and has accumulated depreciation of $405,360. The expected future net cash flows from the use of the asset are expected to be $563,000. The fair value of the equipment is $450,400. Prepare the journal entry, if any, to record the impairment loss.

Question 21

Everly Corporation acquires a coal mine at a cost of $505,200. Intangible development costs total $126,300. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $101,040), after which it can be sold for $202,080. Everly estimates that 5,052 tons of coal can be extracted. If 884 tons are extracted the first year, prepare the journal entry to record depletion.

Question 22

Francis Corporation purchased an asset at a cost of $46,000 on March 1, 2012. The asset has a useful life of 8 years and a salvage value of $4,600. For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2012–2017.

(Round answers to 0 decimal places.)

Question 23

Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2012, for $55,480. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10 years. Prepare Celine Dion's journal entries to record the purchase of the patent and 2012 amortization.

Question 24

Karen Austin Corporation has capitalized software costs of $832,900, and sales of this product the first year totaled $409,980. Karen Austin anticipates earning $956,620 in additional future revenues from this product, which is estimated to have an economic life of 5 years. Compute the amount of software cost amortization for the first year.

(a) Compute the amount of software cost amortization for the first year using the percent of revenue approach.

(b) Compute the amount of software cost amortization for the first year using the straight-line approach.

Question 25

Jeff Beck is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2012, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Beck had had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Beck in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Beck appears inclined to accept the Railroad's offer. The Railroad's 2012 financial statements should include the following related to the incident:

creation of a liability only.
recognition of a loss and creation of a liability for the value of the land.
recognition of a loss only.
disclosure in note form only

Question 26

Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased $62,000 of inventory, terms 2/10, n/30, FOB shipping point. Roley paid freight costs of $1,470. On July 3, Roley returned damaged goods and received credit of $6,200. On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley. (For multiple debit/credit entries, list amounts from largest to smallest, e.g. 10, 8, 6.)

Question 27

Takemoto Corporation borrowed $68,400 on November 1, 2012, by signing a $69,939, 3-month, zero-interest-bearing note. Prepare Takemoto's November 1, 2012, entry; the December 31, 2012, annual adjusting entry; and the February 1, 2013, entry. (For multiple debit/credit en tries, list amounts from largest to smallest, e.g. 10, 8, 6. Round all answers to 0 decimal places, e.g. 11,150.)

Question 28

Whiteside Corporation issues $592,000 of 9% bonds, due in 16 years, with interest payable semiannually. At the time of issue, the annual market rate for such bonds is 10%. Compute the issue price of the bonds. (Use the present value tables in the text. Round your answer to zero decimal places, e.g. 2,510.)

Question 29

Indiana Jones Company enters into a 6-year lease of equipment on January 1, 2012, which requires 6 annual payments of $40,540 each, beginning January 1, 2012. In addition, the lessee guarantees a residual value of $20,860 at lease-end. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the carrying amount of the machinery is $197,246.

Prepare Lost Ark's January 1, 2012, journal entries.
 Question 30

On January 1, 2012, Irwin Animation sold a truck to Peete Finance for $25,250 and immediately leased it back. The truck was carried on Irwin's books at $17,850. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requires five equal rental payments of $7,005 at the end of each year. The appropriate rate of interest is 12%, and the truck has a useful life of 5 years with no salvage value. Prepare Irwin's 2012 journal entries. (Round your answer to the nearest dollar eg 58,591. For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)