ACCT 557 Midterm + Final Exam 2023 Business Finance
2023 ACCT 557 Intermediate Accounting III DeVry Winter 2016 ACCT 557 Week 4 Midterm Exam Date Taken 2016 Question
ACCT 557 Intermediate Accounting III
(DeVry – Winter 2016)
ACCT 557 Week 4 Midterm Exam
# Of Questions:
(TCO A) In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the
(TCO A) Tim Construction Co. began operations in 2014. Construction activity for 2014 is shown below. Tim uses the percentage of completion method.
What amount of Gross Profit should Tim show on the Income Statement of 2014 related to Contract 2?
(TCO B) K Corporation’s partial income statement after its first year of operations is as follows:
Income before Income Taxes $3,750,000
Income Tax expense
Net Income $2,655,000
K uses the straight-line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $1,000,000. No other differences existed between book income and taxable income except for the amount of depreciation.
Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation’s tax return for the current year?
(TCO B) Deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent based on
(TCO C) On January 1, 2008, Nen Co. has the following balances:
Projected benefit obligation $4,200,000
Fair value of plan assets 3,750,000
The settlement rate is 10%. Other data related to the pension plan for 2014 are:
Service cost $240,000
Amortization of unrecognized prior service costs 54,000
Benefits paid 225,000
Actual return on plan assets 264,000
Amortization of unrecognized net gain 18,000
The balance of the projected benefit obligation at December 31, 2014 is
(TCO C) Presented below is pension information related to Woods, Inc. for the year 2013.
Service cost $84,000
Interest on projected benefit obligation $46,000
Interest on vested benefits $30,000
Expected return on plan assets $21,000
The amount of pension expense to be reported for 2013 is
(TCO D) Capitalization of lease requires which of the following?
(TCO D) Pirate, Inc. leased equipment from Shoreline Enterprises under a four-year lease requiring equal annual payments of $320,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pirate, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by ,Pirate Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the amount of interest expense recorded by Pirate, Inc. in the first year of the asset’s life?
PV Annuity Due PV Ordinary Annuity
8%, 4 periods 3.5771 3.31213
10%, 4 periods 3.48685 3.16986
(TCO D) On January 2, 2013, Bentley Co. leases equipment from Harry’s Leasing Company with five equal annual payments of $30,000 each, payable beginning December 31, 2013. Bentley Co. agrees to guarantee the $60,000 residual value of the asset at the end of the lease term. Bentley’s incremental borrowing rate is 10%; however, it knows that Harry’s implicit interest rate is 8%. What journal entry would Harry’s Leasing Company make at January 2, 2013 assuming this is a direct–financing lease?
PV Annuity Due PV Ordinary Annuity PV Single Sum
8%, 5 periods 4.31213 3.99271 0.68058
10%, 5 periods 4.16986 3.79079 0.62092
(TCO D) Lease A does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75% of the estimated economic life of the leased property. Lease B does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. How should the lessee classify these leases?
(TCO C) Measuring, recording, and reporting pension expense and liability.
Feeble Co. on January 1, 2011 initiated a noncontributory, defined-benefit pension plan that grants benefits to its 100 employees for services rendered in years prior to the adoption of the pension plan. The total expected service-years of the 100 employees who are expected to receive benefits under the plan is 1,200. An actuarial consulting firm has indicated that the present value of the projected benefit obligation on January 1, 2011 was $5,040,000. On December 31, 2011 the following information was provided concerning the pension plan’s operations for its first year.
Employer’s contribution at end of year $1,600,000
Service cost 600,000
Projected benefit obligation 6,043,200
Plan assets (at fair value) 1,600,000
Expected return on plan assets 9%
Settlement rate 8%
(a) Compute the pension expense recognized in 2011. Assume the prior service cost is amortized over the average remaining service life of the employees.
(b) Prepare the journal entries to reflect accounting for the company’s pension plan for the year ended December 31, 2011.
(c) Indicate the amounts that are reported on the income statement and the balance sheet for 2011.
(TCO A) Chicago contractors got $5,400,000 contract to construct a school building for the City of Chicago. Work on this contract began in 2013 and the financial data pertaining to this contract is available here.
Cost incurred till Dec.31, 2013 $1,080,000
Billings made to City $1,000,000
Amount collected from City $ 750,000
The estimated future cost to complete this contract is $3,240,000.
(a) Prepare Chicago contractors 2013 journal entries using completed contract method.
(b) Show how the contract accounts will appear in the Balance Sheet of Chicago Contractors on 12/31/2013.
(TCO B) Hertz Co. prepared the following reconciliation of its pretax financial statement income to taxable income for the year ended December 31, 2013, its first year of operations:
Pretax financial income $300,000
Nontaxable interest received on municipal securities (15,000)
Estimated warranties not deductible for tax purpose in 2013 30,000
Depreciation in excess of financial statement amount (50 ,000)
Taxable income $265,000
Hertz’s tax rate for Year 2013 and for future years is 40%.
(a) In its Year 1 income statement, what amount should Hertz report as income tax expense-current portion?
(b) In its December 31, 2013 balance sheet, what amount should Hertz report as deferred income tax liability/asset?
ACCT 557 Week 8 Final Exam
Date Taken: ……..2016
Question Type: # Of Questions
Multiple Choice 10
Question 1.Question : (TCO A) Amazon Building, Inc. won a bid for a new warehouse
Below is information from the project
Total Construction Fixed Price $10,000,000
Construction Start Date June 13, 2012
Construction Complete Date December 16,
As of Dec.
31… 2012 2013
incurred $4,500,000 $2,360,000
Estimated remaining costs $2,250,000 $-
customer $6,000,000 $4,000,000
customer $5,000,000 $3,500,000
Assuming Amazon Building, Inc. uses the completed contract
method, what amount of gross profit would be recognized in 2013?
Question 2.Question : (TCO B) At the beginning of 2012, Annie, Inc. has a deferred tax
asset of $7,500 and deferred tax liability of $10,500. In 2012, pretax
financial income was $826,000 and the tax rate was
Pretax income included:
Interest income from municipal
Accrued warranty costs, estimated to be used in
Prepaid rent expense, will be used in
Installment sales revenue, to be collected in
What is taxable income for 2012?
Question 3.Question : (TCO C) Presented below is pension information related to
Amazing Goods, Inc. for the year 2013.
Interest on projected benefit
Interest on vested
Amortization of prior service cost due to increase in
Expected return on plan
The amount of pension expense to be reported for 2013 is
Question 4.Question : (TCO C) Apple Dumpling Inc. sponsors a defined-benefit pension
plan. The following data relates to the operation of the plan for the
Service cost $320,000
Contributions to the plan $285,000
Actual return on plan assets $215,000
Projected benefit obligation (beginning of year) $3,100,000
Fair value of plan assets (beginning of year) $3,600,000
The expected return on plan assets and the settlement rate were
both 9%. The amount of pension expense reported for 2013 is
Question 5.Question : (TCO D) Animal, Inc. leased equipment from Zoo Enterprises
under a 5-year lease requiring equal annual payments of $63,000,
with the first payment due at lease inception. The lease does not
transfer ownership, nor is there a bargain purchase option. The
equipment has a 5-year useful life and no salvage value. Animal,
Inc.’s incremental borrowing rate is 10% and the rate implicit in the
lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease
is properly classified as a capital lease, what is the amount of
interest expense recorded by Animal, Inc. in the first year of the
PV Annuity Due PV Ordinary
8%, 5 periods 4.31213 3.99271
10%, 5 periods 4.16986 3.79079
Question 6.Question : (TCO E) On December 31, 2013, Bob’s Trucking, Inc.
appropriately changed its inventory valuation method from
weighted-average cost to FIFO method for financial statement and
income tax purposes. The change will result in an $800,000
increase in the beginning inventory at January 1, 2013. Assume a
40% income tax rate. The cumulative effect of this accounting
change on beginning retained earnings is
Question 7.Question : (TCO E) Which of the following is not a change in accounting
Question 8.Question : (TCO F) Amazing Glory, Inc. recognized a net income of $55,000
including $8,000 in depreciation expense.
Additional changes from the balance sheet are as follows.
Accounts Receivable $1,200 decrease
Prepaid Expenses $600 decrease
Inventory $14,600 increase
Accrued Liabilities $1,000 decrease
Accounts Payable $2,100 increase
Compute the net cash from operating activities based on the above
Question 9.Question : (TCO G) Which of the following events that occurred after the
balance sheet date but before issuance of the financial statements
would require adjustment of the accounts before issuance of the
Question 10.Question : (TCO G) Adventure, Inc. is a company that operates in four
different divisions. The following information relating to each
segment is available for 2013.
Sales revenue Operating profit (loss) Identifiable assets
A $85,000 $31,000 $56,000
B $105,000 $(16,000) $82,000
C $250,000 $112,000 $640,000
D $20,000 $4,000 $35,000
For which of the segments would information have to be disclosed
in accordance with professional pronouncements?
Question 11.Question : (TCO A) Adam’s Adorable Creations Company provided the
following financial information for its installment sales for the
Installment sales for current year $2,400,000
Cost of goods sold on installment basis $1,800,000
Repossessed merchandise: Estimated value $56,000
Repossessed merchandise: Unpaid balances $90,000
Payments by customers $1,750,000
(a) Prepare journal entries for the end of the year based on
the information above.
(b) Prepare the entry to record the gross profit realized in the
Question 12.Question : (TCO B) The Accent Corporation shows the following
On January 1, 2012, Accent purchased a donut machine for
(a) Pretax financial income is $2,300,000 in 2012 and
$2,400,000 in 2013.
(b) Taxable income is expected in future years with an
expected tax rate of 35%.
(c) The company recognized an extraordinary gain of
$150,000 in 2013 (which is fully taxable).
(d) Tax-exempt municipal bonds yielded interest of
$150,000 in 2013.
(e) Straight-line basis for 7 years for financial reporting
(See Appendix 11A.)
(f) Half-year convention basis depreciation for 4 years
for tax purposes.
(a) Compute taxable income and income taxes
payable for 2013.
(b) Prepare the journal entries for income tax
expense, income taxes payable, and deferred taxes for 2013.
(c) Prepare the deferred income taxes presentation for
December 31, 2013 balance sheet.
Question 13.Question : (TCO D) Absolute Leasing, Inc. agrees to lease equipment to Allen,
Inc. on January 1, 2012. They agree on the following terms:
(a) The normal selling price of the equipment is $600,000 and the
cost of the asset to Absolute Leasing, Inc. was $475,000.
(b) At the end of the lease, the equipment will revert to Absolute
Leasing, Inc. and have an unguaranteed residual value of $60,000.
Their implicit interest rate is 10%.
(c) The lease is noncancelable with no renewal option. The lease
term is 10 years (the same as the estimated economic life).
(d) Absolute Leasing, Inc. incurred costs of $10,000 in negotiating
and closing the lease. There are no uncertainties regarding
additional costs yet to be incurred and the collectability of the lease
payments is reasonably predictable.
(e) The lease begins on January 1, 2012 and payments will be in
equal annual installments.
(f) Allen will pay all maintenance, insurance, and tax costs directly
and annual payments of $65,000 on January 1 of each year.
(a) Determine what type of lease this would be for the lessee and
calculate the initial obligation.
(b) Prepare Allen, Inc.’s amortization schedule for the lease terms.
(c) Prepare all the journal entries for Allen, Inc. for 2012. Assume a
calendar year fiscal year.
Question 14.Question : (TCO F) Drexon Corp., which follows U.S. GAAP, uses the direct
method to report its cash flows. The CFO is assessing the impact on
cash flows of 12 events during the fiscal year. Specify which
category each event falls under (under the direct method) and note
whether it increases cash, decreases cash, or has no impact on cash:
1 Accounts payable decreases from $400,000 to $385,000.
2 An interest payment of $85,000 is made on a new debt
3 Capital expenditures of $35,000 are made for equipment
used in day to day operations.
4 Dividends of $6,500 are received from a stock classified
as available for sale.
5 A gain of $8,200 is booked on the sale of an asset.
6 Depreciation and amortization expense totaling $50,000 is
7 Drexon purchases a trading security which it classifies as
8 Accrued liabilities increase from $245,000 to $250,000.
9 40,000 new shares of stock are issued near the close of the
10 Drexon purchases 60% of a subsidiary company.
11 Accounts receivable decreases from $620,000 to
12 Dividends of $12,000 are paid on Drexon company stock.
Question 15.Question : (TCO G) Selected financial ratios.
The following information pertains to Allbright, Inc.
Accounts receivable $186,000
Plant assets (net) $320,000
Total assets $641,000
Accounts payable $85,000
Accrued taxes and expenses payable $12,000
Long-term debt $268,000
Common stock ($10 par) $120,000
Paid-in capital in excess of par $6,000
Retained earnings $150,000
Total equities $641,000
Net sales (all on credit) $980,000
Cost of goods sold $760,000
General & Admin Expenses $160,000
Net income $60,000
Compute the following: (It is not necessary to use averages for any
balance sheet figures involved.)
(a) Current ratio
(b) Inventory turnover
(c) Receivables turnover
(d) Book value per share
(e) Earnings per share
(f) Debt to total assets
(g) Profit margin on sales
(h) Return on common stock equity
Question 16.Question : (TCO E) Please describe the requirements for a change in
accounting principle and at least four reasons why companies might implement a change in accounting principle.
We give our students 100% satisfaction for their assignment, which is one of the most important reasons students prefer us from other helpers. Our professional group and planners have more than ten years of rich experience. The only reason that our inception days, we have helped more than 100000 students with their assignments successfully. Our expert’s group have more than 2200 professionals of different topics, and that not all; we get more than 300 jobs every day more than 90% of the assignment get the conversion for payment.
Place Order Now