ACCT370 Final Exam With 100% All
Accurate Answers 2026-2027 Latest
Edition.
When the market rate of interest is below the stated rate of interest, a bond sells at: - Answer
a premium.
Income tax expense when interperiod tax allocation is used creates a more stable effective tax
rate over time relative to using tax payments as income tax expense. - Answer True
During its first three years of operations a company reported pre-tax book income of $1,000,000
in year 1, ($1,800,000) in year 2, and $3,000,000 in year 3. The income tax rate applicable to
each of the years was 21%.
Assume that there weren't any temporary differences and a valuation allowance was not
necessary.
What amount of income tax expense was reported by the company in year 3 with respect to the
net operating loss carryforward? - Answer $630,000
Doggy Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 20X1 and
completed construction of the ship on October 31, 20X2. To finance construction, Doggy took
out an $8,000,000, 2-year, 6% construction loan on February 1, 20X1. Interest on the loan was
to be paid annually on the anniversary date of the loan. Doggy has no other outstanding
interest-bearing debt. Doggy made the following expenditures in conjunction with this
construction project:
2/1/20X1 $1,050,000
3/31/20X1 $900,000
6/1/20X1 $750,000
10/1/20X1 $1,000,000
12/31/20X1 $600,000
3/1/20X2 $900,000
9/1/20X2 $250,000
How much interest should Doggy capitalize in 20X1 related to the cutter project? - Answer
$139,500
On January 2, 20X1, Ziegler Company issues a four-year note in exchange for a license
agreement requiring four annual payments of $27,956. The market value of the four-year
,agreement is $100,000. The first payment is due on the day the agreement is signed. The
effective interest rate is 8%. The first payment includes interest expense of: - Answer 0
Some financial analysts contend that reporting debt at amortized historical cost rather than at
fair value: - Answer makes it easier to manipulate accounting numbers.
When accounting for a long-term operating lease under ASC 842, which one of the following
accounts are charged with the expense on the lessee's income statement? - Answer Lease
Expense
During 20X1, a company reported an increase in the deferred tax liability account of $47,790, a
decrease in the deferred tax asset account of $17,225, and an income tax liability as per the
20X1 income tax return of $198,375. What is the income tax expense to be reported on the
income statement for the year ending December 31, 20X1? - Answer $263,390
Flimm Company leases an asset over its estimated useful life of six years. At the inception of the
lease, the present value of the lease payments is $240,000. The market value of the leased asset
is $258,000.
Flimm's journal entry to recognize the inception of the lease includes a debit to - Answer
Right-to-use asset for $240,000
Flimm Company leases an asset over its estimated useful life of six years. At the inception of the
lease, the present value of the lease payments is $240,000. The market value of the leased asset
is $258,000.
Assuming that the lease contract includes a highly favorable option for Flinn to purchase the
leased equipment at the end of the lease term, Flinn should allocate the cost of the related
asset by debiting - Answer amortization expense for $43,000
In comparing firms in the same industry, which of the following does not present a challenge for
analysts? - Answer Each of these answer choices presents a challenge for analysts.
When a financial analyst adjusts a company's reported depreciation expense to improve
comparisons of profitability with another firm that uses the same depreciation method, the
analyst assumes all of the following to be true except that: - Answer the useful lives
differences are "real".
Correct
Strauss Company sold $100,000 of long-term bonds in the open market for $100,000. The entry
to record the transaction would be: - Answer DR Cash 100,000
,CR Bonds Payable 100,000
To adjust for distortions that arise from off-balance sheet leases when comparing among firms,
analysts relied on - Answer required note disclosures.
Under ASC 842 for lease accounting, which statement below is not accurate with respect to
financial reporting? - Answer Lease expense is shown in the financing section of the statement
of cash flows.
Using the effective interest method, amortization of a discount or premium behave in this
manner over the life of the outstanding bonds. - Answer Increase for premium bond, increase
for discounted bond
Pepper, Inc. agrees to lease equipment from the Blue Corporation for 10 years at $25,000 at the
end of each year. The equipment has a fair value of $175,000 and an estimated useful life of 10
years. The lease includes a guaranteed residual value of $10,000. In addition to the lease
payments, Pepper will pay $5,000 per year for a maintenance agreement. Pepper can finance
this lease with its bank at a 12% rate. The lessor's implicit lease rate, known to the lessee, is
10%. The lessor and the lessee use ASC 842 guidelines for lease accounting.
Present value interest factors are:
PV factor of $1 for 10 periods
10% @ 0.38554
12% @ 0.32197
PV factor for ordinary annuity for 10 periods
10% @ 6.14457
12% @ 5.65022
The Pepper lease is a(n): - Answer finance lease because the lease term covers the major part
of the economic life of the asset.
U.S. GAAP capitalizes expenditures to upgrade long-lived assets when the expenditure causes
any of the following conditions except: - Answer There is an increase in the non-economic
benefits associated with owning the asset (such as an increase in the appearance of the
company's offices).
During its first year of operations a company recorded accrued expenses totaling $375,000 for
book purposes. For tax purposes, $175,000 of the expenses are deductible during the first year
of operations and $200,000 are deductible during the second year of operations. The enacted
income tax rate was 21% during the first year of operations and 25% during the second year of
, operations. The balance sheet at the end of the first year of operations will report a deferred
tax: - Answer asset of $50,000.
Amortizable intangible assets include all of the following except: - Answer goodwill.
Which of the following is not a correct statement regarding deferred tax asset valuation
allowance? - Answer Profitable companies will never have valuation allowances against
deferred tax assets.
Stone Company reported pre-tax book income of $700,000 in 20X1, the first year of operation.
The tax depreciation exceeded the book depreciation by $90,000. The tax rate for 20X1 and all
future years was 21%.
If Stone paid no estimated taxes, what amount of income tax payable should Stone report in its
December 31, 20X1, balance sheet? - Answer $ 128,100
A bond with a $750,000 maturity value is immediately retired for $745,000 plus accrued
interest. The discount on bonds payable (bond discount) at the retirement date is $25,500.
Which of the following statements is correct? - Answer The loss on the debt extinguishment is
$20,500.
Research findings almost uniformly indicate that existing U.S. GAAP for both R&D and software
development is: - Answer conservative.
A lessor mistakenly treated a direct financing lease as an operating lease. How does this mistake
impact the following at the end of the first year of the lease term? - Answer Rent/Lease
revenue is overstated.
Interest revenue is understated.
Consistent with ASC 842, the lessor records all leases that meet one of the five classification
criteria as sales-type lease, whether or not a manufacturing profit is derived. - Answer True
Creation of the deferred tax asset valuation allowance account is subjective and therefore
provides management the opportunity to manage earnings. - Answer True
Henry Co. manufactures DVD players. At the end of Year 1, Henry's management believes the
growing popularity of streaming video content will reduce the demand for Henry's DVD players.
The DVD players are manufactured using specialized equipment with a historical cost of
$3,000,000 and accumulated depreciation of $1,520,000. The managers estimate the
equipment has a remaining useful life of 4 years and will generate the following undiscounted
cash flows:
Accurate Answers 2026-2027 Latest
Edition.
When the market rate of interest is below the stated rate of interest, a bond sells at: - Answer
a premium.
Income tax expense when interperiod tax allocation is used creates a more stable effective tax
rate over time relative to using tax payments as income tax expense. - Answer True
During its first three years of operations a company reported pre-tax book income of $1,000,000
in year 1, ($1,800,000) in year 2, and $3,000,000 in year 3. The income tax rate applicable to
each of the years was 21%.
Assume that there weren't any temporary differences and a valuation allowance was not
necessary.
What amount of income tax expense was reported by the company in year 3 with respect to the
net operating loss carryforward? - Answer $630,000
Doggy Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 20X1 and
completed construction of the ship on October 31, 20X2. To finance construction, Doggy took
out an $8,000,000, 2-year, 6% construction loan on February 1, 20X1. Interest on the loan was
to be paid annually on the anniversary date of the loan. Doggy has no other outstanding
interest-bearing debt. Doggy made the following expenditures in conjunction with this
construction project:
2/1/20X1 $1,050,000
3/31/20X1 $900,000
6/1/20X1 $750,000
10/1/20X1 $1,000,000
12/31/20X1 $600,000
3/1/20X2 $900,000
9/1/20X2 $250,000
How much interest should Doggy capitalize in 20X1 related to the cutter project? - Answer
$139,500
On January 2, 20X1, Ziegler Company issues a four-year note in exchange for a license
agreement requiring four annual payments of $27,956. The market value of the four-year
,agreement is $100,000. The first payment is due on the day the agreement is signed. The
effective interest rate is 8%. The first payment includes interest expense of: - Answer 0
Some financial analysts contend that reporting debt at amortized historical cost rather than at
fair value: - Answer makes it easier to manipulate accounting numbers.
When accounting for a long-term operating lease under ASC 842, which one of the following
accounts are charged with the expense on the lessee's income statement? - Answer Lease
Expense
During 20X1, a company reported an increase in the deferred tax liability account of $47,790, a
decrease in the deferred tax asset account of $17,225, and an income tax liability as per the
20X1 income tax return of $198,375. What is the income tax expense to be reported on the
income statement for the year ending December 31, 20X1? - Answer $263,390
Flimm Company leases an asset over its estimated useful life of six years. At the inception of the
lease, the present value of the lease payments is $240,000. The market value of the leased asset
is $258,000.
Flimm's journal entry to recognize the inception of the lease includes a debit to - Answer
Right-to-use asset for $240,000
Flimm Company leases an asset over its estimated useful life of six years. At the inception of the
lease, the present value of the lease payments is $240,000. The market value of the leased asset
is $258,000.
Assuming that the lease contract includes a highly favorable option for Flinn to purchase the
leased equipment at the end of the lease term, Flinn should allocate the cost of the related
asset by debiting - Answer amortization expense for $43,000
In comparing firms in the same industry, which of the following does not present a challenge for
analysts? - Answer Each of these answer choices presents a challenge for analysts.
When a financial analyst adjusts a company's reported depreciation expense to improve
comparisons of profitability with another firm that uses the same depreciation method, the
analyst assumes all of the following to be true except that: - Answer the useful lives
differences are "real".
Correct
Strauss Company sold $100,000 of long-term bonds in the open market for $100,000. The entry
to record the transaction would be: - Answer DR Cash 100,000
,CR Bonds Payable 100,000
To adjust for distortions that arise from off-balance sheet leases when comparing among firms,
analysts relied on - Answer required note disclosures.
Under ASC 842 for lease accounting, which statement below is not accurate with respect to
financial reporting? - Answer Lease expense is shown in the financing section of the statement
of cash flows.
Using the effective interest method, amortization of a discount or premium behave in this
manner over the life of the outstanding bonds. - Answer Increase for premium bond, increase
for discounted bond
Pepper, Inc. agrees to lease equipment from the Blue Corporation for 10 years at $25,000 at the
end of each year. The equipment has a fair value of $175,000 and an estimated useful life of 10
years. The lease includes a guaranteed residual value of $10,000. In addition to the lease
payments, Pepper will pay $5,000 per year for a maintenance agreement. Pepper can finance
this lease with its bank at a 12% rate. The lessor's implicit lease rate, known to the lessee, is
10%. The lessor and the lessee use ASC 842 guidelines for lease accounting.
Present value interest factors are:
PV factor of $1 for 10 periods
10% @ 0.38554
12% @ 0.32197
PV factor for ordinary annuity for 10 periods
10% @ 6.14457
12% @ 5.65022
The Pepper lease is a(n): - Answer finance lease because the lease term covers the major part
of the economic life of the asset.
U.S. GAAP capitalizes expenditures to upgrade long-lived assets when the expenditure causes
any of the following conditions except: - Answer There is an increase in the non-economic
benefits associated with owning the asset (such as an increase in the appearance of the
company's offices).
During its first year of operations a company recorded accrued expenses totaling $375,000 for
book purposes. For tax purposes, $175,000 of the expenses are deductible during the first year
of operations and $200,000 are deductible during the second year of operations. The enacted
income tax rate was 21% during the first year of operations and 25% during the second year of
, operations. The balance sheet at the end of the first year of operations will report a deferred
tax: - Answer asset of $50,000.
Amortizable intangible assets include all of the following except: - Answer goodwill.
Which of the following is not a correct statement regarding deferred tax asset valuation
allowance? - Answer Profitable companies will never have valuation allowances against
deferred tax assets.
Stone Company reported pre-tax book income of $700,000 in 20X1, the first year of operation.
The tax depreciation exceeded the book depreciation by $90,000. The tax rate for 20X1 and all
future years was 21%.
If Stone paid no estimated taxes, what amount of income tax payable should Stone report in its
December 31, 20X1, balance sheet? - Answer $ 128,100
A bond with a $750,000 maturity value is immediately retired for $745,000 plus accrued
interest. The discount on bonds payable (bond discount) at the retirement date is $25,500.
Which of the following statements is correct? - Answer The loss on the debt extinguishment is
$20,500.
Research findings almost uniformly indicate that existing U.S. GAAP for both R&D and software
development is: - Answer conservative.
A lessor mistakenly treated a direct financing lease as an operating lease. How does this mistake
impact the following at the end of the first year of the lease term? - Answer Rent/Lease
revenue is overstated.
Interest revenue is understated.
Consistent with ASC 842, the lessor records all leases that meet one of the five classification
criteria as sales-type lease, whether or not a manufacturing profit is derived. - Answer True
Creation of the deferred tax asset valuation allowance account is subjective and therefore
provides management the opportunity to manage earnings. - Answer True
Henry Co. manufactures DVD players. At the end of Year 1, Henry's management believes the
growing popularity of streaming video content will reduce the demand for Henry's DVD players.
The DVD players are manufactured using specialized equipment with a historical cost of
$3,000,000 and accumulated depreciation of $1,520,000. The managers estimate the
equipment has a remaining useful life of 4 years and will generate the following undiscounted
cash flows:
