Exam (elaborations) Liberty University ACCT 370 Quiz 1 Power answer

Exam (elaborations) Liberty University ACCT 370 Quiz 1 Power answer Liberty University ACCT 370 Quiz 1 Power answer A+ Guarantee: When adjusting accrual earnings to obtain cash flows from operations, an increase in Prepaid Rent Expense is subtracted to arrive at cash flow from operations. The Barden Company provides the following trial balance as of December 31, 20X1. Debit Credit Cash and cash equivalents $345,000 Accounts receivable 115,000 Inventory 120,000 Prepaid insurance 7,500 Prepaid rent 40,000 Equipment 265,000 Accumulated depreciation – Equipment 65,000 Accounts payable 45,000 Accrued liabilities 10,000 Notes payable, due in 2020 135,000 Common stock 300,000 Additional paid-in capital 87,500 Retained earnings 250,000 Total $892,500 $892,500 What would Barden report as total stockholders’ equity on its balance sheet? Which of the following statements is not true regarding the cash flow statement? Which of the following statements is not true? The U.K. Equity account "Hedging reserve" is reported on a U.S. GAAP balance sheet as The balance sheet provides information on all of the following except: Balance sheet amounts would not be measured as: Which of the following statements is not true regarding the adoption of ASC Topic 606 guidance for revenue recognition? Liberty University ACCT 370 Quiz 1 Power answer In accounting for revenue recognition under ASC Topic 606, when there is a modification of a contract, which of the following is correct? Under ASC Topic 606 for revenue recognition, which of the following factors is not an indicator of the principal/agent determination? Under ASC Topic 606 for revenue recognition, which of the following statements is not accurate regarding performance obligations? Payments to a customer for slotting fees: Hargren Publishing offers its Accounting textbooks as e-texts through its online homework management system. Purchase of an access code provides the student with access to the e-text and online learning materials for six months. During that time, students have access to updates to the text and learning materials. Hargren should recognize revenue for purchases of access codes: Under the ASC Topic 606, which of the following statements is not a criteria that may determine whether revenue may be recognized over time? Which of the following statements is not true regarding the software developer example provided in ASC Topic 606 guidance for revenue recognition? Under ASC Topic 606 for revenue recognition, a performance obligation is considered satisfied when control over the goods and services is transferred to the customer. Which of the following is not an indicator that control has transferred? Which of the following statements is true regarding the new ASC Topic 606 for revenue recognition? To get revenue and expense account balances to zero requires a/an: Which of the following statements is correct regarding revenue and expense accounts? A debit does which of the following? Other Comprehensive Income (OCI) is used both in U.S. GAAP and IFRS. Which of the following statements is correct? When actuarial estimates related to defined benefit pension plans are adjusted: When analysts provide basic EPS for income from continuing operations that exclude the effects of special (i.e., nonrecurring) gains or losses and certain other non-cash charges, such earnings are frequently referred to as: Black & Decker decides to discontinue producing toasters in lieu of more versatile toaster ovens. In the process of discontinuing this line, the company disposes of the old production equipment and buys new equipment. The disposal of the old equipment would be reported in the income statement as: A component of an entity may be a/an: When reporting unusual or infrequent items in the income statement which of the following is not correct? The statement, "linkage between these costs and individual sales is difficult to establish," refers to The matching principle requires that expenses be recognized: The Canon Corporation sells ten copiers to the Title Company on October 15 for $40,000. Canon delivers the copiers to Title on October 20 and Title pays $16,000, agreeing to pay the balance on November 10. Under the accrual basis, how much revenue should Canon recognize in November? Which of the following is not correct with respect to accrual accounting? Which of the following does not describe how FASB endeavors to draft pronouncements? Which of the following is not an accurate statement related to the demand for financial reporting? When a company changes from straight-line to the declining balance method of accounting for depreciation, the financial statements lack: Which of the following create a competitive disadvantage according to the full disclosure principle? When financial statements are used by shareholders and investors to evaluate the performance of a company’s top executives it is referred to as the _____________ function of financial reports. Business enterprises enter into many different types of contracts. Examples of such contracts that often contain language that refers to verifiable financial statement numbers include all of the following except: Which of the following may cause fully diluted EPS to differ from basic EPS? Muenster Company sells its network servers with a warranty than includes preventive maintenance. Muenster should account for the warranty as a(n): Losses must be accrued if they are: 1. A 3-for-1 stock split will reduce the per share par value and will 2. accounting errors or irregularities can occur for what reason? 3. Accrual accounting net income can differ from operating cash flows for all of the following reasons except: A) future pension and healthcare benefits. B) estimates of uncollectible accounts. C) useful lives of assets. D) dividend declaration and payment dates. 4. Assuming the requirements for recognizing revenue over time are met, and using the percentage-of-completion method to recognize revenue, the measure of completion is computed by dividing: 5. A balance sheet prepared in accordance with U.S. GAAP typically: 6. The balance sheet provides information on all of the following except: A) where the money came from. B) assessing rates of return. C) how management invested its money. D) the market price of the company’s stock. 7. Balance sheets prepared under IFRS: 8. Being verifiable and neutral is part of what makes financial information 9. The best measure of a firm’s sustainable income is 10. Cash collected from customers can be derived: 11. The cash flow from operating activities: 12. The cash flow statement of the company is in process for 2019. They are reporting the following balances: 12/31/18 12/31/19 Equipment $ 100,000 $ 170,000 Loss on sale of equipment 0 10,000 Accumulated dep.—equipment 75,000 95,000 During 2019, they sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash. Equipment purchases in 2019 were: 13. The cash flow statement of the company is in process for 2019. They are reporting the following balances: 12/31/18 12/31/19 Equipment $ 100,000 $ 170,000 Loss on sale of equipment 0 10,000 Accumulated dep.—equipment 75,000 95,000 During 2019, they sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash. If these were the only investing activities, the cash flow from investing activities is a net cash: 14. Changes in the balance sheet accounts at June 30, 2018 and 2019 for the Company are presented below: Assets Cash $ 480,000 Accounts receivable 200,000 Inventory 300,000 Long-term investments 200,000 Equipment (200,000 ) Accumulated depreciation (60,000 ) Liabilities and Stockholders’ Equity Accounts payable $ (40,000 ) Dividends payable 400,000 Notes payable—Current (200,000 ) Notes payable—Long-term 400,000 Common stock, $1.00 par 300,000 Additional paid-in capital 100,000 Retained earnings 80,000 Additional Information for 2019: -Net income was $480,000 and dividends of $400,000 were declared. -Common stock was issued for cash. -A new long-term investment was acquired for $360,000. -A long-term investment was sold for $160,000. -Equipment that cost $600,000 was sold for $200,000. -The book value of those assets was $150,000. The cash flow from financing activities for 2019 is a: 15. Changes in the balance sheet accounts at June 30, 2018 and 2019 for the Company are presented below: Assets Cash $ 480,000 Accounts receivable 200,000 Inventory 300,000 Long-term investments 200,000 Equipment (200,000 ) Accumulated depreciation (60,000 ) Liabilities and Stockholders’ Equity Accounts payable $ (40,000 ) Dividends payable 400,000 Notes payable—Current (200,000 ) Notes payable—Long-term 400,000 Common stock, $1.00 par 300,000 Additional paid-in capital 100,000 Retained earnings 80,000 Additional Information for 2019: -Net income was $480,000 and dividends of $400,000 were declared. -Common stock was issued for cash. -A new long-term investment was acquired for $360,000. -A long-term investment was sold for $160,000. -Equipment that cost $600,000 was sold for $200,000. -The book value of those assets was $150,000. The gain on the sale of equipment for 2019 is: 16. Changes in the balance sheet accounts at June 30, 2018 and 2019 for the Company are presented below: Assets Cash $ 480,000 Accounts receivable 200,000 Inventory 300,000 Long-term investments 200,000 Equipment (200,000 ) Accumulated depreciation (60,000 ) Liabilities and Stockholders’ Equity Accounts payable $ (40,000 ) Dividends payable 400,000 Notes payable—Current (200,000 ) Notes payable—Long-term 400,000 Common stock, $1.00 par 300,000 Additional paid-in capital 100,000 Retained earnings 80,000 Additional Information for 2019: -Net income was $480,000 and dividends of $400,000 were declared. -Common stock was issued for cash. -A new long-term investment was acquired for $360,000. -A long-term investment was sold for $160,000. -Equipment that cost $600,000 was sold for $200,000. -The book value of those assets was $150,000. The purchase of equipment during 2019 is: 17. Companies that have projected operating cash flow that are more than sufficient to meet debt payments are: 18. Companies with a history of net operating losses are prone to issue which one of the following to raise money? 19. A company decides to discontinue producing toasters in lieu of more versatile toaster ovens. In the process of discontinuing this line, the company disposes of the old production equipment and buys new equipment. The disposal of the old equipment would be reported in the income statement as: 20. A company discovered that equipment purchased on January 1, 2018 for $300,000 will not last as long as originally estimated. The firm was depreciating the equipment at the rate of $40,000 per year with an estimated salvage value of $20,000. New estimates on January 1, 2021 indicate that the equipment will last a total of five years with no salvage value. How much should the company record as depreciation in 2021? 21. A company has the following shareholders’ equity accounts at December 31, 2018: Preferred stock, $100 par value, 10% dividend, 50,000 shares issued and outstanding $5,000,000 Common stock, $6 par value, 1 million shares issued and outstanding $6,000,000 Paid-in capital in excess of par $119,000,000 Unrestricted retained earnings $7,500,000 RE restricted for plant expansion $2,500,000 Assuming that the preferred stock is cumulative, and that there are no dividends in arrears, what is the maximum dividend that may be distributed to common shareholders at December 31, 2018? 22. A company installs and maintains manufacturing equipment. The contract with its customers to purchase equipment includes installation and includes a one-year maintenance contract, renewable for up to five years. Because the useful life of the equipment is expected to be five years, the company can reasonably expect its customers to renew the maintenance contracts for the full five years. The company records the cost of installation of the equipment as a capitalized contract and amortizes the cost over the five-year maintenance agreement period. Because of a defect in model A5403, the company anticipates that many of its customers will trade in the model and not renew the maintenance contracts. The company should, 23. A company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Year 1 Year 2 Year 3 Costs incurred $ 1,000 $ 1,500 $ 1,250 Est. com. costs $ 3,000 $ 1,500 $ 0 Billings $ 750 $ 1,750 $ 2,500 Cash collected $ 500 $ 1,500 $ 3,000 Using the percentage-of-completion method of revenue recognition, how much income is recognized in Year 2? 24. A company records revenue on the installment sales method, prior to ASC Topic 606 for revenue recognition. The following information is available for the first two years of business. Year 1 Year 2 Sales $ 200,000 $ 250,000 COGS 140,000 162,500 Cash collections: Yr 1 sales 100,000 80,000 Yr 2 sales 130,000 Assume that the company has consistently recognized revenue on installment sales using the cost recovery method. How much realized gross profit on installment sales will Ford recognize in Year 1? 25. A company reported net income for 2018 of $100,000. The company reported depreciation expense of $17,500 and amortization of $5,000. The company also reported a loss on the sale of equipment of $2,500. Based only on this information, the company would report cash flow from operating activities of: 26. A company reported net income for 2018 of $177,500. They began the year with 100,000 shares of $5 par value common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, they sold 10,000 shares of common stock for $6 per share. They paid dividends to the common shareholders in December. The basic earnings per share for 2018 is: 27. A company reported net income for 2018 of $177,500. They began the year with 100,000 shares of $5 par value common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, they sold 10,000 shares of common stock for $6 per share. They paid dividends to the common shareholders in December. The weighted average number of common shares used to compute earnings per share for 2018 is 28. A company reported net income of $770,000 for 2018. They sold 15,000 shares of treasury stock acquired in a previous year on July 1 and 15,000 new shares on November 1. At year-end, 180,000 shares were outstanding. They had 20,000 shares of $100 par value 7% preferred stock outstanding all year. They paid dividends to the preferred shareholders. The basic earnings per share for 2018 is: 29. A company’s financial statements reflect information about: 30. A company’s retained earnings on December 31, 2018 was $2,190,000 and its shareholders’ equity was $8,760,000. During 2019 the company reported the following: -Net income $225,000 -A sale of treasury stock costing $75,000 for $79,750 -A treasury stock purchase costing $125,700 -A cash dividend declaration of $73,200 -A 10,000 share “small” common stock ($10 par value) dividend was declared and distributed when the market value was $12.75 per share. What is the shareholders’ equity balance on December 31, 2019? 31. Contributed capital might be a negative dollar amount because: 32. A corporation reported the following during 2018: -Net income $175,250 -Sale of 10,000 shares of $5 par value common stock for $8.75 per share -A repurchase of shares as treasury stock, costing $24,750 -A resale of treasury stock for $14,695; the shares cost $15,500 when repurchased. -A declaration and distribution of a $39,000 cash dividend -A declaration and distribution of a “small” stock dividend of 5,000 shares of $5 par value common stock at a total market value of $50,000. What was the increase in shareholders’equity during 2018? 33. Creditors assess credit risk by comparing a firm’s required principal and interest payments to estimates of the firm’s current and future 34. Current liabilities are reported on the balance sheet at: 35. A decrease in accounts receivable of $16,000 for the year: 36. The denominator used in the calculation of basic earnings per share is the: 38. Employee demand financial information for all the following EXCEPT: A) monitoring how much the senior executives earn B) monitoring union contracts that link negotiated wage increases to company financial performance