ACC 422 Final Exam Complete Solution Answered.

ACC 422 FINAL Question 1 Kraft Enterprises owns the following assets at December 31, 2014. Question 2 Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made ...

ACC 422 FINAL Question 1 Kraft Enterprises owns the following assets at December 31, 2014. Question 2 Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $50,000 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. Prepare the required journal entries for Restin Co. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Question 3 Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 50 units that cost $34 each. During June, (1) the company purchased 150 units at $34 each, (2) returned 6 units for credit, and (3) sold 125 units at $50 each. Journalize the June transactions. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Question 4 Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available. Don't show me this message again for the assignment Calculate weighted average cost per unit. (Round answer to 2 decimal places, e.g. 2.76.) Compute the April 30 inventory and the April cost of goods sold using the average-cost method. (Round answers to 0 decimal places, e.g. 2,760.) Question 5 Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available. Compute the April 30 inventory and the April cost of goods sold using the FIFO method. Question 6 Shania Twain Company was formed on December 1, 2013. The following information is available from Twain’s inventory records for Product BAP. Prepare schedules to compute the ending inventory at March 31, 2014, under FIFO inventory methods. (Round answer to 0 decimal places, e.g. 2,760.) FIFO Ending Inventory at March 31, 2014 $ Don't show me this message again for the assignment Link to Text Prepare schedules to compute the ending inventory at March 31, 2014, under LIFO inventory methods. (Round answer to 0 decimal places, e.g. 2,760.) Calculate average-cost per unit. (Round answer to 2 decimal places, e.g. 2.76.) Prepare schedules to compute the ending inventory at March 31, 2014, under Weighted-average inventory methods. (Round answer to 0 decimal places, e.g. 2,760.) Question 7 Presented below is information related to Rembrandt Inc.’s inventory. (per unit) Skis Boots Parkas Historical cost $190.00 $106.00 $53.00 Selling price 212.00 145.00 73.75 Cost to distribute 19.00 8.00 2.50 Current replacement cost 203.00 105.00 51.00 Normal profit margin 32.00 29.00 21.25 Determine the following: (a) the two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis. (b) the cost amount that should be used in the lower-of-cost-or-market comparison of boots. (c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market. Question 8 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 $2,000 $2,050 $2,100 $1,600 Penguins 5,000 5,100 4,950 4,100 Riddlers 4,400 4,550 4,625 3,700 Scarecrows 3,200 2,990 3,830 3,070 Determine the final lower-of-cost-or-market inventory value for each item. Question 9 Kumar Inc. uses a perpetual inventory system. At January 1, 2014, inventory was $214,000 at both cost and market value. At December 31, 2014, the inventory was $286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method (b) Loss method. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Question 10 Boyne Inc. had beginning inventory of $12,000 at cost and $20,000 at retail. Net purchases were $120,000 at cost and $170,000 at retail. Net markups were $10,000; net markdowns were $7,000; and sales revenue was $147,000. Compute ending inventory at cost using the conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.) Question 11 Mark Price 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 $ 160,000 Purchases (gross) 640,000 Freight-in 30,000 Sales revenue 1,000,000 Sales returns 70,000 Purchase discounts 12,000 (a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales. (b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.) Question 12 Previn Brothers Inc. purchased land at a price of $27,000. Closing costs were $1,400. An old building was removed at a cost of $10,200. What amount should be recorded as the cost of the land? Question 13 Garcia Corporation purchased a truck by issuing an $80,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Question 14 Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $315,000. The estimated fair values of the assets are land $60,000, building $220,000, and equipment $80,000. At what amounts should each of the three assets be recorded? (Round final answers to 0 decimal places, e.g. 5,275.) Question 15 Fielder Company obtained land by issuing 2,000 shares of its $10 par value common stock. The land was recently appraised at $85,000. The common stock is actively traded at $40 per share. Prepare the journal entry to record the acquisition of the land. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Question 16 Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer worth $3,300. Navajo also paid $500 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Question 17 Mehta Company traded a used welding machine (cost $9,000, accumulated depreciation $3,000) for office equipment with an estimated fair value of $5,000. Mehta also paid $3,000 cash in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Question 18 Which of the following is the recommended approach to handling interest incurred in financing the construction of property, plant and equipment? Capitalize no interest during construction. Capitalize interest costs equal to the prime interest rate times the estimated cost of the asset being constructed. Capitalize only the actual interest costs incurred during construction. Charge construction with all costs of funds employed, whether identifiable or not. Question 19 Fernandez Corporation purchased a truck at the beginning of 2014 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2014 and 31,000 miles in 2015. Compute depreciation expense for 2014 and 2015. Question 20 Lockard Company purchased machinery on January 1, 2014, for $80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years. Don't show me this message again for the assignment Compute 2014 depreciation expense using the double-declining-balance method. Compute 2014 depreciation expense using the double-declining-balance method, assuming the machinery was purchased on October 1, 2014. Question 21 Jurassic Company owns machinery that cost $900,000 and has accumulated depreciation of $380,000. The expected future net cash flows from the use of the asset are expected to be $500,000. The fair value of the machinery is $400,000. Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Question 22 Everly Corporation acquires a coal mine at a cost of $400,000. Intangible development costs total $100,000. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $80,000), after which it can be sold for $160,000. Everly estimates that 4,000 tons of coal can be extracted. If 700 tons are extracted the first year, prepare the journal entry to record depletion. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Don't show me this message again for the assignment Question 23 Francis Corporation purchased an asset at a cost of $50,000 on March 1, 2014. The asset has a useful life of 8 years and a salvage value of $4,000. For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2014–2019. (Round answers to 0 decimal places, e.g. 45,892.) Question 24 Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 21,000 miles in 2014 and 29,000 miles in 2015. What is the depreciation expense for 2015? $6,000 $37,500 $21,750 $23,490 Question 25 Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2014, for $54,000. 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 2014 amortization. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Question 26 Gershwin Corporation obtained a franchise from Sonic Hedgehog Inc. for a cash payment of $120,000 on April 1, 2014. The franchise grants Gershwin the right to sell certain products and services for a period of 8 years. Prepare Gershwin’s April 1 journal entry and December 31 adjusting entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Question 27 Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. (a) On July 1, (1) Roley purchased $60,000 of inventory, terms 2/10, n/30, FOB shipping point. (2) Roley paid freight costs of $1,200. (b) On July 3, Roley returned damaged goods and received credit of $6,000. (c) On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Question 28 Takemoto Corporation borrowed $60,000 on November 1, 2014, by signing a $61,350, 3-month, zero-interest-bearing note. Prepare Takemoto’s November 1, 2014, entry; the December 31, 2014, annual adjusting entry; and the February 1, 2015, entry. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Question 29 Whiteside Corporation issues $500,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. (Round answer to 0 decimal places, e.g. 38,548.) Question 30 On January 1, 2014, Irwin Animation sold a truck to Peete Finance for $33,000 and immediately leased it back. The truck was carried on Irwin’s books at $28,000. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requires 5 equal rental payments of $8,705 at the end of each year. The appropriate rate of interest is 10%, and the truck has a useful life of 5 years with no salvage value. Prepare Irwin’s 2014 journal entries. To record amortization of profit on sale use Depreciation Expense account and not Sales Revenue account. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)