1. Use the following to answer questions 2 and 3: 2. Robert Plant Inc. owns equipment...

  

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1. Use the following to answer questions 2 and 3: 2. Robert Plant Inc. owns equipment for which it paid $90 million. At the end of 2016, accumulated depreciation on the equipment was $27 million. Due to adverse economic conditions, Plant's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated future cash flows (without discounting) to be provided by the equipment total $60 million, and its fair value at that point totals $40 million. Under these circumstances, Plant: A) B) C) D) Yanni Ltd. purchased equipment on 1/1/2015 for $800,000. The estimated useful life is five-years, the estimated residual value is $50,000, and a full year's depreciation is recorded in the year of purchase. 3. 4. Under double declining balance, depreciation recorded by Yanni in 2016 is: A) B) C) D) Would record no impairment loss on the equipment. Would record a $3 million impairment loss on the equipment. Would record a $23 million impairment loss on the equipment. Would record a $30 million impairment loss on the equipment. A) B) C) D) Under sum of the year's digits, depreciation recorded by Yanni in 2016 is: $200,000 $213,333 $266,667 $250,000 A) B) $192,000 $180,000 C) D) $300,000 $320,000 In 2015, John Bonham Inc. acquired Zeppi Company and recorded $245 million of goodwill as a result of this acquisition. At the end of 2016, Bonham decided to test for impairment of goodwill associated with its acquisition of Zeppi Company. At the end of 2016, the book value of Zeppi Company's net assets (including goodwill) in Bonham's Company's accounting records was $580 million. Also at the end of 2016, Bonham assessed the fair value of Zeppi to be $700 million, while the fair value of Zeppi's net assets was $550 million. The amount of the goodwill impairment loss that Bonham would record at the end of 2016 is: $150 million. $95 million. $0 $120 million. 5. 6. Use the following to answer questions 6 and 7: The Peter Noone Company paid $200,000 for the rights to mine lead in Southeast Missouri and $2,400,000 to drill and erect a mine shaft. Equipment was also purchased for $1,800,000 to process the lead ore before shipment to customers. The mine is expected to yield 2,000,000 tons of ore during the 5 years it is expected to be in operation. Peter will not have to reclaim the land when mining is complete; it will be used as an "off road" park for all terrain vehicles. The equipment is salvageable and is expected to be worth $100,000 when mining is concluded. The mine started operations on January 1, 2016, and 300,000 tons of ore were extracted during the year. 7. In 2016, Jimmy Page Company discovered a building addition completed in January 2014, at a cost of $360,000 was charged to building maintenance expense in error. The cost should have been charged to the building asset account. The company uses straight line depreciation; the estimated life of the building addition when it was completed in 2014 was 25 years, the estimated residual value of the building addition was $100,000, and the company records a full year depreciation on all assets place in service during the year. Fixing this error in 2016 would have the following impact on Page's accounting records: A) 8. increase the book value of the equipment by $239,200. increase the book value of the equipment by $360,000. decrease retained earnings by $360,000. increase retained earnings by $339,200. Total depletion recorded by Peter Noone in 2016 is: A) B) B) C) D) Total depreciation recorded by Peter Noone in 2016 is: A) $340,000 $360,000 $270,000 $255,000 $360,000 $390,000 $660,000 $645,000 02 The Boss Corporation purchased 1,000 shares of E Street Band Corp. common stock in 2014 for $800 per share and classified the investment as available for sale. E Street's market value was $400 per share on December 31, 2014, and $300 per share on December 31, 2015. The Boss deemed the reduction in market value to be temporary. During 2016, The Boss sold all of its E Street stock at $350 per share. In its 2016 income statement, The Boss Corporation would report: A) A realized gain of $50,000. An unrealized loss of $400,000. A loss on the sale of investments of $450,000. A trading gain of $50,000 and an unrealized loss of $500,000. Use the following to answer questions 9 through 11: On January 1, 2016, John Paul Jones Corp. purchased 30% of Sky Tech Inc. for $45 million. This acquisition gave John Paul Jones significant influence over Sky Tech. At the date of acquisition, the book value of Sky Tech's net assets was $75 million and their fair value was $90 million. The difference was attributed to the fair value of equipment exceeding book value, and the remaining useful life of this equipment was 5 years. For 2016, Sky Tech reported a net income of $75 million and declared and paid $20 million in dividends. 10. 11. 12. Relative to its investment in Sky Tech, the amount of investment income reported by John Paul Jones Corp. on it's year end December 31, 2016 income statement is: A) $6 million. B) C) D) The total amount that John Paul Jones Corp. would report for its investment in Sky Tech Inc. on its December 31, 2016 balance sheet is: A) B) C) D) $16.5 million. $22.5 million. $21.6 million. A) B) Assuming John Paul cannot exercise significant influence over Sky Tech and classifies this investment as available for sale, total investment income reported by John Paul Jones Corp. on its year end December 31, 2016 income statement is: A) $6 million. B) D) Bon Jovi Inc. purchased ABC Company bonds and LMN Company common stock during 2015, its first year of operations. Bon Jovi still owns the securities at the end of 2016. The following information pertains to these securities. The ABC Company bonds are classified as held to maturity securities. The following pertains to these bonds: amortized cost is $360,000 at the end of 2015 and $367,500 at the end of 2016; and the fair value of these bonds are $375,000 at the end of 2015 and $400,000 at the end of 2016. The LMN Company common stock is classified as available for sale. The following pertains to this investment: the common stock cost $140,000; and the fair value is $130,500 at the end of 2015 and $150,400 at the end of 2016. At what amount would Bon Jovi report accumulated other comprehensive income in the shareholders' equity section of its year end 2016 balance sheet? positive $55,100. positive $26,500. C) D) $67.5 million. $61.5 million. $60.6 million. $66.6 million. $21.6 million. $22.5 million. $5.1 million. positive $10,400. positive $19,900. 13. Fair values or subsequent growth of the investee are irrelevant for investments in which of the following categories? A) B) Held-to-maturity securities. Securities available for sale. Use the following to answer questions 14 and 15: During 2016, Dennis De Young Enterprises purchased less than 20% of the common stock of four other firms and classified the investments as available for sale. At December 31, 2016, the investments are summarized as follows: Company Taliesin Corporation Wolf Company Tiger, Inc. Stoppard Company 15. 16. Securities reported under the equity method. Trading securities. Number of shares owned C) D) 1,000 1,200 1,900 1,500 Purchase Price per Share De Young expects to sell its investments in Taliesin and Wolf Co. during 2017; however, they do not expect to sell their investments in Tiger, Inc. and Stoppard in the foreseeable future. $537,300 $582,900 $306,900 $315,300 $126 87 81 102 Market value per share @ 12/31/16 $138 108 102 81 With regards to the above investments, the total amount reported as current assets by Dennis De Young Enterprises on its December 31, 2016 balance sheet is: $537,300 B) $582,900 $267,600 $230,400 With regards to the above investments, the total amount reported by Dennis De Young Enterprises as non current assets in the Investments & Funds section of its December 31, 2016 balance sheet is: A) B) In May of 2016, Eric Clapton Financial Services became involved in a tax dispute with the IRS. At December 31, 2016, the attorney for Clapton indicated an unfavorable outcome to the dispute was probable. The additional taxes were estimated to be $770,000 but could be as high as $1,170,000. After the year-end, but before the 2016 financial statements were issued, Clapton accepted an IRS settlement offer of $900,000. The accrued liability Clapton should report on its December 31, 2016, balance sheet is: A) $770,000 $900,000 $970,000 $1,170,000 Use the following to answer questions 17 and 18: In 2016, Keith Moon Inc. offers a $20 cash rebate coupon to customers who purchased one of its new line of products. Moon sold 10,000 of these products during the year. By the end of 2016, 7,600 of the rebates had been claimed, and 7,100 had been paid. Moon's historical experience with such rebates indicates that 85% of customers claim the rebates. Customers have until June 30, 2017 to claim their rebates. 17. 18. 19. 20. The total promotion rebate expense Moon should report on its 2016 income statement is: A) B) C) D) The promotion rebate liability Moon would report on its December 31, 2016 balance sheet is: A) B) C) D) $142,000 $152,000 $170,000 $200,000 A) B) C) D) $20,000 $28,000 Roger Daltrey Company, a building materials supplier, has $18,000,000 of notes payable due April 12, 2017. At December 31, 2016, Daltrey signed an agreement with First Bank to borrow up to $18,000,000 to refinance the notes on a long-term basis. The agreement specified that borrowings could not exceed 75% of the value of collateral Daltrey provided. At the date of issue of the December 31, 2016, financial statements, the value of Daltrey's collateral was $20,000,000. On its December 31, 2016, balance sheet, Roger Daltrey Company would classify the notes as follows: $15,000,000 in long-term and $3,000,000 in current liabilities. $4,500,000 in long term and $13,500,000 in current liabilities. $18,000,000 of current liabilities. $18,000,000 of long-term liabilities. $18,000 $58,000. Large, highly rated firms sometimes sell commercial paper: A) To borrow funds at a lower rate than through a bank. B) To borrow funds that are not available at banks. C) Because they can't borrow anywhere else. Because the interest rate is locked in by the Federal Reserve board. 1. Use the following to answer questions 2 and 3: 2. Robert Plant Inc. owns equipment for which it paid $90 million. At the end of 2016, accumulated depreciation on the equipment was $27 million. Due to adverse economic conditions, Plant's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated future cash flows (without discounting) to be provided by the equipment total $60 million, and its fair value at that point totals $40 million. Under these circumstances, Plant: A) B) C) D) Yanni Ltd. purchased equipment on 1/1/2015 for $800,000. The estimated useful life is five-years, the estimated residual value is $50,000, and a full year's depreciation is recorded in the year of purchase. 3. 4. Under double declining balance, depreciation recorded by Yanni in 2016 is: A) B) C) D) Would record no impairment loss on the equipment. Would record a $3 million impairment loss on the equipment. Would record a $23 million impairment loss on the equipment. Would record a $30 million impairment loss on the equipment. A) B) C) D) Under sum of the year's digits, depreciation recorded by Yanni in 2016 is: $200,000 $213,333 $266,667 $250,000 A) B) $192,000 $180,000 C) D) $300,000 $320,000 In 2015, John Bonham Inc. acquired Zeppi Company and recorded $245 million of goodwill as a result of this acquisition. At the end of 2016, Bonham decided to test for impairment of goodwill associated with its acquisition of Zeppi Company. At the end of 2016, the book value of Zeppi Company's net assets (including goodwill) in Bonham's Company's accounting records was $580 million. Also at the end of 2016, Bonham assessed the fair value of Zeppi to be $700 million, while the fair value of Zeppi's net assets was $550 million. The amount of the goodwill impairment loss that Bonham would record at the end of 2016 is: $150 million. $95 million. $0 $120 million. 5. 6. Use the following to answer questions 6 and 7: The Peter Noone Company paid $200,000 for the rights to mine lead in Southeast Missouri and $2,400,000 to drill and erect a mine shaft. Equipment was also purchased for $1,800,000 to process the lead ore before shipment to customers. The mine is expected to yield 2,000,000 tons of ore during the 5 years it is expected to be in operation. Peter will not have to reclaim the land when mining is complete; it will be used as an "off road" park for all terrain vehicles. The equipment is salvageable and is expected to be worth $100,000 when mining is concluded. The mine started operations on January 1, 2016, and 300,000 tons of ore were extracted during the year. 7. In 2016, Jimmy Page Company discovered a building addition completed in January 2014, at a cost of $360,000 was charged to building maintenance expense in error. The cost should have been charged to the building asset account. The company uses straight line depreciation; the estimated life of the building addition when it was completed in 2014 was 25 years, the estimated residual value of the building addition was $100,000, and the company records a full year depreciation on all assets place in service during the year. Fixing this error in 2016 would have the following impact on Page's accounting records: A) 8. increase the book value of the equipment by $239,200. increase the book value of the equipment by $360,000. decrease retained earnings by $360,000. increase retained earnings by $339,200. Total depletion recorded by Peter Noone in 2016 is: A) B) B) C) D) Total depreciation recorded by Peter Noone in 2016 is: A) $340,000 $360,000 $270,000 $255,000 $360,000 $390,000 $660,000 $645,000 02 The Boss Corporation purchased 1,000 shares of E Street Band Corp. common stock in 2014 for $800 per share and classified the investment as available for sale. E Street's market value was $400 per share on December 31, 2014, and $300 per share on December 31, 2015. The Boss deemed the reduction in market value to be temporary. During 2016, The Boss sold all of its E Street stock at $350 per share. In its 2016 income statement, The Boss Corporation would report: A) A realized gain of $50,000. An unrealized loss of $400,000. A loss on the sale of investments of $450,000. A trading gain of $50,000 and an unrealized loss of $500,000. Use the following to answer questions 9 through 11: On January 1, 2016, John Paul Jones Corp. purchased 30% of Sky Tech Inc. for $45 million. This acquisition gave John Paul Jones significant influence over Sky Tech. At the date of acquisition, the book value of Sky Tech's net assets was $75 million and their fair value was $90 million. The difference was attributed to the fair value of equipment exceeding book value, and the remaining useful life of this equipment was 5 years. For 2016, Sky Tech reported a net income of $75 million and declared and paid $20 million in dividends. 10. 11. 12. Relative to its investment in Sky Tech, the amount of investment income reported by John Paul Jones Corp. on it's year end December 31, 2016 income statement is: A) $6 million. B) C) D) The total amount that John Paul Jones Corp. would report for its investment in Sky Tech Inc. on its December 31, 2016 balance sheet is: A) B) C) D) $16.5 million. $22.5 million. $21.6 million. A) B) Assuming John Paul cannot exercise significant influence over Sky Tech and classifies this investment as available for sale, total investment income reported by John Paul Jones Corp. on its year end December 31, 2016 income statement is: A) $6 million. B) D) Bon Jovi Inc. purchased ABC Company bonds and LMN Company common stock during 2015, its first year of operations. Bon Jovi still owns the securities at the end of 2016. The following information pertains to these securities. The ABC Company bonds are classified as held to maturity securities. The following pertains to these bonds: amortized cost is $360,000 at the end of 2015 and $367,500 at the end of 2016; and the fair value of these bonds are $375,000 at the end of 2015 and $400,000 at the end of 2016. The LMN Company common stock is classified as available for sale. The following pertains to this investment: the common stock cost $140,000; and the fair value is $130,500 at the end of 2015 and $150,400 at the end of 2016. At what amount would Bon Jovi report accumulated other comprehensive income in the shareholders' equity section of its year end 2016 balance sheet? positive $55,100. positive $26,500. C) D) $67.5 million. $61.5 million. $60.6 million. $66.6 million. $21.6 million. $22.5 million. $5.1 million. positive $10,400. positive $19,900. 13. Fair values or subsequent growth of the investee are irrelevant for investments in which of the following categories? A) B) Held-to-maturity securities. Securities available for sale. Use the following to answer questions 14 and 15: During 2016, Dennis De Young Enterprises purchased less than 20% of the common stock of four other firms and classified the investments as available for sale. At December 31, 2016, the investments are summarized as follows: Company Taliesin Corporation Wolf Company Tiger, Inc. Stoppard Company 15. 16. Securities reported under the equity method. Trading securities. Number of shares owned C) D) 1,000 1,200 1,900 1,500 Purchase Price per Share De Young expects to sell its investments in Taliesin and Wolf Co. during 2017; however, they do not expect to sell their investments in Tiger, Inc. and Stoppard in the foreseeable future. $537,300 $582,900 $306,900 $315,300 $126 87 81 102 Market value per share @ 12/31/16 $138 108 102 81 With regards to the above investments, the total amount reported as current assets by Dennis De Young Enterprises on its December 31, 2016 balance sheet is: $537,300 B) $582,900 $267,600 $230,400 With regards to the above investments, the total amount reported by Dennis De Young Enterprises as non current assets in the Investments & Funds section of its December 31, 2016 balance sheet is: A) B) In May of 2016, Eric Clapton Financial Services became involved in a tax dispute with the IRS. At December 31, 2016, the attorney for Clapton indicated an unfavorable outcome to the dispute was probable. The additional taxes were estimated to be $770,000 but could be as high as $1,170,000. After the year-end, but before the 2016 financial statements were issued, Clapton accepted an IRS settlement offer of $900,000. The accrued liability Clapton should report on its December 31, 2016, balance sheet is: A) $770,000 $900,000 $970,000 $1,170,000 Use the following to answer questions 17 and 18: In 2016, Keith Moon Inc. offers a $20 cash rebate coupon to customers who purchased one of its new line of products. Moon sold 10,000 of these products during the year. By the end of 2016, 7,600 of the rebates had been claimed, and 7,100 had been paid. Moon's historical experience with such rebates indicates that 85% of customers claim the rebates. Customers have until June 30, 2017 to claim their rebates. 17. 18. 19. 20. The total promotion rebate expense Moon should report on its 2016 income statement is: A) B) C) D) The promotion rebate liability Moon would report on its December 31, 2016 balance sheet is: A) B) C) D) $142,000 $152,000 $170,000 $200,000 A) B) C) D) $20,000 $28,000 Roger Daltrey Company, a building materials supplier, has $18,000,000 of notes payable due April 12, 2017. At December 31, 2016, Daltrey signed an agreement with First Bank to borrow up to $18,000,000 to refinance the notes on a long-term basis. The agreement specified that borrowings could not exceed 75% of the value of collateral Daltrey provided. At the date of issue of the December 31, 2016, financial statements, the value of Daltrey's collateral was $20,000,000. On its December 31, 2016, balance sheet, Roger Daltrey Company would classify the notes as follows: $15,000,000 in long-term and $3,000,000 in current liabilities. $4,500,000 in long term and $13,500,000 in current liabilities. $18,000,000 of current liabilities. $18,000,000 of long-term liabilities. $18,000 $58,000. Large, highly rated firms sometimes sell commercial paper: A) To borrow funds at a lower rate than through a bank. B) To borrow funds that are not available at banks. C) Because they can't borrow anywhere else. Because the interest rate is locked in by the Federal Reserve board.

Answer rating: 100% (QA)

1 The correct answer is C Would record a 23 million impairment loss on the equipment To determine the impairment loss we compare the carrying amount of the equipment 90 million 27 million 63 million w... View the full answer