1.Berful Industries, a US corporation using US GAAP accounting standards, asks your advice in preparing its year-end financial statements.Indicate your answer by checking the appropriate line next to your selected answer.

a.Berful is going to select straight-line depreciation for the new assets it acquires this year instead of the sum-of-the-years-digits method.Does this increase net income?Yes _____ No _____

b.Berful has a machine that has gold electrical connectorsthe price of gold has risen so much that the fair market value of the machine has risen dramatically. Does this increase in fair market value for the machine require Berful to write up the value of the machine in its accounts and increase depreciation expense associated with the machine?Yes _____No _____

c.Berful plans to sell treasury stock at a gain this year. Does this gain on the sale of treasury stock increase net income?Yes _____ No _____

d.Are Berful's liabilities required to be valued at the lower-of-cost-or-market-value?Yes _____ No _____

e.Berful would like to report as revenue the manufacturer's list price for goods it makes and sells, although it often cannot sell them for a price this high. Is this acceptable?Yes _____ No _____

f.Berful plans to issue new common shares this year at a price above par value. Increases net income?Yes _____ No _____

g.Berful plans to change from LIFO to FIFO in measuring the cost of its ending inventory and cost of goods sold, in a period of rising prices. Does this increase net income?Yes _____ No _____

h.Berful has used the direct write-off method to account for bad debts, but must change to the allowance method, in a year in which it has no write-offs, but expects to discover next year that some of the current year sales are uncollectible. Does this change increase net income?

Yes _____ No _____

i.Berful wishes to accelerate the timing of the recognition of revenue by collecting cash in advance of performing services or delivering goods. Does this increase net income? Yes _____ No _____

j.Berful is planning to sell land it has owned for many years, at a loss of $50,000. Does this affect net income in the year of the sale? Yes _____ No _____

k.Berful is considering purchasing a machine, but is concerned that the delivery charges will drive down its reported profit in the year of purchase.Will these costs decrease net income in the year of purchase?Yes _____ No _____

l.Berful wants to keep its current ratio high, and classifies compensating balance checking accounts as cash. Is this properly reported as cash? Yes _____ No _____

m. Berful is planning to treat as part of the cost its truck repairs and maintenance costs incurred, spreading the income statement effect over several years as depreciation expense. Is this appropriate? Yes _____ No _____

n.Berful plans to undertake a large research and development project this year, planning on treating as an asset the cost of the R & D activity. Is this correct?Yes _____ No _____

o.Berful is planning to acquire another company this year, and hopes to avoid the recognition of goodwill.Will the recognition of goodwill reduce the net income of Berful in the year of acquisition?Yes _____ No _____

p.Berful is reducing the dividends it declares. Will this increase net income in the year declared?Yes _____ No _____

q.Berful plans to acquire land to use as a future plant site. Will the company depreciate the land when it is used as a building site for a new plant?Yes _____ No _____

r.Berful purchased a patent from another company this year, believing that the patent's value was grossly understated. It intends to value the patent for balance sheet purposes at its fair market value. Is this correct?Yes _____ No _____

s.Berful is being sued in court in a contract dispute. Its attorneys indicate that it is likely that the firm will lose when the court renders its verdict next year. Is this loss required to be reported this year or next year? This year _____ Next year _____

t.Berful plans to purchase treasury stock this year, and to classify it as a current asset on its balance sheet carried at its historical cost. Is this correct?Yes _____ No _____

2.Calculate the following, and place the calculated solution on the appropriate line. In all cases, assume the companies that are the subject of the question are US corporations using US GAAP.

a.Berful sells a product. It had one item in beginning inventory that cost $60,000, and purchased two more--one for $70,000, and later, one for $80,000.If two of the three items were sold this year, determine the cost of ending inventory under the following cost flow assumptions.

FIFO______________

LIFO______________

Weighted Average____________

b.Berful buys a machine for $25,000 on the first day of the year. The machine is expected to have a life of 5 years, and to have a salvage value of $5,000.Calculate the second year's depreciation under the following methods.

Straight-line method_______________

Double-declining balance_______________

c.Calculate the correct balance of cash in a firm's checking account by preparing a bank reconciliation, and place the correct balance on the line below.

Balance per bank statement4,932.27

Balance per books3,479.48

Deposits in transit1,654.24

Outstanding checks3,028.89

Interest earned on bank account

but not recorded on the books8.64

Bank service charge, not recorded

on books20.50

Error in book recording of a deposit

($100 deposit recorded as $10)90.00

Ending cash balance_______________

d.What accounting entries are required from your cash reconciliation in (c.) above?

3.List three major differences between IFRS and US GAAP accounting standards in accounting for assets, liabilities, or owners equity. List only differences found in the valuation of these accounts!

a.

b.

c.

4.Examine each of the transactions below and indicate if the general journal entry that follows it is the correct entry to record that transaction using US GAAP standards by checking "Yes" or "No."

a.Berful Corporation purchases a machine for $5,000, paying $400 in cash and issuing a note for the remainder.

Cash400

Note Payable4,600

Equipment5,000Yes _____ No _____

b.Berful discovers that it has earned by year end $1,000 currently recorded as Unearned Revenue.

Cash1,000

Revenue1,000Yes _____ No _____

c.Berful calculates its depreciation expense to be $22,000 for the year.

Depreciation Expense 22,000

Accumulated Depreciation22,000

Yes _____ No _____

d.Berful pays $200,000 in dividends to its shareholders.

Dividends Payable 200,000

Cash200,000

Yes _____ No _____

e.Berful borrows $10,000 from a bank on the last day of the year, agreeing to pay $500 in interest at the end of each year for the next three years, and then repay the principal amount of the debt.

Cash10,000

Interest Expense1,500

Bank Note Payable11,500

Yes _____ No _____

f.Berful has $3,000 in its Supplies account, and takes an inventory of supplies and finds only $400 remainthe rest have been used.

Supplies Expense2,600

Cash2,600Yes _____ No _____

5.Berful Corporation reports net income for 2016 as $52,000. Included on its income statement were Depreciation Expense of $4,600, and Amortization Expense of $600. During the year Accounts Receivable increased by $6,800, Inventories decreased by $3,800, Prepaid Expenses decreased by $400, Accounts Payable increased by $10,000, and Other Accrued Liabilities decreased by $900. The firm added $40,000 in new equipment, and borrowed $50,000 on a long-term note. Calculate Net Cash Flow from Operating Activities under US GAAP, using the indirect method, and record your answer on the following line.$___________________

6.Berful Industries has fixed costs of $500,000, unit variable costs of $20.00, and the only product it makes sells for $70 per unit.

a.Calculate the contribution margin________________

b.Calculate the contribution margin ratio____________

c.Calculate breakeven in units___________________

d.Calculate the revenue required to generate a profit of $100,000 _____________

e.Calculate the new breakeven point if fixed costs decline to $450,000.__________________

f.Calculate the breakeven point if the price drops to $50.00 and fixed costs increase to $600,000_____________

7.White Rock Lake Co. has an inventory of bicycle parts including part XC1 that cost $19,500. The part is now generally thought to be obsolete. However, it can be sold for $7,000 for non-bicycle applications, or modified for an additional cost of $10,000 and sold for $20,300.What action should be taken to maximize profit?

Sell as is _____Modify and sell_____