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

a. Berful issued new common shares of stock during the year, at a price well above its minimum legal capital value. Does this excess issuing price increase net income? Yes __ No __

b. Are Berfuls liabilities valued at present value? Yes __ No __

c. Berful sometimes sends goods to customers that have not ordered them, hoping that the customer will pay for them. Can revenue be recognized at time of delivery? Yes __ No __

d. Berful sold treasury stock at a substantial gain this year. Does this increase net income? Yes __ No __

e. Berful acquired treasury stock during the year, intending to report it as an asset on its balance sheet. Right? Yes __ No __

f. Berful can choose to value its inventory using LIFO or FIFO. In a period of steeply rising prices, is LIFO most likely to produce the highest cost of goods sold? Yes __ No __

g. Berful accelerated the recognition of revenue by requiring all customers to pay significant deposits before work began. Does this succeed in causing revenue to be recognized sooner? Yes __ No __

h. Berful paid significant transportation costs in acquiring heavy equipment and having it delivered to its work site on the Canadian border. Are these costs associated with the purchase of the equipment treated as Transportation Expense in the year of acquisition? Yes __ No __

i. Berful has borrowed cash from banks that require it to maintain compensating balance checking accountsaccounts that are locked, making the cash unavailable to Berful. Are these accounts reported as Cash on the balance sheet? Yes __ No __

j. Are Berfuls inventories valued at Lower-of-Cost-or Market on the balance sheet? Yes __ No __

k. Berful sold land that it had owned for several years at a loss. Does this transaction reduce net income in the year of the sale? Yes __ No __

l. Berful has a fleet of delivery vehicles and incurs significant vehicle maintenance costs. Should Berful treat these costs as assets on its balance sheet? Yes __ No __

m. Berful incurs significant research and development costs. Are these assets? Yes __ No __

n. Berful pays significant dividends to its shareholders, but wishes to increase its net income and wonders if reducing the dividend payout will increase its net income? Yes __ No __

o. Is the allowance method acceptable under US GAAP for the reporting of bad debts expense? Yes __ No __

p. Berful acquired another company this year, but had to recognize goodwill in the transaction. Is goodwill treated as an expense in the year of acquisition? Yes __ No __

q. Berful sold goods to a company that is known to be in significant financial difficulty, hoping to collect the full amount of the revenue when the customer finds an investor. Is this revenue appropriately recognized in the year of the sale? Yes __ No __

r. Berful transports some of its employees to a remote jobsite, incurring the risk of a catastrophic accidenta risk that it is unable to obtain adequate insurance against. Should Berful estimate the uninsured portion of the risk and recognize it as a liability? Yes __ No _

s. Berful issued 1,000 shares of no par common stock for $14 per share. Should its balance sheet report an increase in its Common Stock account of $14,000? Yes __ No __

t. Berful issued 1,000 shares of $2 par value common stock for $14 per share. Should it report an increase in its Additional Paid in Capital account of $2,000? Yes __ No __