Accounting 310: Intermediate Accounting Quiz help please!

Name: Date: Intermediate Accounting ACCT 310 Section 6980 Quiz # 2 Part I. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question (2 points each). (60 points) 1. On its December 31, Year 1 balance sheet, Anderson Co. reported accounts receivable of $120,000 before allowance for uncollectible accounts of $20,000. Credit sales during Year 2 were $648,000, and collections from customers, excluding recoveries, totaled $574,000. During Year 2, accounts receivable of $64,000 were written off and $19,000 were recovered. Anderson estimated that $25,000 of the accounts receivable at December 31, Year 3, were uncollectible. In its December 31, Year 2 balance sheet, what amount should Anderson report as accounts receivable before allowance for uncollectible accounts? a. $44,000 b. $64,000 c. $110,000 d. $130,000 2. After being held for 30 days, a 90-day 15% interest-bearing note receivable was discounted at a bank at 20%. The proceeds received from the bank equal a. Maturity value less the discount at 15%. b. Face value less the discount at 15%. c. Maturity value less the discount at 20%. d. Face value less the discount at 20%. 3. A company had the following sales and accounts receivable balances, prior to any adjustments at year end: Credit sales Accounts receivable Allowance for uncollectible accounts (credit balance) $50,000,000 $10,000,000 $150,000 The company uses 5% of accounts receivable to determine its allowance for uncollectible accounts at year end. By what amount should the company adjust its allowance for uncollectible accounts at year end? a. $150,000 b. $250,000 c. $350,000 d. $500,000 1|Page 4. Which method of recording uncollectible accounts expense is not consistent with GAAP and accrual accounting? Direct Write-Off Allowance a. Yes Yes b. Yes No c. No No d. No Yes 5. Anderson Co. determined that the net value of its accounts receivable at December 31, 20X3, based on an aging of the receivables, was $250,000. Additional information is as follows: Allowance for uncollectible accounts - 1/1/X3 $40,000 Uncollectible accounts written off during 20X3 $24,000 Uncollectible accounts recovered during 20X3 $4,000 Accounts receivable at 12/31/X3 $300,000 For 20X3, what would be Anderson's uncollectible accounts expense? a. $0 b. $4,000 c. $28,000 d. $30,000 6. On March 15, Year 1, Anderson Corp. adopted a plan to accumulate $1,000,000 by September 1, Year 5, Anderson plans to make four equal annual deposits to a fund that will earn interest at 10% compounded annually, Anderson compounded annually, Anderson made the first deposit on September 1 Year 1, Future value and future amount factors are as follows Future value of $1 at 10% for 4 periods 1.46 Future amount of ordinary annuity of $1 at 10% for four periods 4.64 Future amount of annuity in advance of $1 at 10% for four periods 5.11 Anderson should make four annual deposits (rounded) of a. $146.000. b. $195,700 c. $215,500 d. $250,000 7. A company pledged some of its accounts receivable to a Financing Corporation in return for a loan. Which of the following statements is correct? a. The Financing Corporation will take title to the receivables, and will return title to the company after the loan is paid. b. The company will retain control of the receivables. c. The Financing Corporation will assume the responsibility of collecting the receivables. d. The Financing Corporation cannot take title to the receivables company does not repay the loan. Title can only be taken if the receivables are factored. 2|Page This information is for questions 7 and 8 On January 1, Anderson Inc. factored $100,000 of its accounts receivable without recourse. The factor retained 15% of the accounts receivable as an allowance for sales returns and charged a 6% commission on the gross amount of the factored receivables. 8. What amount of cash did Anderson receive from the factored receivables? a. $68,000 b. $79,000 c. $85,000 d. $94,000 9. What is the loss on factoring for Anderson? a. $900 b. $5,100 c. $6,000 d. $15,000 10. A company uses the installment sales method to recognize revenue. Customers pay the installment notes in 12 equal monthly amounts, which include 10% interest. What is an installment note's receivable balance six months after the sale? a. 50% of the original sales price. b. Less than 50% of the original sales price. c. Less than the present value of the remaining monthly payments discounted at 10%. d. The present value of the remaining monthly payments discounted at 10%. 11. Anderson Bank grants a ten-year loan to a company in the amount of $150,000 with a stated interest rate of 6%. Payment are due monthly, and are computed to be $1,665. Anderson Bank incurs $4,000 of direct loan origination costs and $2,000 of indirect loan origination costs. In addition, Anderson Bank charges the company a four-point nonrefundable loan origination fee. The company, the borrower, has a carrying amount of a. $144,000 b. $148,000 c. $150,000 d. $152,000 3|Page 12. On December 1, 20X9, Anderson Inc. issued $600,000 of 10%, 15-year bonds at 98.8. Interest is payable semiannually on June 1 and December 1. Discount at issuance was $9,000. Anderson uses the straight-line method to amortize the discount, which does not differ materially from GAAP in this instance. On December 1, 20X14, Tory retired half of the bonds at 98. What is the net amount that Anderson should use in computing the gain or loss on retirement of debt? a. $291,000 b. $295,500 c. $297,000 d. $298,000 13. During 20X5, Anderson Co. issued 5,000 of its 9%, $1,000 face value bonds at 102 1/2. In connection with the sale of these bonds, Anderson aid the following expenses: Promotion costs $15,000 Engraving and printing $30,000 Legal fees $100,000 Underwriters' commissions $250,000 What amount should Anderson record as bond issue costs to be amortized over the term of the bonds? a. $0 b. $250,000 c. $295,000 d. $395,000 14. On April 1 of the current year, Anderson Corp. issued $550,000 of 3% bonds payable at par with interest payment dates of May 1 and September 1. In its income statement for the current year ended December 31, what amount of accrued bond interest payable should Anderson report? a. $0 b. $1,375 c. $5,500 d. $16,500 15. A company issued a bond with a stated rate of interest that is greater than the effective interest rate on the date of issuance. The bond was issued on one of the interest payment dates. What should the company report on the first interest payment date? a. An interest expense that is less than the cash payment made to bondholders. b. An interest expense that is greater than the cash payment made to the bondholders. c. A debit to the unamortized bond discount. d. A debit to the unamortized bond premium. 4|Page 16. On July 1, year 1, after recording interest and amortization, Anderson Co. converted $1,000,000 of its 12% convertible bonds into 50,000 shares of $1 par value common stock. On the conversion date the carrying amount of the bonds was $1,300,000, the marker value of the bonds was $1,400,000, and Anderson's common stock was publicly trading at $30 per share. Using the book value method, what amount of additional paidin capital should Anderson record as a result of the conversion? a. $950,000 b. $1,250,000 c. $1,350,000 d. $1,500,000 17. On May 1 of the current year, Anderson Corp. issued $600,000 of 10% bonds payable at par with interest payment dates of March 1 and September 1. In its income statement for the current year ended December 31, what amount of interest expense should Anderson report? a. $5,000 b. $15,000 c. $40,000 d. $60,000 18. What type of bonds in a particular bond issuance will not all mature on the same date? a. Debenture bonds. b. Sinking fund bonds. c. Serial bonds. d. Term bonds. 19. Anderson Co. incurred some interest expense. In their statement of cash flows prepared under IFRS, where would this expense show up? a. Investing activities. b. Either operating activities or financing activities. c. Either in operating activities or investing activities. d. Operating activities. 20. A company purchased commercial paper with a maturity of 60 days. The company treats as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in the company's statement of cash flows? a. As an outflow from financing activities. b. As an outflow from investing activities. c. As an outflow from operating activities. d. Not reported. 5|Page 21. Anderson Co.'s worksheet for the preparation of its 20X5 statement of cash flows included the following: December 31 January 1 Accounts receivable $23,000 $29,000 Allowance for uncollectible accounts $1,400 $800 Prepaid rent expense $5,200 $15,200 Accounts payable $20,600 $25,600 Anderson's 20X5 net income is $175,000. What amount should Anderson include as net cash provided by operating activities in the statement of cash flows? a. $176,600 b. $184,600 c. $186,600 d. $195,000 22. On January 1, year 1, Anderson Corp. issued 1,000 of its 10%, $1,000 bonds for $1,040,000. These bonds were to mature on January 1, year 11 but were callable at 101 any time after December 31, year 4. Interest was payable semiannually on July 1 and January 1. Anderson did not elect the fair value option for reporting its financial liabilities. On July 1, year 6, Anderson called all of the bonds and retired them. Bond premium was amortized on a straight-line basis. Before income taxes, Anderson's gain or loss in year 6 on this early extinguishment of debt was a. $0 b. $8,000 gain c. $10,000 loss d. $30,000 gain 23. A consultant, keeps his accounting records on a cash basis. During the current year, the consultant collected $150,000 in fees from clients. At December 31st of the previous year, the consultant had accounts receivable of $30,000. At December 31st of the current year, the consultant had accounts receivable of $80,000, and unearned fees of $15,000. On an accrual basis, what was the consultant's service revenue for the current year? a. $180,000 b. $185,000 c. $215,000 d. $230,000 24. Compared to its 20X5 cash basis net income, Anderson Co.'s 20X5 accrual basis net income increased when it a. Sold used equipment for cash at a gain in 20X5. b. Had lower accrued expenses on December 31, 20X5, than on January 1, 20X5. c. Declared a cash dividend in 20X4 that it paid in 20X5. d. than it reported as uncollectible accounts expense in 20X5. 6|Page 25. During a period of inflation in which a liability account balance remains constant, which of the following occurs? a. A purchasing power gain, if the item is a non-monetary liability. b. A purchasing power gain, if the item is a monetary liability. c. A purchasing power loss, if the item is a non-monetary liability. d. A purchasing power loss, if the item is a monetary liability. 26. The following information pertains to each unit of merchandise purchased for resale by a company: March 1, 20X1 Purchase price Selling price Price level index $14 $17 121 December 31, 20X1 Replacement cost $15 Selling price $21 Price level index 131 Under current cost accounting, what is the amount of company's holding gain on each unit of this merchandise? a. $0 b. $1.00 c. $2.00 d. $4.00 27. In a period of rising general price levels, Anderson Corp. discloses income on a current cost basis. Compared to historical cost income from continuing operations, which of the following conditions increases Anderson's current cost income from continuing operations? a. Current cost of land is greater than historical cost. b. Ending net monetary assets are less than beginning net monetary assets. c. Current cost of cost of goods sold is less than historical cost. d. Current cost of equipment is greater than historical cost 28. When computing purchasing power gain or loss on net monetary items, which of the following accounts is classified as nonmonetary? a. Accumulated depreciation of equipment. b. Advances to unconsolidated subsidiaries. c. Unamortized premium on bonds payable. d. Allowance for uncollectible accounts. 7|Page 29. In its financial statements, Anderson Co. discloses supplemental information on the effects of changing prices. Anderson computed the increase in current cost of inventory as follows: Increase in current cost (nominal dollars) $18,000 Increase in current cost (constant dollars) $14,500 What amount should Anderson disclose as the inflation component of the increase in current cost of inventories? a. $0 b. $3,500 c. $14,500 d. $32,500 30. On January 2, year 1, Anderson Co. issued 8% bonds with a face amount $1,000,000 that mature on January 2, Year 7. The bonds were issued to yield 12%, resulting in a discount of $150,000, Anderson incorrectly used the straight-line method instead of the effective interest method to amortize the discount, Anderson does not elect the fair value option for reporting financial liabilities. How is the carrying amount of the bonds affective by the error? At December 31, Year 1 January 2, Year 7 a. Overstated Understated b. No effect Understated c. Overstated No effect d. Understated Overstated Part II (10 points) What are the major advantages of notes to the financial statements? What type of items are usually reported in notes? 8|Page Part IV (30 points) During the year ended December 31, 2014, a company reported $134,000 of net income. Cash at December 31, 2014 was $37,000. Following is a list of transactions that occurred during the year: a. Depreciation expense, $21,000 b. Decrease in accounts receivable, $10,000 c. Purchase Land for $70,000 d. Increase in Prepaid expenses, $6,000 e. Purchase of Building $200.000 f. Issuance of bonds for cash, $150,000 g. Purchase of Equipment for $68,000 h. At the end of the fiscal year, a $18,000 cash dividend was declared and paid. i. Increase in accounts payable, $35,000. Required: 1. Prepare a statement of cash flows. 2. Explain what this statement tells you about the company. 9|Page Name: Date: Intermediate Accounting ACCT 310 Section 6980 Quiz # 2 Answer Sheet Part I. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question (2 points each). (60 points) 1) 6) 11) 16) 21) 26) 2) 7) 12) 17) 22) 27) 3) 8) 13) 18) 23) 28) 4) 9) 14) 19) 24) 29) 5) 10) 15) 20) 25) 30) Part II (10 points) What are the major advantages of notes to the financial statements? What type of items are usually reported in notes? Part IV (30 points) During the year ended December 31, 2014, a company reported $134,000 of net income. Cash at December 31, 2014 was $37,000. Following is a list of transactions that occurred during the year: a. Depreciation expense, $21,000 b. Decrease in accounts receivable, $10,000 c. Purchase Land for $70,000 d. Increase in Prepaid expenses, $6,000 e. Purchase of Building $200.000 f. Issuance of bonds for cash, $150,000 g. Purchase of Equipment for $68,000 h. At the end of the fiscal year, a $18,000 cash dividend was declared and paid. i. Increase in accounts payable, $35,000. Required: 1. Prepare a statement of cash flows. 2. Explain what this statement tells you about the company