1. Berful Industries requests your assistance in preparing its accounting records for its annual audit, following US GAAP. What advice would you give them with respect to the following list of accounting questions?

1. On the last day of the year, Berful borrowed $50,000 from a bank, agreeing to pay the $50,000 principle amount of the loan and $3,000 in interest on the last day of the next yearone year later. Is the principle amount of the loan a liability on the day the money is borrowed? YES _____ NO _____

Is the $3,000 in interest a liability of the firm on the day the money is borrowed? YES _____ NO _____

2. Berful bought a new truck, paying $1,000 to have it delivered to its Alaskan office. Is the delivery fee part of the cost of the truck or Delivery Expense? Part of the cost of the truck _____ Delivery Expense _____

3. Berful hired a new accountant on the last day of the year on a one-year contract, with the new duties beginning on the first day of the next year. Is the salary to be paid the new accountant a liability to Berful on its balance sheet in the year in which she is hired? YES _____ NO _____

4. Berful spent $20,000,000 to undertake original new product research this year. Are these expenditures treated as an asset or an expense this year? ASSET _____ EXPENSE _____

5. Berful has no bad debts this year, but expects some of its current year sales, now in accounts receivable, to be identified as uncollectible next year. Using the Direct Write-off Method, would Berful recognize any Bad Debts Expense this year? YES _____ NO _____

6. Same facts as in e. above, but Berful uses the Allowance Method to account for accounts receivable. Does Berful have any Bad Debts Expense to recognize in the current year? YES _____ NO _____

7. Berful owns a mine with an estimated 200,000,000 tons of ore. The cost of the ore is estimated to be $2.00 per ton, while the cost of the land without the ore is calculated as $1,000,000. If 6,000,000 tons are mined and sold in the current year, what amount of Mineral Depletion Expense is expected to be recognized this year? _______________

8. If Berful acquires another business, and believes that $20,000 in Goodwill should be recorded, is this an asset on Berfuls books or an expense? ASSET _____ EXPENSE _____

1. If Berful bought a new machine this year for $40,000 on the first day of the year, and estimates the machine to have $4,000 in salvage value, and a life of 8 years, calculate the first year depreciation expense to be recognized under the following depreciation methods:

1. Straight Line ____________
2. Double Declining Balance ____________

10. Berful sells a very expensive product that it buys for resale. It sold one this year. It had one item in beginning inventory that cost $1,000,000, and it acquired 2 more during the year, costing $1,100,000, and $1,200,000 for the last one. Calculate Cost of Goods Sold and Ending Inventory for these facts under these cost flow assumptions:

1. FIFO Cost of Goods Sold ________ Ending Inventory ________
2. LIFO Cost of Goods Sold ________ Ending Inventory ________
3. Average Cost of Goods Sold ________ Ending Inventory ________

11. Prepare a bank reconciliation using the following data, and record the ending balance of cash in this account on the line provided:

Balance per Bank Statement $4,862.77

Balance per Books 2,479.48

Deposits in Transit, not on bank statement 654.24

Outstanding checks, not on bank statement 3,028.89

Interest earned, not in books yet 8.64

Ending balance of cash in this account _________

I. Berful wants to increase its reported net income. Will the following result in an increase in net income for the firm?

1. Berful issues new shares of stock to investors, with investors paying an amount per share in excess of par value. YES _____ NO _____
2. Berful sells to the public some of its own shares held as Treasury Stock, at a gain. YES _____ NO _____