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 rather than cost. Is this correct? Yes No S. Berful is being sued in court in a contract dispute. Its attorneys indicate that it is probable that the firm will lose when the court renders its verdict next year and have to pay the full amount sought by the plaintiffs. 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 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 in negotiations with an existing customer over the price to charge for a large sale. He has ordered the goods sent to the customer, expecting the negotiations to be completed soon, and is recording the sale at the usual price rather than the lower price the customer wants. Is this income at the time of shipping? 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 1. Berful classifies a compensating balance checking account- restricted as to useas 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
