Question 6

Mortenson Corporation sells its product, a rare metal, in a controlled market with a quoted price applicable to all quantities. The total cost of 5,000 pounds of the metal now held in inventory is $150,000. The total selling price is $420,000, and estimated costs of disposal are $15,000. At what amount should the inventory of 5,000 pounds be reported in the balance sheet?

$135,000.

$420,000.

$150,000.

$405,000.

Question 2 Grove Corporation issued $4,000,000 of 8% bonds on October 1, 2014, due on October 1, 2019. The interest is to be paid twice a year on April 1 and October 1. The bonds were sold to yield 10% effective annual interest. Grove Corporation closes its books annually on December 31.

Complete the following amortization schedule for the dates indicated.(Round answers to 0 decimal places, e.g. 5,275.)

Date	Credit Cash	Debit Interest Expense	Credit Bond Discount	Carrying Amount of Bonds
October 1, 2014	$3,691,117
April 1, 2015
October 1, 2015

Grove Corporation issued $4,000,000 of 8% bonds on October 1, 2014, due on October 1, 2019. The interest is to be paid twice a year on April 1 and October 1. The bonds were sold to yield 10% effective annual interest. Grove Corporation closes its books annually on December 31. Complete the following amortization schedule for the dates indicated. (Round answers to 0 decimal places, e.g. 5,275.) D a t Debit Credit Carrying e Credit Cash Interest Expense Bond Discount Amount of Bonds O ct o b er $3,691,117 1, 2 0 1 4 A pr il 1, 2 0 1 5 O ct o b er 1, 2 0 1 5 Prepare the adjusting entry for December 31, 2015. Use the effective-interest method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) D a Account Titles and t Explanation e D e c. 3 1 Debit Credit Compute the interest expense to be reported in the income statement for the year ended December 31, 2015. $ Interest expense Question 3 Total payroll of Walnut Co. was $1,850,000, of which $300,000 represented amounts paid in excess of $106,800 to certain employees. The amount paid to employees in excess of $7,000 was $1,480,000. Income taxes withheld were $431,000. The state unemployment tax is 1.2%, the federal unemployment tax is .8%, and the F.I.C.A. tax is 7.65% on an employee's salaries and wages to $106,800 and 1.45% in excess of $106,800. Prepare the journal entry for the salaries and wages paid. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit * Prepare the entry to record the employer payroll taxes. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Question 4 Flint Department Store wishes to use the retail LIFO method of valuing inventories for 2015. The appropriate data are as follows: At Cost December 31, 2014 inventory (base layer) Purchases (net of returns, allowances, markups, and markdowns) $1,250,000 2,100,000 Sales revenue Price index for 2015 At Retail $2,100,000 3,500,000 3,290,000 105 Complete the following schedule. (Do not leave any answer field blank. Enter 0 for amounts.) Com puta tion of Reta il Inve ntor y for 201 5 Inve ntor y, Dece mber 31, 2014 Purc hase s (net of retur ns, allow ance s, mark ups, and mark dow ns) Cost Retail $ Ratio $ % $ Total avail able $ Less: Sale s Inve ntor y, Dece mber 31, 2015 , at retail Adjus tment of Inven tory to LIFO Basis Ending invent ory at base year prices Beginn ing invent ory at base year prices $ Cost Retail $ Increa se at base year prices $ Increa se at 2015 retail $ Increa se at 2015 cost Invent ory, Decem ber 31, 2015 at LIFO $ $ cost Question 5 Moore Corporation follows a policy of a 10% depreciation charge per year on all machinery and a 5% depreciation charge per year on buildings. The following transactions occurred in 2015: March 31, 2015- Negotiations which began in 2014 were completed and a building purchased 1/1/06 (depreciation has been properly charged through December 31, 2014) at a cost of $6,480,000 with a fair value of $4,160,000 was exchanged for a second building which also had a fair value of $4,160,000. The exchange had no commercial substance. Both parcels of land on which the buildings were located were equal in value, and had a fair value equal to book value. June 30, Machinery with a cost of $716,000 and accumulated depreciation through January 1 of 2015$537,000 was exchanged with $451,000 cash for a parcel of land with a fair value of $698,000. The exchange had commercial substance. Prepare all appropriate journal entries for Moore Corporation for the above dates. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Da Account Titles and te Explanation 3/ 31 /1 5 (To record depreciation.) 3/ 31 /1 5 (To record exchange of buildings.) 6/ 30 /1 5 Debit Credit (To record depreciation.) 6/ 30 /1 5 (To record exchange of machineries.) Question 6 Mortenson Corporation sells its product, a rare metal, in a controlled market with a quoted price applicable to all quantities. The total cost of 5,000 pounds of the metal now held in inventory is $150,000. The total selling price is $420,000, and estimated costs of disposal are $15,000. At what amount should the inventory of 5,000 pounds be reported in the balance sheet? $135,000. $420,000. $150,000. $405,000. Question 7 Which of the following statements is true regarding IFRS and inventories? IFRS allows inventory to be written up above its original cost. With respect to inventories, IFRS defines market as net realizable value. In order to determine market valuation of inventories, IFRS uses a ceiling and a floor. IFRS permits the option of valuing inventories at fair value. Question 8 Exiter Inc. owns the following assets: Asset Cost Salvage Estimated Useful Life A $140,000 $14,000 10 years B 75,000 7,500 5 years C 164,000 8,000 12 years What is the composite depreciation rate of Exiter's assets? 12.9% 11.1% 14.0% 10.3% Question 9 Use of the double-declining balance method means salvage value is not deducted in computing the depreciation base. results in a decreasing charge to depreciation expense. means the book value should not be reduced below salvage value. all of these. Question 10 Halltown Company purchased a depreciable asset for $450,000. The estimated salvage value is $30,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset? $84,375 $112,500 $78,750 $52,500 Question 11 Transactions for the month of June were: Purchases June 1 3 7 15 22 (balance) 1,600 4,400 2,400 3,600 1,000 Sales @ $3.20 @ 3.10 @ 3.30 @ 3.40 @ 3.50 June 2 6 9 10 18 25 1,200 3,200 2,000 800 2,800 400 @ $5.50 @ 5.50 @ 5.50 @ 6.00 @ 6.00 @ 6.00 Assuming that perpetual inventory records are kept in dollars, the ending inventory on a LIFO basis is $8,220. $8,320. $8,580. $8,940. Question 12 The following information applied to Howe, Inc. for 2014: Merchandise purchased for resale Freight-in Freight-out Purchase returns Howe's 2014 inventoriable cost was $391,000. $386,000. $380,000. $383,000. Question 13 $380,000 8,000 5,000 2,000 The acquisition cost of a certain raw material changes frequently. The book value of the inventory of this material at year end will be the same if perpetual records are kept as it would be under a periodic inventory method only if the book value is computed under the Weighted-average method. LIFO method. FIFO method. Moving average method. Question 14 Kerr Co.'s accounts payable balance at December 31, 2014 was $1,400,000 before considering the following transactions: Goods were in transit from a vendor to Kerr on December 31, 2014. The invoice price was $70,000, and the goods were shipped f.o.b. shipping point on December 29, 2014. The goods were received on January 4, 2015. Goods shipped to Kerr, f.o.b. shipping point on December 20, 2014, from a vendor were lost in transit. The invoice price was $50,000. On January 5, 2015, Kerr filed a $50,000 claim against the common carrier. In its December 31, 2014 balance sheet, Kerr should report accounts payable of $1,400,000. $1,450,000. $1,520,000. $1,470,000. Question 15 On September 10, 2014, Jenks Co. incurred the following costs for one of its printing presses: Purchase of attachment Installation of attachment Replacement parts for renovation of press Labor and overhead in connection with renovation of press $45,000 5,000 18,000 7,000 Neither the attachment nor the renovation increased the estimated useful life of the press. However, the renovation resulted in significantly increased productivity. What amount of the costs should be capitalized? $0 $68,000 $57,000 $75,000 Question 16 A machine cost $600,000, has annual depreciation of $100,000, and has accumulated depreciation of $450,000 on December 31, 2014. On April 1, 2015, when the machine has a fair value of $137,500, it is exchanged for a machine with a fair value of $675,000 and the proper amount of cash is paid. The exchange had commercial substance. The new machine should be recorded at $612,500. $675,000. $537,500. $662,500. Question 17 For a nonmonetary exchange of plant assets, accounting recognition should not be given to part of a gain when the exchange has no commercial substance and cash is received (cash paid or received is less than 25% of the fair value of the exchange). a gain when the exchange has commercial substance. part of a gain when the exchange has no commercial substance and cash is paid (cash paid/received is less than 25% of the fair value of the exchange). a loss when the exchange has no commercial substance. Question 18 The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to promoters, and the costs of meetings for organizing the promoters. These costs are said to benefit the corporation for the entity's entire life. These costs should be capitalized and amortized over 40 years. capitalized and amortized over 5 years. expensed as incurred. capitalized and never amortized. Question 19 Lynne Corporation acquired a patent on May 1, 2014. Lynne paid cash of $45,000 to the seller. Legal fees of $1,000 were paid related to the acquisition. What amount should be debited to the patent account? $45,000 $46,000 $1,000 $44,000 Question 20 A loss on impairment of an intangible asset is the difference between the asset's carrying amount and its fair value. carrying amount and the expected future net cash flows. book value and its fair value. fair value and the expected future net cash flows. Question 21 Harrel Company acquired a patent on an oil extraction technique on January 1, 2014 for $6,250,000. It was expected to have a 10 year life and no residual value. Harrel uses straight-line amortization for patents. On December 31, 2015, the expected future cash flows expected from the patent were expected to be $750,000 per year for the next eight years. The present value of these cash flows, discounted at Harrel's market interest rate, is $3,500,000. At what amount should the patent be carried on the December 31, 2015 balance sheet? $6,000,000 $3,500,000 $6,250,000 $5,000,000 Question 22 Which of the following is a current liability? A long-term debt maturing currently, which is to be paid with cash in a sinking fund A long-term debt maturing currently, which is to be retired with proceeds from a new debt issue A long-term debt maturing currently, which is to be converted into common stock None of these