Intermediate accounting
week 3
The following trial balance of Flip Corp. at December 31, year 1, has been adjusted except for incometax expense.
The following trial balance of Flip Corp. at December 31, year 1, has been adjusted except for incometax expense.
Account Debit Credit
Cash $600,000
Accounts Receivable, net 3,500,000
Cost in excess of billings on long-ter
contracts 1,600,000
Billings in excess of cost on long-term
contracts $700,000
Prepaid taxes 450,000 n
Property, plant, and equipment, net 1,480,000
Notes Payable, noncurrent 1,620,000
Common Stock 750,000
Additional Paid In Capital 2000,000
Retained Earnings – unappropriated 900,000
Retained Earnings - restricted for Notes Payable 160,000
Earning from long-term contracts 6,680,000
Cost and Expenses 5,180,000________
Totals $12,810,000
$12,810,000
Other financial data for the year ended December 31, year 1, are Flip uses the percentage-of-completion method to account for long- term construction contracts
for financial statement and income tax purposes. All receivables on these contracts are considered to be collectible within twelve months.
During year 1, estimated tax payments of $450,000 were charged to prepaid taxes. Flip has notrecorded income tax expense. There were no temporary or permanent differences, and Flip'stax rate is 30%.
In Flip's December 31, year 1 balance sheet, what amount should be reported as total noncurrent liabilities?
Question 1 options:
$2,480,000
$1,780,000
$1,620,000
$2,320,000
Question
2 (1 point)
The following trial balance of Flip Corp. at December 31, year 1, has been adjusted except for incometax expense.
Account Debit Credit
Cash $600,000
Accounts Receivable,
net 3,500,000
Cost in excess of
billings on long-ter contracts 1,600,000
Billings in
excess of cost on long-term contracts $700,000
Prepaid taxes 450,000
Property, plant, and
equipment, net 1,480,000
Notes Payable,
noncurrent 1,620,000
Common Stock 750,000
Additional Paid In Capital 2000,000
Retained Earnings –
unappropriated 900,000
Retained Earnings -
restricted for Notes Payable 160,000
Earning from long-term
contracts 6,680,000
Cost and Expenses 5,180,000
________ Totals $12,810,000
$12,810,000
Other financial data for the year ended December 31, year 1, are
Flip uses the percentage-of-completion method to account for long- term construction contracts
for financial statement and income tax purposes. All receivables on these contracts are considered to be collectible within twelve months.
During year 1,
estimated tax payments of $450,000 were charged to prepaid taxes. Flip has not recorded income tax expense. There were no temporary or permanent differences, and Flip'stax rate is 30%. In
Flip's December 31, year 1 balance sheet, what amount should be reported as total current assets?
$6,150,000
$5,700,000
$5,450,000
$5,000,000
$5,450,000
$5,000,000
Question
3 (1 point)
Flip, Inc. was incorporated on January 1, year 1, with proceeds from the issuance of $750,000 in stock andborrowed funds of $110,000. During the first year of operations, revenues from sales and consulting amounted to
$82,000, and operating costs and expenses totaled $64,000.On December 15st declared a $3,000 cash dividend, payable to stockholders on January 15 year 2. No additional activities
affected owners’ equity in year 1. Flip's liabilities increased to $120,000
by December 31, year 1. On Flip's December 31, year 1 balance sheet, total assets should be reported at current assets.
$885,000
$882,000 $
878,000
$875,000
$885,000
$882,000 $
878,000
$875,000
Question
4 (1 point)
When preparing a draft of its year 1 balance sheet, Flip, Inc. reported net assets totaling $875,000. Includedin the asset section of the balance sheet were the following:
Treasury Stock of Flip, Inc
at cost, which approximates market value on December 31 $24,000
Idle machinery 11,200
Cash surrender value of
life insurance on corporate executives 13,700
Allowance for decline in
market value of noncurrent equity investments 8,400
At what amount should Flip's net assets be reported in
the December 31, year 1 balance sheet?
$850,100
$834,500
$851,000
$842,600
$834,500
$851,000
$842,600
Question
5 (1 point)
In
analyzing a company financial statements, which financial statement would a potential investor
primarily use to assess the company's liquidity and financial flexibility?
Balance sheet
Income statement
Statement of cash flows
Statement of retained earnings
Balance sheet
Income statement
Statement of cash flows
Statement of retained earnings
Question
6 (1 point)
Flip Co. acquired 100%
of Flop Corp. prior to year 2. During year 2, the individual companies included intheir financial statements
the following.
Flip Flop
Officers' salaries
$ 75,000
$50,000
Officers' expenses
20,000
10,000
Loans to officers 125,000
50,000
Intercompany sales 150,000
What amount should be reported as related-party disclosures in the notes
to flip’s year 2 consolidated
financial statements.
$330,000
$175,000
$150,000
$155,000
$175,000
$150,000
$155,000
Question
7 (1 point)
Flop Co. has entered into a joint venture with an affiliate to secure access to additional inventory. Under thejoint venture agreement, Flop will purchase the output of the venture at prices negotiated on an
arm's-length basis. Which of the following is(are) required to
be disclosed about the related-party transaction?
I. The amount due to the affiliate at the balance sheet date.
II. The dollar amount of the purchases during the year.
I only. II only.
I only. II only.
Both I and II.
Neither I nor II.
Question
8 (1 point)
What is the purpose of information presented in notes to the financial statements?
To correct improper presentation in the financial statements.
To present management's responses to auditor comments.
To provide disclosures required by generally accepted accounting principles.
To provide recognition of amounts not included in the totals of the financial statements.
To correct improper presentation in the financial statements.
To present management's responses to auditor comments.
To provide disclosures required by generally accepted accounting principles.
To provide recognition of amounts not included in the totals of the financial statements.
Question
9 (1 point)
Which of the following information should be included in Flop, Inc.'s year 1 summary of significant
accounting policies?
Business component year 1 sales are Alpha $1M, Beta $2M, and Charlie $3M.
Property, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method.
Future common share dividends are expected to approximate 60% of earnings.
During year 1, the Delta component was sold.
Business component year 1 sales are Alpha $1M, Beta $2M, and Charlie $3M.
Property, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method.
Future common share dividends are expected to approximate 60% of earnings.
During year 1, the Delta component was sold.
Question
10 (1 point)
Which of the following information should be
disclosed in
the summary of significant accounting policies?
Guarantees of indebtedness of others.
Criteria for determining which investments are treated as cash equivalents.
Refinancing of debt subsequent to the balance sheet date.
Adequacy of pension plan assets relative to vested benefits.
Guarantees of indebtedness of others.
Criteria for determining which investments are treated as cash equivalents.
Refinancing of debt subsequent to the balance sheet date.
Adequacy of pension plan assets relative to vested benefits.
Question
11 (1 point)
Flop Corp. prepares its financial statements for its fiscal year ending December 31, year 1. Flopestimates that its product warranty liability is $28,000 at December 31, year 1. On February 12, year 2,
before the financial statements were issued, Flop received information about a product
defect that willrequire a recall of all units sold in year 1. It is
expected the product recall will cost an additional $40,000 in
warranty repairs. What should Flop present in its December 31, year 1
financial statements?
A footnote disclosure listing the estimated amount of $40,000 in warranty repairs and an
explanation of the recall.
explanation of the recall.
An estimated warranty liability of
$68,000.
No disclosure is necessary.
A footnote disclosure explaining the product recall.
No disclosure is necessary.
A footnote disclosure explaining the product recall.
Question
12 (1 point)
Flop Corp. has a fiscal year-end of December 31st year 1. On that date, Flop reported total assets of$600,000. On February 1, year 2 before the year 1 financial statements were issued, Floplost $250,000 ofinventory due to a fire. The inventory was a total loss and was
uninsured. How should Flop present thisinformation in its December 31, year 1 financial statements?
should disclose the loss in a footnote to its year 1 financial statements.
Flop should report an allowance for lost inventory in its year 1 balance sheet.
Flop should not report the loss
Flop should report an extraordinary loss in its year 1 income statement.
Flop should not report the loss
Flop should report an extraordinary loss in its year 1 income statement.
Question
13 (1 point)
The fair value of
an asset should be based upon
The replacement cost of an asset.
The price that would be received to sell the asset at the measurement date under current market conditions.
The price that would be paid to acquire the asset.
The original cost of the asset plus an adjustment for obsolescence.
The replacement cost of an asset.
The price that would be received to sell the asset at the measurement date under current market conditions.
The price that would be paid to acquire the asset.
The original cost of the asset plus an adjustment for obsolescence.
Question
14 (1 point)
Which of the following describes a principal market for establishing fair value of an asset?
The market that has the greatest volume and level of activity for the asset.
Any broker or dealer market that buys or sells the asset.
The market in which the amount received would be maximized.
The most observable market in which the price of the asset is minimized.
Question 15 (1 point)
Which of the following is true for valuing an asset to fair value?
The market in which the amount received would be maximized.
The most observable market in which the price of the asset is minimized.
Question 15 (1 point)
Which of the following is true for valuing an asset to fair value?
The price should be
adjusted for transportation costs to transport the asset to its principal market.
The fair value price is based upon an entry price to purchase the asset.
The fair value of the asset should be adjusted for costs to sell.
The price of the asset should be adjusted for transaction costs.
The fair value of the asset should be adjusted for costs to sell.
The price of the asset should be adjusted for transaction costs.
Question
16 (1 point)
Which of the following would meet the qualifications as market participants in determining fair value?
A subsidiary of the reporting unit interested in purchasing assets similar to those being valued.
An independent entity that is knowledgeable about the asset.
A liquidation market in which sellers are compelled to sell.
A broker or dealer that wishes to establish a new market for the asset.
A subsidiary of the reporting unit interested in purchasing assets similar to those being valued.
An independent entity that is knowledgeable about the asset.
A liquidation market in which sellers are compelled to sell.
A broker or dealer that wishes to establish a new market for the asset.
Question
17 (1 point)
The fair value of
an asset at initial recognition is
The price paid to transfer or sell the asset.
The price paid to acquire the asset.
The price paid to acquire the asset less transaction costs.
The book value of the asset acquired.
The price paid to transfer or sell the asset.
The price paid to acquire the asset.
The price paid to acquire the asset less transaction costs.
The book value of the asset acquired.
Question
18 (1 point)
Which of the following is not a valuation technique used in fair value estimates?
Market approach.
Cost approach.
Residual value approach.
Income approach.
Market approach.
Cost approach.
Residual value approach.
Income approach.
Question
19 (1 point)
The market approach valuation technique for measuring fair value requires which of the following?
The weighted-average of the present value of future cash flows.
The price to replace the service capacity of the asset.
Present value of future cash flows.
Prices and other relevant information of transactions from identical or comparable assets.
The weighted-average of the present value of future cash flows.
The price to replace the service capacity of the asset.
Present value of future cash flows.
Prices and other relevant information of transactions from identical or comparable assets.
Question
20 (1 point)
A change in valuation techniques used to measure fair value should be reported as
A change in accounting principle with retrospective restatement.
An extraordinary item on the current year's income statement.
An error correction with restatement of the financial statements of previous periods.
A change in accounting estimate reported on a prospective basis.
A change in accounting principle with retrospective restatement.
An extraordinary item on the current year's income statement.
An error correction with restatement of the financial statements of previous periods.
A change in accounting estimate reported on a prospective basis.
Question
21 (1 point)
Which of the following are observable inputs used for fair value measurements?
I. Bank prime rate.
II. Default rates on loans.
III. Financial forecasts.
III. Financial forecasts.
I and III only.
I, II and III.
I only.
I and II only.
I only.
I and II only.
Question
22 (1 point)
Which of the following best describes the content of the SEC Form 10-Q?
Quarterly audited financial information and other information about the company.
Quarterly reviewed financial information and other information about the company.
Annual audited financial information and nonfinancial information about the company.
Disclosure of material events that affect the company.
Quarterly audited financial information and other information about the company.
Quarterly reviewed financial information and other information about the company.
Annual audited financial information and nonfinancial information about the company.
Disclosure of material events that affect the company.
Question
23 (1 point)
A company is required to file quarterly financial statements with the United States Securities and Exchange Commission on form 10-Q. The company operates in an industry
that is notsubject to seasonal fluctuations
that could have a significant impact on its financial condition. In additional to the most recent quarter-end, for which of the following periods is thecompany required to present balance sheets on Form 10-Q?
The end of the preceding fiscal year and the end of
the prior two fiscal years.
The end of the preceding fiscal year.
The end of the corresponding fiscal quarter of the preceding fiscal year.
The end of the preceding fiscal year and the end of the corresponding fiscal quarter of the preceding fiscal years.
The end of the corresponding fiscal quarter of the preceding fiscal year.
The end of the preceding fiscal year and the end of the corresponding fiscal quarter of the preceding fiscal years.
Question
24 (1 point)
A company is an accelerated filer that is required to file Form 10-k with the United States Securitiesand Exchange Commission (SEC). What isthe maximum number of days after the company's fiscalyear-end that the company has to file Form 10-K with the SEC?
75 days. 120 days. 90 days. 60 days.
75 days. 120 days. 90 days. 60 days.
Question
25 (1 point)
Flop Inc is a publicly traded company. Recently, Flop entered into a material long-term lease agreement.Which SEC form discloses information about material events?
Form 8-K
Form 10-K
Form 10Q
Form S-1
Form 8-K
Form 10-K
Form 10Q
Form S-1
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