ACC 577 ACC577 Week 9 Quiz (STRAYER)

ACC 577 Week 9 Quiz

1. Which of the following should be disclosed for each reportable operating segment of an enterprise?
2. Advertising costs may be accrued or deferred to provide an appropriate expense in each period for
3. Ace Co. settled litigation on February 1, 2005 for an event that occurred during 2004. An estimated liability was determined as of December 31, 2004. This estimate was significantly less than the final settlement. The transaction is considered to be material.
4. The financial statements for year-end 2004 have not been issued.
   How should the settlement be reported in Ace's year-end 2004 financial statements?
5. When should a lessor recognize in income a nonrefundable lease bonus paid by a lessee on signing an operating lease?
6. In a sale-leaseback transaction, a gain resulting from the sale should be deferred at the time of the sale-leaseback and subsequently amortized when
   I. The seller-lessee has transferred substantially all the risks of ownership.
   II. The seller-lessee retains the right to substantially all of the remaining use of the property.
7. The following information pertains to a sale and leaseback of equipment by Mega Co. on December 31, 2005:
8. What amount of deferred gain on the sale should Mega report at December 31, 2005?
9. On August 1, 2005, Metro, Inc. leased a luxury apartment unit to Klum.
   The parties signed a 1-year lease beginning September 1, 2005 for a $1,000 monthly rent payable on the first day of the month.
10. At the August 1 signing date, Metro collected $540 as a nonrefundable fee for allowing Klum to sign a 1-year lease (the normal lease term is three years) and $1,000 rent for September. Klum has made timely payments each month, but prepaid January's rent on December 20.
    In Metro's 2005 income statement, rent revenue should be reported as
11. On January 1 of the current year, Tell Co. leased equipment from Swill Co. under a nine-year sales-type lease. The equipment had a cost of $400,000 and an estimated useful life of 15 years.
    Semiannual lease payments of $44,000 are due every January 1 and July 1. The present value of lease payments at 12% was $505,000, which equals the sales price of the equipment.
    Using the straight-line method, what amount should Tell recognize as depreciation expense on the equipment in the current year? 
12. A twenty-year property lease, classified as an operating lease, provides for a 10% increase in annual payments every five years. In the sixth year compared to the fifth year, the lease will cause the following expenses to increase
13. Gei Co. determined that, due to obsolescence, equipment with an original cost of $900,000 and accumulated depreciation at January 1, 2004 of $420,000 had suffered permanent impairment, and as a result should have a carrying value of only $300,000 as of the beginning of the year. In addition, the remaining useful life of the equipment was reduced from 8 years to 3.
    In its December 31, 2004 balance sheet, what amount should Gei report as accumulated depreciation?
14. Dahl Co. traded a delivery van and $5,000 cash for a newer van owned by West Corp. Assume there is no commercial substance to the exchange. The following information relates to the values of the vans on the exchange date:
15. On July 1, 2004, Balt Co. exchanged a truck for 25 shares of Ace Corp.'s common stock. Assume commercial substance.
16. On that date, the truck's carrying amount was $2,500, and its fair value was $3,000. Also, the book value of Ace's stock was $60 per share. On December 31, 2004, Ace had 250 shares of common stock outstanding and its book value per share was $50.
    What amount should Balt report in its December 31, 2004, balance sheet as investment in Ace?
17. On December 31, 2004, a building owned by Carr, Inc. was destroyed by fire. Carr paid $12,000 for removal and cleanup costs. The building had a book value of $250,000 and a fair value of $280,000 on December 31, 2004.
    What amount should Carr use to determine the gain or loss on this involuntary conversion?
18. On July 1, 2005, Glen Corp. leased a new machine from Ryan Corp.
19. The lease contains the following information:
20. No bargain purchase option is provided, and the machine reverts to Ryan when the lease expires. What amount should Glen record as a capitalized leased asset at inception of the lease?
21. Scott Co. exchanged nonmonetary assets with Dale Co. No cash was exchanged. There is commercial substance to the exchange.
22. The carrying amount of the asset surrendered by Scott exceeded both the fair value of the asset received and Dale's carrying amount of that asset.
    Scott should recognize the difference between the carrying amount of the asset it surrendered and
23. Lease A does not contain a purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property.
    Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases?
24. On December 31, 2005, Bit Co. had capitalized costs for a new computer software product with an economic life of five years. Sales for 2006 were 30 percent of expected total sales of the software. At December 31, 2006, the software had a net realizable value equal to 90 percent of the capitalized cost.
    What percentage of the original capitalized cost should be reported as the net amount on Bit's December 31, 2006 balance sheet?
25. On January 1, 2001, Babson, Inc. leased two automobiles for executive use. The lease requires Babson to make five annual payments of $13,000 beginning January 1, 2001. 
26. YIV Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. YIV should report segment financial information for each division meeting which of the following criteria?
27. Brill Co. made the following expenditures during 2004: