ACCT 311 ACCT311 Quiz 2 (Chap 17, 18, 23 and 24) Answers (UMUC)

ACCT 311 ACCT311 Quiz 2 (Chap 17, 18, 23 and 24) Answers (UMUC)

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ACCT311 Quiz 2 (Chap 17, 18, 23 and 24) (UMUC)

1. Isaac Inc. began operations in January 2013. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's installment payments.

In 2013, Isaac had $600 million in sales of this type. Scheduled collections for these sales are as follows:

2.Beresford Inc. purchased several investment securities during 2012, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent.

3. Hutton Construction specializes in the construction of commercial and industrial buildings. The contractor is experienced in bidding long-term construction projects of this type, with the typical project lasting fifteen to twenty-four months. The contractor uses the percentage-of-completion method of revenue recognition since, given the characteristics of the contractor's business and contracts, it is the most appropriate method. Progress toward completion is measured on a cost to cost basis. Hutton began work on a lump-sum contract at the beginning of 2014. As bid, the statistics were as follows:

4. Computation of selected ratios.

5. 

a.  Prepare a cash flow statement for the following information.

b.  Include a cash reconciliation statement

6. An analyst compiled the following information for U Inc. for the year ended December 31, 2013

Multiple Choice

 

  1. Santo Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods?
  2. An investor has a long-term investment in stocks. Regular cash dividends received by the investor are recorded as
  3. Koehn Corporation accounts for its investment in the common stock of Sells Company under the equity method. Koehn Corporation should ordinarily record a cash dividend received from Sells as
  4. Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the
  5. Judd, Inc., owns 35% of Cosby Corporation. During the calendar year 2010, Cosby had net earnings of $300,000 and paid dividends of $30,000. Judd mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively?
  6. Dublin Co. holds a 30% stake in Club Co. which was purchased in 2011 at a cost of $3,000,000. After applying the equity method, the Investment in Club Co. account has a balance of $3,040,000. At December 31, 2011 the fair value of the investment is $3,120,000. Which of the following values is acceptable for Dublin to use in its balance sheet at December 31, 2011?
  7. A sale should not be recognized as revenue by the seller at the time of sale if
  8. The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of six conditions have been met. Which of the following is not one of these six conditions?
  9. In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be
  10. The percentage-of-completion method must be used when certain conditions exist. Which of the following is not one of those necessary conditions?
  11. When work to be done and costs to be incurred on a long-term contract can be estimated dependably, which of the following methods of revenue recognition is preferable?
  12. How should the balances of progress billings and construction in process be shown at reporting dates prior to the completion of a long-term contract?
  13. In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the
  14. How should earned but unbilled revenues at the balance sheet date on a long-term construction contract be disclosed if the percentage-of-completion method of revenue recognition is used?
  15. The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it
  16. Which of the following facts concerning plant assets should be included in the summary of significant accounting policies?
  17. Farr, Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. Farr should report segment financial information for each division meeting which of the following criteria?
  18. Unruh Corp. and its divisions are engaged solely in manufacturing operations. The following data (consistent with prior years' data) pertain to the industries in which operations were conducted for the year ended December 31, 2013.
  19. The following information pertains to Nixon Corp. and its divisions for the year ended December 31, 2013.
  20. Advertising costs may be accrued or deferred to provide an appropriate expense in each period for
  21. Mayo Corp. has estimated that total depreciation expense for the year ending December 31, 2013 will amount to $400,000, and that 2013 year-end bonuses to employees will total $800,000. In Mayo's interim income statement for the six months ended June 30, 2013, what is the total amount of expense relating to these two items that should be reported?
  22. Fina Corp. had the following transactions during the quarter ended March 31, 2013:
  23. The required approach for handling extraordinary items in interim reports is to
  24. If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be
  25. The MD&A section of a company's annual report is to cover the following three items
  26. How is the amortization of patents reported in a statement of cash flows that is prepared using the direct method?
  27. Creditors and investors would generally find the statement of cash flows least useful for assessing the:
  28. A firm reported ($ in millions) net cash inflows (outflows) as follows: operating $75, investing ($200), and financing $350. The beginning cash balance was $250. What was the ending cash balance? 
  29. Cash equivalents generally would not include short-term investments in
  30. Cash equivalents have each of the following characteristics except: 
  31. When a company purchases a security it considers a cash equivalent, the cash outflow is: 
  32. When preparing a statement of cash flows using the direct method, accrual of payroll expense is: 
  33. A firm reported salary expense of $239,000 for the current year. The beginning and ending balances in salaries payable were $40,000 and $15,000, respectively. What was the amount of cash paid for salaries? 
  34. In a statement of cash flows in which operating activities are reported by the direct method, which of the following would increase reported cash flows from operating activities? 
  35. Which of the following is reported as an operating activity in the statement of cash flows? 

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