Log in
Accounting
2
answers
0
watching
78
views

BCS has provided the auditor with the following informationregarding their investment accounts: At 12/31/2011, Tradingsecurities $400,000, Available-for-Sale Securities $500,000,Held-to-Maturity Securities $1,500,000. At 12/31/2012, TradingSecurities $600,000, Available-for-Sale Securities $350,000,Held-to-Maturity Securities $2,000,000. Additional information: Themarket value of the trading securities was $450,000 on December 31,2011 and $475,000 on December 31, 2012; the market value of theavailable for sale securities was $600,000 on December 31, 2011 and$250,000 on December 31, 2012.


a. What is the proper valuation for the trading andavailable-for-sale securities on 12/31/11 and 12/31/12? (What valuewill appear on the balance sheet for these securities?)
b. The trading securities held by the company at the end of 2011were sold in 2012 for $450,000. What was the gain or lossrecognized on the sale? Prepare the journal entry to record thesale.
c. What is the impact on the income statement in 2011 and 2012 ofholding these investment securities (show your calculation).
d. How would you audit the balance in the held-to-maturitysecurities at the end of 2012? What is the appropriate valuationbase for these securities?
e. What is the impact of the held-to-maturity securities on theincome statement for 2012?

Watch
2
answers
0
watching
78
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Bunny Greenfelder
Bunny GreenfelderLv2
28 Sep 2019
Already have an account? Log in
Share

Related questions

QUESTION 1

Which of the following is not an equity security?

a. Common stock

b.Warrants

c. Call options

d. Redeemable preferred stock with a mandatory redemptionperiod

QUESTION 2

On January 1, 2005, N Inc. purchased 10-year bonds issued by BCompany. The bonds have a face value of $500,000 and pay interestannually at 8 percent on each December 31. N purchased the bondsfor $550,000. N�s accounting year ends on December 31. N�smanagement has chosen to treat the bonds purchased as anavailable-for-sale security. There are no other securities in theavailable-for-sale portfolio. Assume that on December 31, 2005, thefair market value of the bonds was $510,000. The company uses thestraight-line method of amortization. What is the amount ofinterest income to be reported on the 2005 incomestatement?

a.$35,000

b. $40,000

c. $44,000

d. $45,000

QUESTION 3

At December 31, 2005 and 2006, C Corp. had outstanding 4,000shares of $100 par value, 6 percent cumulative preferred stock and20,000 shares of $10 par value common stock. At December 31, 2005,dividends in arrears on the preferred stock were $12,000. Cashdividends declared in 2006 totaled $44,000. Of the $44,000, whatamounts were payable on each class of stock?

Preferred Stock

Common Stock

a. $44,000

$0

b. $36,000

$8,000

c. $32,000

$12,000

d. $24,000

$20,000

QUESTION 4

A liability for a cash dividend exists atthe

a. end of each year

b. date of declaration

c. date of record

d. date of payment

QUESTION 5

Coe Corp. issued 20,000 shares of $5 par common stock at $10 pershare. On December 31, 2005, Coe's retained earnings were $300,000.In March 2006, Coe reacquired 5,000 shares of its common stock at$20 per share. In June 2006, Coe sold 1,000 of these shares to itscorporate officers for $25 per share. Coe uses the cost method toaccount for its treasury stock. Net income for the year endedDecember 31, 2006, was $60,000. At December 31, 2006, what amountshould Coe report as retained earnings?

a. $360,000

b. $365,000

c.$375,000

d. $380,000

QUESTION 6

William Corp. issued 10,000 shares of its $1 par value commonstock for a building. The building was listed for sale at $500,000.William�s common stock is currently selling for $45 per share.William Corp. should record the buildingat

a.$10,000

b. $440,000

c. $450,000

d. $500,000

QUESTION 7

Assume that S Company makes sales of $400,000 during 2004 andreports the amount as sales revenue on its income statement. Alsoassume that the company wishes to delay the reporting of a portionof that amount for tax purposes and uses the installment salesmethod for tax purposes. Assume that $100,000 of collectionsoccurred during 2004, $150,000 occurred in 2005, and the remainderwill occur in 2006. Assuming a tax rate of 40 percent, what is theamount of the entry into the Deferred Tax account at the end of theyear 2004?

a. $40,000

b.$60,000

c.$120,000

d. $160,000

QUESTION 8

The Company purchases an asset on January 1, 2005, for $200,000.The straight-line method of depreciation is used for book purposes,resulting in depreciation of $50,000 per year. An acceleratedmethod is used for tax purposes, resulting in depreciation of$80,000, $60,000, $40,000, and $20,000 for the years 2005, 2006,2007, and 2008, respectively. Assume that the tax rate is 40percent for all years and that depreciation is the only temporarydifference between book and tax purposes. The 2005 journal entrywould include a

a. debit to Deferred Tax Liability of$12,000

b. debit to Deferred Tax Liability of $4,000

c. credit to Deferred Tax Asset of$4,000

d. credit to Deferred Tax Liability of $12,000

QUESTION 9

Which of the following has no effect on comprehensiveincome?

a. Unrealized gains and losses on held-to-maturityinvestments

b. Unrealized gains and losses on available-for-saleinvestments

c. Unrealized gains and losses on tradingsecurities

d. Realized gains and losses on available-for-sale securitiesthat were held in previous periods

QUESTION 10

Assume that Grandzol Company believes that $120,000 of a$600,000 deduction will not be utilized in future periods and thatthe tax rate is 40 percent for all periods. What is the amount ofthe valuation allowance?

a.$48,000

b. $120,000

c. $192,000

d. $240,000

QUESTION 11

Information regarding Silly Co.�s portfolio ofavailable-for-sale securities is as follows:

a. Aggregate cost as of 12/31/05 $170,000

b. Unrealized gains as of 12/31/05 4,000

c. Unrealized losses as of 12/31/05 26,000

d. Net realized gains during 2005 30,000

At December 31, 2004, Silly reported an unrealized holding lossfrom available-for-sale securities of $1,500 on the statement ofstockholders� equity. Assuming the application of SFAS No. 115,�Accounting for Certain Investments in Debt and Equity Securities,�what amount should Silly report on its December 31, 2005, balancesheet as an unrealized holding loss?

a.$26,000

b. $22,000

c.$20,500

d. $0

QUESTION 12

Treasury stock is a(n)

a. asset account

b. contra-asset account

c. equityaccount

d. contra-equity account

QUESTION 13

On March 1, 2004, LeoCorp. was formed by issuing 100,000 shares of $1 par value commonstock at $5 per share and 20,000 shares of $100 par value preferredstock at $101 per share. If Leo earned $35,000 in its first year ofoperations, total stockholders� equity at year end would be

a. $335,000

b. $735,000

c. $2,135,000.

d. $2,555,000

QUESTION 14

Interest received from available-for-sale debt securities shouldbe reportedas

a. an unrealized holdinggain�income

b. an unrealized holding gain�equity

c. other revenue on the income statement

d. a reclassification adjustment on the statement ofcomprehensive income

QUESTION 15

During 2005, Bob Co. issued 5,000 shares of $100 par convertiblepreferred stock for $110 per share. One share of preferred stockcan be converted into three shares of Bob's $25 par common stock atthe option of the preferred shareholder. On December 31, 2006, whenthe market value of the common stock was $40 per share, all of thepreferred stock was converted. What amount should Bob credit toCommon Stock and to Additional Paid-in Capital as a result of theconversion?

Common Stock

Additional Paid-in-Capital

a. $375,000

$175,000

b. $375,000

$225,000

c. $500,000

$50,000

d. $600,000

$0

QUESTION 16

If a company reissued at $20 per share 100 shares of treasurystock that it had previously acquired for $28 per share and therewasn�t any Paid-in Capital from Treasury Stock, it would debit

a. Loss on Sale of Treasury Stock for $800

b. Paid-in Capital from Common Stock for $800

c. Retained Earnings for $800

d. Treasury Stock for $800

QUESTION 17

B Corp. issued 200,000 shares of common stock when it beganoperations in 2004 and issued an additional 100,000 shares in 2005.B also issued preferred stock convertible into 100,000 shares ofcommon stock. In 2006, B purchased 75,000 shares of its commonstock and held it in the treasury. At December 31, 2006, how manyshares of B's common stock were outstanding?

a. 400,000

b.325,000

c.300,000

d. 225,000

QUESTION 18

Assume that Bad Company makes sales of $200,000 during 2004 andreports the amount as sales revenue on its income statement. Alsoassume that the company wishes to delay the reporting of a portionof that amount for tax purposes and uses the installment salesmethod for tax purposes. Assume that $60,000 of collectionsoccurred during 2004 and the remainder will occur in 2005. What isthe amount of the temporary difference at the end of the year2004?

a.$200,000

b.$140,000

c.$60,000

d. $0

QUESTION 19

Rent income received in advance that is included for taxpurposes when received, but recorded for book purposes when earnedresults in

a. expense items and deductions being taken for tax purposesbefore bookpurposes

b. expense items and deductions being recorded for book purposesbefore tax purposes

c. purposes income being included for tax purposes beforebook

d. income being recorded for book purposes before taxpurposes.

QUESTION 20

Debt securities that are classified as available-for-salesecurities are reported on the balance sheet at

a. fair value

b. historical cost

c. amortized cost

d. lower of amortized cost or fair value

QUESTION 21

Dividends are a(n)

a.expense

b. distribution to owners

c. asset

d. increase in equity

QUESTION 22

Which of the following does not use the Adjustment andUnrealized Holding Gain (Loss) accounts?

a. Held-to-maturitysecurities

b. Tradingsecurities

c. Available-for-salesecurities

d. Both held-to-maturity and trading securities

QUESTION 23

Other comprehensive income includes changes in the fair valueof

a. held-to-maturity securities

b. tradingsecurities

c. available-for-sale securities

d. investments accounted for under the equity method

On December 31, 2016, Price Company recorded the journalentries required for items #1-14 below. The entries record either:(a) annual adjusting entries at year-end or (b)transactions that occurred onDecember 31, 2016. Show all computations. Round any amounts to thenearest dollar.

1. The December 31, 2016, balance in Rent Revenue beforeadjusting entries is $36,000. This amount was received on July 1,2016, for an 18-month lease beginning on that date.

2. On December 31, 2016, Price recorded an adjusting entryrelated to a 10%, $500,000 note payable. The annual interestpayment on the note is due on January 1, 2017; the note is dueJanuary 1, 2019.

3. On December 31, 2016, Price received $9,000 for an annualinterest payment on Williams Company bonds that mature in 4 years.The 6% bonds have a face value of $150,000 were purchased to yield8%. The current balance in the Discount on bond investment accountis $7,731. Price classified this investment as held-to-maturity andused the effective interest method. The fair value of the bonds atyear-end was $170,000. Note: Itis not necessary to compute theprice/present value of the bond investment.

4. On December 31, 2016, Price received $47,000 from the sale of100 tablet devices. Each tablet came with 6-months of tech supportand service beginning on January 1, 2017. The stand-alone sellingprices are: tablet,$450 per device; tech support, $50 per tablet.COGS related to this sale is included in item #7.

5. On December 31, 2016, Price recorded bad debt expense usingthe allowance method. At the beginning of2016, the balances inAccounts Receivable and Allowance for Uncollectible Accounts were$1,000,000 and $50,000 (credit), respectively. In 2016, Pricerecorded net credit sales of $5,000,000 and cash collections of$4,700,000. Actual uncollectible accounts receivable written off in2016 were $100,000. Price estimated uncollectible accounts to be 5%of year-end Accounts Receivable.

6. On December 31, 2016, Price recorded interest on a 3-year,$100,000 noninterest-bearing note using the effective interestmethod. Price received the note from a customer on January 1, 2016.The effective interest rate was 10%. (Assume the sales revenuerecorded on January 1 is included in the 2016 preliminary netincome in part 2).

7. On December 31, 2016, Price the cost of goods sold entry forthe periodic recordkeeping system. Price used the FIFO inventorymethod and had 6,000 units left in ending inventory. The followinginventory information was available:

Jan. 1, 2016, beginning inventory 3,000 units at $100= $300,000

March purchases 8,000 units at $120 = 960,000

September purchases 5,000 units at $130 = 650,000

8. On December 31, 2016, the net realizable value of Price’sinventory was $750,000. Price records LCNRV write-downs as separatelosses.

9. On December 31, 2016, the balance in the Building account was$6,000,000, the cost of construction of a new building that wascompleted at the end of the year and will be placed in service in2017. The average accumulated expenditures for this project were$3,200,000. On January 1, 2016, Price borrowed $4,000,000on a5-year, 9% note to finance construction. The interest on this noteis due January 1, 2017; Price has not recorded any interest relatedto this note in 2016.

10. During 2016, Price saw demand for one of its productsdecline and is concerned about whether the manufacturing machinerymay have suffered a permanent decline in value. On December 31,2016, the balances in the Machinery and Accumulated Depreciationaccounts were $1,100,000 and $400,000,respectively. At this time,Price estimated the future cash flows from the machinery to be$650,000 and the fair value to be $570,000. (Assume 2016depreciation has already been recorded.)

11. At the end of 2016, Price revised the estimated useful lifeof the company’s corporate jet. The jet was purchased on January 1,2015, for $2,000,000. At that time, Price adopted straight-linedepreciation and estimated the jet’s useful life to be 15 years andresidual value to be $500,000. However, in 2016, Price dramaticallyreduced its use of the jet due to shareholders’ scrutiny ofbenefits granted to corporate executives. At the end of 2016, thecompany expected that the jet will be sold at the end of 2018 at anestimated price of $1,000,000. 2016 depreciation has not yet beenrecorded on the jet.

12. In 2016, Price had investments in debt and equity securitiesclassified as available-for-sale and trading.The followinginformation is available on December 31, 2016 before the year-endfair value adjustment is recorded:

Available-for-salesecurities Tradingsecurities

Balance in Investment account $2,500,000(AFS) $1,350,000(TS)

Fair Value Adj. account, 1-1-16 100,000 credit(AFS)

Accumulated OCI, 1-1-16 100,000 debit(AFS)

Fair value, 12-31-16 2,700,000 (AFS) 800,000(TS)

13. Price owns 25% of the common stock of Harvey Company. At thebeginning of 2016, the balance in theInvestment in Harvey stock was$9,000,000. On December 31, 2016, Price received $250,000 in cashdividends from Harvey and was notified that Harvey’s 2016 netincome was $3,000,000. At the time, the fair value of Price’sinvestment in Harvey was $8,700,000. No transactions have beenrecorded in 2016 related to the Harvey Co. investment.

14. On December 31, 2016, Price declared dividends of $30,000that will be paid to common shareholders on January 15, 2017.

1 of 50

Investments in debt securities, such as bonds, may be classifiedas either current or long-term assets.

True
False

Question

2 of 50

Marketable securities that are held until the due date of thesecurities are

trading and held-to-maturitysecurities.
available-for sale securities.
held-to-maturity securities.
trading securities.

Question

3 of 50

Which of the following business types is most common as measuredby the amount of business transacted?

Government entities
Proprietorships
Partnerships
Corporations

Question

4 of 50

Depreciation is based upon cost, useful life, and salvagevalue.

True
False

Question

5 of 50

Because depreciation is not cash-based, it is NOT reported inthe direct method of the statement of cash flows.

True
False

Question

6 of 50

A company has a petty cash fund of $200. At the end of themonth, $6.41 remains in the fund along with $190.96 in variousreceipts. The journal entry to replenish the fund would show adebit(s) to

various expenses for $190.96 andCash Short of $2.63.
Cash for $190.96.
Cash for $193.59.
various expenses for $190.96 andCash Over of $2.63.

Question

7 of 50

A 12-month, 8% note dated August 1, 2013 for $5,000 would haveaccrued interest payable on December 31, 2013 of $166.67.

True
False

Question

8 of 50

Warranty expense must be estimated and matched to revenues.

True
False

Question

9 of 50

Upgrading the RAM on a computer would be an example of a(n)

capital expense.
betterment.
ordinary repair.
extraordinary repair.

Question

10 of 50

The formula for the quick ratio is quick assets divided bynoncurrent assets.

True
False

Question

11 of 50

Which of the following are considered to be legal entities thatexist separate and distinct from their owners?

Sole proprietorships
Organizations with more than 100partners
Partnerships
Corporations

Question

12 of 50

Patents and copyrights can be seen, held, or touched.

True
False

Question

13 of 50

Which of the following would be considered part of the cost ofmachinery and equipment?

Repairs after start-up
Insurance after purchase
Maintenance
Sales taxes

Question

14 of 50

The business or person that signs the note and promises to paythe required amount is called the payee.

True
False

Question

15 of 50

Conley Company has a petty cash fund of $300. At the end of themonth, $42.38 remains in the fund along with $260.75 in variousreceipts. The journal entry to replenish the fund would bedebit

Petty Cash for $257.62 and creditCash for $257.62.
various expenses, $260.75 andcredit Cash for $260.75.
various expenses, $260.75, creditCash Over for $3.13, and credit Cash for $257.62.
various expenses, $254.49, debitCash Short for $3.13, and credit Cash for $257.62.

Question

16 of 50

Neither land nor land improvements are depreciated.

True
False

Question

17 of 50

Using a 365-day year, the maturity value of a 180-day note for$2,700 at 9% annual interest is (rounded to the nearest cent)

$2,819.84.
$2,821.50.
$2,943.00.
$ 119.84.

Question

18 of 50

On January 1, Bestway, Inc. signed a $175,000, 8%, 30-yearmortgage that requires semiannual payments of $7,735 on June 30 andDecember 31 of each year. The journal entry to record the secondsemiannual payment would be (round interest calculation to thenearest dollar) to

debit Interest expense, $764; debitMortgage payable, $6,971; credit Cash, $7,735.
debit Mortgage payable, $7,735;credit Cash, $7,735.
debit Interest expense, $6,971;debit Mortgage expense, $764; credit Cash, $7,735.
debit Interest expense, $6,971;debit Mortgage payable, $764; credit Cash, $7,735.

Question

19 of 50

Allied Industries purchased a piece of equipment for $65,000with an estimated salvage value of $15,000 on January 1. Itsestimated life is five years. To the nearest dollar, what is theequipment's depreciation using double-declining-balance for yeartwo?

$ 26,000
$ 12,000
$ 20,000
$ 15,600

Question

20 of 50

Payroll is also called employee compensation and can consist ofmany parts.

True
False

Question

21 of 50

The number of shares of stock that a corporation is given theright to sell is called

authorized stock.
issued stock.
outstanding stock.
capital stock.

Question

22 of 50

Which of the following would NOT be considered part of the costof machinery and equipment?

In-transit insurance costs
Delivery charges
Installation costs
Repairs and maintenance afterstart-up

Question

23 of 50

Equipment costing $118,000 has accumulated depreciation of$92,000. The equipment is a trade-in for new equipment costing$187,000. If the trade-in value received for the old equipment is$30,000, the journal entry to record this transaction is to

debit Equipment (New) for $187,000,debit Accumulated Depreciation – Equipment for $92,000, creditEquipment (Old) for $118,000, and credit Cash for $161,000.
debit Equipment (New) for $187,000and credit Cash for $187,000.
debit Accumulated Depreciation –Truck for $50,000, debit Loss on Disposal $6,000, and credit Truckfor $56,000.
debit Equipment (New) for $187,000,debit Accumulated Depreciation – Equipment for $92,000, debit Losson Exchange of Assets for $26,000, credit Equipment (Old) for$118,000 and credit Cash for $187,000.

Question

24 of 50

Liberty Company has declared a $40,000 cash dividend toshareholders. The company has 5,000 shares of $20-par, 6% preferredstock and 10,000 shares of $15-par common stock. The preferredstock is cumulative. How much will be distributed to the preferredand common stockholders on the date of payment if the preferredstock is $12,000 in arrears?

$18,000 preferred, $22,000common
$20,000 preferred, $20,000common
$6,000 preferred, $34,000common
$40,000 preferred, $0 common

Question

25 of 50

In accounting, what is the meaning of capitalized?

Capitalized means that a given cityhas been selected as a government center.
Capitalized means that the cost ofan asset is recorded as a debit (increase) to expense.
Capitalized means that a liabilityaccount is credited (increase
Capitalized means that an assetaccount is debited (increased) for the cost of an asset.

Question

26 of 50

Interest is an expense to the debtor and income to thecreditor.

True
False

Question

27 of 50

Cash consists of anything that a bank will take as adeposit.

True
False

Question

28 of 50

The cost of long-term assets must be allocated to an expense asthe asset is used up.

True
False

Question

29 of 50

The process of acquiring merchandise from a supplier begins withthe

purchase order.
check for payment.
receiving report.
invoice.

Question

30 of 50

Appleway Corporation purchases a machine for $125,000. It has anestimated salvage value of $10,000 and is expected to produce50,000 units in its lifetime. During the first year of operation,it produced 14,500 units. To the nearest dollar, the depreciationfor the first year under the units of production method will be

$35,500.
$31,250.
$36,250.
$33,350.

Question

31 of 50

Book value is depreciable cost minus accumulateddepreciation.

True
False

Question

32 of 50

The records of Inland Equipment showed a net loss of $30,000,depreciation expense of $25,000, and an increase in supplies onhand of $5,000. The amount of net cash flow from operatingactivities using the indirect method is

($10,000).
$15,000.
$20,000.
($15,000).

Question

33 of 50

Retained earnings represent internally generated capital.

True
False

Question

34 of 50

A company issues 15,000 shares of its $25 par common stock for$29 per share. The amount to be debited to Cash is

$435,000.
$375,000.
$405,000.
$ 60,000.

Question

35 of 50

On September 1, 2012, Juno Corp. lent $2,400 to Bill Askins on asix-month 8% promissory note. The journal entry to record the notefor Juno Corp. would be to:

debit Note Receivable/Tim, $2,400;credit Cash, $2,400.
debit Note Receivable/Tim, $96;credit Interest Income, $96.
debit Note Receivable/Tim, $2,496;credit Cash, $2,496.
debit Cash, $2,400; credit NotePayable/Tim, $2,400.

Question

36 of 50

Separation of duties is essential for internal control over cashreceipts and cash payments.

True
False

Question

37 of 50

Which of the following would indicate poor internal control overaccounts receivable?

The same person handling cashreceipts also records the accounts receivable transactions.
The person handling cash receiptspasses the receipts to someone who enters them into accountsreceivable.
The mailroom employees open themail and give the cash receipts to another employee.
The person who handles accountsreceivable would not write off accounts as uncollectible.

Question

38 of 50

Limited liability means that the stockholders of a corporationshare a personal liability for all debts of the corporation.

True
False

Question

39 of 50

Accumulated depletion is a(n)

contra-asset account.
cash account.
contra-liability account.
expense account.

Question

40 of 50

Allied Industries reported net income of $52,000, depreciationexpenses of $13,000, a gain on a land sale of $3,000, and adecrease in accounts receivable of $1,500. Under the indirectmethod, net cash flows from operations is

$63,500.
$66,500.
$69,500.
$60,555.

Question

41 of 50

The portion of stockholders' equity that can be used fordividends is referred to as legal capital.

True
False

Question

42 of 50

Franklin Industries had total assets of $560,000; totalliabilities of $250,000; and total stockholders' equity of$310,000. Franklin Industries debt ratio is

55.4%.
28.7%.
44.6%.
80.6%.

Question

43 of 50

Financial analysis is used to predict the future of abusiness.

True
False

Question

44 of 50

Online banking should NOT be used to reconcile the bankaccount.

True
False

Question

45 of 50

Costs of testing machinery or equipment before they are usedwould be included in the price of the machinery or theequipment.

True
False

Question

46 of 50

There are two methods for accounting for uncollectiblereceivables.

True
False

Question

47 of 50

Assets that are NOT expected to provide benefits for a number ofaccounting periods are called

current assets.
property, plant, andequipment.
long-term assets.
natural resources.

Question

48 of 50

The allowance method of accounting for bad debts is required byGAAP because of the materiality principle.

True
False

Question

49 of 50

A stock dividend affects total stockholders' equity.

True
False

Question

50 of 50

Realized gains and losses only occur when the security is soldfor more or less than the original cost.

True
False

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in