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ACCO 420 Study Guide - Midterm Guide: Certified Emission Reduction, Effective Interest Rate, Book Value

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bluecockroach703
17 May 2016
School
Concordia University
Department
Accountancy
Course
ACCO 420
Professor
Kelly Gheyara

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Document Summary

Accounts payable generally are zero-interest-bearing and unsecured. It is expected to be settled in the entity"s normal operating cycle. It is due within 12 months from the end of the reporting period. The entity does not have an unconditional right to defer its settlement for at least 12 months after the date of the statement of financial position. Revenue method (how to record transactions): sales. Unearned warranty revenue (average price, competitors price x units: warranty cost. Warranty revenue (percentage of revenues that is recognized) Expense method (how to record transactions): sales. Warranty expense (actual warranty cost for the year) Miscellaneous accounts (or cash, inventory, accrued payroll: adjustment at the end of the year. Estimated liability for warranties (estimated warranty expenses actual warranty costs) Acceptable when: costs are not material, warranty period is relatively short, the amount of the liability cannot reasonably be estimated, future costs are not likely to be incurred. Recognizes costs both legal and constructive operations.

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Related Questions

Smyth Corporation had the following balances at 12/31/x1:

CASH $ 2,200,000

INVESTMENTS-TRADING 3,750,000

ACCOUNTS RECEIVABLE(NET) 5,500,000

INVENTORIES 2,600,000

PROPERTY, PLANT, & EQUIP(NET) 5,450,000

ACCOUNTSPAYABLE 4,510,000

INTERESTPAYABLE 90,000

ACCRUED VACATIONPAY 7,000

LIABILITY FOR PRODUCT WARRANTIES 21,000

NOTES PAYABLE (longterm) 7,000,000

BONDSPAYABLE 5,000,000

COMMONSTOCK 1,000,000

COMMON STOCK DIVIDENDS DISTRIBUTABLE 2,000

RETAINEDEARNINGS (1/1/x1) 370,000

SALES 19,000,000 COST OF GOODSSOLD 10,900,000

OPERATINGEXPENSES 4,700,000

INTERESTEXPENSE 1,900,000

Additional information. No adjustments have been made for any ofthe additional information. No reversing entries were made at1/1/x1. (Hints!!! Do not change "Cash".) Financial statements arenot issued until March of x2.)

a. Smyth has a policy that allows employees 8 vacation daysannually. The vacation days vest after an employee hasbeen employed for six months. Smyth has a workforce of 20 employeeseach of whom has been with the company for at least three years.The average weekly salary is $1,000 (assume a five day work week).During the year employees took vacation hours totaling 112 days.The bookkeeper debited Wage Expense when the employees were paidfor these days. (Ignore payroll taxes)

b. Sales include state sales tax at 4%. The bookkeeper debits SalesTax Expense when sales taxes are paid to the state. At year end,sales tax of $21,000 is due to the state. Sales Tax Payable at1/1/x1 was zero.

c. Warranty costs are estimated at 1.6% of selling price. Actualwarranty costs incurred during the year totaled $245,000. Thebookkeeper debits warranty expense as these costs are incurred.

d. The corporate tax rate is 40%.

e. The company president receives a bonus based upon 10% of netincome.

f. $1,000,000 of the bonds mature 6/30/x2. The minutes of the lastboard meeting state that the company plans to refinance the bondson a long-term basis when they mature. You have determined that thecompany has no commitments from any lender to take care of thesebonds.

g. $1,000,000 of the bonds matured 1/31/x2. They were extinguished byissuing common stock. (Today

Smyth Corporation had the following balances at 12/31/x1:

CASH $ 2,200,000

INVESTMENTS-TRADING 3,750,000

ACCOUNTS RECEIVABLE(NET) 5,500,000

INVENTORIES 2,600,000

PROPERTY, PLANT, & EQUIP(NET) 5,450,000

ACCOUNTSPAYABLE 4,510,000

INTERESTPAYABLE 90,000

ACCRUED VACATIONPAY 7,000

LIABILITY FOR PRODUCT WARRANTIES 21,000

NOTES PAYABLE (longterm) 7,000,000

BONDSPAYABLE 5,000,000

COMMONSTOCK 1,000,000

COMMON STOCK DIVIDENDS DISTRIBUTABLE 2,000

RETAINEDEARNINGS (1/1/x1) 370,000

SALES 19,000,000 COST OF GOODSSOLD 10,900,000

OPERATINGEXPENSES 4,700,000

INTERESTEXPENSE 1,900,000

Additional information. No adjustments have been made for any ofthe additional information. No reversing entries were made at1/1/x1. (Hints!!! Do not change "Cash".) Financial statements arenot issued until March of x2.)

a. Smyth has a policy that allows employees 8 vacation daysannually. The vacation days vest after an employee hasbeen employed for six months. Smyth has a workforce of 20 employeeseach of whom has been with the company for at least three years.The average weekly salary is $1,000 (assume a five day work week).During the year employees took vacation hours totaling 112 days.The bookkeeper debited Wage Expense when the employees were paidfor these days. (Ignore payroll taxes)

b. Sales include state sales tax at 4%. The bookkeeper debits SalesTax Expense when sales taxes are paid to the state. At year end,sales tax of $21,000 is due to the state. Sales Tax Payable at1/1/x1 was zero.

c. Warranty costs are estimated at 1.6% of selling price. Actualwarranty costs incurred during the year totaled $245,000. Thebookkeeper debits warranty expense as these costs are incurred.

d. The corporate tax rate is 40%.

e. The company president receives a bonus based upon 10% of netincome.

f. $1,000,000 of the bonds mature 6/30/x2. The minutes of the lastboard meeting state that the company plans to refinance the bondson a long-term basis when they mature. You have determined that thecompany has no commitments from any lender to take care of thesebonds.

g. $1,000,000 of the bonds matured 1/31/x2. They were extinguished byissuing common stock. (Today

Anderson Accounting Services LLC provides accounting and tax preparation and consulting services. Sometimes customers only wish to have financial statements and/or tax returns prepared. Sometimes customers bundle accounting and tax preparation with consulting services (to be provided over a period of time). Sometimes customers only wish to have consulting services provided over a period of time. Because Anderson is a service firm there is no cost of goods sold associated with their services.
Customer is Civic Corporation 1
Tax consulting begins on November 1st and runs through the next April 11/1/X7
Date of contract 11/1/X7
Length of consulting services 6 months months
Tax return preparation occurs over the period February through April of 20X8
Length of tax prepartion 3 months
Price of tax preparation to be allocated over the return preparation period $ 2,000 stand alone price
Price of consulting services to be allocated over consulting period $ 5,000 stand alone price
Customers are charged a lesser amount as follows for both tax and consulting $ 6,000
Anderson Accounting Services LLC's current year end 12/31/X7
Customers pay at the contract date for BOTH the consulting and tax preparation services.

What are the performance obligations in the contract?

A.

Tax preparation services
B.

Tax preparation services and tax consulting services
C.

Unable to determine

D.Tax consulting services

QUESTION 3

Determine the transaction price that should be allocated to the consulting services.

A.

$4,286
B.

$1,714
C.

$1,429
D.

$4,571

QUESTION 4

Calculate the total revenue that should be recognized in the current accounting period.

A.

$4,571
B.

$1,714
C.

$1,429

D. $4,286

QUESTION 5

What is the total amount in the deferred revenue account(s) at the end of the current accounting period?

A.

$1,714
B.

$4,571
C.

$4,286
D.

$1,429

QUESTION 6

What is the total amount of revenue that should be recognized in the NEXT accounting period period?

A.

$1,714
B.

$4,286
C.

$1,429
D.

$4,571

QUESTION 7

The following journal entry has what impact on the income statement?

Debit Cash XXX

Credit Deferred Revenue XXX

A.

No impact
B.

Decrease
C.

Increase

QUESTION 8

The following journal entry has what impact on the income statement?

Debit Cash XXX

Credit Accounts Receivable XXX

A.

No impact
B.

Increase
C.

Decrease

QUESTION 9

Revenue is defined as:

An inflow or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.

Revenue is recognized from the settlement of which of the following liabilities:
A.

Discount on Bonds Payable
B.

Deferred Revenue
C.

Salaries Payable
D.

Accrued Interest

QUESTION 10

A customer must have "control" over the good or service in order for a performance obligation to be considered as having been satisfied for purposes of revenue recognition.
A.

TRUE
B.

FALSE