Simulated Exam Missed Questions Flashcards
On 12/31, Devin Co. sold goods to Jenson Co. for $10,000, under an arrangement where:
1. Jensen has an unlimited right of return and
2. Jensen’s obligation to pay Devin is contingent upon Jensen’s reselling the goods
Past experience has shown that Jensen resells 60% of goods and returns the other 40%.
What amount should Devin include in sales revenue for this transaction on its 12/31 income statement?
$0
No information is presented about consideration received and no resale of products has occurred at 12/31
On 3/15/Year 1, Krol paid property taxes of $90,000 on its office building for the calendar year. On 4/1/Year 1, Krol paid $150,000 for unanticipated repairs to its office equipment. The repairs will benefit operations for the remainder of Year 1.
What is the total amount of these expenses that Krol should include in its quarterly income statement for the 3 months ended 6/30/Year 1?
$72,500
Annual property taxes (90,000/4)= 22,500
Repairs that benefit operations for 3 quarters remaining in year (150,000/3)= 50,000
22,500+50,000= 72,500
Actual and estimated expenditures benefiting all interim periods equally should be expensed how?
Ratably throughout the year
What must be present in order to require the disclosure of the estimated effect of a change in an estimate used in the preparation of financial statements?
It is reasonably possible that the estimate will change in the near term
AND
The effect of a change in the estimate would be material
Which method of determining fair value would an entity’s discount rate be most important?
Income approach
The income approach determines fair value by:
Converting future amounts, including cash flows or earnings, to a single discounted amount
Douglas Co. leased machinery with an economic useful life of 6 years. For tax purposes, the depreciable life is 7 years. The lease is for 5 years, and Douglas can purchase the machinery at fair value at the end of lease. What is the depreciable life of the leased machinery for financial reporting?
5 years
Although the machine has an economic life of 6 years, there is no indication that Douglas will exercise the fair value purchase option. So, the machine should be depreciated over the lease term, which is 5 years.
When a company pledges (assigns) receivables in return for a loan, the assigning company will….
Retain title to the receivables and will use the proceeds collected from the receivables to repay the loan
The following info pertains to Park township’s general fund at 12/31/Year 1:
Total assets, including $200K cash- $1,000,000
Total liabilities - $600,000
Budgetary control (open purchase orders) - $100,000
Appropriations do not lapse at year-end. At 12/31/Year 1, what amount should Park report as unassigned fund balance in its general fund balance sheet?
$300,000
Total assets - 1,000,000
Less: Total liabilities - (600,000)
Total fund balance - $400,000
Since appropriations do not lapse at year end, the budgetary control must be reported a part of the assigned portion of fund balance
So, 400,000 - 100,000 = $300,000
How are discontinued operations that occur at mid year initially reported?
Included in net income and disclosed in the notes to the interim financial statements
