Exam 1: Intermediate Accounting Volume 1

Note with fair value not equal to cash consideration On January 1, 2013, Senegal Corp.lent $50,000 to its CEO, interest-free.However, the loan is repayable in five instalments, each December 31, until paid.The market rate for similar loans (with similar credit risk)is 4%. Instructions a)Calculate the present value (fair value)of this loan (round to the nearest dollar). b)Prepare the journal entry to record this transaction.

Which of the following statements with respect to the gross profit method of estimating inventory is NOT correct?

Use the following information for questions. Tuba Ltd.began work in 2014 on a contract for $1,250,000.Other data are: Revenue Recognition 6 - 19 -If Tuba uses the percentage-of-completion method, the gross profit to be recognized in 2014 is

Amortization of discount under the straight-line and effective interest methods On January 1, 2013, Ethiopia Corporation receives a four-year, $50,000 zero-interest bearing note in payment of goods sold.The present value of the note equals the agreed upon sales price of $32,936.55.Ethiopia is a privately held company and follows ASPE. Instructions a)Assuming Ethiopia uses the straight-line method to amortize the note's discount, prepare the journal entry to record the sale on January 1, and the interest accrual on December 31, 2013. b)Assuming Ethiopia uses the effective interest method to amortize the note's discount, prepare the journal entry to record the sale on January 1, and the interest accrual on December 31, 2013.

Wilma received merchandise on consignment from Bubbles.As of January 31, Wilma included the goods in inventory, but did not record the transaction.The effect of this on Wilma's financial statements for January 31 would be

Calculation of net income from the change in shareholders' equity Presented below are changes in selected account balances of Briefcase Inc.during last year, except for retained earnings. The only entries in Retained Earnings were for net income and a dividend declaration of $10,000. Instructions Calculate the net income for last year.

Use the following information for questions Venus Corp.'s trial balance at December 31, 2014 is properly adjusted except for the income tax expense adjustment. Other financial data for the year ended December 31, 2014: - Included in accounts receivable is $720,000 due from a customer and payable in quarterly instalments of $90,000.The last payment is due December 29, 2016. - The balance in the future income tax liability account relates to a temporary difference that arose in a prior year, of which $30,000 is classified as a current liability. - During the year, estimated tax payments of $465,000 were charged to income tax expense. The current and future tax rate on all types of income is 35 percent. -In Venus's December 31, 2014 statement of financial position, the current liabilities total is

Factoring accounts receivable On April 1, Morocco Ltd.factored $500,000 of accounts receivable with Kenya Finance Corp.on a without recourse basis.Under the arrangement, Morocco was to handle disputes concerning service, and Kenya Finance was to make the collections, handle the sales discounts, and absorb the credit losses.Kenya Finance assessed a finance charge of 5% of the total accounts receivable factored and retained an amount equal to 2% of the total receivables to cover sales discounts. Instructions a)Prepare the journal entry required on Morocco's books on April 1. b)Prepare the journal entry required on Kenya Finance's books on April 1. c)Instead, assume Morocco factors the $500,000 of accounts receivable with Kenya Finance on a with recourse basis.The recourse provision has a fair value of $12,000.Prepare the journal entry required on Morocco's books on April 1.

Which of the following is a current asset?

For calendar 2014, the gross profit of Allan Corp.was $350,000; the cost of goods manufactured was $890,000; the beginning inventories of goods in process and finished goods were $76,000 and $112,000, respectively; and the ending inventories of goods in process and finished goods were $92,000 and $143,000, respectively.Allan Corp.'s sales for 2014 must have been

Use the following information for questions The 2014 and 2015 financial statements of Banana Inc.contained the following errors: -Assuming that none of the errors were detected or corrected, by what amount will 2014 income before taxes be overstated or understated?

Use the following information for questions. Tuba Ltd.began work in 2014 on a contract for $1,250,000.Other data are: Revenue Recognition 6 - 19 -If Tuba uses the completed-contract method, the gross profit to be recognized in 2015 is

Lebanon Ltd.prepared an aging of its accounts receivable at December 31, 2013 and determined that the net realizable value of the receivables was $290,000.Additional information for calendar 2013 follows: For the year ended December 31, 2013, Lebanon's bad debt expense should be

Intraperiod tax allocation

Use of an allowance for doubtful accounts is an application of the

Some events are NOT recorded in the accounting information system because

Which of the following is INCORRECT regarding factoring of receivables?

Which of the following serves as the justification for the periodic recording of depreciation expense?

In many cases, an entity may have an implicit obligation even if it is not explicitly noted in a sales contract.This is called a(n)

Under ASPE, the primary sources of GAAP include