Exam 22: Accounting Corrections and Error Analysis

A guaranteed residual value reduces the amount of minimum lease payments.

What types of accounts are typically affected by financing cash flows?

Journal entry for the year of the change: January 1,2016 Retained Earnings-Prior Period Adj. $51,000 Cumulative effect of the change: $20,000 (2014)+ $31,000 (2015)= $51,000

In completing the adjusting entries for 2017 in early 2018,the internal auditor discovered that a patent,with an estimated eight year life that was registered in January,2017 had not been amortized.The patent cost $360,000.The income tax rate is 40%.What is the journal entry to correct the error?

Fields Construction decides to change from completed-contract method to percentage-of-completion method of recording construction projects.It also has a compensation plan for bonuses to supervisors for three percent of net income,which are retroactive for changes in prior years net income.Discuss the direct and indirect effects of this change.

Prepare the journal entry required to record the accounting change on January 1,2016.

When a material seven-year depreciable asset is recorded as an expense,which one of the following statements is correct?

Lessees capitalize expenditures for leasehold improvements as part of the carrying value of the leased asset.

C2496 (22) -Chapter 22 The Statement of Cash Flows

Under the indirect method,the adjustments to net income are based on accounting equation relationships.

Under both U.S.GAAP and IFRS,bank overdrafts are netted against the other positive balances included in cash and cash equivalents.

If title does not pass from the lessor to the lessee under the terms of a lease,________.

In a sales-type capital lease,the present value of the unguaranteed residual value is included in both the sales revenue and cost of goods sold.

Refer to Rocket Corporation. Required: 1.Determine the pre-tax amounts that Denver Leasing would record on its balance sheet and income statement as of December 31 of the current year. 2.Make the appropriate journal entries to record the lease and the related transactions from the inception of the lease through December 31 on Denver's books. 3.Determine the pre-tax amounts that Denver Leasing would record on its balance sheet and income statement as of December 31 of the next year.

Austin Motor Works declared a 5% stock dividend in 2016 when the stock was selling for $18 per share.There were 2,000,000 shares outstanding at the time of the dividend declaration.The controller recorded the distribution at par value ($1 per share)resulting in a debit to retained earnings and a credit to common stock for $100,000.Upon review in early 2017 when the 2016 books were still open,the CFO made which of the following correcting entries?

Changes in which of the following are included in financing activities? A)accounts payable B)bonds payable C)accounts receivable D)property,plant,and equipment

Cash flows from investing activities include receipts of cash from collection of notes receivable and from the sale of fixed assets.

A lessor reports rental revenue if it classifies the leased asset as inventory and reports a gain on leased asset if it classifies the leased asset as property,plant,and equipment.

Initial direct costs are matched with the rental revenues they help generate in ________. A)an operating lease B)a direct financing lease C)a sales-type lease D)a capital lease

PipCo financial statements included the following amounts for the current year: Based on this information,what is the amount of net cash flows from financing activities? A)$92,000 net inflow B)$9,000 net inflow C)$18,000 net outflow D)$56,000 net outflow