ACCT 551 Week 4 Midterm (2 Different Versions)

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ACCT 551 - Intermediate Accounting II (DeVry)

ACCT 551 Week 4 Midterm (Version 1)

1. Question: (TCO C) The cost of an intangible asset includes all of the following except
2. Question: (TCO C) Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to
3. Question: (TCO C) Negative goodwill arises when the _____ of the net assets acquired is higher than the purchase price of the assets.
4. Question: (TCO C) ELO Corporation purchased a patent for $90,000 on September 1, 2008. It had a useful life of 10 years. On January 1, 2010, ELO spent $22,000 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2010?
5. Question: (TCO C) General Products Company bought Special Products Division in 2010 and appropriately recorded $500,000 of goodwill related to the purchase. On December 31, 2011, the fair value of Special Products Division is $4,000,000 and it is carried on General Products’ books for a total of $3,400,000, including the goodwill. An analysis of Special Products Division’s assets indicates that goodwill of $400,000 exists on December 31, 2011. What goodwill impairment should be recognized by General Products in 2011?
6. Question: (TCO D) An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's
7. Question: (TCO D) Which gives rise to the requirement to accrue a liability for the cost of compensated absences?
8. Question: (TCO D) Which of the following is not acceptable treatment for the presentation of current liabilities?
9. Question: (TCO D) Jenkins Corporation has $2,500,000 of short-term debt it expects to retire with proceeds from the sale of 75,000 shares of common stock. If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities?
10. Question: (TCO D) Tender Foot, Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that it may lose the case. The attorneys estimated that there is a 40% chance of losing. Tender Foot’s attorney estimated that if it loses, then the amount of any payment would be $500,000. What is the required journal entry as a result of this litigation?
11. Question: (TCO D) Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity 10 years from date of issue. If the bonds were issued at a premium, this indicates that
12. Question: (TCO D) If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a
13. Question: (TCO D) On January 1, 2010, Ellison Co. issued 8-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are as follows:
14. Question: (TCO D) A company issues $5,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2010. Interest is paid on June 30 and December 31. The proceeds from the bonds are $4,901,036. Using effective-interest amortization, how much interest expense will be recognized in 2010?
15. Question: (TCO D) On January 1, Martinez Inc. issued $3,000,000, 11% bonds for $3,195,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report unamortized bond premium of
1. Question: (TCO C) Intangible assets may be internally generated or purchased from another party. In either case, the cost that should be included in the initial valuation of the asset is an issue.
2. Question: (TCO C) Under what circumstances is it appropriate to record goodwill in the accounts? How should goodwill, properly recorded on the books, be written off in accordance with generally accepted accounting principles?
3. Question: (TCO D) Irving Music Shop gives its customers coupons redeemable for a poster plus a Dixie Chicks CD. One coupon is issued for each dollar of sales. On the surrender of 100 coupons and $5.00 cash, the poster and CD are given to the customer. It is estimated that 80% of the coupons will be presented for redemption. Sales for the first period were $700,000, and the coupons redeemed totaled 340,000. Sales for the second period were $840,000, and the coupons redeemed totaled 850,000. Irving Music Shop bought 20,000 posters at $2.00/poster and 20,000 CDs at $6.00/CD.             
4. Question: (TCO D) On January 1, 2011, Piper Co. issued 10-year bonds with a face value of $1,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:           
5. Question: (TCO D) Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar). The December 31, 2010 balance sheet of Wolfe Co. included the following items:
7.5% bonds payable due December 31, 2018     $1,200,000
Unamortized discount on bonds payable            48,000
The bonds were issued on December 31, 2008 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization)
On April 1, 2011, Wolfe retired $240,000 of these bonds at 101 plus accrued interest.

 

ACCT 551 Week 4 Midterm (Version 2)

Multiple Choice
1. Question: (TCO C) The cost of an intangible asset includes all of the following except
2. Question: (TCO C) Which of the following is not an intangible asset?
3. Question: (TCO C) The intangible asset goodwill may be
4. Question: (TCO C) ELO Corporation purchased a patent for $90,000 on September 1, 2008. It had a useful life of ten years. On March 1, 2010, ELO spent $17,500 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is five years. What amount should be reported for patent amortization expense for 2010?
5. Question: (TCO C) Floyd Company purchases Haeger Company for $800,000 cash on January 1, 2011. The book value of Haeger Company’s net assets, as reflected on its December 31, 2010 balance sheet, is $620,000. An analysis by Floyd on December 31, 2010 indicates that the fair value of Haeger’s tangible assets exceeded the book value by $60,000, and the fair value of identifiable intangible assets was equal to book value. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company?
6. Question: (TCO D) An employee’s net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee’s
7. Question: (TCO D) Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for one year that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty
8. Question: (TCO D) On December 31, 2010, Irey Co. has $2,000,000 of short-term notes payable due on February 14, 2011. On January 10, 2011, Irey arranged a line of credit with County Bank which allows Irey to borrow up to $1,700,000 at one percent above the prime rate for three years. On February 2, 2011, Irey borrowed $1,700,000 from County Bank and used $300,000 additional cash to liquidate $1,700,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2010 balance sheet which is issued on March 5, 2011 is
9. Question: (TCO D) Tender Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $500,000. What is the required journal entry as a result of this litigation?
10. Question: (TCO D) Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a discount this indicates that
11. Question: (TCO D) If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will
12. Question: (TCO D)When the interest payment dates of a bond are June 1 and December 1, and a bond issue is sold on November 1, the amount of cash received by the issuer will be
13. Question: (TCO D) Feller Company issues $20,000,000 of ten-year, 9% bonds on August 1, 2010 at 97 plus accrued interest. The bonds are dated January 1, 2010, and pay interest annually on December 31. What is the total cash received on the issue date?
14. Question: (TCO D) A company issues $5,000,000, 7.8/%, 20-year bonds to yield 8% on January 1, 2010. Interest is paid on December 31. The proceeds from the bonds are $4,901,036. Using effective-interest amortization, how much interest expense will be recognized in 2010?
15. Question: (TCO D) On January 1, Martinez Inc. issued $3,000,000, 11% bonds for $3,195,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report unamortized bond premium of:
Explanatory
1. Question: (TCO C) Sisco Co. purchased a patent from Thornton Co. for $180,000 on July 1, 2007. Sisco amortizes the patent over a period of 10 years. Expenditures of $92,000 for successful litigation in defense of the patent were paid on July 1, 2011. Sisco estimates that the useful life of the patent will be increase by 10 years from the date of litigation becasue of successfully defending it
Instructions:
Prepare a computation of the carrying value of the patent at December 31, 2011.
2. Question: (TCO C) Fred’s Company is considering the write-off of a limited life intangible asset because of its lack of profitability. Explain to the management of Fred’s how to determine whether a writeoff is permitted.
3. Question: (TCO D) Edwards Co. includes one coupon in each bag of dog food it sells. In return for four coupons, customers receive a dog toy that the company purchases for $1.20 each. Edwards’s experience indicates that 60 percent of the coupons will be redeemed. During 2010, 100,000 bags of dog food were sold, 12,000 toys were purchased, and 40,000 coupons were redeemed. During 2011, 120,000 bags of dog food were sold, 16,000 toys were purchased, and 60,000 coupons were redeemed.
Instructions:
Determine the premium expense to be reported in the income statement and the estimated liability for premiums on the balance sheet for 2010 and 2011.
4. Question: (TCO D) Prepare journal entries to record the following transactions related to long-term bonds of Quirk Co.
(a) On April 1, 2009, Quirk issued $500,000, 9% bonds for $537,868 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2019.
(b) On July 1, 2011 Quirk retired $150,000 of the bonds at 102 plus accrued interest. Quirk uses straight-line amortization.
5. Question: (TCO D) Mann, Inc., which owes Doran Co. $600,000 in notes payable with accrued interest of $54,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with a fair value of $570,000, an original cost of $840,000, and accumulated depreciation of $195,000.
Instructions:
(a) Compute the gain or loss to Mann on the settlement of the debt.
(b) Compute the gain or loss to Mann on the transfer of the equipment.

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    ACCT 551 Week 4 Midterm Solutions (2 Different Versions)
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