Department of Accounting & Finance Financial Accounting II test -2 Instruction: Don’t write your name rather only ID Put your answer on space provided only Switch of your mobile phone Any attempt to cheat will nullify your result ID:_______________ Part I. multiple choice 1. Physical asset (property, plant and equipment) should report at ________ A. Cost necessary for acquisition of it B. Cost required to purchase and make it ready for use C. Cost of acquisition plus repairing and maintenance cost D. All except B 2. If land having an old building on it (not required) is purchased at cost of Br, 32,000 & brokerage and attorney fee of Br, 3200 and 5000 respectively. At what amount should the land be reported if, old building on the land is sold for Br, 6000?________ A. Br, 40,200 B. Br, 41,200 C. Br, 34,200 D. Br, 46,200 3. If an plant asset is acquired for 10% interest bearing note of Br,80,000 payable after 3 years and market rate is 12%, the cost at which the asset should be reported is ______ A. Br,56 942.4 B. Br, 80,000 C. Br,19214.6 D.Br, 76167 4. If MIE has been improved part of operating machine with another similar and better quality part to increase the useful of the machine, the entry to record the improvement is ________ A. Debit to Accumulated depreciation C. debit to new machine B. Debit to operating machine D. credit to accumulated depreciation 5. National cement factory purchase land and building for a lump sum payment of Br, 639,000.If the fair value of land & building is Br,420,000 and 280,000 respectively, the recording value of land would be_________ A. Br, 420,000 B, Br,383400 C. Br, 255,600 D. Br, 280,000 1 Department of Accounting & Finance Financial Accounting II test -2 6. Which one of the following is True about accounting for subsequent costs_____ A. Expenditures that do not increase the service benefits of the asset are expensed. B. If accompany is improve and existed asset and carrying value of old asset is known the approach to follow is to remove the book value of the old asset and substitute the cost of the new asset. C. Any addition to plant assets is capitalized because a new asset has been created. D. All 7. Which one of the following is current liability?__________ A. Current maturing Long term debt , which is to be paid from fund set aside for this purpose B. Long term debt maturing currently, which is to be paid from issuance of new debt C. Long term debt maturing currently, which is to be converted in to common stock D. None of the above 8. Which one of the following is current liability _________ A. Dividend payable in the form of additional stock B. dividend in arrears of Preferred stock C. cash dividend declared to distribute D. note payable matured after one operating cycle 9. Which of the following should not be included in the current liabilities section of the balance sheet?_________ A. Trade notes payable B. Short-term zero-interest-bearing notes payable C. The discount on short-term notes payable D. All of these are included 10. If plant asset is acquired for issuance of 4000 shares of common stock with par value Br 15 and fair value of Br, 14, the reporting balance of plant asset would be________ A. Br, 56,000 B. Br 60,000 C. Br, 4000 D. Br, 116,000 2 Department of Accounting & Finance Financial Accounting II test -2 Part II. Work out questions 1. JUST DO IT, Company manufactures sophisticated electronic systems & provides a one-year warranty for all products sold. The company estimates that the warranty cost is $200 per unit sold. If during the current year, the company sold 60,000 units for a total of $243 million and paid warranty claims of $9,000,000 on current and prior year sales, what amount of liability would the company report on its balance sheet at the end of the current year? Required: make necessary journal entries to record a. Sale of products b. Current liability & payment of expense 2. On December 31, 2010, ALTAYE Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows. Machine Accumulated depreciation Book value $1,300,000 360,000 $ 940,000 Depreciation is computed at $72,000 per year on a straight-line basis. Instructions Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal. (a) A fire completely destroys the machine on August 31, 2011. An insurance settlement of $630,000 was received for this casualty. Assume the settlement was received immediately. (b) On April 1, 2011, ALTAYE sold the machine for $1,040,000 to Avanti Company. 3
