ACC 340 Name___________________________________ Quiz 3 Multiple Choice. Select the best answer to each question below. Mark your response in the space provided. 1.___B____ In no case can "market" in the lower-of-cost-or-market rule be more than a. estimated selling price in the ordinary course of business. b. estimated selling price in the ordinary course of business, less reasonably predictable costs of completion and disposal. c. estimated selling price in the ordinary course of business, less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin. d. estimated selling price in the ordinary course of business, less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible future losses. 2.___D_____What is the rationale behind the ceiling when applying the lower-of-cost-ormarket method to inventory? a. Prevents understatement of the inventory value. b. Allows for a normal profit to be earned. c. Allows for items to be valued at replacement cost. d. Prevents overstatement of the value of obsolete or damaged inventories. 3.__D______Which of the following accounts is credited in the loss method of writingdown of inventory to its net realizable value? a. Allowance to Reduce Inventory to NRV b. Loss Due to Decline of Inventory to NRV c. Cost of Goods Sold d. Inventory 4.__A_______The following information is available for October for Barton Company. Beginning inventory Net purchases Net sales Percentage markup on cost $350,000 1,050,000 2,100,000 66.67% A fire destroyed Barton’s October 31 inventory, leaving undamaged inventory with a cost of $21,000. Using the gross profit method, the estimated ending inventory destroyed by fire is a. $119,000. b. $539,000. c. $560,000. d. $700,000. BI Net purchases Goods available Sales 2,100,000 Less Gross Profit (*40% of 2,100,000) 840,000 Sales (at cost) Approximate inventory (at cost) Undamaged inventory Estimated inventory destroyed By fire 350,000 1,050,000 1,400,000 1,260,000 140,000 21,000 119,000 *66.67%/100%+66.67%= 40% Gross Profit on Selling Price 5.___A_____ Oslo Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. A profit margin of 30% on selling price is considered normal for each product. Specific data with respect to each product follows: Product #1 Product #2 Historical cost $10 $ 18 Replacement cost 11 14 Estimated cost to dispose 3 7 Estimated selling price 20 33 In pricing its ending inventory using the lower-of-cost-or-market, what unit values should Oslo use for products #1 and #2, respectively? a. $10 and $16. b. $13 and $16. c. $13 and $15. d. $11 and $14. Solution: Product 1: RC = $11, NRV = $20 – $3 = $17 NRV – PM = $17 – ($20 × .3) = $11, cost = $10. Product 2: RC = $14, NRV = $33 – $7 = $26 NRV – PM = $26 – ($33 × .3) = $16, cost = $18. Quiz 4 Multiple Choice. Select the best answer to each question below. Mark your response in the space provided. 1. ____C_____Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be a. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down. b. written off as a loss in the year the hotel is torn down. c. capitalized as part of the cost of the land. d. capitalized as part of the cost of the new hotel. 2. . ____C______ When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to a. the total interest cost actually incurred. b. a cost of capital charge for stockholders' equity. c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made. d. that portion of weighted-average accumulated expenditures on which no interest cost was incurred. 3. ___B______ Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid $120,000 to tear down two buildings on the land. Salvage was sold for $8,100. Legal fees of $5,220 were paid for title investigation and making the purchase. Architect's fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900. Excavation cost $15,660. The contractor was paid $4,200,000. An assessment made by the city for pavement was $9,600. Interest costs during construction were $255,000. The cost of the land that should be recorded by Wilson Co. is a. $1,470,720. b. $1,480,320. c. $1,484,820. d. $1,494,420. 4. _____B_____ Gutierrez Company is constructing a building. Construction began in 2017 and the building was completed 12/31/17. Gutierrez made payments to the construction company of $3,000,000 on 7/1, $6,600,000 on 9/1, and $6,000,000 on 12/31. Weighted-average accumulated expenditures were a. $3,150,000. b. $3,700,000. c. $9,600,000. d. $15,600,000. 5. _____A______ Mendenhall Corporation constructed a building at a cost of $14,000,000. Weighted-average accumulated expenditures were $5,600,000, actual interest was $560,000, and avoidable interest was $280,000. If the salvage value is $1,120,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is a. $329,000. b. $336,000. c. $357,000. d. $469,000. ACC 340 Name________ _____________ Quiz 7 Multiple Choice. Select the best answer to each question below. Mark your response in the space provided. 1.____D_____ An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's a. portion of FICA taxes and unemployment taxes. b. and employer's portion of FICA taxes, and unemployment taxes. c. portion of FICA taxes, unemployment taxes, and any union dues. d. portion of FICA taxes and any union dues. 2.____B____ Greeson Corp. signed a three-month, zero-interest-bearing note on November 1, 2017 for the purchase of $500,000 of inventory. The face value of the note was $507,800. Greeson used a “Discount of Note Payable” account to initially record the note. Assuming that the discount will be amortized equally over the 3-month period and that there was no adjusting entry made for November, the adjusting entry made at December 31, 2017 will include a a. debit to Discount on Note Payable for $2,600. b. debit to Interest Expense for $5,200. c. credit to Discount on Note Payable for $2,600. d. credit to Interest Expense for $5,200. 3.____B____ Palmer Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 3 boxtops from Palmer Frosted Flakes boxes and $1. The company estimates that 60% of the boxtops will be redeemed. In 2018, the company sold 1,350,000 boxes of Frosted Flakes and customers redeemed 660,000 boxtops receiving 220,000 bowls. If the bowls cost Palmer Company $3 each, how much liability for outstanding premiums should be recorded at the end of 2018? a. $540,000 b. $100,000 c. $150,000 d. $276,000 4.____C____ Presented below is information available for Marley Company. Current Assets Cash $ 4,000 Short-term investments 55,000 Accounts receivable 61,000 Inventory 110,000 Prepaid expenses 30,000 Total current assets $260,000 Total current liabilities are $100,000. The acid-test ratio for Marley is: a. 2.60 to 1 b. 2.30 to 1 c. 1.20 to 1 d. 0.59 to 1 5._______D____ The ability to consummate the refinancing of a short-term obligation may be demon- strated by a. actually refinancing the obligation by issuing a long-term obligation after the date of the balance sheet but before it is issued. b. entering into a financing agreement that permits the enterprise to refinance the debt on a long-term basis. c. actually refinancing the obligation by issuing equity securities after the date of the balance sheet but before it is issued. d. all of these answers are correct.
