In considering interim financial reporting, how did the Accounting Principles Board
conclude that such reporting should be viewed?
a. As a "special" type of reporting that need not follow generally accepted accounting
principles.
b. As useful only if activity is evenly spread throughout the year so that estimates are
unnecessary.
c. As reporting for a basic accounting period.
d. As reporting for an integral part of an annual period.
FAITH, Inc. disclosed the following information as of and for the year ended
December 31,
2013:
Net cash sales
Net credit sales
Inventory at beginning
Inventory at end
Net income
Accounts receivable at beginning of year
Accounts receivable at end of year
Fargo’s receivables turnover is
a. 6.9 to 1.
b. 7.5 to 1.
c. 12.5 to 1.
d. 13.6 to 1.
600,000
900,000
100,000
150,000
30,000
110,000
130,000
CARDO Company contracted on 4/1/12 to construct a building for $2,300,000. The project
was
completed in 2014. Additional data follow:
2012
2013
2014
Costs incurred to date
$ 560,000
$1,350,000
$1,900,000 Estimated cost to complete
1,040,000
450,000
—
Billings to date
500,000
1,800,000
2,300,000
Collections to date
Instructions
400,000
1,300,000
2,200,000
(a) Calculate the income recognized by Edwards under the percentage-of-completion
method of
accounting in each of the years 2012, 2013, and 2014.
(b) Prepare all necessary entries for the year 2013.
(c) Present the balance sheet disclosures at December 31, 2013. Proper headings or
subheadings must be indicated
Problem F-III — Accounting Changes, Error Corrections, and Prior Period Adjustments.
Molina Company’s reported net incomes for 2013 and the previous two years are presented
below.
2013
2012
2011
$105,000
$95,000
$70,000
2013’s net income was properly determined after giving effect to the following accounting
changes, error corrections, etc. which took place during the year. The incomes for 2011 and
2012
do not take these items into account and are stated at the amounts determined in those
years.
Ignore income taxes.
Instructions
(a) For each of the six accounting changes, errors, or prior period adjustment situations
described below, prepare the journal entry or entries Molina Company should record during
2013. If no entry is required, write “none.”
(b) After recording the situation in part (a) above, prepare the year-end adjusting entry for
December 31, 2013. If no entry, write “none.”
1. Early in 2013, Molina determined that equipment purchased in January, 2011 at a cost of
$645,000, with an estimated life of 5 years and salvage value of $45,000 is now estimated
to continue in use until December 31, 2017 and will have a $15,000 salvage value. Molina
recorded its 2013 depreciation at the end of 2013.