Quiz Review 3- Business - Accounting And Taxation

An offer does not need to be communicated to the offeree to be effective.

The Retained earnings account has a credit balance of $21,250 before closing entries are made. If total revenues for the period are $67,700, total expenses are $49,300, and dividends are $11,250, what is the ending balance in the Retained earnings account after all closing entries are made?

3

Answer the following statements true (T) or false (F)

4

Treasury stock is reported as an asset on the balance sheet because treasury shares may be sold later

5

Yawl Inc. must choose between two business opportunities: Opportunity 1 will generate $40,000 before-tax cash flow in years 0, 1, and 2, with a $7,000 annual tax cost. Opportunity 2 will also generate $40,000 before-tax cash flow in years 0, 1, and 2. However, the tax cost will be $15,000 in year 0, $2,500 in year 2, and $2,500 in year 3. Which opportunity should Yawl choose if it uses a 6% discount rate to compute NPV (round the calculations to the nearest whole dollar)?

6

CAATs are commonly used in all of the following situations except:

7

A liability arises when a firm

8

One division of the Marvin Educational Enterprises has depreciable assets costing $4,000,000. The cash flows from these assets for the past three years have been:Year Cash flows1 $1,200,000 2 $1,400,000 3 $1,620,000 The current (i.e., replacement) costs of these assets were expected to increase 25% each year. Marvin used the straight-line depreciation method and the assets had an estimated useful life of 10 years with no salvage value. For return on investment (ROI) calculations, Marvin uses end-of-year balances.What is the ROI using historical cost and gross book value? Year 1 Year 2 Year 3A.20.0% 25.0% 30.5%B.25.0% 28.0% 32.0%C.18.0% 26.5% 28.0%D.30.0% 35.0% 40.5%

9

Hannah is a 52-year-old an unmarried taxpayer who is not an active participant in an employer-sponsored qualified retirement plan. Before IRA contributions, her AGI is $66,000 in 2019. What is the maximum amount she may contribute to a tax deductible IRA?

10

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

11

Accounting estimate nirvana is ________.

in Business

A) the width of reasonable range is greater than or equal to the material misstatement,
which means that there is no significant risk for any estimates within the
reasonable range
B) the width of reasonable range is less than the material misstatement but not greater
than two times the material misstatement, which means an estimate with no
significant risk can be found within the reasonable range
C) the width of the reasonable range is greater than the material misstatement but not
greater than two times the material misstatement, which means an estimate with no
significant risk can be found within the reasonable range
D) the width of the reasonable range is less than or equal to the material misstatement,
which means that there is no significant risk for any estimates within the
reasonable range

12

A company is considering two projects, Project A and Project B. The following information is available for each project: Project AProject B Investment $500,000$2,000,000Net present value of cash flows$600,000$800,000Calculate the profitability index for each project. Based on the profitability index, which project, if any, should the company pursue and why?

13

Under IFRS, there is no need to use the weighted-average accumulated expenditures to determine capitalizable interest

14

If sales remain the same and the margin of safety increases, which of the following is true?

15

When an auditor increases the planned assessed level of control risk because certain control procedures were determined to be ineffective, the auditor would most likely increase the ________.

16

If a U.S. Tax Court agrees with the taxpayer on appeal that the IRS position was largely unjustified, which of the following is correct?

17

In general, there is a direct relationship between the quality of the information provided to managers and the quality of decisions made using that information.

18

Why does the IASB believe that a principles-based approach to standard setting is superior to a rules-based approach?

19

The May 31 balance per bank statement was $12,400. The unadjusted book balance was $17,000. Outstanding checks amounted to $1,700, and deposits in transit were $4,800. The bank statement contained an NSF check for $1,100, a service charge for $50, and a debit memo for direct payment of the telephone bill of $350 (which has not yet been recorded by the company).Required:a) Determine the true cash balance by preparing a bank reconciliation as of May 31.

20

How many of the following transactions would decrease total stockholders' equity in the current period?• Pay dividends to stockholders.• Delay payment on supplies purchased until the following period.• Provide services on account to customers.• Borrow cash from a local bank.

21

Which step of estimating a cost function using quantitative analysis is the most difficult step for a manager to implement in cost analysis?

22

The following table contains financial information for Intel Corp.

in Business

a) Enter the data, as shown, into a worksheet and format the numbers with a comma separating the thousands position and no decimal places.
e) Create the required formulas to calculate the missing variables, and format the results to match the other numbers.
f) Calculate the average tax rate, the gross profit margin, and the net profit margin for 2012-2016. Format the results as percentages with two decimal places.
g) Create a line chart showing the gross profit margin and the net profit margin for 2012-2016. Make sure to title the chart and label the axes.
h) Create a copy of the income statement and replace each item with a formula that shows it as a percentage of sales. You should only use one formula that can be copied and pasted to the rest of the income statement.

23

The Yeoman Trust has generated several Federal income tax credits for this tax year

24

Evan's Electronics Boutique sells a digital camera. The following information was reported for the digital camera last month: Sales$17,600Variable expenses 9,680Contribution margin 7,920Fixed expenses 3,600Net operating income$4,320 Evan's margin of safety in dollars and percentage are closest to:

25

Gamma Corporation has sales of $120,000, a contribution margin of $48,000, and a net operating income of $12,000. The company's degree of operating leverage is:

26

Which of the following statements is correct with respect to the § 338 election?

27

Home mortgage interest is an itemized deduction or deduction from AGI.

28

The common metric that managerial accountants use to compare work completed in each category and to obtain the measure of work completed is:

29

Miller and Sons' static budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for direct labor, variable utilities of $5,000, and supervisor salaries of $24,000. A flexible budget for 12,000 units of production would show

30

When merchandise is sold for $600 plus 6% sales tax, the Sales account should be credited for $636

31

When plant assets are reported, the current period's depreciation expense is subtracted from the original cost on the balance sheet

32

Assuming that Keen Inc. purchases 80% of Lax Inc. for $240,000, prepare the consolidated balance sheet on the date of acquisition under the Entity Theory.

33

Identify the formula used to calculate profit margin

34

Kathy is 48 years of age and self-employed. During 2019 she reported $500,000 of revenues and $100,000 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k)?

35

On April 1, Alliance Company purchased $50,000 of Tetter Company's 12% bonds at 100 plus accrued interest of $2,000 . On June 30, Alliance received its first semiannual interest. On February 1, Alliance sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Alliance will record on April 1 for the purchase of the bonds will include a

36

A company reported a contribution margin per unit of $75 and it reported that the managers sold a total of 40 units

37

Clearview Corporation had the following bond issue: Date of issue/sale: March 1, 20-AFace value: $700,000Sale price of bonds: 103Life of bonds: 10 yearsStated rate: 6% a year payable semiannually on August 31 and February 28 Required:Prepare the following general journal entries. a.The issuance of the bonds on March 1, 20-A.b.The interest payment and premium amortization on the bonds for the first six months.c.The year-end adjusting entry for interest and premium amortization.d.The reversing entry for January 1, 20-B.

a. GENERAL JOURNALPage 1DateDescriptionPostRef.DebitCreditMar. 1Cash 721,000.00 Premium on Bonds Payable 21,000.00 Bonds Payable 700,000.00

b. GENERAL JOURNALPage 1DateDescriptionPostRef.DebitCreditAug. 31Bond Interest Expense 19,950.00 Premium on Bonds Payable 1,050.00 Cash 21,000.00

c. GENERAL JOURNALPage 1DateDescriptionPostRef.DebitCreditDec. 31Bond Interest Expense 13,300.00 Premium on Bonds Payable 700.00 Bond Interest Payable 14,000.00

d. GENERAL JOURNALPage 1DateDescriptionPostRef.DebitCreditJan. 1Bond Interest Payable 14,000.00 Bond Interest Expense 13,300.00 Premium on Bonds Payable 700.00

38

The issue price of a bond is always calculated at present value using the market rate of interest

39

Indenture refers to a bond's legal contract; debenture refers to an unsecured bond.

40

Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago. This year the land is distributed to Sergio, another partner in the partnership. At the time of distribution, the land had a $12,000 FMV. How much gain should Mirabelle and Sergio recognize?

41

Refer to Tullis Corporation. How much should Tullis report as Accounts Receivable at the end of year 1 on the balance sheet assuming the use of the completed-contract method?

42

When a company pays its rent in advance, an asset is reported on the balance sheet.

43

The receipt of nonqualified preferred stock in exchange for the transfer of appreciated property to a controlled corporation results in recognition of gain to the transferor

44

Which of the following would be evaluated during the PCAOB inspection process? Firm's system of Financial viability quality control of the firm A. Yes No B. Yes Yes C. No Yes D. No No

45

Camellia, an accountant, takes a new job located 1,000 miles away from her current job location. She has to pay a moving company plus the transportation costs for herself to move to the new location, totaling $6,000. After she submits all the receipts, the new employer reimburses her in full. Camellia will treat the reimbursement and the moving costs as follows:

46

All of the following are classified as definitely determinable liabilities except

47

On January 1, 2017, Ferguson Company signed a lease agreement that requires monthly payments of $5000 at the beginning of every month for two years. Ferguson Company paid $5000 on January 1, 2017. This is a capital lease

48

How would an increase in the Accounts Receivable account of a company from $40,000 at the beginning of the year to $60,000 at the end of the year be shown on the company's statement of cash flows prepared under the indirect method?

49

Which of the following sections from the statement of cash flows would include the issuance of a

50

The Townson Manufacturing Company has gathered the following information for the month of September: • 6,000 units in the beginning Work-in-Process Inventory (75% complete as to materials, 1/3 complete with respect to the conversion costs). • 60,000 units were started into production. • 50,000 units were completed and transferred to the next department. • The ending Work-in-Process Inventory is complete as to materials but only 3/8 complete with respect to conversion costs. What are the equivalent units of production (EUPs) for materials in the month of September assuming Townson uses weighted-average process costing?

51

Roseanne sells her personal automobile for $1,000 . The car cost her $12,000 nine years ago. What are the tax effects of the current sale? I. Roseanne recognizes a deductible loss of $11,000 on her current-year tax return due to the capital recovery concept. II. Roseanne recognizes no loss on her tax return due to lack of business purpose with the automobile

52

Mark is planning on making an investment in a new computer system. He wants to know how much he must invest to have $9,000 in 4 years if the interest rate is 5% per year?

53

The marginal income tax rate is the tax rate paid on additional amounts of pretax income

54

Identify the type of organization in which all major planning and operating decisions are made by top management

55

Compare and contrast why companies invest cash in short-term temporary investments vs. long-term investments

56

Thomas Manufacturing produces a chemical pesticide and uses process costing. There are three processing departments—Mixing, Refining, and Packaging. On January 1, the Refining Department had 2000 gallons of partially processed product in production. During January, 36,000 gallons were transferred in from the Mixing Department, and 31,000 gallons were completed and transferred out. At the end of the month, there were 7000 gallons of partially processed product remaining in the Refining Department. See additional details below

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Quiz Review 3- Business - Accounting And Taxation

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