ACCTG 305 - Exam 2.docx - ACCTG 305 Exam 2 Q On Behrend Land Sales sold a tract of land that cost $3,000,000 for $6,000,000 Behrend appropriately uses

ACCTG 305 - Exam 2.docx - ACCTG 305 Exam 2 Q On Behrend...

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ACCTG 305 - Exam 2 Q: On December 15, 2013, Behrend Land Sales sold a tract of land that cost $3,000,000 for $6,000,000. Behrend appropriately uses the cost recovery first method of accounting for this transaction. Terms called for three annual payments of $2,000,000 received by Behrend on 12/15/13, 12/15/14 and 12/15/15. Ignore interest charges. Behrend has a December 31 year-end. In 2015, Behrend would recognize gross profit in the amount of: A: $2,000,000 Q: Behrend Corp. began the year with a $60,000 balance in its Allowance for Uncollectible Accounts (AFUA). During the year, Behrend wrote off $52,000 of customer accounts as uncollectible, so that the balance in AFUA before year-end adjustment was $8,000. The year-end balance sheet included AFUA of $50,000. How much uncollectible accounts expense did Behrend recognize during the year? A: 50,000 – 8,000 = $42,000 Q: Which of the following are examples of applying the conservatism convention in financial accounting. A: Immediate recognition of losses when first expected when accounting for long term contracts; Presentation of inventory on the balance sheet at lower of cost or market. Q: Under what circumstances are financial statements permitted to be presented in a manner that violates GAAP? A: if the impact upon the financial statements is judged to be “immaterial” Q: Behrend Corporation held the following items at 12/31/14: Currency and coins $650 Balance in checking account 2,600 Customer checks waiting to be deposited 1,200 Treasury bills, purchased on 12/1/14, mature on 5/1/15 10,200 What amount will Behrend include in its year-end balance sheet as “cash and cash equivalents?” A: $4,450 Q: The following information pertains to Behrend Co.’s accounts receivable at December 31, 2014: Days Estimated % Outstanding Amount Uncollectible 0-30 $420,000 2% 31-60 140,000 5% 61-120 100,000 10% Over 120 120,000 15%
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Behrend’s December 31, 2013, Balance Sheet reported allowance for uncollectable accounts (AFUA) of $40,000. During 2014, Behrend wrote off $32,000 of uncollectible customer accounts. Under the aging method, how much uncollectible accounts expense should Behrend report in its 2014 income statement? A: 420,000 * .02 + 140,000 * .05 + 100,000 * .1 + 120,000 * .15 – (40,000 – 32,000) = 35,400 Q: Firms may achieve “off balance sheet financing” by treating the transfer of receivables with recourse: A: As a sale when in substance it represents a secured borrowing. Q: Accounts Receivable should be reported in the balance sheet at _______________. A: net realizable value Q: Behrend Corp. consistently purchases inventory from suppliers on account with terms 2/10, n/30. What method of accounting for purchases discounts accommodates “Management by Exception?” A: the Net method Q: Which of the following is the least conservative method of profit recognition where customers make periodic (for example, monthly) payments?
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