Spring Exam 1 Solutions

Spring Exam 1 Solutions - Intermediate Accounting II ACCTG...

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Unformatted text preview: Intermediate Accounting II ACCTG 302 Section A Spring 2005 Instructor J.B. Paperman Exam #1 April 19, 2005 Name: ____________________________ INSTRUCTIONS: a) This exam is closed book. You may use one double-sided sheets of notes. You may use a calculator to assist in computations. b) You must complete this exam on your own. No assistance is allowed except that provided by the instructor. c) If you feel there is ambiguity in a problem, state your assumptions clearly. d) The exam has 11 pages in total and 14 questions with 100 points. e) The last page of the exam is a set of PV tables; feel free to tear this page off. 1 Multiple Choice (5 points each) – Circle the MOST correct answer 1. Which of the following is NOT true about the discount on short-term notes payable? a. The Discount on Notes Payable account has a debit balance. b. The Discount on Notes Payable account should be reported as an asset on the balance sheet. c. When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate. d. All of these are true. B – Should be reported as a contra liability. 2. Which of the following statements is correct? a. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis. b. A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to consummate a refinancing. c. A company may exclude a short-term obligation from current liabilities if it is paid off after the balance sheet date and subsequently replaced by long-term debt before the balance sheet is issued. d. None of these. D – Must have both the intent and demonstrate ability. C would lead to a current classification – must refinance before payoff. 3. Ritter Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2003, the company began a program of granting its employees 10 days' paid vacation each year. Vacation days earned in 2003 may first be taken on January 1, 2004. Information relative to these employees is as follows: Hourly Vacation Days Earned Vacation Days Used Year Wages by Each Employee by Each Employee 2003 $17.20 10 2004 18.00 10 8 2005 19.00 10 10 Ritter has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned. What is the amount of expense relative to compensated 2 absences that should be reported on Ritter's income statement for 2003? a. $0. b. $45,920. c. $50,400. d. $48,160. D - $17.20/hr*8hrs/day*10days/employee*35employees = $48,160 4. A contingency can be accrued when a. it is certain that funds are available to settle the disputed amount....
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This note was uploaded on 01/30/2010 for the course BUS Business 1 taught by Professor B.mishra during the Spring '10 term at UC Riverside.

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Spring Exam 1 Solutions - Intermediate Accounting II ACCTG...

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