fav3chp5-7 - 53 CHAPTER5 Problem 5-1 1.C 2.B 3.B 4.C 5.D...

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53 CHAPTER 5 Problem 5-1 Problem 5-2 Problem 5-3 1.  C     6.  A 1.  C 1.  B     6.  A 2.  B     7.  C 2.  C 2.  A     7.  B 3.  B     8.  B 3.  A 3.  A     8.  B 4.  C     9.  D 4.  B 4.  D     9.  B 5.  D   10.  D 5.  A 5.  A   10.  C Problem 5-4 Answer A Cost 3,000,000 Accumulated depreciation (3,000,000 / 6 x 3) 1,500,000 Book value – January 1, 2008 1,500,000 Depreciation for 2008 (1,500,000/5)       300,000 Problem 5-5 Answer A Cost 2,640,000 Accumulated depreciation (2,640,000 / 8 x 3)    990,000 Book value – January 1, 2008 1,650,000 Accumulated depreciation – January 1, 2008      990,000 Depreciation for 2008 (1,650,000 – 240,000 / 3)      470,000 Balance – December 31, 2008 1,460,000 Problem 5-6 Answer D Straight line depreciation for year 2008 (1,536,000 / 8)    192,000 Problem 5-7  Answer  C Cost – 1/1/2006 6,000,000 Accumulated depreciation – 1/1/2008 (6,000,000 – 600,000 x 20 x 2)    540,000 Book value – 1/1/2008 5,460,000
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Depreciation for 2008 (5,460,000 – 800,000 / 10)    466,000 54 Problem 5-8  Answer  A Patents – 1/1/2003 3,000,000 Accumulated amortization (3,000,000 / 10 x 5) 1,500,000 Book value – 1/1/2008 1,500,000 Amortization of patents for 2008 (1,500,000 / 3)    500,000 Depreciation for 2008 (4,600,000 – 200,000 / 10)    440,000 Total charge against 2008 income    940,000 Problem 5-9  Answer  D Inventory     600,000         Retained earnings       600,000 Problem 5-10 Answer A Inventory – January 1, 2008:     Weighted average              7,700,000     FIFO               7,200,000     Effect of change – increase in inventory                  500,000 Problem 5-11  Answer  C Percentage of completion 9,000,000 Cost recovery method 7,000,000 Cumulative effect – understatement of income 2,000,000 Tax (35% x 2,000,000)      (    700,000) Net cumulative effect 1,300,000
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The   change   from   cost   recovery   method   to   percentage   of   completion   is   a   change   in  accounting policy. Accordingly, the cumulative effect is an adjustment of retained earnings. Problem 5-12  Answer  A Percentage of completion Cost recovery method 2005 15,000,000   7,000,000 2006 16,000,000 13,000,000 2007   7,000,000 12,000,000 Total 38,000,000 32,000,000 Cumulative effect (38,000,000 – 32,000,000) 6,000,000 55 Problem 5-13  Answer  A Only   the   unrecorded   warranty   cost   of   P100,000   on   December   31,   2007   should   be  accounted   for   as   a   prior   period   error.   The   change   from   straight   line   to   accelerated  depreciation   is   a   change   in   estimate   and   therefore   should   be   treated   currently   and  prospectively. Problem 5-14 Answer B Retained earnings (2,000,000 / 5)      400,000 Depreciation            400,000         Accumulated depreciation         800,000 Problem 5-15 Answer A Retained earnings – January 1, 2008    850,000 Prior period errors – underdepreciation: 2006 (    25,000) 2007 (    25,000) Corrected beginning balance    800,000 Net income for 2008    500,000 Retained earnings – December 31, 2008 1,300,000
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Problem 5-16 Answer B Net income 3,500,000
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This note was uploaded on 08/12/2010 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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fav3chp5-7 - 53 CHAPTER5 Problem 5-1 1.C 2.B 3.B 4.C 5.D...

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