ACCT+2101+Quiz+6+Spr07

ACCT+2101+Quiz+6+Spr07 - ACCT 2101 Quiz #6 Spring Semester,...

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Unformatted text preview: ACCT 2101 Quiz #6 Spring Semester, 2007 Name (please print clearly) Pledge: On my honor, I have neither given nor received any unauthorized help on this quiz. (signed) QUICK RETURN OPTION: If you would like to have your quiz graded and returned by this Friday and are willing to have your quiz graded without consideration for partial credit, please sign here: Instructions: 1. You must write legibly or your answers will not be graded. 2. Show and label all work for possible partial credit. 3. Do NOT pull this quiz apart under any circumstances. 4. Make sure you have 7 numbered pages including the cover sheet. 5. You must use one of the authorized calculators — you may not use your own. 6. Good luck! Point Allocation: Question 1 1.5 Question 2 1.5 Question 3 2.0 Question 4 2.5 Question 5 1.5 Question 6 1.0 Extra Credit Question Q; TOTAL AVAILABLE POINTS 10.2 ACCTZIOI Quiz6 I Question 1. On January 1 of the current year, Turner Company acquired a tract of property containing mineral-bearing ore at a cost of $8,000,000. After the ore is removed, the land will be worth about $1,200,000 and will be sold to another party. Costs of developing the site were $750,000. It was expected that 5,000,000 tons of the ore can be economically mined. During the first year, 1,600,000 tons of the ore were extracted. Of the ore extracted, 1,200,000 tons of ore were sold. REQUIRED: Record the journal entries for each of the following: a. The acquisition of the property. b. The development costs. c. Depletion cost for the first year. d. Depletion expense (part of cost of goods sold) and ending inventory for the first year. ACCTZIO] Quiz6 2 Question 2. East Company spent $249,900 to purchase a patent on January 2, 2006. Management assumes that the patent’s useful life is 17 years. In January 2007, the company hired an outside law firm and successfully defended the patent in a lawsuit at a cost of $48,000. Also, in January 2007, the company paid $72,000 to obtain patents that could, if used by competitors, make the earlier East patent useless. The purchased patents will never be used. REQUIRED: Record the journal entries for each of the following: a. Purchase of the patent on January 2, 2006. b. Patent amortization for 2006. c. Patent defense costs in January 2007. d. Purchase of competing patents in January 2007. e. Patent amortization for 2007. ACCTZJOI Quiz6 3 Question 3. The Hanson Company's accounting year ends on December 31. On December 31, 2006, Hanson issued 15-year, 7% bonds, with a $300,000 face value, for $300,000. The bonds are dated December 31, 2006, call for semiannual interest payments on June 30 and December 31, and mature on December 31, 2021. REQUIRED: Record the journal entries for each of the following: a. On date of issuance, December 31, 2006: b. On the first interest date, June 30, 2007. c. On the maturity date, December 31, 2021: ACCTZIO] Quiz 6 4 Question 4. The Turner Company issues 9-year, 8% bonds with a $700,000 face value on March 31, 2007. On the date of issuance, the market interest rate on similar bonds was 12%. The Turner Company bonds pay interest semiannually. REQUIRED: a. Compute the price of the Turner Company bonds on March 31, 2007. Show all of your work to receive ANY credit. The present value tables are on the last page of the quiz. b. Record the journal entry that would be required on Turner Company’s books on March 31, 2007, to reflect the issuance of the bonds. ACCTZJOI Quiz6 5 Question 5. In financial reporting, we use three different terms to recognize the “using up” of our long-term assets. For each of those three terms listed below, please indicate (1) what category of assets it applies to and (2) two examples of assets from that category. - Depreciation: - Depletion: o Amortization: Question 6. In financial reporting, we categorize liabilities into three different categories. Those categories are listed below. For each category, please provide one example of a liability that fits with that description. 0 Clearly determinable: 0 Estimated: 0 Contingent: Extra Credit Question: What is the BEST program? Where will it be held? ACCTZJO] Quiz 6 6 Table 1 Present Value of 1 M (n) Periods 4% 5% 6% 8% 9% 10% 11% 12% 15% 1 .96154 .95238 .94340 .92593 .91743 .90909 .90090 .89286 .86957 2 .92456 .90703 .89000 .85734 .84168 .82645 .81162 .79719 .75614 3 .88900 .86384 .83962 .79383 .77218 .75132 .73119 .71178 .65752 4 .85480 .82270 .79209 .73503 .70843 .68301 .65873 .63552 .57175 5 .82193 .78353 .74726 .68058 .64993 .62092 .59345 .56743 .49718 6 .79031 .74622 .70496 .63017 .59627 .56447 .53464 .50663 .43233 7 .75992 .71068 .66506 .58349 .54703 .51316 .48166 .45235 .37594 8 .73069 .67684 .62741 .54027 .50187 .46651 .43393 .40388 .32690 9 .70259 .64461 .59190 .50025 .46043 .42410 .39092 .36061 .28426 10 .67556 .61391 .55839 .46319 .42241 .38554 .35218 .32197 .24719 11 .64958 .58468 "52679 .42888 .38753 .35049 .31728 .28748 .21494 12 .62460 ,55684 .49697 .39711 .35554 .31863 .28584 .25668 .18691 13 .60057 .53032 .46884 .36770 .32618 .28966 .25751 .22917 .16253 14 .57748 .50507 .44230 .34046 .29925 .26333 .23199 .20462 .14133 15 .55526 .48102 .41727 .31524 .27454 .23939 .20900 .18270 .12289 16 .5339] .45811 .39365 .29189 .25187 .21763 .18829 .16312 .10687 17 .51337 .43630 .37136 .27027 .23107 .19785 .16963 .14564 .09293 18 .49363 .41552 .35034 .25025 .21199 .17986 .15282 .13004 .08081 19 .47464 .39573 .33051 .23171 .19449 .16351 .13768 .11611 .07027 20 45639 37689 31180 .21455 .17843 .14864 .12403 .10367 .06110 Table 2 Present Value of an Annuity of 1 W (n) Pen‘ods 4% 5% 6% 8% 8 9% 10% 11% 12% 15% 1 .96154 .95238 .94340 .92593 .91743 .90909 .90090 .89286 .86957 2 1.88609 1.85941 1.83339 1.78326 1.75911 1 73554 1.71252 1.69005 1.62571 3 2 77509 2.72325 . 2.67301 2.57710 2.53130 2.48685 2 44371 2.40183 2.28323 4 3.62990 3.54595 3.46511 3.31213 3.23972 3.16986 3.10245 3.03735 2.85498 5 445182 432948 421236 399271 388965 379079 369590 360478 335216 6 5.24214 5.07569 4.91732 4.62288 4.48592 4.35526 4.23054 4.11141 3.78448 7 600205 578637 558238 520637 503295 486842 471220 456376 416042 8 673274 646321 620979 574664 553482 533493 514612 496764 448732 9 7.43533 7.10782 6.80169 6.24689 5.99525 5.75902 5.53705 5.32825 4.77158 10 811090 772173 736009 671008 641766 614457 588923 565022 501877 11 876048 830641 788687 713896 680519 649506 620652 593770 523371 12 9.38507 8.86325 8.38384 7.53608 7.16073 6.81369 6.49236 6.19437 5.42062 13 998565 939357 885268 790378 748690 710336 674987 642355 558315 14 1056312 989864 929498 824424 778615 736669 698187 662817 572448 15 11.11839 10.37966 9.71225 8.55948 8.06069 7.60608 7.19087 6.81086 5.84737 16 11.65230 10 83777 10.10590 8.85137 8.31256 7.82371 7.37916 6 97399 5.95424 17 1216567 1L27407 1047726 912164 854363 802155 754879 711963 604716 18 12.65930 11.68959 10.82760 9.37189 8.75563 8.20141 7.70162 7.24967 5. ‘ 6.12797 19 13.13394 12.08532 11.15812 9.60360 8.95012 8.36492 7.83929 7.36578 6.19823 20 13.59033 12.46221 11.46992 9.81815 9.12855 8.51356 7.96333 7.46944 6.25933 m ACCT 2101 Quiz #6 Version 1 Solution Spring Semester, 2007 Name (please print clearly) Pledge: On my honor, I have neither given nor received any unauthorized help on this quiz. (signed) QUICK RETURN OPTION: If you would like to have your quiz graded and returned by this Friday and are willing to have your quiz graded without consideration for partial credit, please sign here: Instructions: 1. You must write legibly or your answers will not be graded. 2. Show and label all work for possible partial credit. 3. Do NOT pull this quiz apart under any circumstances. 4. Make sure you have 7 numbered pages including the cover sheet. 5. You must use one of the authorized calculators w you may not use your own. 6. Good luckl Point Allocation: Question 1 1.5 Question 2 1.5 Question 3 2.0 Question 4 2.5 Question 5 1.5 Question 6 1.0 Extra Credit Question @ TOTAL AVAILABLE POINTS 1,9,2. ACCT 210! Quiz 6 l Question 1. On January 1 of the current year, Turner Company acquired a tract of property containing mineral-bearing ore at a cost of $8,000,000. After the ore is removed, the land will be worth about $1,200,000 and will be sold to another party. Costs of developing the site were $750,000. It was expected that 5,000,000 tons of the ore can be economically mined. During the first year, 1,600,000 tons of the ore were extracted. Of the ore extracted, 1,200,000 tons of ore were sold. REQUIRED: Record the journal entries for each of the following: a. The acquisition of the property. Mineral Ore Deposits 6,800,000 Land 1,200,000 o a? '5 Cash 8,000,000 b. The development costs. Mineral Ore Deposits 750,000 , Q 33’ Cash 750,000 c. Depletion cost for the first year. Depletion 2,416,000 . ‘3 Accumulated Depletion - Ore Deposits 2,416,000 ($6,800,000 + $750,000) / 5,000,000 tons = $1.51 per ton 1,600,000 tons >“ $1.51 per ton = $2,416,000 Depletion d. Depletion expense (part of cost of goods sold) and ending inventory for the first year. Depletion Expense (or COGS) 1,812,000 8 Inventory 604,000 g ,5 Depletion 2,416,000 ) Depletion expense = 1,200,000 tons sold *‘ $1.51 per ton = $1,812,000 Ix.) ACCT 2 10/ Quiz 6 Question 2. East Company spent $249,900 to purchase a patent on January 2, 2006. Management assumes that the patent’s useful life is 17 years. In January 2007, the company hired an outside law firm and successfully defended the patent in a lawsuit at a cost of $48,000. Also, in January 2007, the company paid $72,000 to obtain patents that could, if used by competitors, make the earlier East patent useless. The purchased patents will never be used. REQUIRED: Record the journal entries for each of the following: a. Purchase of the patent on January 2, 2006. Patents 249,900 ‘ g .3 Cash 249,900 b. Patent amortization for 2006. Patent Amortization Expense 14,700 E 35 Patents 14,700 } ‘ Patent amortization = $249,900 / 17 years = $14,700 c. Patent defense costs in January 2007. Patents 48,000 ? 05 Cash 48,000 1 d. Purchase of competing patents in January 2007. Patents 72,000 a _ gs Cash 72,000 j: e. Patent amortization for 2007. \ Patent Amortization Expense 22,200 g .57 Patents 22,200 Patent amortization = [($249,900 — $14,700 + $48,000 + $72,000) / 16 2 $22,200] ACCT 2101 Quiz: 6 " 3 Question 3. The Hanson Company’s accounting year ends on December 31. On December 31, 2006, Hanson issued 15-year, 7% bonds, with a $300,000 face value, for $300,000. The bonds are dated December 31, 2006, call for semiannual interest payments on June 30 and December 31, and mature on December 31, 2021. REQUIRED: Record the journal entries for each of the following: a. On date of issuance, December 31, 2006: Cash 300,000 57 Bonds Payable 300,000 ’ b. On the first interest date, ]une 30, 2007. Bond Interest Expense * 10,500 g “‘1 ‘3 Cash 10,500 "‘ $300,000 x .07 x 6/12 2 $10,500 c. On the maturity date, December 31, 2021: Bond Interest Expense 10,500 jg Bonds Payable 300,000 Cash 310,500 ACCTZIOI Quizé 4 Question 4. The Turner Company issues 9—year, 8% bonds with a $700,000 face value on March 31, 2007. On the date of issuance, the market interest. rate on similar bonds was 12%. The Turner Company bonds pay interest semiannually. REQUIRED: a. Compute the price of the Turner Company bonds on March 31, 2007. Show all of your work to receive ANY credit. The present value tables are on the last page of the quiz. b. Record the journal entry that would be required on Turner Company’s books on March 31, 2007, to reflect the issuance of the bonds. a. Bond Valuation: PV of principal: $700,000 x PV (126%, n=18) = $700,000 x 0.35034 2 33 245,238 2 PV of interest: ($700,000 x .08 x 1/2) x PVA (126%,11218) 35 = $28,000 x 10.82760 2 303,173 PV (market price) of bonds (DISCOUNT of $151,589 ) i 5&8 $11, b. Cash 548,411 g Discount on Bonds Payable 151,589 Bonds Payable 700,000 ACCTZ/Of Quiz 6 5 Question 5. In financial reporting, we use three different terms to recognize the "using up” of our long-term assets. For each of those three terms listed below, please indicate (1) what category of assets it applies to and (2)®examples of assets from that category. c Depreciation: f z 5 m; (1) Property, plant 8: equipment 5 35 .4). (2) Examples include buildings, equipment, furniture, computers, cars, etc. - Depletion: .33" “9‘ (1) Natural resources . ggwg, (2) Timber stands, oil reserves, mineral ore, etc. - Amortization: .33”? (1) intangible assets 3.5;”; (2) Patents, copyrights, trademarks, franchises, goodwill, etc. Question 6. In financial reporting, we categorize liabilities into three different categories. Those categories‘are listed below. For each category, please providezirg example of a liability that tits With that description. o Clearly determinable: accounts payable, interest payable, wages payable, rent .33 “it i payable, sales tax payable $.55 Ma, Estimated: product warranty liability, pension liability 15% M39 - Contingent: litigation liabilities, tax disputes, discounted notes receivable. Extra Credit Question: What is the BEST program? Where will it be held? The BEST (Business and Economics Summer Term) program is a study abroad program in Duisburg, Germany. W”WM’ mm! i 5‘ k i ACCT2101 Quizé 6 ...
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ACCT+2101+Quiz+6+Spr07 - ACCT 2101 Quiz #6 Spring Semester,...

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