Financial 2 PassMaster Questions - Becker CPA Review...

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Becker CPA Review, PassMaster Questions Lecture: Financial 2 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. CPA PassMaster Questions–Financial 2 Export Date: 10/30/08
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Becker CPA Review, PassMaster Questions Lecture: Financial 2 2 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. Timing Issues CPA-00536 Type1 M/C A-D Corr Ans: B PM#1 F 2-01 1. CPA-00536 FARE R03 #9 Page 18 Miller Co. incurred the following computer software costs for the development and sale of software programs during the current year: Planning costs $ 50,000 Design of the software 150,000 Substantial testing of the project’s initial stages 75,000 Production and packaging costs for the first month's sales 500,000 Costs of producing product masters after technology feasibility was established 200,000 The project was not under any contractual arrangement when these expenditures were incurred. What amount should Miller report as research and development expense for the current year? a. $200,000 b. $275,000 c. $500,000 d. $975,000 CPA-00536 Explanation Choice "b" is correct. Before technological feasibility is established computer software development costs are expensed as research and development. Miller Co.'s research and development costs are: Planning costs $ 50,000 Design of the software 150,000 Substantial testing of the project's initial stages 75,000 $275,000 CPA-00538 Type1 M/C A-D Corr Ans: A PM#3 F 2-01 2. CPA-00538 FARE R97 #6 Page 5 Troop Co. frequently borrows from the bank to maintain sufficient operating cash. The following loans were at a 12% interest rate, with interest payable at maturity. Troop repaid each loan on its scheduled maturity date. Date of Maturity Term of Loan Amount Date Loan 11/1/95 $10,000 10/31/96 1 year 2/1/96 30,000 7/31/96 6 months 5/1/96 16,000 1/31/97 9 months Troop records interest expense when the loans are repaid. Accordingly, interest expense of $3,000 was recorded in 1996. If no correction is made, by what amount would 1996 interest expense be understated? a. $1,080 b. $1,240 c. $1,280 d. $1,440 CPA-00538 Explanation Choice "a" is correct. $1,080 understated interest expense. Actual interest expense: Date Amount Rate Time 11/1/95 Loan $10,000 × 12% × 10/12 mos = $1,000
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