During the course of your examination of the financial statements of the
Haley Sporting Goods Corporation for the year ended December 31, 2013,
Problem I you discover the following:
a. Net income reported in the 2013 income statement is $42,000 b
The Scott-Dennis Company uses the dollar-value LIFO retail inventory method. The following
information is available for 2013:
Pinder Implements sometimes sells products on an installment basis. In those
cases, Pinder recognizes installment income for financial reporting purposes in
the year of the sale. However, for tax purposes, installment income is reported
Net income as reported
Only $4,000 of rent should be expensed
Sales revenue overstated
Interest expense understated ($30,000 x 10% x 4/12)
Supplies expense overstated
Adjusted net income
$2,600 11.25508 = $231 = required monthly payments
Present value of an ordinary annuity of $1: n=12, i=1% (from Table 4)
Choose the alternative with the highest present value.
PV = $200,000
Practice Exam Chapters 6-9
Problem I Short answer exercises (Answer in the space provided)
1. On April 30, 2013, Jonathan Wells purchased a big screen TV from the Great Guys
Department Store for $2,600. Jonathan will make 12 equal monthly payments,
Plus: Net purchases
Less: Net markdowns
Goods available for sale (excluding beginning inventory)
Goods available for sale (including beginning inventory)
Shea Industries, a dental supplies facilitator, borrowed $480,000 cash on
October 1, 2013. West Bank made the loan in accordance with a shortterm revolving credit agreement. Shea issued a 7-month, 12% promissory
note with interest payab
1. Prepare the journal entry for the issuance of the note by Shea
2. Prepare the appropriate adjusting entry for the note by Shea
Industries on December 31, 2013.
Problem I 1.
Enacted tax rate
Tax payable currently
Deferred tax liability
($ in millions)
Problem IRequirement 1
fair value per option
x 20 million options granted
= $100 million fair value of award
Compensation expense ($100 million 4 years)
Paid-in capital - stock options.
Vacaro Corporation provides a variety of share-based compensation plans to its employees.
Under its executive stock option plan, Vacaro granted incentive stock options on January 1,
2013, that permit executives to acquire 20 million of
TABLE 5 Future Value of an Annuity Due of $1TABLE 5 Future Value of an Annuity Due of $1
FVFV AD =AD
(1 + i)n - 1 x (1 + i)(1
i(1 + i)n - 1 x + i)
n/in/ 1.0%1.0% 1.5%1.5% 2.0% 2.5%2.0%
3.0%3.0% 3.5%3.5% 4.0%4.0 4.5%4.5% 5.0%5.0% 5.5%5.5%
T-account account with space at the top for the account title and two sides for recording
increases and decreases.
Taxable income comprises revenues, expenses, gains, and losses as measured according to
the regulations of the appropriate taxing authority.
S corporation characteristics of both regular corporations and partnerships.
SAB No. 101 Staff Accounting Bulletin 101 summarizes the SEC's views on revenue
Sale-leaseback transaction the owner of an asset sells it and immediately leases it b
Date of record specific date stated as to when the determination will be made of the recipient
of the dividend.
Debenture bond secured only by the "full faith and credit" of the issuing corporation.
Debits represent the left side of the account.
Accounting equation the process used to capture the effect of economic events; Assets =
Liabilities + Owner's Equity.
Accounting Principles Board (APB) the second private sector body delegated the task of
setting accounting standards.
Accounts storage are
Early extinguishment of debt debt is retired prior to its scheduled maturity date.
Earnings per share (EPS) the amount of income earned by a company expressed on a per
Earnings quality refers to the ability of reported earnings (income) to pr
F.O.B. (free on board) shipping point legal title to the goods changes hands at the point of
shipment when the seller delivers the goods to the common carrier, and the purchaser is
responsible for shipping costs and transit insurance.
F.O.B. destination t
Half-year convention record one-half of a full year's depreciation in the year of acquisition
and another half year in the year of disposal.
Hedging taking an action that is expected to produce exposure to a particular type of risk that
is precisely the o
Land improvements the cost of parking lots, driveways, and private roads and the costs of
fences and lawn and garden sprinkler systems.
Last-in, first-out (LIFO) method assumes units sold are the most recent units purchased.
Leasehold improvements account
Gain or loss on the PBO the decrease or increase in the PBO when one or more estimates
used in determining the PBO require revision.
Gains increases in equity from peripheral, or incidental, transactions of an entity.
General journal used to record any ty
Management discussion and analysis (MDA) provides a biased but informed perspective of
a company's operations, liquidity, and capital resources.
Managerial accounting deals with the concepts and methods used to provide information to
an organization's int
Natural resources oil and gas deposits, timber tracts, and mineral deposits.
Net income/net loss revenue + gains (expenses and losses for a period) income
statement bottom line.
Net interest cost/income interest rate times the net difference between the d
Objectives-oriented/principles-based accounting standards approach to standard setting
stresses professional judgment, as opposed to following a list of rules.
Onerous performance obligation The proposed ASU on revenue recognition may require the
Paid-in capital invested capital consisting primarily of amounts invested by shareholders
when they purchase shares of stock from the corporation.
Parenthetical comments/modifying comments supplemental information disclosed on the
face of financial statem
Rate of return on stock investment
Ratio analysis comparison of accounting numbers to evaluate the performance and risk of a
Raw materials cost of components purchased from other manufacturers that will become part
of the finished product.
Bad debt expense an operating expense incurred to boost sales; inherent cost of granting
Balance sheet a position statement that presents an organized list of assets, liabilities, and
equity at a particular point in time.
Balance sheet approach de