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Assignment 7. Graded Problem Set 3 David McMahon 1 Fences and parking lots are reported on the balance sheet as a. current assets. land...

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No. Assignment 7.3.1: Graded Problem Set 3 David McMahon 1 Fences and parking lots are reported on the balance sheet as a. current assets. b. land improvements. c. land. d. property and equipment. 2 a. expensed. b. debited to accumulated depreciation. c. capitalized in the machine account. d. al ocated between accumulated depreciation and the machine account. 3 A change in estimate should a. result in restatement of prior period statements. b. be handled in current and future periods. c. be handled in future periods only. d. be handled retroactively. 4 Which of the following disclosures is not required in the financial statements regarding depreciation? a. Accumulated depreciation, either by major classes of depreciable assets or in total. b. Details demonstrating how depreciation was calculated. c. Depreciation expense for the period. d. Balances of major classes of depreciable assets, by nature and function. 5 a. $10,000 b. $10,500 c. $10,925 d. $11,275 6 a. Attorney Fees b. Consulting Fees c. Research and Development Fees d. Design Costs 7 a. Trade Name b. Research and Development Costs c. Franchise d. Copyright 8 The intangible asset goodwill may be a. capitalized only when purchased. b. capitalized either when purchased or created internal y. c. capitalized only when created internal y. d. written off directly to retained earnings. 9 a. an extraordinary gain. b. al periods benefited on an equitable basis. c. reduce proportionately the values assigned to noncurrent assets. d. reduce proportionately the values assigned to both current and noncurrent assets. 10 A loss on impairment of an intangible asset is the difference between the asset's a. carrying amount and the expected future net cash flows. b. carrying amount and its fair value. c. fair value and the expected future net cash flows. d. book value and its fair value. 11 a. $0 b. $100,000 c. $1,800,000 d. $2,100,000 12 a. It is a present obligation that entails settlement by probable future transfer or use of cash, goods, or services. c. The liability must be an unavoidable obligation. d. The transaction or other event creating the obligation must have already occurred. 13 Which of the following must be disclosed relative to long-term debt maturities and sinking fund requirements? a. The present value of future payments for sinking fund requirements and long-term debt maturities during each of the next five years. b. The present value of scheduled interest payments on long-term debt during each of the next five years. c. The amount of scheduled interest payments on long-term debt during each of the next five years. d. The amount of future payments for sinking fund requirements and long-term debt maturities during each of the next five years. 14 a. No recognition b. Note disclosure only c. Operating expense of $800,000 and liability of $800,000 d. Appropriation of retained earnings of $800,000 15 a. No entry is required. b. A loss and liability of $10 mil ion. c. A loss and liability of $6 mil ion. d. A loss and liability of $2 mil ion. 16 When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the a. market value of the services received. b. par value of the shares issued. c. market value of the shares issued. d. Any of these provides an appropriate basis for recording the transaction. 17 Presented below is information related to Edis Corporation: Common Stock, $1 par $4,300,000.00 Paid-in Capital in Excess of Par - Common Stock $550,000.00 Preferred 8 1/2% Stock, $50 par $2,000,000.00 Paid-in Capital in Excess of Par - Preferred Stock $400,000.00 Retained Earnings $1,500,000.00 Treasury Common Stock (at cost) $150,000.00 The total stockholders' equity of Edis Corporation is a. $8,600,000 b. $8,750,000 c. $7,100,000 d. $7,250,000 18 Presented below is information related to Edis Corporation: Common Stock, $1 par $4,300,000.00 Paid -in Capital in Excess of Par - Common Stock $550,000.00 Preferred 8 1/2% Stock, $50 par $2,000,000.00 Paid-in Capital in Excess of Par - Preferred Stock $400,000.00 Retained Earnings $1,500,000.00 Treasury Common Stock (at cost) $150,000.00 The total paid-in-capital (cash collected) related to the common stock is a. $4,300,000 b. $4,850,000 c. $5,250,000 d. $4,700,000 19 Presented below is information related to Edis Corporation: Common Stock, $1 par $4,300,000.00 Paid-in Capital in Excess of Par - Common Stock $550,000.00 Preferred 8 1/2% Stock, $50 par $2,000,000.00 Paid-in Capital in Excess of Par - Preferred Stock $400,000.00 Retained Earnings $1,500,000.00 Treasury Common Stock (at cost) $150,000.00 Cash dividends are paid on the basis of the number of shares a. authorized. b. issued. c. outstanding. d. outstanding less the number of treasury shares. 20 a. the common stock is worth more than its current market value. b. a gain on the sale of stock is a part of the transaction. c. the common stock was sold at a discount. d. the stated value of the common stock is less than the per share price investors were wil ing to pay. An improvement made to a machine increased its fair market value and its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be Tyson Chandler Company purchased equipment for $10,000. Sales tax on the purchase was $500. Other costs incurred were freight charges of $200, repairs of $350 for damage during instal ation, and installation costs of $225. What is the cost of the equipment? When a company develops a trademark or trade name, the costs directly related to securing it should general y be capitalized. Which of the fol owing costs associated with a trademark or trade name would not be allowed to be capitalized? Which of the following is not an intangible asset? When the fair market value of the assets acquired in a business purchase exceed the purchase price, negative goodwill (also called badwill) arises. When negative goodwil arises, GAAP requires that it be allocated to Blue Sky Company's 12/31/08 balance sheet reports assets of $5,000,000 and liabilities of $2,000,000. All of Blue Sky's assets' book values approximate their fair value, except for land, which has a fair value that is $300,000 greater than its book value. On 12/31/08, Horace Wimp Corporation paid $5,100,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp record as a result of this purchase? A liability has three essential characteristics. Which of the following is not one of them? b. The obligation must be liquidated using cash, goods, or services that were earned by the entity in the performance of its normal business operation. Lopez Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2008. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Lopez recall al cans of this paint sold in the last six months. The management of Lopez estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation? Wilson Company is involved in a litigation suit concerning the clean-up of old underground oil storage tanks on property it sold to a housing development company five years ago. The attorneys for Wilson Company cannot give a best estimate for the probable liability; however, the attorneys state that the liability to Wilson Company will probably fal within a range of $2 million to $10 mil ion. According to the SEC, what should Wilson Company record with regards to this environmental liability? When common stock is sold by a corporation, a journal entry is prepared which includes a debit to cash and a credit to the common stock account. If the debit to cash is greater than the credit to the common stock account, then it can be assumed that:
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