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Benedictine University - ACCOUNTING 211 Exam 3 ACCT 211 Final Fall 2013 1)In accounting for oil and gas exploration costs, companies: A

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Benedictine University - ACCOUNTING 211

Exam 3 ACCT 211 Final Fall 2013

1)In accounting for oil and gas exploration costs, companies:

A.         May not use the full-cost method.

B.         May use the successful efforts method.

C.         May use the slippery slope method.

D.         All of the above are correct.

 

 

 

2.         The use of LIFO during a long inflationary period can result in:

A.         A net increase in income tax expense.

B.         An inflated balance sheet.

C.         Significant cash flow advantages over FIFO.

D.         A reduction in inventory turnover over FIFO.

 

3.         In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:

A.         Weighted average.

B.         Moving average.

C.         FIFO.

D.         LIFO.

 

 

 

4.         Cost of goods sold is given by:

A.         Beginning inventory - net purchases + ending inventory.

B.         Beginning inventory + accounts payable - net purchases.

C.         Net purchases + ending inventory - beginning inventory.

D.         Net Purchases + beginning inventory - ending inventory.

 

 

 

5.         Inventory does not include:

A.         Materials used in the production of goods to be sold.

B.         Assets intended to be sold in the normal course of business.

C.         Equipment used in the manufacturing of assets for sale.

D.         Assets currently in production for normal sales.

 

 

 

6.         The purpose of ceilings and floors in LCM is to prevent profit distortion.

 True    False

 

 

 

7.         Net realizable value is selling price less costs of completion and disposal.

 True    False

 

 

 

Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

•          40 units at $100

•          70 units at $80

•          170 units at $60

Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.

 

8.         Ending inventory using the average cost method (rounded) is: A. $650.

B. $1,000.

C. $707.

D. $600.

 

9.         Ending inventory using the LIFO method is:

A. $650.

B. $1,000.

C. $707.

D. $600.

 

 

 

10.       Ending inventory using the FIFO method is:

A. $650.

B. $1,000.

C. $707.

D. $600.

 

 

 

11.       Grab Manufacturing Co. purchased a ten-ton draw press at a cost of $180,000 with terms of 5/15, n/45. Payment was made within the discount period. Shipping costs were $4,600, which included $200 for insurance in transit. Installation costs totaled $12,000, which included $4,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the ten-ton draw press is: A. $171,000.

B. $183,600.

C. $187,600.

D. $185,760.

 

 

 

12.       Asset retirement obligations:

A.         Increase the balance in the related asset account.

B.         Are measured at fair value in the balance sheet.

C.         Are liabilities associated with the restoration of a long-term asset.

D.         All of the above are correct.

 

 

 

13.       The exclusive right to benefit from a creative work, such as a film, is a:

A.         Patent.

B.         Copyright.

C.         Trademark.

D.         Franchise.

 

14.       Goodwill is:

A.         Amortized over the greater of its estimated life or forty years.

B.         Only recorded by the seller of a business.

C.         The excess of the fair value of a business over the fair value of all net identifiable assets.

D.         None of the above.

 

 

15.       Inventory written down due to LCM may be written back up if market values go back up.

 True    False

 

16.       Assuming an asset is used evenly over a four-year service life, which method of depreciation will always result in the largest amount of depreciation in the first year?

A.         Straight-line.

B.         Units-of-production.

C.         Double-declining balance.

D.         Sum-of-the-year's digits.

 

 

 

17.       Depreciation, depletion, and amortization:

A.         All refer to the process of allocating the cost of long-term assets used in the business over future periods.

B.         All generally utilize the same methods of cost allocation.

C.         Are all handled the same in arriving at taxable income.

D.         All of the above are correct.

 

 

 

18.       In applying LCM, market cannot be:

A.         Less than net realizable value minus a normal profit margin.

B.         Net realizable value less reasonable completion and disposal costs.

C.         Greater than net realizable value reduced by an allowance for normal profit margin.

D.         Less than cost.

 

 

 

19.       The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at:

A.         Fair value of the asset(s) given up.

B.         The book value of the asset given plus any cash or other monetary consideration received.

C.         Fair value or book value, whichever is smaller.

D.         Book value of the asset given.

 

20.       Vijay Inc. purchased a 3-acre tract of land for a building site for $320,000. On the land was a building with an appraised value of $120,000. The company demolished the old building at a cost of $12,000, but was able to sell scrap from the building for $1,500. The cost of title insurance was $900 and attorney fees for reviewing the contract was $500. Property taxes paid were $3,000, of which $250 covered the period subsequent to the purchase date. The capitalized cost of the land is:

A. $336,400.

B. $336,150.

C. $334,650. D. $201,150.

 

 

 

On September 30, 2011, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bricker records partial-year depreciation based on the number of months in service.

 

21.       Depreciation (to the nearest dollar) for 2011, using sum-of-the-years' digits, would be: A. $9,091.

B. $24,545.

C. $27,273.

D. $8,182.

 

22.       Depreciation for 2011, using double-declining balance, would be: A. $40,000.

B. $10,000.

C. $36,000.

D. $9,000.

 

23.       Depreciation for 2011, using the straight-line method is: A. $13,500.

B. $15,000.

C. $4,500.

D. $5,000.

 

 

 

 

 

 

 

 

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On June 30, 2011, Prego Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value. The cost of the machine was $450,000 and is to be depreciated using the units-of-production method. During the six months of 2011, 24,000 units of product were produced. At the beginning of 2012, engineers estimated that the machine can realistically be used to produce only another 230,000 units. During 2012, 70,000 units were produced.

 

24.       Prego would report depreciation in 2012 of:

A. $135,230.

B. $126,000.

C. $108,000.

D. $105,000.

 

Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,000.

 

 

 

25.       Using the sum-of-the-years'-digits method, depreciation for 2011 and book value at December 31, 2011 would be:

A. $22,000 and $44,000.

B. $22,000 and $50,000. C. $24,000 and $48,000.

D. $24,000 and $42,000.