University of Utah

ACCT 5110

Quiz 11

1)On Jan. 1, Jim decides to invest money in a 6% CD account that compounds interest annually. Jim would like the account to have a balance of $50,000 in five years. How much must Jim deposit to accomplish his goal?

2. On Jan. 1, Jim decides to invest money in a 6% CD account that compounds interest semiannually. Jim would like the account to have a balance of $50,000 in five years. How much must Jim deposit to accomplish his goal?

3. You win $10,000,000 in the state lottery. You’ll be paid $500,000 at the end of each year for the next 20 years. How much have you actually won? Assume an interest rate of 7%.

4. XYZ Company issues $1,000,000 of 5% bonds due in 10 years with interest payable at each year end. The current market rate of interest for these bonds is 6%. What amount will XYZ receive when it issues the bonds?

Hint: The coupon rate is 5%, which means the annual interest payments will be 5% of the bond's face value. The 6% market rate is used to discount cash flows in the present value calculations. To determine the cash received, you'll need to discount both the stream of 10 annual interest payments and then separately discount the return of principal after 10 years.

5. Acme purchased a $1,000 six-month treasury bill on January 12, 2014. It matures 26 weeks later during July 2014. At Acme’s June 30, 2014, quarter end, how should the $1,000 be presented on the balance sheet?

Cash

Cash Equivalent

Short-term Investment

6. Accounts receivable are valued are reported at net realizable value. Which of the following does not represent a valid reduction to gross accounts receivable when determining net accounts receivable?

Sales without a fixed price

 Uncollectible

accounts Sales returns

7. At the beginning of the second quarter (Q2), Acme had an Allowance for Uncollectible Accounts that totaled $30,000. During Q2, $12,000 of specific receivables were written off due to customer bankruptcies. At the end of Q2, Acme determines an allowance of $37,000 is appropriate. What amount of Bad Debt Expense should Acme report in its Q2 income statement? (just enter numbers--no symbols like $ or ,)

8. At the end of the fourth quarter (Q4), Acme had $50,000 in accounts receivable outstanding. However, based on past experience, it only expected to collect $42,000 in cash from those receivables. Acme began Q4 with an allowance for doubtful accounts balance of $6,000 and during the quarter wrote off $3,000 in accounts that it determined to be uncollectable. How much Bad Debt Expense should Acme report in its Q4 income statement? (just enter numbers--no symbols like $ or ,)

9. A company might decide to use its accounts receivable to obtain immediate access to cash, either by selling them or pledging them as collateral for a loan. In either case, the cash received would be recorded as a debit to cash. If the arrangement is deemed a sale, what type of account should the company credit? Ignore any fees.

Asset

Contra

Asset Liability

Revenue

10. When prices are rising, which inventory method produces a higher Ending Inventory balance?

FIFO

 LIFO

Average Cost

Guesstimation

11. ABC Corp. opened for business in November 2015. During November, ABC purchased 200 items of inventory for $2.00 each ($400 total cost). During December, ABC purchased another 200 items for $3.00 each ($600 total cost). In late December, ABC had its first and only sale of the quarter, 250 items for $5.00 each ($1,250 total revenue). What is ABC's Cost of Goods Sold for the December sale of 250 items? ABC uses the FIFO cost flow assumption. (Just enter a number--no symbols like $ or ,)

[Same facts as Question 2 but different cost flow assumption]

12. ABC Corp. opened for business in November 2015. During November, ABC purchased 200 items of inventory for $2.00 each ($400 total cost). During December, ABC purchased another 200 items for $3.00 each ($600 total cost). In late December, ABC had its first and only sale of the quarter, 250 items for $5.00 each ($1,250 total revenue). What is ABC's Cost of Goods Sold for the December sale of 250 items? ABC uses the LIFO cost flow assumption. (Just enter a number--no symbols like $ or ,)

[Same facts as Question 2 but different cost flow assumption]

13. ABC Corp. opened for business in November 2015. During November, ABC purchased 200 items of inventory for $2.00 each ($400 total cost). During December, ABC purchased another 200 items for $3.00 each ($600 total cost). In late December, ABC had its first and only sale of the quarter, 250 items for $5.00 each ($1,250 total revenue). What is ABC's Cost of Goods Sold for the December sale of 250 items? ABC uses the average cost flow assumption. (Just enter a number--no symbols like $ or ,)

14. Company X purchased inventory for $2,700. X normally pays additional shipping charges of

$300 per order, but in this one instance paid $900 to rush the shipment because inventory levels on hand had fallen unusually low. At what cost should X record the inventory? (omit , and $ in the answer)

15. On December 20, 2012, Company X purchased $100 of inventory on account from its supplier. The supplier offered a 2% discount on the purchase if X pays within 10 days. X paid the discounted $98 on December 27. At what amount would X report the inventory on its balance sheet dated December 31? X uses the gross method of accounting for purchase discounts. (omit , and $ in the answer)

16. When prices are rising, which inventory method produces a higher Ending Inventory?

FIFO

 LIFO

Average Cost

 Guesstimation

17. When prices are falling, which inventory method generally produces a more accurate Ending Inventory?

FIFO 

LIFO

Average Cost

Guesstimation

18. Raw materials are not considered to be Inventory when they are first purchased; only after they are actually used in production.

True

False

19. In March 2012, X Corp. purchased an item of inventory for $400. By June, that item could be purchased for $360 and re-sold for $440. X’s normal profit for the item is $50. At what amount should X report the item in its June 30 balance sheet? X uses the LIFO inventory cost flow assumption. (omit , and $ in the answer)

20. X, Inc., uses the LIFO cost flow assumption. X had 100 items in its Jan. 1 beginning inventory balance, totaling $500 (that is, $5 each). X purchased another 200 items on Jan. 9 for $7 each. On Jan. 12 X sold 230 items for $10 each. By how much did this LIFO liquidation increase X's usual profit on a sale of 230 items? (omit , and $ in the answer)

21. X, Inc., is a manufacturer that can produce 10,000 units per quarter at capacity. However, normal production ranges from 9,000 to 10,000 units. During the quarter, X has fixed overhead costs of $80,000 and produces only 8,000 units due to unexpected maintenance issues that forced the facility to close for several days. How much of the $80,000 in fixed overhead costs should X include in its Inventory balances for the quarter? (use the approach we discussed in class and omit , and $ in the answer)

22. XYZ Enterprises purchased equipment for $70,000 on January 1, 2015. The equipment is expected to have a five-year life and a residual value of $10,000. Using the straight-line method, XYZ’s Depreciation Expense for 2015 would be (omit $ and , in the answer):

23. XYZ Enterprises purchased equipment for $70,000 on January 1, 2015. The equipment is expected to have a five-year life and a residual value of $10,000. Using the straight-line method, the Accumulated Depreciation on XYZ's equipment at the end of 2016 would be (omit $ and , in the answer):

24. XYZ Enterprises purchased equipment for $70,000 on January 1, 2015. The equipment is expected to have a five-year life and a residual value of $10,000. Using the straight-line method, the Net Book Value of XYZ’s equipment at the end of 2017 would be (omit $ and , in the answer):

25. XYZ Enterprises purchased equipment for $70,000 on January 1, 2015. The equipment is expected to have a five-year life and a residual value of $10,000. Using the double-declining balance method, XYZ’s Depreciation Expense for 2015 would be (omit $ and , in the answer):

26. Changes in the estimates involved in depreciation, depletion, and amortization require retroactive restatement of financial statements.

True

 False

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

Straight-line

Units-of-production

Double-declining balance

Sum-of-the-years’-digits

28. XYZ Enterprises purchased equipment for $70,000 on July 1, 2013. The equipment is expected to have a five-year life and a residual value of $10,000. Using the sum-of-years'-digits method, the net book value of XYZ’s equipment on December 31, 2014, would be (omit $ and , in the answer):

29. XYZ Enterprises purchased equipment for $70,000 on July 1, 2013. The equipment is expected to have a five-year life and a residual value of $10,000. Using the double-declining balance method, accumulated depreciation for XYZ’s equipment on December 31, 2014 would be (omit $ and , in the answer):

30. At the end of its 2015 fiscal year, a triggering event caused XYZ Enterprises to perform an impairment test for one of its manufacturing facilities. The following information is available for the facility as of Dec. 31, 2015:

Original cost                                                                       $90 million

Accumulated depreciation                                           $35 million Estimated undiscounted future cash flows $60 million Fair value   $50 million

Based on this information, XYZ should record:

no impairment

an impairment of $5 million an impairment of $30 million an

 impairment of $40 million an impairment of $90 million