Franco Company uses IFRS and owns property, plant and equipment with a historical cost of 5,000,000 euros. At December 31, 2011, the company reported a valuation reserve of 8,365,000 euros. At December 31, 2012, the property, plant and equipment was appraised at 5,325,000 euros. The property, plant and equipment will be reported on the December 31, 2012 balance sheet at 5,325,000 euros. 8,365,000 euros. 8,690,000 euros. 5,000,000 euros. A general description of the depreciation methods applicable to major classes of depreci-able assets should be included in corporate financial statements or notes thereto. is not a current practice in financial reporting. is not essential to a fair presentation of financial position. is needed in financial reporting when company policy differs from income tax policy. Sauder Corporation reports the following information: Net income $ 300,000 Depreciation expense 70,000 Increase in accounts receivable 30,000 Sauder should report cash provided by operating activities of $260,000 $340,000 $400,000 $200,000 Keisler Corporation reports: Cash provided by operating activities $ 240,000 Cash used by investing activities 110,000 Cash provided by financing activities 140,000 Beginning cash balance 70,000 What is Keisler's ending cash balance? $560,000 $490,000 $270,000 $340,000 If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows? It would be a negative $8,000 in the financing section and a positive $8,000 in the investing section. It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities. It would depend on whether you are using the direct or the indirect method. It would be a positive $8,000 in the financing section and a negative $8,000 in the investing section. Significant accounting policies may not be omitted from financial-statement disclosure. unusual or innovative in application. selected on the basis of judgment. selected from existing acceptable alternatives. The following trial balance of Reese Corp. at December 31, 2012 has been properly adjusted except for the income tax expense adjustment. Reese Corp. Trial Balance December 31, 2012 Dr. Cr. Cash $ 975,000 Accounts receivable (net) 2,695,000 Inventory 2,085,000 Property, plant, and equipment (net) 7,366,000 Accounts payable and accrued liabilities $ 1,801,000 Income taxes payable 654,000 Deferred income tax liability 85,000 Common stock 2,350,000 Additional paid-in capital 3,680,000 Retained earnings, 1/1/10 3,450,000 Net sales and other revenues 13,460,000 Costs and expenses 11,180,000 Income tax expenses 1,179,000 $ 25,480,000 $ 25,480,000 Other financial data for the year ended December 31, 2012: 1. Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000. The last payment is due December 29, 2014. 2. The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability. 3. During the year, estimated tax payments of $525,000 were charged to income tax expense. The current and future tax rate on all types of income is 30%. In Reese's December 31, 2012 balance sheet, the current assets total is $5,605,000 $6,280,000 $5,155,000 $5,755,000 Kohler Company owns the following investments: Trading securities (fair value) $ 120,000 Available-for-sale securities (fair value) 70,000 Held-to-maturity securities (amortized cost) 94,000 Kohler will report securities in its long-term investments section of $164,000 or an amount less than $164,000, depending on the circumstances. exactly $190,000. exactly $214,000. exactly $284,000. The correct order to present current assets is cash, accounts receivable, prepaid items, inventories. cash, inventories, accounts receivable, prepaid items. cash, inventories, prepaid items, accounts receivable. cash, accounts receivable, inventories, prepaid items. Barkley Company will receive $300,000 in a future year. If the future receipt is discounted at an interest rate of 8%, its present value is $189,051. In how many years is the $300,000 received? 6 years 7 years 8 years 5 years Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Interest compounded annually is 10%. Periods Present Value of $1 Discounted at 10% per Period 1 1.080 1 0.909 2 0.826 3 0.751 4 0.683 5 0.621 What is the present value today of $6,000 to be received six years from today? $6,000 × 0.751 × 2 $6,000 × 0.621 × 0.909 $6,000 × 0.683 × 3 $6,000 × 0.909 × 6 Present value is all of these. the value now of a future amount. always smaller than the future value. the amount that must be invested now to produce a known future value. Given below are the future value factors for 1 at 8% for one to five periods. Interest compounded annually is 8%. Periods Future Value of 1 at 8% 1 1.080 2 1.166 3 1.260 4 1.360 5 1.469 If $3,000 is put in a savings account today, what amount will be available three years from today? $3,000 × 1.260 ($3,000 × 1.080) + ($3,000 × 1.166) + ($3,000 × 1.260) $3,000 × 1.080 × 3 $3,000 ÷ 1.260 John won a lottery that will pay him $150,000 at the end of each of the next twenty years. Assuming an appropriate interest rate is 8% compounded annually, what is the present value of this amount? $6,864,294. $32,183. $1,590,540. $1,472,723. On December 30, 2012, AGH, Inc. purchased a machine from Grant Corp. in exchange for a zero-interest-bearing note requiring eight payments of $70,000. The first payment was made on December 30, 2012, and the others are due annually on December 30. At date of issuance, the prevailing rate of interest for this type of note was 11%. Present value factors are as follows: Period Present Value of Ordinary Annuity of 1 at 11% Present Value of Annuity Due of 1 at 11% 7 4.712 5.231 8 5.146 5.712 On AGH's December 31, 2012 balance sheet, the net note payable to Grant is $360,220. $366,485. $329,840. $399,840. On January 2, 2010, Wine Corporation wishes to issue $3,000,000 (par value) of its 8%, 10-year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 10%. Using the interest factors below, compute the amount that Wine will realize from the sale (issuance) of the bonds. Present value of 1 at 8% for 10 periods 0.4632 Present value of 1 at 10% for 10 periods 0.3855 Present value of an ordinary annuity at 8% for 10 periods 6.7101 Present value of an ordinary annuity at 10% for 10 periods 6.1446 $2,631,204 $3,000,018 $3,318,078 $3,000,000 On January 2, 2010, Wine Corporation wishes to issue $3,000,000 (par value) of its 8%, 10-year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 10%. Using the interest factors below, compute the amount that Wine will realize from the sale (issuance) of the bonds. Present value of 1 at 8% for 10 periods 0.4632 Present value of 1 at 10% for 10 periods 0.3855 Present value of an ordinary annuity at 8% for 10 periods 6.7101 Present value of an ordinary annuity at 10% for 10 periods 6.1446 $2,631,204 $3,000,018 $3,318,078 $3,000,000 For which of the following transactions would the use of the present value of an annuity due concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence? A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement. A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%. A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement. A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%. Use the following 8% interest factors. Present Value of Ordinary Annuity Future Value of Ordinary Annuity 7 periods 5.2064 8.92280 8 periods 5.7466 10.63663 9 periods 6.2469 12.48756 Korman Company wishes to accumulate $400,000 by May 1, 2020 by making 8 equal annual deposits beginning May 1, 2012 to a fund paying 8% interest compounded annually. What is the required amount of each deposit? $69,606 $40,312 $37,606 $34,820 What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? As assets but separately from other receivables. As trade notes and accounts receivable if they otherwise qualify as current assets. As offsets to capital. By means of footnotes only. Of the approaches to record cash discounts related to accounts receivable, which is more theoretically correct? Allowance approach. All three approaches are theoretically correct. Net approach. Gross approach. Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account increases the allowance for uncollectible accounts. has no effect on the allowance for uncollectible accounts. decreases net income. has no effect on net income. On June 1, 2012, Yang Corp. loaned Gant $400,000 on a 12% note, payable in five annual installments of $80,000 beginning January 2, 2013. In connection with this loan, Gant was required to deposit $4,000 in a zero-interest-bearing escrow account. The amount held in escrow is to be returned to Gant after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2012. Gant made timely payments through November 1, 2012. On January 2, 2013, Yang received payment of the first principal installment plus all interest due. At December 31, 2012, Yang's interest receivable on the loan to Gant should be $12,000. $0. $4,000. $8,000. Which of the following should be recorded in Accounts Receivable? None of these Receivables from officers Receivables from subsidiaries Dividends receivable Genesis Company has seven loans receivable. The loans vary in size and have been extended to companies with different credit ratings. Given a downturn in the economy, it is expected that at least two of these loans will be impaired. Which of the following statements best describes the accounting for these loans under iGAAP? iGAAP implies that the loans should be reported as an aggregated portfolio. Under iGAAP, when impairment is permitted, the balance on each of the impaired loans becomes the new basis for the loan. iGAAP uses an expected loss model, so the entire diverse portfolio should be written down based on the anticipated impairment. iGAAP uses an incurred loss model rather than an expected loss model, so no impairment on each of the two loans is recognized until an identifiable event occurs and is measurable.

 Franco Company uses IFRS and owns property, plant and equipment with a historical cost of 5,000,000 euros. At December 31, 2011, the company reported a valuation reserve of 8,365,000 euros. At December 31, 2012, the property, plant and equipment was appraised at 5,325,000 euros. The property, plant and equipment will be reported on the December 31, 2012 balance sheet at

 
5,325,000 euros.
 
8,365,000 euros.
 
8,690,000 euros.
 
5,000,000 euros.

A general description of the depreciation methods applicable to major classes of depreci-able assets

 
should be included in corporate financial statements or notes thereto.
 
is not a current practice in financial reporting.
 
is not essential to a fair presentation of financial position.
 
is needed in financial reporting when company policy differs from income tax policy.

Sauder Corporation reports the following information:
Net income         $    300,000
Depreciation expense              70,000
Increase in accounts receivable              30,000
Sauder should report cash provided by operating activities of

 
$260,000
 
$340,000
 
$400,000
 
$200,000

Keisler Corporation reports:
Cash provided by operating activities         $    240,000
Cash used by investing activities              110,000
Cash provided by financing activities              140,000
Beginning cash balance              70,000
What is Keisler's ending cash balance?

 
$560,000
 
$490,000
 
$270,000
 
$340,000

If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows?

 
It would be a negative $8,000 in the financing section and a positive $8,000 in the investing section.
 
It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.
 
It would depend on whether you are using the direct or the indirect method.
 
It would be a positive $8,000 in the financing section and a negative $8,000 in the investing section.

Significant accounting policies may not be

 
omitted from financial-statement disclosure.
 
unusual or innovative in application.
 
selected on the basis of judgment.
 
selected from existing acceptable alternatives.

The following trial balance of Reese Corp. at December 31, 2012 has been properly adjusted except for the income tax expense adjustment.
Reese Corp.
Trial Balance
December 31, 2012
          Dr.         Cr.
Cash         $    975,000               
Accounts receivable (net)              2,695,000               
Inventory              2,085,000               
Property, plant, and equipment (net)              7,366,000               
Accounts payable and accrued liabilities                        $    1,801,000
Income taxes payable                             654,000
Deferred income tax liability                             85,000
Common stock                             2,350,000
Additional paid-in capital                             3,680,000
Retained earnings, 1/1/10                             3,450,000
Net sales and other revenues                             13,460,000
Costs and expenses              11,180,000               
Income tax expenses              1,179,000               
          $    25,480,000         $    25,480,000
Other financial data for the year ended December 31, 2012:
1.    Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000. The last payment is due December 29, 2014.
2.    The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability.
3.    During the year, estimated tax payments of $525,000 were charged to income tax expense. The current and future tax rate on all types of income is 30%.
In Reese's December 31, 2012 balance sheet, the current assets total is

 
$5,605,000
 
$6,280,000
 
$5,155,000
 
$5,755,000

Kohler Company owns the following investments:
Trading securities (fair value)         $    120,000
Available-for-sale securities (fair value)              70,000
Held-to-maturity securities (amortized cost)              94,000
Kohler will report securities in its long-term investments section of

 
$164,000 or an amount less than $164,000, depending on the circumstances.
 
exactly $190,000.
 
exactly $214,000.
 
exactly $284,000.

The correct order to present current assets is

 
cash, accounts receivable, prepaid items, inventories.
 
cash, inventories, accounts receivable, prepaid items.
 
cash, inventories, prepaid items, accounts receivable.
 
cash, accounts receivable, inventories, prepaid items.

Barkley Company will receive $300,000 in a future year. If the future receipt is discounted at an interest rate of 8%, its present value is $189,051. In how many years is the $300,000 received?

 
6 years
 
7 years
 
8 years
 
5 years

Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Interest compounded annually is 10%.
     Periods    Present Value of $1
Discounted at 10% per Period
     1    1.080
     1    0.909
     2    0.826
     3    0.751
     4    0.683
     5    0.621
What is the present value today of $6,000 to be received six years from today?

 
$6,000 × 0.751 × 2
 
$6,000 × 0.621 × 0.909
 
$6,000 × 0.683 × 3
 
$6,000 × 0.909 × 6

Present value is

 
all of these.
 
the value now of a future amount.
 
always smaller than the future value.
 
the amount that must be invested now to produce a known future value.

Given below are the future value factors for 1 at 8% for one to five periods. Interest compounded annually is 8%.
     Periods    Future Value of 1 at 8%
     1    1.080
     2    1.166
     3    1.260
     4    1.360
     5    1.469

If $3,000 is put in a savings account today, what amount will be available three years from today?

 
$3,000 × 1.260
 
($3,000 × 1.080) + ($3,000 × 1.166) + ($3,000 × 1.260)
 
$3,000 × 1.080 × 3
 
$3,000 ÷ 1.260

John won a lottery that will pay him $150,000 at the end of each of the next twenty years. Assuming an appropriate interest rate is 8% compounded annually, what is the present value of this amount?

 
$6,864,294.
 
$32,183.
 
$1,590,540.
 
$1,472,723.

On December 30, 2012, AGH, Inc. purchased a machine from Grant Corp. in exchange for a zero-interest-bearing note requiring eight payments of $70,000. The first payment was made on December 30, 2012, and the others are due annually on December 30. At date of issuance, the prevailing rate of interest for this type of note was 11%. Present value factors are as follows:
    Period    Present Value of Ordinary
Annuity of 1 at 11%    Present Value of
Annuity Due of 1 at 11%
    7    4.712    5.231
    8    5.146    5.712
On AGH's December 31, 2012 balance sheet, the net note payable to Grant is

 
$360,220.
 
$366,485.
 
$329,840.
 
$399,840.

On January 2, 2010, Wine Corporation wishes to issue $3,000,000 (par value) of its 8%, 10-year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 10%. Using the interest factors below, compute the amount that Wine will realize from the sale (issuance) of the bonds.
Present value of 1 at 8% for 10 periods    0.4632
Present value of 1 at 10% for 10 periods    0.3855
Present value of an ordinary annuity at 8% for 10 periods    6.7101
Present value of an ordinary annuity at 10% for 10 periods    6.1446

 
$2,631,204
 
$3,000,018
 
$3,318,078
 
$3,000,000

On January 2, 2010, Wine Corporation wishes to issue $3,000,000 (par value) of its 8%, 10-year bonds. The bonds pay interest annually on January 1. The current yield rate on such bonds is 10%. Using the interest factors below, compute the amount that Wine will realize from the sale (issuance) of the bonds.
Present value of 1 at 8% for 10 periods    0.4632
Present value of 1 at 10% for 10 periods    0.3855
Present value of an ordinary annuity at 8% for 10 periods    6.7101
Present value of an ordinary annuity at 10% for 10 periods    6.1446

 
$2,631,204
 
$3,000,018
 
$3,318,078
 
$3,000,000

For which of the following transactions would the use of the present value of an annuity due concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?

 
A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement.
 
A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%.
 
A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement.
 
A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%.

Use the following 8% interest factors.
     Present Value of
Ordinary Annuity    Future Value of
Ordinary Annuity
7 periods    5.2064    8.92280     
8 periods    5.7466    10.63663     
9 periods    6.2469    12.48756     
Korman Company wishes to accumulate $400,000 by May 1, 2020 by making 8 equal annual deposits beginning May 1, 2012 to a fund paying 8% interest compounded annually. What is the required amount of each deposit?

 
$69,606
 
$40,312
 
$37,606
 
$34,820

What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet?

 
As assets but separately from other receivables.
 
As trade notes and accounts receivable if they otherwise qualify as current assets.
 
As offsets to capital.
 
By means of footnotes only.

Of the approaches to record cash discounts related to accounts receivable, which is more theoretically correct?

 
Allowance approach.
 
All three approaches are theoretically correct.
 
Net approach.
 
Gross approach.
   

Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account

 
increases the allowance for uncollectible accounts.
 
has no effect on the allowance for uncollectible accounts.
 
decreases net income.
 
has no effect on net income.

On June 1, 2012, Yang Corp. loaned Gant $400,000 on a 12% note, payable in five annual installments of $80,000 beginning January 2, 2013. In connection with this loan, Gant was required to deposit $4,000 in a zero-interest-bearing escrow account. The amount held in escrow is to be returned to Gant after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2012. Gant made timely payments through November 1, 2012. On January 2, 2013, Yang received payment of the first principal installment plus all interest due. At December 31, 2012, Yang's interest receivable on the loan to Gant should be

 
$12,000.
 
$0.
 
$4,000.
 
$8,000.

Which of the following should be recorded in Accounts Receivable?

 
None of these
 
Receivables from officers
 
Receivables from subsidiaries
 
Dividends receivable

Genesis Company has seven loans receivable. The loans vary in size and have been extended to companies with different credit ratings. Given a downturn in the economy, it is expected that at least two of these loans will be impaired. Which of the following statements best describes the accounting for these loans under iGAAP?

 
iGAAP implies that the loans should be reported as an aggregated portfolio.
 
Under iGAAP, when impairment is permitted, the balance on each of the impaired loans becomes the new basis for the loan.
 
iGAAP uses an expected loss model, so the entire diverse portfolio should be written down based on the anticipated impairment.
 
iGAAP uses an incurred loss model rather than an expected loss model, so no impairment on each of the two loans is recognized until an identifiable event occurs and is measurable.

                                       


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