Financial Statements Paper 5

1

During Year 1, Tidal Co. began construction on a project scheduled for completion in Year 3. At December 31, Year 1, an overall loss was anticipated at contract completion. What would be the effect of the project on Year 1 operating income under the percentage-of-completion method and the completed-contract method?
Percentage-of-Completion.... Completed-Contract






2

The measurement basis most often used to report a long-term payable representing a commitment to pay money at a determinable future date is






3

Johnson Company uses the allowance method to account for uncollectible accounts receivable. After recording the estimate of uncollectible accounts expense for the current year, Johnson decided to write off in the current year the $10,000 account of a customer who had filed for bankruptcy. What effect does this write-off have on the company’s current net income and total current assets, respectively? ..Net Income...Total Current Assets






4

A shoe retailer allows customers to return shoes within 90 days of purchase. The company estimates that 5% of sales will be returned within the 90-day period. During the month, the company has sales of $200,000 and returns of sales made in prior months of $5,000. What amount should the company record as net sales revenue for new sales made during the month?






5

Unrealized gains and losses on trading securities should be presented in the






6

A corporation entered into a purchase commitment to buy inventory. At the end of the accounting period, the current market value of the inventory was less than the fixed purchase price by a material amount. Which of the following accounting treatments is most appropriate?






7

Which one of the following statements is correct about the reconciliation of U.S. GAAP and International Financial Reporting Standards (IFRS)?






8

Income-tax-basis financial statements differ from those prepared under GAAP because they






9


Selected financial information for Windham, Inc., for the year just ended is shown below.
Pretax income $5,000,000
Interest received on municipal bonds 600,000
Gain on the sale of land reported this year but not taxable until next year 1,000,000
Tax rate for all years 40%
Beginning balances:
Income taxes payable -0-
Deferred tax liability $50,000
"The total income tax expense reported on Windham’s income statement for the year just ended should be"






10

Cali, Inc. had a $4,000,000 note payable due on March 15, year 3. On January 28, year 3, before the issuance of its year 2 financial statements, Cali issued long-term bonds in the amount of $4,500,000. Proceeds from the bonds were used to repay the note when it came due. How should Cali classify the note in its December 31, year 2 financial statements?






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