acca 305 extra credit assignment 2

8/10/2019 ACCA 305 Extra Credit Assignment 2

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INTERMEDIATE FINANCIAL ACCOUNTING II

2014

Extra Credit

Assignment

Tuesday, 15 April

Aleshia Cooper

Mr. Terrance Richards


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Multiply Choice Section

1. Answer:b. The par value of all capital stock issued.

Explanation:The taxable income of a corporation differs from accounting income due to

differences in interfered allocation and permanent differences between the two methods of

income determination.

2. Answer:c. Bear the ultimate risks and uncertainties and receive the benefits of enterprise

ownership.

Explanation: Taxable income has permanent differences and temporary differences.

3. Answer: c. A claim against a portion of the total assets of an enterprise.

Explanation:Stockholders' equity represents the equity stake currently held on the books by a

firm's equity investors .It is calculated either as a firm's total assets minus its total liabilities, or as

share capital plus retained earnings minus treasury shares.

4. Answer: c.May decrease but not increase retained earnings.

Explanation:Depreciation may result in Future taxable amounts: Yes future deductible

amounts: Yes

5. Answer:c.

Explanation:The deferred tax expense is the increase in balance of deferred tax liability

minus the increase in balance of deferred tax asset.


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6. Answer:c.means that the shareholder can accumulate preferred stock until it is equal to the par

value of common stock at which time it can be converted into common stock.

Explanation: Tax rates other than the current tax rate may be used to calculate the deferred

income tax amount on the balance sheet if the future tax rates have been enacted into law

7. Answer:c. Decrease No effect

Explanation:Recognition of tax benefits in the loss year due to a loss carry forward

requires the establishment of a deferred tax asset.

8. Answer:b.Liquidation preferences

Explanation:Recognizing a valuation allowance for a deferred tax asset requires that a

company consider only the positive information in determining the need for a valuation

allowance.

9. Answer:c.Treasury Stock for $60,000 and Paid-in Capital from Treasury Stock for $16,000.

Explanation:4,000 * $15 = $60,000 4,000 * $4 = $16,000.

10. Answer:c.$905,000

Explanation:900,000 + 2,000 * 5500 * 10 = $ 905,000

11.Answer: d.$3,330,000.


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17. Answer:d.based on the relative market values of the two securities involved.

Explanation:The following is not a characteristic of a defined-contribution pension plan

benefits to be received by employees are usually determined by an employees three highest

years of salary defined by the terms of the plan.

18. Answer:c. No Yes

Explanation:In accounting for a defined-benefit pension plan an appropriate funding

pattern must be established to ensure that enough monies will be available at retirement to meet

the benefits promised.

19.Answer:b.the holder has to pay a certain amount of cash to obtain the shares.

Explanation:The relationship between the amount funded and the amount reported for

pension expense is as follows pension expense may be greater than, equal to, or less than the

amount funded.

20. Answer: a.credit of $136,000 to Paid-in Capital in Excess of Par

Explanation:$800,000 + 175,000 * .32800 * 30 * 30 = $136,000.


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21. Answer: b.$3,600 increase in paid-in capital in excess of par.

Explanation:60,000(1,200 45)2,400 = $3,600

22. Answer: a. $330,000

Explanation:(2,400,000 1,000) * 40 * 20 = $1,920,000

(2,400,000 16,000,000) * 1,000,000 = $150,000

2,400,0001,920,000150,000 = $330,000.

23. Answer: c. $70,500.

Explanation:(3,000,0002,883,000) 117 = $1,000

(3,000,000 .09 3/12) + (1,000 3) = $70,500.

24.Answer:b.$21,600.

Explanation:$117,000 117 = $1,000

$117,000(1,000 * 3) + (1,000 * 6) * $600,000/$3,000,000= $21,600


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25.Answer: b. Cash 240,000

Paid-in CapitalStock Warrants 40,000

Common Stock 160,000

Paid-in Capital in Excess of Par 120,000

Explanation: Cash: 16,000 * 15 = $240,000

Paid-in CapitalStock Warrants: $100,000 * 16/40 = $40,000

Common Stock: 16,000* 10 = $160,000

Paid-in Capital in Excess of Par: 240,000+40,000-160,000= $120,000.

26. Answerb.$20,500

Explanation:20,000 (20,000 + 180,000) * $205,000 = $20,500.

27.Answer:c.discount of $5,600.

Explanation:500,000 * .96 + 500 * 20 * $2 = $500,000

500,000494,400 = $5,600

28. Answer:b. warrants.


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Explanation:Securities which could be classified as held-to-maturity are warrants

29. Answer:c.trading.

Explanation: Unrealized holding gains or losses which are recognized in income are from

securities classified as trading.

30. Answer: a. make an adjusting entry to debit Interest Receivable and to credit Interest Revenue

for the amount of interest accrued since the last interest receipt date.

Explanation: The investor must make an adjusting entry to debit Interest Receivable and to

credit Interest Revenue for the amount of interest accrued since the last interest receipt date.

31. Answer: a. held-to-maturity debt securities.

Explanation:Debt securities that are accounted for at amortized cost, not fair value, are held-to-

maturity debt securities.

32. Answer:c. available-for-sale debt securities.

Explanation:Debt securities acquired by a corporation which are accounted for by recognizing

unrealized holding gains or losses and are included as other comprehensive income and as a

separate component of stockholders' equity are


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33. Answer:b.a varying amount being recorded as interest income from period to period.

Explanation:Use of the effective-interest method in amortizing bond premiums and discounts

results in a varying amount being recorded as interest income from period to period.

34. Answer:a.available-for-sale securities where a company has holdings of less than 20%.

Explanation: Equity securities acquired by corporations which are accounted for by recognizing

unrealized holding gains or losses as other comprehensive income and as a separate component

of stockholders' equity are available-for-sale securities where a company has holdings of less

than 20%.

35. Answer:d.All of these are required

Explanation:A requirement for a security to be classified as held-to-maturity is ability to hold the

security to maturity, positive intent and the security must be a debt security

36. Answer:b.acquisition cost plus amortization of a discount.

Explanation:Held-to-maturity securities are reported at acquisition cost plus amortization of a

discount.

37. Answer:c. a debit to Held-to-Maturity Securities at $315,000.


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Explanation:($376,100 * .055)($400,000 * .05) = $686

43. Answer:b.$41,409.

Explanation:$376,100 * .055 = $20,686 ($376,100 + $686) * .055 - $20,723;

$20,686 + $20,723 = $41,409.

44.

Answer:b. $20,000 loss

Explanation:$400,000$380,000 = $20,000 loss.

45. Answer:c. $20,000 gain

Explanation:320,000$300,000 = $20,000 gain.

46.Answer:b. Securities Fair Value Adjustment 5,000

(Available-for-Sale)

Unrealized Holding Gain or Loss-Equity 5,000

Explanation:($40,000$33,000)$2,000 = $5,000

47. Answer:b.$260,000


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Explanation:+ [($420,000$180,000) .25] = $320,000 X + $60,000 =

$320,000 X = $260,000.

48. Answer:c. $50,000

Explanation:200,000 * (25,000 100,000) = $50,000

49.

Answer:c. $564,000

Explanation:$500,000 + [($800,000$640,000) * (20,000 50,000)] = $564,000.

50. Answer:a.$320,000.

Explanation:$800,000 (20,000 50,000) = $320,000.

51. Answer:c. $195,000

Explanation:acquisition cost

52.Answer:b.$225,000


53.Answer:b.$135,000


54.Answer:b.$216,000

55.Explanation:$202,500 + ($75,000 * .3)($30,000 *.3) = $216,000


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Problems Section

Problem 2.

In order for a lessor to classify a lease as a direct financing or a sales-type lease, the lease

must meet one or more of the following criteria and both of the second grouping of criteria:

Group I

(1) The lease transfers ownership of the property to the lessee.

(2) The lease contains a bargain purchase option.

(3) The lease term is equal to 75% or more of the estimated economic life of the leased

property.

(4) The present value of the minimum lease payments (excluding executory costs) equals or

exceeds 90% of the fair value of the leased property.

Group II

(1) Collectability of the payments required from the lessee is reasonably predictable.

And

(2) No important uncertainties surround the amount of costs yet to be incurred by the

lessor under the lease.


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Problem 3.

It is a sales-type lease to the lessor, Hayes Corp. It is not an operating lease

because title to the assets passes to the lessee, the present value of the minimum lease payments

exceeds 90% of the fair value of the leased trailers, collectability is reasonably assured, and no

important uncertainties surround the amount of unreimbursable costs yet to be incurred by the

lessor.

Part B.

($50,000 10) 4.62288 = $108,158.

Part C.

Date Annual Lease

Rental

Interest On

Lease Receivable

Lease Receivable

Recovery

Lease Recovery

Jan 1 2011 500,000

Jan 31 2011 108,158 40,000 68,158 431,842

Dec 31 2012 108,158 34,547 73,611 358,231Dec 31 2013 108,158 28,658 79,500 278,731

Part D

January 1, 2011

Lease Receivable 500,000

Cost of Goods Sold 450,000

Sales Revenue 500,000

Inventor 450,000


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December 31, 2011

Cash 108,158


Interest Revenue 40,000

December 31, 2012

Cash 108,158


Interest Revenue 34,547

acca 305 extra credit assignment 2

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