2024 – for complete question check the attachment Intermediate Accounting I Final Exam Booklet Replacement Part A 20 Point

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Intermediate Accounting I

Final Exam Booklet

Replacement

Part A

 20 Point Questions ( 3 questions x 20 points = 60 total points)

 Show all work.

1. The following information is provided in the 2011 annual report to shareholders of The

BizStore:

Required: Compute U-Z in the table above.

2. Shown below is the activity for one of the products of Random Creations:

January 1 balance, 80 units @ $50 $4,000

 2a. Compute the ending inventory and cost of goods sold assuming Random Creations

uses FIFO.

2b. Compute the ending inventory and cost of goods sold assuming Random Creations

uses LIFO and perpetual inventory system.

2c. Compute the ending inventory and cost of goods sold assuming Random Creations

uses LIFO and a periodic inventory system.

2d. Compute the ending inventory and cost of goods sold assuming Random Creations

uses average cost and a periodic inventory system.

2e. Compute the ending inventory and cost of goods sold assuming Random Creations

uses average cost and a perpetual inventory system.

3. On January 3, 2011, Michelson & Sons acquired a tract of land just outside the city

limits. The land and existing building were purchased for $2.4 million. Michelson paid

$400,000 and signed a noninterest-bearing note requiring the company to pay the

remaining $2,000,000 on December 31, 2012. An interest rate of 7% properly reflects the

time value of money for this type of loan agreement. Transfer taxes, title insurance and

other costs totaling $24,000 were paid at closing.

During February, the old building was demolished at a cost of $120,000, and an

additional $100,000 was paid to clear and grade the land. Construction of a new building

began on March 1 and was completed on October 30. Construction expenditures were as

follows:

Michelson did not borrow specifically for the construction project, but did have the

following debt outstanding throughout 2011:

$6,000,000, 8% long-term note payable

$2,000,000, 5% long-term note payable

In December, the company purchased equipment and office furniture and fixtures for a

lump-sum price of $800,000. The fair values of the equipment and the furniture and

fixtures were $540,000 and $360,000, respectively. In December, Michelson paid

$340,000 for the construction of parking lots and landscaping.

Required:

3a. Determine the initial values of the various assets that Michelson acquired or

constructed during 2011.

3b. How much interest expense will Michelson report in its 2011 income statement?

 

 Part B:

 4 Point Questions (10 questions x 4 points = 40 total points)

 Show all work.

1. Tri Fecta, a partnership, had revenues of $360,000 in its first year of operations. The

partnership has not collected on $35,000 of its sales, and still owes $40,000 on $150,000

of merchandise they purchased. There was no inventory on hand at the end of the year.

The partnership paid $25,000 in salaries. The partners invested $40,000 in the business

and $25,000 was borrowed on a five-year note. The partnership paid $3,000 in interest

that was the amount owed for the year and paid $8,000 for a two-year insurance policy on

the first day of business.

Required:

1a. Compute net income for the first year for Tri Fecta.

1b. Compute the cash balance at the end of the first year for Tri Fecta. 2. Presented below is a partial trial balance for the Messenger Corporation at December

31, 2011.

Additional information:

 

1. The note receivable, along with any accrued interest, is due on November 1, 2012.

 

2. The note payable is due in 2016. Interest is payable annually.

 

3. The marketable securities consist of equity securities of other corporations.

Management does not intend to sell any of the securities in the next year.

 

4. Unearned revenue will be earned equally over the next eighteen months.

Required: Determine the company’s working capital (current assets minus current

liabilities) at December 31, 2011. 3. Paris Company reported the following items in its December 31, 2011, year-end

adjusted trial balance:

Required: Prepare the December 31, 2011, income statement for Paris Company starting

with income from continuing operations before income taxes.

 

4. Beck Construction Company began work on a new building project on January 1, 2010.

The project is to be completed by December 31, 2012, for a fixed price of $108 million.

The following are the actual costs incurred and estimates of remaining costs to complete

the project that were made by Beck’s accounting staff:

Required:What amount of gross profit (or loss) would Beck record on this project in

each year under the percentage-of-completion method? Place answers in the spaces

provided below and show supporting computations.5. White & Decker Corporation’s 2011 financial statements included the following

information in the long-term debt disclosure note:

The disclosure note stated that the debenture bonds were issued late in 2006 and have a

maturity value of $500 million. The maturity value indicates the amount that White &

Decker will pay bondholders in 2026. Each individual bond has a maturity value (face

amount) of $1,000. Zero-coupon bonds pay no cash interest during the term to maturity.

The company is “accreting” (gradually increasing) the issue price to maturity value using

the bonds’ effective interest rate computed on an annual basis.

Required:

 

5a. . Determine the effective interest rate on the bonds.

 

5b. . Determine the issue price in late 2006 of a single, $1,000 maturity-value bond.

 

6. During Bricker Company’s first year of operations, credit sales totaled $200,000 and

collections on credit sales totaled $145,000. Bricker estimates that $1,000 of its ending

accounts receivable balance will not be collected. By year-end, Bricker had written off

$330 of specific accounts as uncollectible.

Required:

 

6a. Prepare all appropriate journal entries relative to uncollectible accounts and bad debt

expense.

 

6b. Show the year-end balance sheet presentation for accounts receivable.

 

7. Chavez Inc adopted dollar-value LIFO on January 1, 2011, when the inventory value

was $850,000. The December 31, 2011, ending inventory at year-end cost was $950,000

and the cost index for the year is 1.08.

Required:

Compute the dollar-value LIFO inventory valuation (rounded) for the December 31, 2011,

inventory.

 

8. Penfold’s Paints uses the average cost retail method to estimate its ending inventories.

The following data has been summarized for the year 2011:

 

Required: Compute the cost-to-retail percentage used by Penfold’s Paints.

9. Calegari Mining paid $2 million to obtain the rights to operate a coal mine in

Tennessee. Costs of exploring for the coal deposit totaled $1,500,000 and development

costs of $5 million were incurred in preparing the mine for extraction, which began on

January 2, 2011. After the coal is extracted in approximately five years, Calegari is

obligated to restore the land to its original condition. The company’s controller has

provided the following three cash flow possibilities for the restoration costs:

The company’s credit-adjusted, risk-free rate of interest is 7%, and its fiscal year ends on

December 31.

Required:

 

9a.. What is the initial cost of the coal mine? (Round computations to nearest whole

dollar.)

 

9b. . How much accretion expense will Calegari report in its 2011 and 2012 income

statements?

 

9c. . What is the carrying value (book value) of the asset retirement obligation that

Calegari will report in its 2011 and 2012 balance sheets?

 

9d. . Assume that actual restoration costs incurred in 2016 totaled $1,370,000. What

amount of gain or loss will Calegari recognize on retirement of the liability? 10. On June 30, 2009, Mobley Corporation acquired a patent for $4 million. The patent

was estimated to have an eight-year life and no residual value. Mobley uses the straightline

method of amortization for intangible assets. At the beginning of January 2011,

Mobley successfully defended its patent against infringement. Litigation costs totaled

$650,000.

Required:

 

10a.. Calculate patent amortization for 2009 and 2010.

 

10b. Prepare the journal entry to record the 2011 litigation costs.

 

10c. Calculate amortization for 2011.

 

10d. Repeat requirements 2 and 3 assuming that Mobley prepares its financial statements

according to International Financial Reporting Standards.