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ACC 304 ACC/304 ACC304 MidTerm Exam

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ACC 304 ACC/304 ACC304 MidTerm Exam The acquisition cost of a certain raw material changes frequently. The book value of the inventory of this material at year end will be the same if perpetual records are kept as it would be under a periodic inventory method only if the book value is computed under the 2. In a period of rising prices which inventory method generally provides the greatest amount of net income? 3. How might a company obtain a price index in order to apply dollar-value LIFO? 4. Risers Inc. reported total assets of $3,200,000 and net income of $170,000 for the current year. Risers determined that inventory was understated by $46,000 at the beginning of the year and $20,000 at the end of the year. What is the corrected amount for total assets and net income for the year? 5. Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 2,400 units that cost $12 each. During the month, the company made two purchases: 1,000 units at $13 each and 4,000 units at $13.50 each. Checkers also sold 4,300 units during the month. Using the LIFO method, what is the ending inventory? 6. Goods on consignment are 7. A major advantage of the retail inventory method is that it 8. Lower-of-cost-or-market as it applies to inventory is best described as the 9. An inventory method which is designed to approximate inventory valuation at the lower of cost or market is 10. Below is the information relative to an exchange of assets by Stanton Company. The exchange lacks commercial substance. Old Equipment Book Value Fair Value Cash Paid Case I $225,000 $225,000 $45,000 Case II $150,000 $135,000 $21,000 Which of the following would be correct for Stanton to record in Case II? Record Equipment at: Record a gain of (loss) of: 15. An improvement made to a machine increased its fair value and its production capacity by 25% without extending the machine’s useful life. The cost of the improvement should be 16. The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were 17. In accounting for plant assets, which of the following outlays made subsequent to acquisition should be fully expensed in the period the expenditure is made? 21. For 2012, Hoyle Company reports beginning of the year total assets of $900,000, end of the year total assets of $1,100,000, net sales of $750,000, and net income of $150,000. Hoyle’s 2012 asset turnover ratio is 22. The major difference between the service life of an asset and its physical life is that 23. Rivera Company purchased a tooling machine on January 3, 2006 for $700,000. The machine was being depreciated on the straight-line method over an estimated useful life of 10 years, with no salvage value. At the beginning of 2013, the company paid $175,000 to overhaul the machine. As a result of this improvement, the company estimated that the useful life of the machine would be extended an additional 5 years (15 years total). What should be the depreciation expense recorded for the machine in 2013? 24. For the composite method, the composite 25. During 2012, Noller Co. sold equipment that had cost $294,000 for $176,400. This resulted in a gain of $12,900. The balance in Accumulated Depreciation—Equipment was $975,000 on January 1, 2012, and $930,000 on December 31. No other equipment was disposed of during 2012. Depreciation expense for 2012 was

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