ACCT 557 Week 8 Final Exam(NEW)

1. TCO A) Benny Building, Inc. won a bid for a new warehouse building contract.

Below is information from the project accountant.
Total Construction Fixed Price $25,000,000
Construction Start Date June 13, 2012
Construction Complete Date December 16, 2013

As of Dec. 31… 2012 2013
Actual cost incurred $11,500,000 $8,360,000
Estimated remaining costs $8,250,000 $-
Billed to customer $9,000,000 $16,000,000
Received from customer $7,500,000 $16,500,000
Assuming Benny Building, Inc. uses the completed contract method, what amount of gross profit would be recognized in 2013?

2. (TCO B) At the beginning of 2012, Barbara, Inc. has a deferred tax asset of $8,000 and deferred tax liability of $6,500. In 2012, pretax financial income was $600,000 and the tax rate was 35%.

Pretax income included:
Interest income from municipal bonds $25,000
Accrued warranty costs, estimated to be used in 2013 $74,000
Prepaid rent expense, will be used in 2013 $16,000
Installment sales revenue, to be collected in 2013 $45,000
Operating loss carryforward $36,000
What is the adjustment needed to correct the balance of deferred tax asset for 2012?

3. (TCO C) Presented below is pension information related to Baked Goods, Inc. for the year 2013.

Service cost $103,000
Interest on projected benefit obligation $65,000
Interest on vested benefits $12,000
Amortization of prior service cost due to increase in benefits $14,000
Expected return on plan assets $18,000
The amount of pension expense to be reported for 2013 is

4. (TCO C) Bunny Hopping, Inc. sponsors a defined-benefit pension plan. The following data relate to the operation of the plan for the year 2013.

Service cost $135,000
Contributions to the plan $105,000
Actual return on plan assets $120,000
Projected benefit obligation (beginning of year) $1,800,000
Fair value of plan assets (beginning of year) $1,900,000
The expected return on plan assets and the settlement rate were both 9%. The amount of pension expense reported for 2013 is

5. (TCO D) Bucky, Inc. leased equipment from Green Enterprises under a 5-year lease requiring equal annual payments of $43,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 5-year useful life and no salvage value. Bucky, Inc.’s incremental borrowing rate is 6% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the amount of interest expense recorded by Bucky, Inc. in the first year of the asset’s life?

PV Annuity Due PV Ordinary Annuity
8%, 5 periods 4.31213 3.99271
6%, 5 periods 4.46511 4.21236

6. (TCO E) On December 31, 2013, Antique Salvage, Inc. appropriately changed its inventory valuation method from weighted-average cost to FIFO method for financial statement and income tax purposes. The change will result in a $1,700,000 increase in the beginning inventory at January 1, 2013. Assume a 30% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is

7. (TCO E) Which of the following is not a change in accounting estimate?

8. (TCO F) Balancing Act, Inc. recognized net income of $367,000 including $15,600 in depreciation expense.

Additional changes from the balance sheet are as follows.
Accounts Receivable $3,400 decrease
Prepaid Expenses $18,500 decrease
Inventory $3,600 increase
Accrued Liabilities $12,000 decrease
Accounts Payable $13,500 increase
Compute the net cash from operating activities based on the above information.

9. (TCO G) The disclosure of accounting policies is important to the financial statements when determining

10. (TCO G) Adventure, Inc. is a company that operates in four different divisions. The following information relating to each segment is available for 2013.

Sales revenue Operating profit (loss) Identifiable assets
A $11,200 $- $72,800
B $630,000 $168,700 $511,000
C $75,600 $(8,400) $65,800
D $44,800 $6,510 $47,600
Required:
For which of the segments would information have to be disclosed in accordance with professional pronouncements?

1. (TCO A) Bentley Corporation has several divisions. All operations keep their own accounting books and have chosen the appropriate method of revenue recognition.

Information on Divisions:

Bargain Electronics Division

Bargain Electronics Division sells computers through agents in various cities. Revenue is recognized at the point of sales. Agents send orders and down payments to our company. The division then ships the goods F.O.B. shipping point directly to the customers.

Additional Financial Data:
Orders for fiscal year 2012 $600,000
Down Payments collected in 2012 $60,000
Billed and shipped in 2012 $550,000
Freight billed in 2012 $20,000
Commissions paid to Agents (after ship to customer) 8%
Warranty Returns as % of Sales 2%

Barry's Construction Division

The Barry Construction Division was working on one project and used the percentage of completion revenue recognition method for 2012 fiscal year.

Contract for new retail mall building
Total Contract Amount $120,000,000
Contract Grant Date August 14, 2012
Construction Began September 1, 2012

Estimated Cost to Complete at beginning of contract $95,000,000
Estimated Time to Complete Project 2 years

As of December 31, 2012
Construction costs incurred to date $26,000,000
Billings to date $25,000,000
Expected costs to complete $78,000,000

Bead's Magazine Distribution Division