ACCT 557 Final Exam (NEW)

ACCT 557 Final Exam (NEW)

Author: Christine Farr


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
For which of the segments would information have to be disclosed in accordance with professional pronouncements?

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