Diagnostic Exam 1.23 AK

 

AIR DIAGNOSTIC EXAM Cluster 1- Level 2 & 3 03.30.15

Wrte t!e letter "# $"ur %!"%e e#"re e'%! (u)er. N" er'sures 'll"*e+. 1. Infa Infation tion is ignored ignored in in account accounting ing due due to a. objectivity c. materiality d. economic entity b. periodicity assumption 2. Wh Which ich o the ollow ollowing ing is include included d in the normal normal journal journal entry entry to reco record rd the collec col lectio tion n o ac accou counts nts recei receivab vable le previ previous ously ly writte written n o when when using using the allowance method? a. ebit !llowance or oubtul !ccounts" credit !ccounts #eceivable b. ebit !llowance or oubtul !ccounts" credit $ad ebt %&pense c. ebit $ad ebt %&pense" credit !llowance or oubtul !ccounts d. ebit !ccounts #eceivable" credit !llowance or oubtul !ccounts '. (ener (enerally" ally" biolog biological ical assets assets should should be measured measured using using a. historical cost b. historical cost less accumulated depreciation c. a air value approach d. net reali)able reali)able value *. +nde +nderr the air value value option" option" an an entity entity may may a. irrevocably designate a ,nancial asset as measured at air value through pro,t or loss even i the amorti)ed cost measurement is satis,ed b. irrevocably designate a ,nancial asset as measured at air value through other comprehensive income c. revocably designate a ,nancial asset as measured at air value through pro,t or loss even i the amorti)ed cost measurement is satis,ed d. designate all instruments as measured at air value through pro,t or loss

     !      6      5  "      4      $      4      3

-. Which o the ollowing ollowing disclosures disclosures must be made when the air value model is used or investment property? a. depreciation method b. the amount o impairment loss recogni)ed c. useul lie or depreciation rate d. net gains or losses rom air value adjustments . ! government government grant grant that becomes repayable repayable shall shall be accounted or as a. change in accounting estimate b. change in accounting policy c. both change in accounting estimate and change in accounting policy d. neither change in accounting estimate nor change in accounting policy /. Wh Which ich o the ollow ollowing ing resear research ch and develop developmen mentt relat related ed co costs sts should should be capitali)ed and depreciated over current and uture periods? a. #esearch and development general laboratory building which can be put to alternative uses in the uture b. Inventory used or a speci,c research project c. !dministrative salaries allocated to research research and development d. #esear esearch ch ,nding ,ndings s purcha purchased sed r rom om anothe anotherr compan company y to aid a partic particula ularr research project currently in process 0. I bonds are issued issued initially initially at a premium and the eectiveinteres eectiveinterestt method o  o  amorti)ation is used" interest e&pense in the earlier years will be a. greater than i the straightline method were used b. greater than the amount o the interest interest payments c. the same as i the straightline method were used d. less than i the straightline method were used . Which o the ollowing ollowing best describes the cashbasis cashbasis method o accounting accounting or warranty costs? a. %&pensed based on estimate in year o sale 1

 

AIR DIAGNOSTIC EXAM Cluster 1- Level 2 & 3 03.30.15 b. %&pensed when liability is accrued c. %&pensed when warranty claims are certain d. %&pensed when incurred 17.!n 17. !n en enti tity ty ha has s pu publ blic ic ac acco coun unta tabi bili lity ty un unde derr al alll o th the e o oll llow owin ing" g" e& e&ce cept pt88

9#%3I%W :4%; a. its debt and ehe goods 2711 goods were were receiv received ed by the the customer customer on anua anuary ry '" 2712. 2712. >he goods had a cost o 62*7"777.

What amount should @ope report as inventory on ecember '1" 2711? a./"'77"777 b. 0"-7"777 c. "*7"777 "/77"777

d.

1'.amie 5ompany started construction on a building at the beginning o the current curr ent year and completed construction construction at year end. >he entity had only two interes inte restt notes outstandi outstanding ng during the year and both o these these notes were outstandin during the year and both o these notes were outstanding or all 12 months o the year. >he ollowing inormation is available8 !verage accumulated e&penditures 62"-77"777 %nding balance in construction in progress beore capitali)ation o Interest '"77"777 E note incurred speci,cally or the project 1"-77"777 2

 

AIR DIAGNOSTIC EXAM Cluster 1- Level 2 & 3 03.30.15 E long term note What is the cost o the building? a. '"/07"777 b. 2"07"777

-"777"777

c. '"/-7"777

d. '"02-"777

1*.>he ollowing e&penditures related to the construction o a new home oGce or Cacetious 5ompany8 5ost o land" which included an old apartment building appraised at 6277"777 Hegal ees" including ee or title search 6ayment 6a yment o apartment apartment building building mortgage mortgage and related interest due at time o sale 6ayme ayment nt o del elin inhe entity entity believed that the property can be sold aterwards or 6-"777"777. %arly in 2712" %arly 2712" roads roads were were constr construct ucted ed and other other develo developme pment nt costs costs were were incurred to aid in the e&traction and transportation o the mined ore at a cost o  6"777"777. In 2712" 277"777 tons o ore were mined and sold. Fn ecember '1" 271' a new survey made by new mining engineer indicated that -"777"777 tons o ore were available or mining. In 271'" 22-"777 tons o ore were e&tracted and sold. What amount o depletion e&pense should be recogni)ed or 271'? a. 1"-7"777 b. 1"'-7"777 c. 1"0-"2-7 d. 1"*17"777 1.:easide 5ompany applied revaluation accounting to plant asset with carrying amount o 6*"777"777 on an 1 271'" useul lie o * years" and no residual value. epreciation is calculated on the straight line basis. Fn ec '1 271'" in inde depe pend nden entt appr apprai aise sers rs dete deterrmine mined d th that at th the e as asse sett has has a a air ir valu value e o  6'"/-7"777 What is the journal entry to record depreciation or 271*? a. ebit accumulated depreciation depreciation 61"777"777 '

 

AIR DIAGNOSTIC EXAM Cluster 1- Level 2 & 3 03.30.15 b. ebit deprec depreciation iation 61"2-7"777 c. 5redit accumulated depreciation 6/-7"777 d. ebit depreciation depreciation 61"777"777 1/.enith 5ompany purchased our convenience store buildings on anuary 1" 277/ or a total o 62-"777"777. 62-"777"777. >he buildings buildings have been depreciated depreciated using the straight line method with a 27year useul lie and 17E residual value. Fn anuary 1" 271'" the entity has converted the buildings into a hotel and restaurant. >he entity estimated that the buildings have a remaining useul lie o 12 years" that their residual value will be )ero" that net cash infows rom the buildings will total 61"77"777 per year" and that the air value less cost o disposal disposal o the our buildings buildings totals totals 617"777"777 617"777"777.. >he appropri appropriate ate discount rate rate is 12E. >he present present value o an ordinary ordinary annuity o 1 at 12E or 17 periods is -.-. What is the amount o impairment impairment loss? a. '"'/-"777 b. 17"77"777 "'/-"777

c. 17 1 7"''-"777

d.

10.in=ie 5ompany incurred 61"77"777 o research and development costs to develop a product product or which which a patent was granted granted on anuary anuary 1" 271'. Hegal ees ee s and other other costs costs assoc associat iated ed with with regis registra tratio tion n o th the e patent patent totale totaled d 6'77"7 6'7 7"777. 77. Fn 4arch 4arch '1" 271'" 271'" in=ie in=ie paid 6*-7"77 6*-7"777 7 or legal legal ees in a successull deense o the patent. successu What is the total amount that should be capitali)ed or the patent through 4arch '1" 271'? b. '77"777 c. 2"7-7"777 d. a. /-7"777 2"'-7"777

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1.4aribeth 5ompany incurred research and development costs in the current year as ollows8 %otal  >otal cash

5ustomersN debit balances" net o customersN deposit o 6-7"777 !llowances or doubtul accounts :elling price o goods invoiced to customers at 1-7E o cost on ecember 2" 271* but delivered on anuary -" 271- and e&cluded rom reported inventory :ubscription receivable" collectible currently

1'7"777

     4      3

'/7"777 -77"777 1"77"77 7 9 1-7"7 77;

/-7"777 1"777"77 7 '"-77"77 7

'7.Fn ecember '1" 271*" what amount should be reported as total current assets? a. "2'7"777 b. -"0'7"777 c. -"77"777 d. -"077"777 '1.$enedict 5ompany had the ollowing ban= reconciliation on une '7" 27118 '"777"7 $alance per ban= statement" une '7 77 *77"77 eposit transit 7 '"*77"7  >otal  >otal 77  77"77 7 Futstanding chec=s 2"-77"7 $alance per boo=" une '7 77  >he ban= statement statement or the month o uly showed showed the ollowing8 ollowing8 eposits 9including 6277"777 note collected or $enedict;

"777"7 /

 

AIR DIAGNOSTIC EXAM Cluster 1- Level 2 & 3 03.30.15

isbursements 9including 61*7"777 J:C chec= and 617"777 service isbursements charge;

77 /"777"7 77

!ll reconciling items on une '7 cleared through the ban= in uly. >he outstanding chec=s totaled 677"777 and the deposit in transit amounted to 61"777"777 on uly '1. What is the cash balance per boo= on uly '1? b. -"'-7"777 c. -"--7"777 d. a. -"*77"777 *"-77"777 '2.Fn '2 .Fn ece ecemb mber er 1" 2717 2717"" $amb $amboo oo 5omp 5ompan any y as assi sign gned ed sp spec eci, i,c c ac acco coun unts ts receivable totaling 62"777"777 as collateral on a 61"-77"777" 12E note rom a cert ce rtai ain n ban= ban=.. $amb $amboo oo 5omp 5ompan any y wi will ll cont contin inue ue to coll collec ectt th the e as assi sign gned ed accounts acco unts receivab receivable. le. In addition" addition" to the interes interestt on the note" the ban= also charged a -E ,nance ee deducted in advance on the 61"-77"777 value o  the note. note. >he >he ecemb ecember er collecti collections ons o as assig signed ned account accounts s recei receivab vable le amounted to 61"777"777 61"777"777 less cash cash discounts discounts o 6-7"777. Fn ecember '1" 2717" $amboo 5ompany remitted the collections to the ban= in payment or the interest accrued on ecember '1" 2717 and the note payable. @ow much cash was received rom the assignment o accounts receivable on ecember 1" 2717? a. 2"777"777 b. 1"-77"777 c. 1"*2-"777 d. 1"2-"777

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''.Oimmy 5ompany used the moving average method to determine the cost o  the inventory. uring anuary o the current year" the entity recorded the ollowing inormation pertaining to its inventory8 +nits +nit 5ost >otal 5ost $alance on an 1 *7"777 -7 2"777"777 :old on an 1/ '-"777 6urchas 6ur chased ed on an 27"777 07 1"77"777 20 What amount o inventory should be reported on an '1? c. 1"2-"777 d. 1"-77"777 a. 2"777"777 b. 1"0-7"777

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'*.>he records o :hoe epartment :tore report the ollowing date or the month o uly 27118 :ales

1'"-77"77 7

4ar= down

1"277"77 7

:ales !llowance

2-7"777

4ar= down cancelations

277"777

:ales returns

-77"777

Creight on purchases

%mployee discounts

277"777

6urchases at cost

277"777 "*77"77 7

'77"777

6urchases 6urchases returns returns at c cost ost

*07"777

-"*77"777

6urchase returns at sales price

/77"777

!dditional mar= up

-77"777

$eginning inventory at cost

4ar= up cancelations

277"777

$eginning inventory as sales price

007"777 1"77"77 7

 >het and other other losses Initial mar=up on purchases

+sing the average retail inventory method" what is the estimated ending inventory? c. 1"7'"/-7 d. a.'/"-77 b. 1"777"777 1"12-"777 '-.6illar 5ompany ache securiti securities es had a mar=et value value o 6-"-77"777 on ecember '1" 271'. Jo securities were sold during 271'. >he transaction costs costs that would be incurred incurred on the disposal o  the investment are estimated at 6177"777. What amount o unreali)ed gain or loss on these securities should be reported in the 271' income statement? a. -77"777 unreali)ed gain c. *77"777 unreali)ed gain b. -77"777 unreali)ed loss d. *77"777 unreali)ed loss '/.Fn Fctober 1" 271'" Pesterday 5ompany purchased *"777 o the 61"777 ace value" 17E bonds o Cell 5ompany or 6*"*77"777 which includes accrued interest o 6177"777. >he bonds" which mature on an 1" 2727" pay interest semiannually on an 1 and uly 1. Pesterday 5ompany used the straight line method o amorti)ation and appropriately recorded the bonds as long term investment. What is the carrying amount o the bonds on ec '1 271'? a. *"20*"777 b. *"200"777 c. *"'77"777 d. *"*77"777      !      6      5  "      4      $

'0.$ona 5ompany and its subsidiarie subsidiaries s own the ollowin ollowing g pr proper operties ties that are are accounted or in accordance with 6!: *7 Hand held by $ona or undetermined use -"777"777 ! vacant building owned by $ona and to be leased out under an operating lease '"777"777 6roperty held by a subsidiary o $ona" a real estate ,rm" in the ordinary course o business 2"777"777 6roperty held by $ona or use in production *"777"777 $uilding owned by a subsidiary o $ona and or which the subsidiary provides security and maintenance services to the lessees 1"-77"777 Hand leased by $ona to a subsidiary under an operating lease 2"-77"777 6roperty under construction or use as investment property "777"777 Hand held or uture actory site '"-77"777 4achinery leased out by $ona to an unrelated unrelated party under an Fperating lease 1"777"777 What is the investment property property that should be reported in the %"(s"l+'te+

     4      3

st'te)e(t  o ,nancial position o the parent and its subsidiaries? a. 1-"-77"777 b. 12"777"777 c. 17"-77"777 d. "-77"777 '.Fn an 1 271*m 5haris 5ompany adopted a plan to accumulate unds or a new building to be erected beginning an 1 2710 at an estimated cost o  627"777"777. >he entity intends to ma=e our ehe mar=et 

 

AIR DIAGNOSTIC EXAM Cluster 1- Level 2 & 3 03.30.15 rates o interest are 17E on an 1" 271* and 12E on an 1" 271-. >he underlying ,&ed interest rate is 17E. >he 63 o 1 at 17E or one period is 7.1 and the 63 o 1 at 12E or one period is .0 What is the derivative asset or liability on ecember '1" 271*? a. 1"777 asset b. 1"777 liability c. 0"777 asset 0"777 liability

d.

*1.:ophia 5ompany purchased ehe eotal

'-7"777 /-7"777

*-.Fn an 1 271'" :3 5ompany granted the chie e&ecutive e&ecutive oGcer 95%F; -7"777 share appreciation rights or past services. >he rights are e&ercisable immediately and e&pire on ec '1 271*. Fn e&ercise" the 5%F is entitled to receive cash or the e&cess o the share mar=et price on e&ercise date over the mar=et price on grant date. >he 5%F did not e&ercise any o the rights in 271'. >he mar=et price o the share 6177 on an 1" 271' and 611- on ec '1 271* when the mar=et price was 6117. What amount should be recogni)ed as gain on reversal o share appreciation rights in 271*? a. 7 b. 2-7"777 c. -77"777 d. /-7"777 12L'1L1' 91-R-7"777; /-7"777 12L'1L1* 917R-7"777 rights; /-7"777

/-7"777

271'8 :alaries

-77"777

2-7"777

!cc

salaries

6ayable

271*8 !cc :alaries 6ayable /-7"777   5ash -77"777

 

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(ain on reversa reversall

2-7"777 *.5am 5ompany reported the ollowing balances or the current year8 ecember '1 anuary 1 Inventory 2"77"777 2"77"777 !ccounts 6ayable /-7"777 -77"777  >he entity paid suppliers 6*"77"777 during the current current year. year. +nder the accrual basis" what amount should be reported as cost o goods sold or the current year? a. -"*-7"777 b. *"-7"777 c. *"0-7"777 d. *"'-7"777

/-7=S*.4-77=Q-"1-7"7779purchases;S2.4 2.4Q-"*-7"777 */.:hara 5ompany reported that the ,nancial statement contained the ollowing errors ecember '1 271' ecember '1 271* %nding inventory 6-7"777 overstated 6077"777 understated epreciation 62-7"777 understated !n insurance premium o 677"777 was prepaid in 271' covering the years 271'" 271*" and 271-. >he entire amount was charged to e&pense in 271'. Jo corrections have been made or any o the errors. Ignore income ta&. What is the total eect o the errors on retained earnings on ecember '1 271*? a. understatement o 61"--7"777 b. overstatement o 61"--7"777 c. overstatement o 6/-7"777 d. understatement o /-7"777 %nding invty

271' 9-7"777;

271* -7"777

Jet eect

11

 

AIR DIAGNOSTIC EXAM Cluster 1- Level 2 & 3 03.30.15 077"777 epreciation Insurance premium %ect

92-7"777; *77"777 9077"777;

9277"777; 1"--7"777

/-7"777

*0.P)a 5ompany provided the ollowing inormation inormation during 271*8 Inventory an 1 1"-7"777 6urchases *"777"777 Inventory ec '1 2"-77"777  >he relevant inde& numbers numbers are 127 on an 1 271*" 207 on ec '1 271*" and the average indde& number or 271' is 117. What is the cost o goods sold in hyperinfationary hyperinfation ary income statement or 271*? d. /"'77"777 a. '"1-7"777 b. *"*17"777 c. "'77"777 6urchases $eg invty %nding invty *.24S-.4'.-4Q.'4

207L277R*4 207L117R1"-7"777 207L277R2.-4

-.4 *.24 '.-4

*.5aroline 5ompany provided the ollowing events that occurred ater ec '1 271'8 1L 1L11-L2 L271 71* * 6'"7 6'"777 77"7 "777 77 o ac acco coun unts ts recei receiva vabl ble e was was writ writte ten n o due to th the e ban=ruptcy o a major customer 2L1*L271* ! shipping vessel o the entity with carrying amount o  6-"777"777 was completely lost at sea because o a hurricane ! cour courtt case case invol involvi ving ng the enti entity ty as the deen deenda dant nt was sett settle led d and the entity was obligated to pay the plainti 61"-77"777. >he enti en tity ty pr prev evio ious usly ly has has not not rec ecog ogni ni)e )ed d a liab liabil ilit ity y o orr th the e su suit it because management deemed it possible that the entity would lose the case 'L1-L271* 'L1-L 271* Fne o the the entityA entityAs s actor actories ies with a carry carrying ing mount mount o 6*"777"77 6*"777"777 7 was completely ra)ed by orest ,re that erupted in its vicinity  >he management completed the the drat o the ,nancial statemen statements ts or 271' on 4arch ch 27" 271 271*" *" th the e boa board rd o di dire recto ctors rs aut author hori)e i)ed d the Ceb 17"271* 17"271*.. Fn 4ar ,nancial ,nan cial stat statement ements s or issu issue. e.   >he >he entity entity announ announced ced its pro,t pro,t and other select sel ected ed inor inormat mation ion on 4arch 4arch 22" 271*. 271*. >he ,nanci ,nancial al st state atemen ments ts were were approved by shareholders on !pril 2" 271* and ,led with the :%5 the very ne&t day. What total amount should be reported as Badjusting eventsD on ecember '1 271'? a. "-77"777 b. 0"-77"777 c. "777"777 d. *"-77"777 'L 'L11 11L2 L271 71* *

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!djust !dju stin ing g ev event ents s tha thatt shoul should d be repo reporte rted8 d8 an an 11-"2 "271 71* * T 4arch 11" 271* -7.Fn an 1 271'" Pvonne 5ompany granted share options to each o the '77 employees wor=ing in the sales department. >he share options vest at the end o a threeyear threeyear period provided that the employees remain in the entityAs employ and provided the volume sales will increase by more than 17E per year. >he air value o each share option on grant date is 6'7. I the sales increase by more than 17E" each employee will receive 277 share options. I  the sales increase by more than 1-E" each employee will receive '77 share options. Fn ec '1 271'" the sales increased by more than 17E but not more than 1-E" and no employees have let the entity. Fn ec '1 271*" sales increased by more than 1-E and no employees let. Fn ecember '1 271-" the sales increased by more than 1-E" and -7 employees let the entity. What amount should be recogni)ed as compensation e&pense or 271-? a. 2"2-7"777 b. 1"277"777 c. *-7"777 d. 77"777

12

 

AIR DIAGNOSTIC EXAM Cluster 1- Level 2 & 3 03.30.15

I sales U17E 277 share options I sales U1-E '77 share options 271' 9277 share optionsR'77R'7;L'Q77"777 271* 9'77 share optio tions nsR R'77R'7;R2L'Q1"077"777 77"777Q1"277"777 271- 9'77 share optionsR2-7R'7;1"077"777Q*-7"77 optionsR2-7R'7;1"077"777Q*-7"777 7

%J FC %V!4



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