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Ccomprehensiveexam C PDF
Ccomprehensiveexam C PDF
PART 3
(Chapters 1014)
___ 3. In accordance with GAAP, the maximum period over which a patent can
be amortized is
a. 20 years.
b. 28 years.
c. 40 years.
d. 50 years.
C-2 Comprehensive Exam C
___ 8. If Davis expensed the total cost of the equipment at 7/1/12, what was
the effect on 2012 and 2013 income before taxes, assuming Davis uses
straight-line depreciation?
a. $882,000 understated and $198,000 overstated.
b. $972,000 understated and $108,000 overstated.
c. $981,000 understated and $198,000 overstated.
d. $1,080,000 understated and $108,000 overstated.
___ 9. If, at the end of 2014, Davis Company decides the equipment still has
five more years of life beyond 12/31/14, with a salvage value of
$90,000, what is straight-line depreciation for 2014? (Assume straight-
line used in all years.)
a. $108,000.
b. $115,500.
c. $130,500.
d. $198,000.
Use the following data for questions 10 through 17. Each question is
independent of the other questions.
On 12/31/12 Brown gave Machine B plus $54,000 cash to Sawyer in return for
Machine A.
C-4 Comprehensive Exam C
__ 10. Assume that both Sawyer and Brown are new machine dealers and
that the machines are still new. Also assume that the exchange lacks
commercial substance. At what amount will Machine A be recorded on
Browns books?
a. $486,000.
b. $414,000.
c. $540,000.
d. $360,000.
___12. Assume that instead of dealers, both Sawyer and Brown are machine
manufacturers and use the machines in production. Assume the
exchange lacks commercial substance. At what amount will Brown
record Machine A?
a. $360,000.
b. $414,000.
c. $486,000.
d. $540,000.
___13. Given the assumption in 12 above, at what amount will Sawyer record
Machine B?
a. $371,739.
b. $270,000.
c. $335,736.
d. $281,739.
Comprehensive Exam C C-5
14.Given the assumption in 12 above except that the fair values of Machines
A and B are $504,000 and $450,000, respectively, at what amount will Brown
record Machine A?
a. $437,400.
b. $504,000.
c. $450,000.
d. $491,400.
___15. Return to the original problem. Assume that Sawyer is a dealer selling
new machines and that Brown is a manufacturer. Assume that the
exchange has commercial substance. For this transaction, at what
amount will Sawyer record the truck?
a. $360,000.
b. $491,400.
c. $414,000.
d. $437,400.
___16. Given the assumptions in 15 above, at what amount will Brown record
Machine A?
a. $360,000.
b. $414,000.
c. $405,000.
d. $364,500.
___17. Given the assumptions in 15 above except that the selling prices and fair
market values of A and B are $504,000 and $450,000, respectively, at
what amount will Brown record Machine A?
a. $437,400.
b. $405,000.
c. $504,000.
d. $450,000.
For the following two questions, indicate the nature of the account or accounts
to be debited when recording each transaction.
C-6 Comprehensive Exam C
___18. A replacement, which extended the life but did not increase the quality
of units produced by the asset, cost $15,000.
a. Asset(s) only.
b. Accumulated amortization, or depletion or depreciation only.
c. Expense only.
d. Asset(s) and expense.
___19. Jim Dolan and Matt Stine, maintenance repairmen, spent five days in
unloading and setting up a new $30,000 precision machine in the plant.
Their wages earned in this five-day period totaled $800.
a. Asset(s) only.
b. Accumulated amortization, depletion, or depreciation only.
c. Expense only.
d. Asset(s) and expense.
1. Jensen Co. and Merton Co. traded the above equipment. The exchange has
commercial substance.
Jensen Co.'s Books: Merton Co.'s Books:
Comprehensive Exam C C-9
2. Jensen Co. and Merton Co. traded the above equipment. The exchange
lacks commercial substance.
Jensen Co.'s Books: Merton Co.'s Books:
Assume that the following cases are independent and rely on the following
data. Make entries on the books of both companies.
Jensen Co. Merton Co.
Equipment (cost) $900,000 $1,650,000
Accumulated depreciation 290,000 1,050,000
Fair value of equipment 560,000 700,000
Cash received (paid) (140,000) 140,000
3. Jensen Co. and Merton Co. traded the above equipment. The exchange has
commercial substance.
Jensen Co.'s Books: Merton Co.'s Books:
4. Jensen Co. and Merton Co. traded the above equipment. The exchange lacks
commercial substance.
Jensen Co.'s Books: Merton Co.'s Books:
(a) What was the amount of the gain or loss on retirement of the bonds?
C-10 Comprehensive Exam C
(b) Prepare the journal entry needed at April 1, 2013 to record retirement
of the bonds. Assume that interest and premium or discount amortization
have been recorded through January 1, 2013. Record interest and
amortization on only the bonds retired.
(c) Prepare the journal entry needed at July 1, 2013 to record interest and
premium or discount amortization.
3. On October 1, 2012, Noller Company issued $4,000,000 par value, 10%, 10-
year bonds dated July 1, 2012, with interest payable semiannually on January
1 and July 1. The bonds are issued at $4,542,000 (to yield 8%) plus accrued
interest. The effective interest method is used.
(a) Prepare the journal entry at the date the bonds are issued.
(b) Prepare the adjusting entry at December 31, 2012, the end of the
fiscal year.
(c) Prepare the entry for the interest payment on January 1, 2013.
1. Double-declining-balance method:
3. Sum-of-the-years'-digits method:
During 2013, 29,000 premiums were purchased at $1.10. The company sold
1,200,000 boxes of soap at $4.00 and 495,000 coupons were presented for
redemption.
Instructions
Prepare all the entries that would be made relative to sales of soap powder and
to the premium plan in both 2012 and 2013. Assume a FIFO inventory flow.
Instructions
Discuss the nature of this transaction, indicating whether any gain or loss is
recognized by either party and preparing any 12/31/12 journal entries that may
be required by the debtor (Carson).
Comprehensive Exam C C-13
Solutions Comprehensive Examination C
2. a. $72,000
b. $108,000
3. a. $120,000
b. $108,000
4. a. $66,000
b. $66,000
Comprehensive Exam C C-17
Problem C-VII Solution.
2012
Premium Inventory (2012) .............................. 18,000
Cash (or Accounts Payable) ..................... 18,000
(18,000 $1.00)
Carson Company would record the debt restructure as follows on December 31,
2012:
Federal Bank would calculate its loss based upon the expected future cash
flows discounted at the historical effective rate of the loan. The loss on
restructuring is written off against the allowance account and the note
receivable is reduced.