ACCT 557 Final Exam

1. (TCO A) Amazon Building, Inc. won a bid for a new warehouse building contract. Below is information from the project accountant. Total Construction Fixed Price $15,000,000 Construction Start Date June 13, 2012 Construction Complete Date December 16, 2013 As of Dec. 31… 2012 2013 Actual cost incurred $6,500,000 $4,360,000 Estimated remaining costs $5,250,000 $- Billed to customer $5,000,000 $7,000,000 Received from customer $4,500,000 $6,500,000 Assuming Amazon Building, Inc. uses the completed contract method, what amount of gross profit would be recognized in 2013? (Points : 5)

$4,140,000
$2,342,128
$2,390,000
$2,290,213

2. (TCO B) At the beginning of 2012, Annie, Inc. has a deferred tax asset of $7,500 and deferred tax liability of $10,500. In 2012, pretax financial income was $826,000 and the tax rate was 35%. Pretax income included: Interest income from municipal bonds $15,000 Accrued warranty costs, estimated to be used in 2013 $74,000 Prepaid rent expense, will be used in 2013 $31,000 Installment sales revenue, to be collected in 2013 $56,000 Operating loss carryforward $71,000 What is taxable income for 2012? (Points : 5)

$727,000
$826,000
$915,000
$1,073,000

3. (TCO C) Presented below is pension information related to Amazing Goods, Inc. for the year 2013. Service cost $96,000 Interest on projected benefit obligation $53,000 Interest on vested benefits $25,000 Amortization of prior service cost due to increase in benefits $10,000 Expected return on plan assets $19,000 The amount of pension expense to be reported for 2013 is (Points : 5)

$130,000.
$140,000.
$165,000.
$184,000

4. (TCO C) Apple Dumpling, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2013. Service cost $280,000 Contributions to the plan $270,000 Actual return on plan assets $260,000 Projected benefit obligation (beginning of year) $2,900,000 Fair value of plan assets (beginning of year ) $2,700,000 The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2013 is (Points : 5)

$280,000.00.
$310,000.00.
$300,000.00.
$570,000.00

5. (TCO D) Animal, Inc. leased equipment from Zoo Enterprises under a 4-year lease requiring equal annual payments of $51,000, 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 4-year useful life and no salvage value. Animal, Inc.’s incremental borrowing rate is 10% 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 Animal, Inc. in the first year of the asset’s life? PV Annuity Due PV Ordinary Annuity 8%, 5 periods 4.31213 3.99271 10%, 5 periods 4.16986 3.79079 (Points : 5)

0
$13,513
$16,290
$17,593

6. (TCO E) On December 31, 2013, Bob’s Trucking, 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 an $800,000 increase in the beginning inventory at January 1, 2013. Assume a 40% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is (Points : 5)

$-.
$800,000.
$480,000.
$320,000

7. (TCO E) Which of the following is not a change in accounting estimate? (Points : 5)

Change in amortization period for an intangible asset.
Change from straight-line to sum-of-the-years’-digits method of depreciation.
Change because of understatement of inventory.
Change in residual value of a depreciable plant asset