Midterm Ac557

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1. (TCO A) An alternative available when the seller is exposed to continued risks of ownership through return of the product is (Points : 6) Recording the sale, and accounting for returns as they occur in future periods. Not recording a sale until all return privileges have expired. Recording the sale, but reducing sales by an estimate of future returns. All of the above.

2. (TCO A) During 2010, Steele Corporation sold merchandise costing $1,500,000 on an installment basis for $2,000,000. The cash receipts related to these sales during 2010 were $800,000.What is the amount of deferred gross profit Steele Corporation will report on Dec 31, 2010? (Points : 6)

$700,000
$200,000
$300,000
$500,000

3. (TCO A) In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the (Points : 6) Total costs incurred to date.

Total estimated cost.
Unbilled portion of the contract price
Total contract price.

4. (TCO B) Larsen Corporation reported $100,000 in revenues in its 2010 financial statements, of which $44,000 will not be included in the tax return until 2011. The enacted tax rate is 40% for 2010 and 35% for 2011. What amount should Larsen report for deferred income tax liability in its balance sheet at December 31, 2010? (Points : 6) $15,400

$17,600
$19,600
$22,400

5. (TCO B) Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if (Points : 6) it is probable that a future tax rate change will occur. it appears likely that a future tax rate will be greater than the current tax rate. the future tax rates have been enacted into law.

it appears likely that a future tax rate will be less than the current tax rate.

6. (TCO B) A deferred tax liability is classified on the balance sheet as either a current or a noncurrent liability. The current amount of a deferred tax liability should generally be (Points : 6) The net deferred tax consequences of temporary differences that will result in net taxable amounts during the next year. Totally eliminated from the financial statements if the amount is related to a noncurrent asset. Based on the classification of the related asset or liability for financial reporting purposes. The total of all deferred tax consequences that are not expected to reverse in the operating period or one year, whichever is greater.

7. (TCO C) Market-related asset value is used to determine the corridor and to calculate the expected return on plan assets. Expected Return
Corridor on Plan Assets
a. Yes Yes
b. Yes No
c. No Yes
d. No No (Points : 6)
A
B
C
D

8. (TCO C) The projected benefit obligation is the measure of pension obligation that (Points : 6) Is required to be used for reporting the service cost component of pension expense. Requires pension expense to be determined solely on the basis of the plan formula applied to years of service to date and based on existing salary levels. Requires the longest possible period for funding to maximize the tax deduction. Is not sanctioned under generally accepted accounting principles for reporting the service cost component of pension expense.

9. (TCO C) On January 1, 2008, Nen Co. has the following balances:Projected benefit obligation $4,200,000 Fair value of plan assets 3,750,000
The settlement rate is 10%. Other data related to the pension plan for 2008 are: Service cost...
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