Practice Exam 3

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Practice Exam Chapters 9-12
1. Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows:   
What should be the carrying value of Montana's inventory? 
A. $600,000.
B. $520,000.
C. $590,000.
D. $510,000.

2. On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available:   
What is the estimated inventory on July 8 immediately prior to the fire?  A. $192,000
B. $490,000
C. $510,000
D. $280,000

3. The conventional retail inventory method is based on:
A. Average cost
B. LIFO cost
C. Average, lower of cost or market
D. LIFO, lower of cost or market

4. Lacy's Linen Mart uses the retail method approximating average cost to estimate inventories. Data for the first six months of 2011 include: beginning inventory at cost and retail were $60,000 and $120,000, net purchases at cost and retail were $312,000 and $480,000, and sales during the first six months totaled $490,000. The estimated inventory at June 30, 2011, would be:  A. $68,200.

B. $55,000.
C. $71,500.
D. $63,250.

5. A company using the periodic inventory method correctly recorded a December 29 purchase of merchandise, but the merchandise was not included in the physical inventory count on December 31 (end of the accounting period). The error caused an: A. Understatement of inventory, purchases, and accounts payable B. Overstatement of both income and assets by the same amount C. Understatement of both income and assets by the same amount D. Overstatement of inventory, purchases, and accounts payable 6. Grab Manufacturing Co. purchased a ten-ton draw press at a cost of $171,000. Shipping costs were $4,600, which included $200 for insurance in transit. Installation costs totaled $12,000, which included $4,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. The capitalized cost of the ten-ton draw press is:  A. $171,000.

B. $183,600.
C. $187,600.
D. $185,760.

7. Horton Stores exchanged land and cash of $5,000 for similar land. The book value and the fair value of the land were $90,000 and $100,000, respectively. Assuming that the exchange has commercial substance, Horton would record land-new and a gain/(loss) of

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8. | Axcel Software began a new development project in 2012. The project reached technological feasibility on June 30, 2013, and was available for release to customers at the beginning of 2014. Development costs incurred prior to June 30, 2013, were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. The 2014 revenues from the sale of the new software were $4,000,000, and the company anticipates additional revenues of $6,000,000. The economic life of the software is estimated at four years. 2014 amortization of the software development costs would be:   

A. | $0.|
B. | $350,000.|
C. | $1,840,000.|
D. | $560,000.|
9.| On July 1, 2013, Larkin Co. purchased a $400,000 tract of land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2013 as follows:

  

What would be the balance in the land account as of December 31, 2013?   
A. | $400,000.|
B. | $475,000.|
C. | $477,000.|
D. | $487,000.|
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Use the following to answer questions 10 and 11:
In 2009, Quasar LTD. acquired all of the common stock of Penlight Laser for $124 million. The fair value of Penlight's identifiable tangible and intangible assets totaled $205 million, and the fair value of liabilities assumed by Quasar was $95 million. Quasar performed the required goodwill impairment test at the end of its fiscal year ended December 31, 2011. Management has provided the following information:   

10. Determine the amount of goodwill that resulted from the...
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