Expenses - CPA Financial Accounting and Reporting (FAR)
Card 1 of 72
Of the following, which would not be included in Cost of Goods Sold?
Of the following, which would not be included in Cost of Goods Sold?
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DM, DL, and MOH are all included in Cost of Goods Manufactured and Cost of Goods Sold.
DM, DL, and MOH are all included in Cost of Goods Manufactured and Cost of Goods Sold.
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As a result of differences between depreciation for financial reporting purposes and tax purposes, the financial reporting basis of a company's plant assets exceeded the tax basis. Assuming the company had no other temporary difference, the firm should report a:
As a result of differences between depreciation for financial reporting purposes and tax purposes, the financial reporting basis of a company's plant assets exceeded the tax basis. Assuming the company had no other temporary difference, the firm should report a:
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If book basis of an asset is greater than tax basis, a deferred tax liability should be established for the tax effect of the difference.
If book basis of an asset is greater than tax basis, a deferred tax liability should be established for the tax effect of the difference.
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During a period of falling prices, which of the following inventory valuation methods would yield the highest cost of goods sold?
During a period of falling prices, which of the following inventory valuation methods would yield the highest cost of goods sold?
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Under FIFO, the oldest inventory goes to COGS. In a period of falling prices, the oldest inventory has the highest cost, driving up COGS.
Under FIFO, the oldest inventory goes to COGS. In a period of falling prices, the oldest inventory has the highest cost, driving up COGS.
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Troy, Inc has inventory with a FIFO cost of $17,730, net realizable value of $17,850, replacement cost of $17,490, and net realizable value less normal profit of $17,545. What amount should Troy report as ending inventory in its balance sheet at year-end?
Troy, Inc has inventory with a FIFO cost of $17,730, net realizable value of $17,850, replacement cost of $17,490, and net realizable value less normal profit of $17,545. What amount should Troy report as ending inventory in its balance sheet at year-end?
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Under FIFO, the oldest inventory goes to COGS first. Here, a total of 10,800 units were sold; the first 8K of these were included in beginning inventory and cost $1 each. The remaining 2,800 units were included in the March 10 purchase at $3 each. Therefore, COGS is calculated as 8,000 units x $1 per unit +2,800 units x $3 per unit.
Under FIFO, the oldest inventory goes to COGS first. Here, a total of 10,800 units were sold; the first 8K of these were included in beginning inventory and cost $1 each. The remaining 2,800 units were included in the March 10 purchase at $3 each. Therefore, COGS is calculated as 8,000 units x $1 per unit +2,800 units x $3 per unit.
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Larry, Inc had beginning inventory in January of Year 2 of 10,000 units costing $1 each. On February 14, 4,000 units were purchased costing $3 each. On April 20, 12,000 units were sold. On November 22, 6,000 more units were purchased at $6 each. What will Larry record as its cost per unit under a weighted average inventory system?
Larry, Inc had beginning inventory in January of Year 2 of 10,000 units costing $1 each. On February 14, 4,000 units were purchased costing $3 each. On April 20, 12,000 units were sold. On November 22, 6,000 more units were purchased at $6 each. What will Larry record as its cost per unit under a weighted average inventory system?
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Under the weighted average costing method, cost per unit is the average price of all inventory purchased. Larry spent a total of $58K (10,000 units x $1 + 4,000 units x $3 each + 6,000 units x $6). This total is divided by the total number of units purchased, which is 20K. To calculate cost per unit, the total cost of $58K is divided by total units of 20K.
Under the weighted average costing method, cost per unit is the average price of all inventory purchased. Larry spent a total of $58K (10,000 units x $1 + 4,000 units x $3 each + 6,000 units x $6). This total is divided by the total number of units purchased, which is 20K. To calculate cost per unit, the total cost of $58K is divided by total units of 20K.
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Which of the following statements is a primary objective of accounting for income taxes? To:
Which of the following statements is a primary objective of accounting for income taxes? To:
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The primary objective of income tax accounting is to recognize and account for deferred tax assets and liabilities.
The primary objective of income tax accounting is to recognize and account for deferred tax assets and liabilities.
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Which of the following is not among the criteria that must be met to record a lease as a capital lease?
Which of the following is not among the criteria that must be met to record a lease as a capital lease?
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To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
To record a lease as a capital lease, at least one of the following criteria must be met: ownership of the asset transfers at the end of the lease term; the lease contains a bargain purchase option; the PV of the lease payments is at least 90% of the FV at inception; and the lease term is at least 75% of the asset's useful life.
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The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
The Global Group leases an asset from Earth Co for 8 years. The life of the asset is expected to be 10 years. If the lease does NOT contain a bargain purchase option or a transfer of title, which of the following is correct?
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In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
In a lease does not contain a bargain purchase option, the asset will be depreciated over the life of the lease, rather than over the useful life of the asset.
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In Year 3, Meyer Corp sold an asset for $900,000 to Sailer Corp and simultaneously leased it back for 5 years. The assets remaining life was 53 years, and the carrying value on the date of the sale was $640,000. The annual lease payments were $180,000 per year. How much gain should be recognized by Meyer in Year 3?
In Year 3, Meyer Corp sold an asset for $900,000 to Sailer Corp and simultaneously leased it back for 5 years. The assets remaining life was 53 years, and the carrying value on the date of the sale was $640,000. The annual lease payments were $180,000 per year. How much gain should be recognized by Meyer in Year 3?
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The gain recognized will be equal to the purchase price of the asset minus the asset's carrying value on the date of the sale. The full gain will be recognized at the time of the sale.
The gain recognized will be equal to the purchase price of the asset minus the asset's carrying value on the date of the sale. The full gain will be recognized at the time of the sale.
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ABC leased equipment to DEF under a noncancellable lease with a transfer of title. Will ABC record depreciation expense on the leased asset and interest revenue related to the lease?
ABC leased equipment to DEF under a noncancellable lease with a transfer of title. Will ABC record depreciation expense on the leased asset and interest revenue related to the lease?
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DEF will capitalize the lease due to the transfer of title and will incur both depreciation and interest expense.
DEF will capitalize the lease due to the transfer of title and will incur both depreciation and interest expense.
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A firm sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reporting as a finance lease under US GAAP. At the time of sale, the sale-leaseback will be considered:
A firm sold its headquarters building at a gain, and simultaneously leased back the building. The lease was reporting as a finance lease under US GAAP. At the time of sale, the sale-leaseback will be considered:
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If the underlying lease in a sale leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.
If the underlying lease in a sale leaseback is a finance lease, it is considered equivalent to a repurchase and will therefore be considered a failed sale.
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During which period of time should a lessee amortize a leased property? The lease is a finance lease and contains a written option to purchase.
During which period of time should a lessee amortize a leased property? The lease is a finance lease and contains a written option to purchase.
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When dealing with a financing lease, the lessee should amortized the leased property over the economic life of the asset when there is a written purchase option or at the time the lessee obtains ownership of the asset.
When dealing with a financing lease, the lessee should amortized the leased property over the economic life of the asset when there is a written purchase option or at the time the lessee obtains ownership of the asset.
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During a period of falling prices, which of the following inventory valuation methods would yield the highest cost of goods sold?
During a period of falling prices, which of the following inventory valuation methods would yield the highest cost of goods sold?
Tap to reveal answer
Under FIFO, the oldest inventory goes to COGS. In a period of falling prices, the oldest inventory has the highest cost, driving up COGS.
Under FIFO, the oldest inventory goes to COGS. In a period of falling prices, the oldest inventory has the highest cost, driving up COGS.
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Troy, Inc has inventory with a FIFO cost of $17,730, net realizable value of $17,850, replacement cost of $17,490, and net realizable value less normal profit of $17,545. What amount should Troy report as ending inventory in its balance sheet at year-end?
Troy, Inc has inventory with a FIFO cost of $17,730, net realizable value of $17,850, replacement cost of $17,490, and net realizable value less normal profit of $17,545. What amount should Troy report as ending inventory in its balance sheet at year-end?
Tap to reveal answer
Under FIFO, the oldest inventory goes to COGS first. Here, a total of 10,800 units were sold; the first 8K of these were included in beginning inventory and cost $1 each. The remaining 2,800 units were included in the March 10 purchase at $3 each. Therefore, COGS is calculated as 8,000 units x $1 per unit +2,800 units x $3 per unit.
Under FIFO, the oldest inventory goes to COGS first. Here, a total of 10,800 units were sold; the first 8K of these were included in beginning inventory and cost $1 each. The remaining 2,800 units were included in the March 10 purchase at $3 each. Therefore, COGS is calculated as 8,000 units x $1 per unit +2,800 units x $3 per unit.
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Larry, Inc had beginning inventory in January of Year 2 of 10,000 units costing $1 each. On February 14, 4,000 units were purchased costing $3 each. On April 20, 12,000 units were sold. On November 22, 6,000 more units were purchased at $6 each. What will Larry record as its cost per unit under a weighted average inventory system?
Larry, Inc had beginning inventory in January of Year 2 of 10,000 units costing $1 each. On February 14, 4,000 units were purchased costing $3 each. On April 20, 12,000 units were sold. On November 22, 6,000 more units were purchased at $6 each. What will Larry record as its cost per unit under a weighted average inventory system?
Tap to reveal answer
Under the weighted average costing method, cost per unit is the average price of all inventory purchased. Larry spent a total of $58K (10,000 units x $1 + 4,000 units x $3 each + 6,000 units x $6). This total is divided by the total number of units purchased, which is 20K. To calculate cost per unit, the total cost of $58K is divided by total units of 20K.
Under the weighted average costing method, cost per unit is the average price of all inventory purchased. Larry spent a total of $58K (10,000 units x $1 + 4,000 units x $3 each + 6,000 units x $6). This total is divided by the total number of units purchased, which is 20K. To calculate cost per unit, the total cost of $58K is divided by total units of 20K.
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Which of the following statements is a primary objective of accounting for income taxes? To:
Which of the following statements is a primary objective of accounting for income taxes? To:
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The primary objective of income tax accounting is to recognize and account for deferred tax assets and liabilities.
The primary objective of income tax accounting is to recognize and account for deferred tax assets and liabilities.
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As a result of differences between depreciation for financial reporting purposes and tax purposes, the financial reporting basis of a company's plant assets exceeded the tax basis. Assuming the company had no other temporary difference, the firm should report a:
As a result of differences between depreciation for financial reporting purposes and tax purposes, the financial reporting basis of a company's plant assets exceeded the tax basis. Assuming the company had no other temporary difference, the firm should report a:
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If book basis of an asset is greater than tax basis, a deferred tax liability should be established for the tax effect of the difference.
If book basis of an asset is greater than tax basis, a deferred tax liability should be established for the tax effect of the difference.
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Of the following, which would not be included in Cost of Goods Sold?
Of the following, which would not be included in Cost of Goods Sold?
Tap to reveal answer
DM, DL, and MOH are all included in Cost of Goods Manufactured and Cost of Goods Sold.
DM, DL, and MOH are all included in Cost of Goods Manufactured and Cost of Goods Sold.
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In Year 1, a company has revenues of $600,000 and expenses of $400,000. Of the expenses, $70,000 represents a warranty on a company product. However, the company only paid $30,000 as a result of this warranty. The remainder is expected to be paid in a future year in which company officials believe there is a 60% chance that the company will have taxable income to be reduced by this warranty cost. The relevant tax rate is 30% for Year 1 and 32% for periods after that. What is the total amount of income tax expense to be recognized in Year 1?
In Year 1, a company has revenues of $600,000 and expenses of $400,000. Of the expenses, $70,000 represents a warranty on a company product. However, the company only paid $30,000 as a result of this warranty. The remainder is expected to be paid in a future year in which company officials believe there is a 60% chance that the company will have taxable income to be reduced by this warranty cost. The relevant tax rate is 30% for Year 1 and 32% for periods after that. What is the total amount of income tax expense to be recognized in Year 1?
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Reported net income of $200K ($600K revenue - $400K expenses) must be adjusted to $240K to exclude the portion of the warranty expenses that weren't paid in Year 1. This means the the current portion of income expense is $72K ($240K x 30%). The remaining $40K deduction is deferred to a future year, so the company recognizes a deferred benefit of $12,800 ($40K x 32%). Total Year 1 tax expense is equal to $72K - $12,800.
Reported net income of $200K ($600K revenue - $400K expenses) must be adjusted to $240K to exclude the portion of the warranty expenses that weren't paid in Year 1. This means the the current portion of income expense is $72K ($240K x 30%). The remaining $40K deduction is deferred to a future year, so the company recognizes a deferred benefit of $12,800 ($40K x 32%). Total Year 1 tax expense is equal to $72K - $12,800.
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The Faulkner Company had an enacted income tax rate of 25%. The company ended Year 1 with a deferred income tax liability of $30,000, a deferred income tax asset of $40,000, and a valuation allowance of $9,000. The enacted tax rate at the beginning of Year 2 was raised to 28%. The company ended Year 2 with a deferred income tax liability of $60,000, a deferred income tax asset of $30,000, and a valuation allowance of $14,000. On the company's Year 2 income statement, what is the amount of income tax expense (deferred) that is reported?
The Faulkner Company had an enacted income tax rate of 25%. The company ended Year 1 with a deferred income tax liability of $30,000, a deferred income tax asset of $40,000, and a valuation allowance of $9,000. The enacted tax rate at the beginning of Year 2 was raised to 28%. The company ended Year 2 with a deferred income tax liability of $60,000, a deferred income tax asset of $30,000, and a valuation allowance of $14,000. On the company's Year 2 income statement, what is the amount of income tax expense (deferred) that is reported?
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The deferred tax liability increases by $30K from Year 1 to Year 2 ($30K to $60K) and the deferred asset decreased by $10K ($40K to $30K). The valuation allowance increased by $5K ($9K to $14K). Therefore, a balancing expense of $45K must be booked ($30K + $10K + $5K).
The deferred tax liability increases by $30K from Year 1 to Year 2 ($30K to $60K) and the deferred asset decreased by $10K ($40K to $30K). The valuation allowance increased by $5K ($9K to $14K). Therefore, a balancing expense of $45K must be booked ($30K + $10K + $5K).
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