UMUC Acct310: Intermediate Accounting I Final Examination 2015

University of Maryland University CollegeFinal ExaminationAcct310: Intermediate Accounting IFor this exam, omit all general journal entry explanations.Ensure to include correct dollar signs, underlines & double underlines, when required. Ensure to use proper financial document format details such as blank lines where required. Unless otherwise noted, all fiscalyears end on December 31.Question 1: 25% points: Presented below is information related to Woozie Floozy Company for 2014. (All balances are normal.)Retained earnings balance, January 1, 2014 $ 980,000Sales for the year 25,000,000Cost of goods sold 17,000,000Interest revenue 70,000Selling and administrative expenses 4,700,000Write-off of goodwill (not tax deductible) 820,000Income taxes for 2014 905,000Gain on the sale of investments (normal recurring) 110,000Loss due to flood damage—extraordinary item (net of tax) 390,000Loss on the disposition of the wholesale division 815,000Loss on operations of the wholesale division 200,000Income tax benefit from discontinued wholesale division 285,000Dividends declared on common stock 250,000Dividends declared on preferred stock 50,000Woozie Floozy Company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. On September 15, Woozie Floozy sold the wholesale operations to Flippy-Floppy Company. During 2014, there were 200,000 shares of common stock outstanding all year.Requirement: Prepare a multistep income statement. Question 2: 20% points:On June 1, 2014, Flippy-Floppy purchased a manufacturing machine for $864,000. The machine has an eight-year estimated life and a $44,000 estimated salvage value. Flippy-Floppy expects to manufacture 1,800,000 units over the life of the machine.Required: Complete the required depreciation schedules on the manufacturing machine for each method listed. (Do not provide any supporting calculations.) The additional production information is as follows:Year Production2014 110,0002015 300,0002016 350,0002017 350,0002018 500,0002019 450,0002020 375,0002021 400,000Schedules for:a. Straight-line.YearDepreciationExpenseAccumulatedDepreciationEnd of Year BookValue201420152016b. Double-declining balance.YearDepreciationExpenseAccumulatedDepreciationEnd of Year BookValue201420152016201720182019202020212022 c. Sum-of-the-years’ digits.YearDepreciationExpenseAccumulatedDepreciationEnd of Year BookValue201420152016201720182019202020212022d. Units of production.YearDepreciationExpenseAccumulatedDepreciationEnd of Year BookValue20142015201620172018201920202021Question 3: 30% points:Selected accounts included in the property, plant, and equipment section ofFlipper Corporation’s balance sheet at December 31, 2014, had the followingbalances:Land $ 400,000Land improvements 130,000Buildings 2,000,000Machinery andequipment800,000During 2015, the following transactions occurred:a. A tract of land was acquired for $200,000 as a potential futurebuilding site from Flopper Corp.b. A plant facility consisting of land and building was acquired fromFlimsy Company in exchange for 20,000 shares of Flipper’s commonstock. On the acquisition date, Flipper’s stock had a closing marketprice of $42 per share on a national stock exchange. The plant facilitywas carried on Flimsy’s books at $178,000 for land and $520,000 forthe building at the exchange date. Current appraised values for theland and the building, respectively, are $200,000 and $800,000. Thebuilding has an expected life of forty years with a $20,000 salvagevalue.c. Items of machinery and equipment were purchased fromGuess Who Equipment at a total cost of $400,000. Additionalcosts were incurred as follows: freight and unloading,$13,000; installation, $26,000. The equipment has a usefullife of ten years with no salvage value.d. Expenditures totaling $ 120,000 were made for new parkinglots, street, and sidewalks at the corporation’s various plantlocations. These expenditures had an estimated useful life offifteen years.e. Research and development costs were $110,000 for the year.Required: Indicate the capitalized cost of each assetacquired during 2015. Prepare the General Journal entriesfor any amortization and depreciation expense recorded foreach of the acquired items in 2015. If no entry is necessary,write “no entry.” Question 4: 25% points:Selected accounts included in the property, plant, and equipmentsection of Faulty Corporation’s balance sheet at December 31, 2017,had the following balances:Land $ 400,000Land improvements 130,000Buildings 2,000,000Machinery and equipment 800,000During 2018, the following transactions occurred:>> A machine costing $18,000 on July 1, 2011, was scrapped onJune 30, 2018. Straight-line depreciation had been recorded onthe basis of a 10-year life with no salvage value.>> A machine was sold for $38,000 on July 1, 2018. Original cost of the machine was $74,000 on January 1, 2015, and it was depreciated on the sum-of-the-years’ digits basis over an estimated useful life of eight years and a salvage value of $2,000.Required:a. Calculate the gain or loss on the disposal of each asset. Place your answer in the appropriate column.b. Prepare the journal entries for the disposal & sale of the machine during 2018. Year 2018 depreciation has yet been recorded.

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