Question

Question 1 (2 points)

On June 30, Year 1, Kip Company had an unadjusted credit balance of $10,000 in its allowance for uncollectible accounts. An analysis of Kip’s trade accounts receivable at that date revealed the following:
Age Amount <fonEstimated Uncollectible</fon
0-30 days $600,000 5%
31-60 days 40,000 10%
Over 60 days 20,000 70%
What amount should Kip report as allowance for uncollectible accounts in its June 30, Year 1 balance sheet?

Question 1 options:

	$48,000.
	$30,000.
	$40,000.
	$58,000.

Question 2 (2 points)

Saved

The percentage-of-completion method of accounting for long-term construction-type contracts is preferable when

Question 2 options:

	Estimates of costs to complete and extent of progress toward completion are reasonably dependable.
	The collectibility of progress billings from the customer is reasonably assured.
	A contractor is involved in numerous projects.
	The contracts are of a relatively short duration.

Question 3 (2 points)

Why are the monthly costs of operating equipment NOT included in the capitalized amount of the asset? The operating expenses:

Question 3 options:

	were not incurred prior to placing the asset in service.
	are a normal cost of operating a business.
	are related to operations and not investments.
	are recurring over the useful life of the asset.

Question 4 (2 points)

What describes the conceptual framework for FASB to create a system of consistent financial reporting objectives and concepts?

Question 4 options:

	The Statement of Financial Accounting Concepts (SFAC).
	Generally Accepted Accounting Principles (GAAP).
	This framework has not yet been developed.
	Securities and Exchange Commission (SEC).

Question 5 (2 points)

Which of the following costs is included in research and development expense?

Question 5 options:

	Design, construction, and testing of preproduction prototypes and models.
	Ongoing efforts to improve existing products.
	Troubleshooting in connection with breakdowns during commercial production.
	Periodic design changes to existing products.

Question 6 (2 points)

When the equity method is used to account for investments in common stock, which of the following affect(s) the investor's reported investment income?
   A change in market value
of investee's common stock Cash dividends
from investee

Question 6 options:

	No No
	No Yes
	Yes No
	Yes Yes

Question 7 (2 points)

In calculating the numerator for diluted earnings per share, the interest on convertible debt is:

Question 7 options:

	added to earnings available to common shareholders after an adjustment for taxes.
	added to earnings available to common shareholders.
	subtracted from earnings available to common shareholders.
	subtracted from earnings available to common shareholders after an adjustment for taxes.

Question 8 (2 points)

The revenues control account of a governmental unit is debited when

Question 8 options:

	The account is closed out at the end of the year.
	The budget is recorded at the beginning of the year.
	Property taxes are recorded.
	Property taxes are collected.

Question 9 (2 points)

Black Co., organized on January 2, Year One, had pretax financial statement income of $500,000 and taxable income of $800,000 for the year ended December 31, Year One. The only temporary differences are accrued product warranty costs, which Black expects to pay as follows:
Year Two $100,000
Year Three $ 50,000
Year Four $ 50,000
Year Five $100,000
The enacted income tax rates are 25% for Year One, 30% for Year Two through Year Four, and 35% for Year Five. Black believes that future years' operations will produce profits. In its December 31, Year One, balance sheet, what amount should Black report as deferred tax asset?

Question 9 options:

	$95,000.
	$50,000.
	$75,000.
	$90,000.

Question 10 (2 points)

Which of the following is NOT a change in an accounting principle? A change:

Question 10 options:

	in the estimated residual value and remaining service life of a class of long-term assets.
	from the percentage-of-completion to the completed contract method.
	from the cost method to the equity method.
	from first-in, first-out (FIFO) to weighted average cost method.

Answer 1

Q1.

Account age	Balance	Estimated uncollectible percentage	Allowance for doubtful Account
0 to 30 Days	600,000	5%	30,000
31-60 Dyas	40,000	10%	4,000
Over 60 Days	20,000	70%	14,000
allowance for uncollectible accounts in its June 30, Year 1			48,000

Answer is A. $48,000