FINANCE EXAM 3 1. The Hasting Company began operations on January 1, 2003 and uses the FIFO method in costing its raw material inventory. An analyst is wondering what net income would have been if the company had consistently followed LIFO (instead of FIFO) from the beginning, 1/1/2003. He has the following information available to him: What would net income have been in 2004 if Hastings had used LIFO since 1/1/2003? $ 110,000 $ 150,000 $ 170,000 $ 230,000 2. A customer is currently suing a company. A reasonable estimate can be made of the costs that would result from a ruling unfavorable to the company, and the amount involved is material. The company’s managers, lawyers, and auditors agree that there is only a remote likelihood of an unfavorable ruling. This contingency: Should be disclosed in a footnote. Should be disclosed as a parenthetical comment in the balance sheet. Need not to be disclosed. Should be disclosed by an appropriation of retained earnings. 3. The ABC Company operates a catering service specializing in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Collections from customers have never been an issue in the past. ABC should recognize revenue from its catering services at the date when a: Customer places an order. Luncheon is served. Billing is mailed. Customer’s payment is received. 4. On June 30, 2001, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co.. The Stone stock was acquired in 1999 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore’s books. Cole should record the patent at: $80,000 $90,000 $135,000 $160,000 5. On June 30, 2001, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co.. The Stone stock was acquired in 1999 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore’s books. Cole should record the patent at: $80,000 $90,000 $135,000 $160,000 6. On January 1, 1997, Phillips, Inc. leased a new machine from U.S. Leasing. The specific information on the lease is as follows: On January 1, 1997, Phillips, Inc. should record a lease liability of: $275,000 $359,464 $0 $250,000 7. FRC Inc. acquired Marketing Inc on 1/1/2004. Marketing Inc. has 10,000 shares outstanding. Each share in Marketing Inc. was exchanged for half a share in FRC, Inc. Shares of FRC Inc., were trading at $100 per share at the date of the announcement of the transaction. Marketing Inc, had the following assets and liabilities that were assumed by FRC Inc. The amount of Goodwill recognized by FRC, Inc. on January 1, 2004 is: $400,000 $360,000 $495,000 $455,000 8. ABC expenses stock options as required by GAAP. On January 1,2005, ABC granted 50 key executives 100 options each. Each option entitled the option holder to purchase 1 share of ABC common stock at $60 per share. The options will vest on January 1st 2008. On the grant date, January 1st, 2005, the stock was quoted on the stock exchange at $63 per share. The fair value of the options on the grant date was estimated at $15 per option. The amounts of compensation expense ABC should recognize with respect to the options during 2005, 2006, and 2007 are: 1. 2. 3. 4. 9. Which of the following situations will not cause a deferred income tax amount to be recorded? An expense that is recognized in 2005 for income tax purposes and in 2006 for financial statement purposes. Interest income from municipal bonds that is recognized in 2005 for financial statement purposes but is tax exempt for income tax purposes. A revenue is r…
Looking for solution of this Assignment?
WHY CHOOSE US?
We deliver quality original papers |
Our experts write quality original papers using academic databases. |
Free revisions |
We offer our clients multiple free revisions just to ensure you get what you want. |
Discounted prices |
All our prices are discounted which makes it affordable to you. Use code FIRST15 to get your discount |
100% originality |
We deliver papers that are written from scratch to deliver 100% originality. Our papers are free from plagiarism and NO similarity |
On-time delivery |
We will deliver your paper on time even on short notice or short deadline, overnight essay or even an urgent essay |