Final Exam ACCT XXXXXXXXXXOct - Dec 2020 University of Maryland Global Campus FINAL EXAM – ACCT XXXXXXXXXX – Intermediate Financial Accounting II INSTRUCTOR: Rohan Chambers INSTRUCTIONS: · This paper...

This is final exam. Section A has 5 questions which is all need to be solved. Section B has 7 questions and only 3 questions need to be solved.


Final Exam ACCT311 7381 Oct - Dec 2020 University of Maryland Global Campus FINAL EXAM – ACCT 311 7381 – Intermediate Financial Accounting II INSTRUCTOR: Rohan Chambers INSTRUCTIONS: · This paper contains 2 sections: A & B. · Section A is mandatory and contains 5 questions · Section B contains 7 questions, choose any 3 · Answer all questions in the space after each question. Of course, you may extend the space needed. (Note – It may also be a good idea to first print a hard copy of this paper) · You have 7 hours in which to complete this exam. Section A (This section contains 5 questions) Answer ALL 5 questions. Total points = 155 Question 1 – Week 5 a) Water Inc. has the following balances at 1/1/10 that relate to its defined-benefit pension plan: Plan Assets $800,000 Net Pension Liability 100,000 Accumulated OCI (PSC) 200,000 During 2010, the following additional data is available: Service Cost for 2010 $75,000 Interest rate 15% Actual return on plan assets in 2010 70,000 Amortization of prior service cost 8,000 Expected return on plan assets 80,000 Unexpected loss from change in projected benefit obligation, due to change in actuarial predictions 60,000 Contributions in 2010 85,000 Benefits paid to retirees in 2010 55,000 Required: Compute pension expense for the year 2010. (20 points) b) George Incorporated has the following balances as of the beginning of each year: Year Plan Assets Pension Asset (Liability) 2010 $1,700,000$(200,000) 2011 2,300,000 100,000 In 2010 there is also a $250,000 opening balance in Accumulated OCI for unrecognized gains. The average remaining service life per employee in 2010 is 12 years, and in 2011 it is 10 years. The net gain or loss that occurred during each year is as follows: Year Gain (Loss) 2010 $350,000 2011 (400,000) Required: Compute the net gain/loss that is amortized in each of the 2 years above. (15 points) (Total 35 points) Write/type your answer here Question 2 – Week 6 Truck Leasing Company (TLC) buys trucks for leasing to various delivery companies. On April 1, 2015, TLC leases a truck to Showman Delivery Company. The cost of the truck of $244,875 and its fair value were the same. The lease payments stipulated in the lease are $35,000 per year in advance for the 10-year period of the lease. The expected economic life of the equipment is also 10 years. The title to the equipment remains in the hands of TLC at the end of the lease term, although only nominal residual value is expected at that time. Showman incremental borrowing rate is 10%, and it uses the straight-line method of depreciation on all owned equipment. Showman does not know the rate implicit in the lease. Both Showman and TLC have fiscal year ending March 31, while lease payments are made on April 1 each year. Required: (a) Determine the rate implicit in the lease (4 points) (b) Determine the present value of the minimum lease payments for the lessee.(7 points) (c) Prepare the entries to record the lease and the first lease payment on the books of the lessor and lessee, assuming the lease meets the criteria of a direct financing lease for the lessor and a capital lease for the lessee. (10 points) (d) Other than those at (c) above, prepare all entries required to account for the lease on both the lessee’s and lessor’s books for the fiscal year 2016.(14 points) (Note – The above requirements are based on the old leasing standard, and not the new one which became effective January 1, 2019) (Total 35 points) Write/type your answer here Question 3 – Week 6 On December 31, 2014, before the books were closed, the management and accountants of Baker Inc made the following determinations about three depreciable assets: 1. Depreciable asset A was purchased January 1, 2010. It originally cost $800,000 and, for depreciation purposes, the sum-of-the-years’-digits method was originally chosen. The asset was originally expected to be useful for 20 years and have a salvage value of $10,000. In 2014 the decision was made to change the depreciation method from sum-of-the-years’-digits to straight-line, and the estimates relating to useful life and salvage value remained unchanged. 2. Depreciable asset B was purchased January 1, 2010. It originally cost $160,000 and was depreciated on the straight-line method basis. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2014, the decision was made to shorten the total life of this asset so that it had just 4 more years to go and to estimate the salvage value at $5,000. 3. Depreciable asset C was purchased January 1, 2010. The asset’s original cost was $120,000, and this amount was entirely expensed in 2010. This particular asset has a 20-year useful life and no salvage value. The straight-line method was used for depreciation. Additional data: · Income in 2014 before depreciation expense amounted to $400,000 · Depreciation expense on assets other than A, B, and C totaled $75,000 in 2014. · Income in 2013 was reported at $380,000 · Ignore all income tax effects. . Required: a) Prepare all necessary journal entries in 2014 to record these determinations. (20 points) b) Prepare comparative retained earnings statements for Baker Inc for 2013 and 2014. The company had retained earnings of $910,000 at December 31, 2012. (15 points) (Total 35 points) Write/type your answer here Question 4– Week 7 Condensed financial data of Fairfield Company for 2010 and 2009 are presented below: Comparative Balance Sheet as at December 31, 2010 and 2009 2010 2009 Cash $2,150 $1,110 Receivables 1,750 1,300 Inventory 1,600 1,900 Plant Assets 1,910 1,700 Accumulated Depreciation (1,200) (1,170) Long-term investments (Held-to-Maturity) 1,300 1,470 $7,510 $6,310 Accounts Payable $1,250 $800 Income Tax Payable Accrued Liabilities 90 200 10 250 Bonds Payable 1,400 1,650 Capital Stock 1,910 1,700 Retained Earnings 2,660 1,900 $7,510 $6,310 Income Statement For the year ended December 31, 2010 Sales $7,000 Cost of goods sold 4,700 Gross margin 2,300 Depreciation Selling and administrative expense 30 900 Income from operations 1,370 Loss on sale of investments 70 Income before tax 1,300 Income tax expense 390 Net Income 910 Additional information: No plant assets were sold in 2010. Cash dividends were $150. Required: (a) Prepare a statement of cash flows for 2010 using the indirect method.(22 points) (b) Using the direct method, prepare the Operating Activities section of the statement of cash flows for 2010.(10 points) (Total 32 points) Write/type your answer here Question 5 – Week 7 Shamrock Company is involved in five separate industries. The following information is available for each of the five industries: Operating Segment Total Revenue Operating Profit (Loss) Identifiable Assets Ohio $20,000 ($1,700) $30,000 Texas $13,000 ($1,500) $170,000 Iowa $29,000 $1,100 $35,000 Delaware $12,000 $1,600 $10,000 Nevada $48,000 $15,000 $80,000 $122,000 $14,500 $325,000 Required: Determine which of the operating segments are reportable based on the: a) Revenue test.(5 points) b) Operating profit (loss) test.(6 points) c) Identifiable assets test. (5 points) d) What are the benefits of disclosing financial results based on segments? (2 points) (Total 18 points) Write/type your answer here Section B (There are 7 questions and each question is worth 35 points). Answer ANY 3 questions. Total points = 105 Question 6 – Week 1 (a) Company sells a machine for $6,800 under a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 500 machines in 2010 (warranty expense is incurred 25% in 2010, 60% in 2011 and 15% in 2012). As a result of product testing, the company estimates that the warranty cost is $380 per machine ($200 parts and $180 labor).   Required: Assuming that actual warranty costs are incurred exactly as estimated, prepare the journal entries that would be made under application of the expense warranty accrual method for the following:              i.      Warranty costs incurred in 2010.   (8 points)             ii.      Warranty costs incurred in 2011. (12 points) (b) Yellow Cab Co. began operations on January 2, 2010. It employs 12 drivers who work 8-hour days. Each employee earns 15 paid vacation days annually. Vacation days may be taken after January 10 of the year following the year in which they are earned. The average hourly wage rate was $25 in 2010 and $26 in 2011. The average vacation days used by each driver in 2011 was 15. Yellow Cab Co. accrues the cost of compensated absences at rates of pay in effect when earned. Required: Prepare journal entries to record the transactions related to paid vacation days during 2010 and 2011.(15 points) (Total 35 points) Write/type your answer here Question 7 – Week 1 XYZ Company is building a new baseball stadium at a cost of $3,500,000. It will receive a grant (for the balance it needs) from a local business to support the project, after borrowing money to complete the project. It decides to issue $3,000,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2010, and pay interest annually on each January 1, beginning 2011. The bonds yield 8%. Required: a) Prepare the journal entry to record the issuance of the bonds on January 1, 2010. (6 points) b) Prepare a bond amortization schedule up to and including January 1, 2015, using the effective-interest method.      (9 points) c) Assume that on July 1, 2014, XYZ Company retires a half of the bonds at a cost of