ACCT 311 – SPRING 2016 Final Exam 1. XYZ Company sells


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Need help with assignment. Can you help? I don’t understand the assignment. ACCT%20311-SPRING%202016%20Final%20Exam.docx ACCT 311 – SPRING 2016 Final Exam 1. XYZ Company sells appliance service contracts agreeing to repair appliances for a two­year period. XYZ’s past experience is that, of the total dollars spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. Receipts from service contract sales for the two years ended December 31, year 2, are as follows: Year 1 Year 2 $500,000 $600,000 Receipts from contracts are credited to unearned service contract revenue. Assume that all contract sales are made evenly during the year. What amount should XYZ report as unearned service contract revenue at December 31, year 2? a. $360,000 b. $470,000 c. $480,000 d. $630,000 2. A Corp. had the following liabilities at December 31, year 2: Accounts payable $55,000 Unsecured notes, 8%, due 7/1/Y3 400,000 Accrued expenses 35,000 Contingent liability 450,000 Deferred income tax liability Senior bonds, 7%, due 3/31/Y3 25,000 1,000,000 The contingent liability is an accrual for possible losses on a $1,000,000 lawsuit filed against A. A’s legal counsel expects the suit to be settled in year 4, and has estimated that A will be liable for damages in the range of $450,000 to $750,000. The deferred income tax liability is not related to an asset for financial reporting and is expected to reverse in year 4. What amount should A report in its December 31, year 2 balance sheet for current liabilities? a. $515,000 b. $940,000 c. $1,490,000 d. $1,515,000 3. During year 2, Smith Co. filed suit against West, Inc. seeking damages for patent infringement. At December 31, year 2, Smith’s legal counsel believed that it was probable that Smith would be successful against West for an estimated amount in the range of $75,000 to $150,000, with all amounts in the range considered equally likely. In March year 3, Smith was awarded $100,000 and received full payment thereof. In its year 2 financial statements, issued in February year 3, how should this award be reported? a. As a receivable and revenue of $100,000. b. As a receivable and deferred revenue of $100,000. c. As a disclosure of a contingent gain of $100,000. d. As a disclosure of a contingent gain of an undetermined amount in the range of $75,000 to $150,000. 4. A $100,000 bond payable is issued on June 1, Year One for 104. The bond pays annual cash interest of 12 percent per year with payments every June 1 and December 1. The bond was sold to yield an effective interest rate of 10 percent per year. If the effective rate method is being used, what amount (rounded) should be reported for the liability as of December 31, Year One? a. $102,880 b. $103,060 c. $103,067 d. $103,209 5. On December 1, year 1, shares of authorized common stock were issued on a subscription basis at a price in excess of par value. A total of 20% of the subscription price of each share was collected as a down payment on December 1, year 1, with the remaining 80% of the subscription price of each share due in year 2. Collectibility was reasonably assured. At December 31, year 1, the stockholders’ equity section of the balance sheet would report additional paid­in capital for the excess of the subscription price over the par value of the shares of common stock subscribed and a. Common stock issued for 20% of the par value of the shares of common stock subscribed. b. Common stock issued for the par value of the shares of common stock subscribed. c. Common stock subscribed for 80% of the par value of the shares of common stock subscribed. d. Common stock subscribed for the par value of the shares of common stock subscribed. 6. A company declared a cash dividend on its common stock on December 15, year 1, payable on January 12, year 2. How would this dividend affect stockholders’ equity on the following dates? Decembe

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