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Acct II Exam 2
Quiz Questions
| Question | Answer |
|---|---|
| Fair value: $400,000. Useful life: 6 years with no salvage value. Lease term is 5 years. Annual lease payments are $60,000 Implicit interest rate: 11%. Can purchase the asset at the end of the lease period for $50,000. What type of lease is this? | Finance, because the 5 year lease term is a major part of the asset's 6 year life. Minnetonka Lease |
| From the perspective of the lessor, two possible lease classifications are: | Operating or sales-type |
| Matt Company is the lessor in connection with an operating lease. Matt Company would record: | Depreciation expense |
| Bhat Creations leased kitchen equipment under a five-year lease with an option to renew for three years at the end of five years and an option to renew for an additional three years at the end of eight years. What is the length of the lease term? | 8 years |
| Lasch Company recorded a right-of-use asset of $224,000 in a 10-year operating lease. Payments of $31,893 are made annually at the end of each year. The interest rate charged was 7%. The balance in the right-of-use asset after the first year will be: | 207,787 |
| What creates a deferred tax liability? | Accelerated depreciation in the tax return |
| Franklin Freightways for its first year of operations: Pretax accounting income: $ 195, Include: Overweight fines (not deductible) 5, Depreciation expense: 70, Depreciation in the tax return: 110 Tax rate is 25%, Franklin's taxable income is: | 160 million (195+5-40) |
| A deferred tax asset represents a: | Future income tax benefit |
| What difference between financial accounting and tax accounting ordinarily creates a deferred tax asset? | Revenue collected in advance. |
| In reconciling net income to taxable income, interest earned on municipal bonds is: | A permanent difference. |
| An underfunded pension plan means that the: | PBO exceeds plan assets. |
| The portion of the obligation that plan participants are entitled to receive regardless of their continued employment is called the: | Vested benefit obligation. |
| Interest cost will increase: | the PBO and increase pension expense. |
| Payment of retirement benefits: | Reduces the PBO. |
| What is the 2024 service cost for Ted Corporation’s plan? | 648 thousand |
| Paid-in capital in excess of par is reported as a(n): | increase in shareholders' equity. |
| Montgomery provided 500 hours of time to Fink and received 1,000 shares of $5 par common stock in exchange. Montgomery's usual rate is $700 per hour, and Fink's stock has a book value of $250 per share. By what amount will paid-in capital increase? | $345,000 |
| When dividends are declared in one fiscal year and paid in the next fiscal year, the liability for the dividend should be recorded as of the: | Date the dividend is declared. |
| On October 1, 24 Liu CO declared and issued a 15% stock dividend. Liu had 88,000 shares of $5 par common stock outstanding. The market price on the date of declaration was $10 per share. As a result of this dividend, Liu's retained earnings will: | decrease by $132,000. (Debit RE, Credit CS and PIC) |
| December 31, 2024, Warner reported the following: Cash dividends payable $ 27,000, Treasury stock 670,000 Paid-in capital 27,000, Common stock 4,700,000, Retained earnings 3,700,000 What was shareholders' equity as of December 31, 2024? | $7,757,000 (27,000 + 4,700,000 + 3,700,000 - 670,000) |
Created by:
Erika.Meakins
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