Exam 2: Asset and Liability Valuation and Income Measurement

Valuation methods that reflect current values or a combination of historical and current values include all of the following except:

Discuss the two principal reasons income before taxes for financial reporting differs from taxable income.

All of the following can be used to describe reliability of accounting information except:

The analytical framework used to evaluate transactions is reproduced below: Using this analytical framework indicate the effect of each of the following transactions for Staples Corporation: 1.Staples recorded cash sales of $25,000.The merchandise had cost $19,000 to manufacture. 2.Staples purchased $8,500 of raw material inventory on account. 3.The company paid $2,500 for property insurance for the next 12 months. 4.Staples paid its employees $5,000 for the month. 5.The company purchased $1,000 of supplies on account. 6.Staples issued $25,000 of long-term debt. 7.The company used $10,000 of excess cash to purchase marketable securities. 8.Staples purchased a machine for $16,000 using $8,000 cash with the balance on account. 9.Staples paid $2,500 for interest expense on the long-term debt. 10.At the end of the year the marketable securities that Staples purchased in transaction 7 were now worth $14,500. 11.Depreciation for the period was $1,500. 12.Staples examined the equipment and determined that its fair value was $10,000.

Balance Sheet Equation -Refer to Balance Sheet Equation.ORP Corporation Purchases land $9,000 cash and 1000 shares of common stock values at 10 per share.This transaction results in ORP recording an decreasein cash of $9,000,an increase in non-cash assets of $ 19,000 and a increase in ______________________________ of $ $10,000

On December 31,2009,Loran Corporation reported a deferred tax liability totaling $12,000,resulting from depreciation timing differences pertaining to a depreciable asset purchased during 2009.Loran uses straight-line depreciation over four years for GAAP (book)purposes;for tax purposes,the depreciation deduction is 40% of cost during 2009,30% of cost during 2010,20% of cost during 2011,and 10% of cost during 2012.During 2010,Loran expensed $80,000of warranty costs that will be deducted for tax purposes in future years.Loran also accrued revenue totaling $135,000 which is taxable in 2011.Loran's GAAP (book)income before taxes during 2010 totaled $380,000The marginal income tax rate is 40% for all years. Required: (1)What is the taxable income? (2)Prepare the journal entry to record income tax expense for the year ended December 31,2010. 

Which of the following would not represent an acquisition cost to be added to the purchase price of building:

Historical costs include all of the following except:

The traditional accounting model delays the recognition of value changes of assets and liabilities until what event occurs?

On January 1,2010,Starlight Company's balance sheet reported a deferred tax liability of $185,000 and a deferred tax asset of $99,900.The future taxable amounts that existed as of January 1,2010 will reverse equally over the next four years beginning in 2010,while the future deductible amounts that existed as of January 1,2010 will reverse equally over the next three years beginning in 2010.The enacted income tax rate for all tax years as of January 1,2010 was 37%.On February 1,2010,the tax laws were amended resulting in income tax rates of 38% for 2010 and 2011;the income tax rate will be 40% for tax years 2012 and later. Required: Prepare the journal entry on February 1,2010 to record the impact of the amended income tax rates. 

Accord Inc.income tax return shows taxes currently payable for 2011 of $85,000.The company reported deferred tax assets of $35,000 at the end of 2010 and $24,000 at the end of 2011.Accord reported deferred tax liabilities of $48,000 at the end of 2011 and $54,000 at the end of 2011. Determine the amount of income tax expense reported by Accord for 2011.

Which of the following assets appears on the balance sheet at Historical cost?

If a portfolio manager had to estimate the fair value of illiquid mortgage-backed securities,which of the following would he/she most likely identify as the level of inputs to determine this?

________________________________________ is the net amount that a firm would receive if it sold an asset or the net amount it would have to pay to settle a liability.

The accounting equation is represented by Assets= Liabilities + Stockholders' Equity which of the following would cause a change in the stockholders' equity accounts:

If a portfolio manager had to estimate the fair value of private equity funds invested in a young,privately-held start-up company,which of the following would he/she most likely identify as the level of inputs to determine this?

What level are inputs for estimating fair values based on a firm's own assumptions about the fair value of an asset or a liability,such as using various data to estimate present values?

Balance Sheet Equation -Refer to the Balance Sheet Equation.To recognize the cost of goods sold ORP Corporation will reduce retained earnings and reduce ______________________________.

a.Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its equipment,which has a useful life of four years.Tax legislation requires the company to depreciate this type of equipment using the following schedule: year 1- 50%,year 2 - 30%,year 3 - 15% and year 4 - 5%.In 2011 Plaxo purchases a piece of equipment with a four year life and an original cost of $100,000.Discuss how this transaction will effect Plaxo's income taxes in 2011.

The analytical framework used to evaluate transactions is reproduced below: Using this analytical framework indicate the effect of each of the following transactions for Wisco Corporation: 1.Wisco sold merchandise for $225,000 on account which cost $170,000 to manufacture. 2.Wisco purchased for cash $110,000 of raw material inventory. 3.The company paid $25,000 in advance for an advertising campaign that would be aired next year. 4.Wisco paid its employees $15,000 for the month. 5.The company purchased $7,000 of supplies on account. 6.Wisco issued $25,000 of long-term debt. 7.The company used $10,000 of excess cash to purchase marketable securities. 8.Wisco purchased a machine for $22,000 in cash. 9.At the end of the year Wisco paid dividends of $5,000. 10.At the end of the year the marketable securities that Wisco purchased in transaction 7 were now worth $11,500. 11.Depreciation for the period was $1,500.