Physical substance

Cash

134. AICPA.051178FAR-FA

The following are held by Smite Co.:

Cash in checking account       $20,000

Cash in bond sinking fund account     30,000

Postdated check from customer dated one month from balance sheet date          250

Petty cash       200

Commercial paper (matures in two months) 7,000

Certificate of deposit (matures in six months)           5,000

What amount should be reported as cash and cash equivalents on Smite’s balance sheet?

$57,200

$32,200

$27,450

$27,200

135. AICPA.930510FAR-P1-FA

Cook Co. had the following balances on December 31, 20X4:

Cash in checking account       $350,000

Cash in money market account          250,000

U.S. Treasury bill, purchased 12/1/X4, maturing 2/28/X5     800,000

U.S. Treasury bond, purchased 3/1/X4, maturing 2/28/X5   500,000

Cook’s policy is to treat as cash equivalents all highly liquid investments with a maturity of three months or less when purchased. What amount should Cook report as cash and cash equivalents in its December 31, 20X4, balance sheet?

$600,000

$1,150,000

$1,400,000

$1,900,000

Accounts Receivable—Accounting and Reporting

143. AICPA.900510FAR-P1-FA

On June 1, 2005, Pitt Corp. sold merchandise with a list price of $5,000 to Burr on account. Pitt allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made FOB shipping point. Pitt prepaid $200 of delivery costs for Burr as an accommodation.

On June 12, 2005, Pitt received from Burr a remittance in full payment amounting to

$2,744

$2,940

$2,944

$3,140

144. CACL-0011

Steven Corporation began operations in year 1. For the year ended December 31, year 1, Steven made available the following information:

Total merchandise purchases for the year     $350,000

Merchandise inventory at December 31, year 1        70,000

Collections from customers   200,000

All merchandise was marked to sell at 40% above cost. Assuming that all sales are on a credit basis and all receivables are collectible, what should be the balance in accounts receivable at December 31, year 1?

$ 50,000

$192,000

$250,000

$290,000

Inventory

161. During a reporting period, a computer manufacturing company used raw materials of $50,000, had direct labor costs of $75,000, and factory overhead of $30,000. Other expenses were for advertising of $5,000, staff salaries of $10,000, and bad debt of $3,000. The company did not have a beginning balance in any inventory account. All goods manufactured during the period were sold during the period. What amount was the company’s cost of goods sold during the reporting period?

$155,000

$160,000

$170,000

$173,000

162. aicpa.aq.intro.invent.002_17

On June 1, Year 2, Archer, Inc. issued a purchase order to Cotton Co. for a new copier machine. The machine requires one month to produce and is shipped f.o.b. destination on July 1, Year 2, and is received by Archer on July 15, Year 2. Cotton issues a sales invoice dated July 2, Year 2, for the machine. As of what date should Archer record a liability for the machine?

June 1, Year 2

July 1, Year 2

July 2, Year 2

July 15, Year 2

Property, Plant and Equipment

191. A company issued a purchase order on December 15, Year 1, for a piece of capital equipment that costs $100,000. The capital equipment was shipped from the vendor on December 31, Year 1, and received by the company on January 5, Year 2. The equipment was installed and placed in service on February 1, Year 2. On what date should the depreciation expense begin?

December 15, Year 1

December 31, Year 1

January 5, Year 2

February 1, Year 2

192.AICPA.101216FAR-SIM

Which of the following is not a requirement for an asset to be categorized as a plant asset?

1.     Have physical substance.

2.     Have a useful life of at least three years.

3.     Currently used in operations.

4.     Not held for investment purposes.

Discuss the questions you worked on and indicate why the answer is correct AND why the other answers are not correct.  This is a very important piece in your advanced financial reporting knowledge, as some of the answers the are wrong are only due to small (sometimes nuances) differences.  As graduate students in this accounting program, it is important for you to not only know why a particular accounting method is correct.  Some may argue it as more important to understand why the other methods are wrong (or not in accordance with GAAP).

Your responses to the correct and incorrect answers should be concise and in your own words (please don’t copy and paste for other sources).

submit your write up of the questions in a word document and submit here.