Intermediate Assignment 1

PART-I: Multiple Choices
Choose The Correct Answer from the give alternative
1.Which of the following is not considered cash for financial reporting purposes?
A. Petty cash funds and change funds C.Coin, currency, and available funds
B. Money orders, certified checks, and personal checks D. Postdated checks and I.O.U.'s
2.Bank overdrafts, if material, should be
A. reported as a deduction from the current asset section. C. reported as a deduction from cash
B. netted against cash and a net cash reported. D. reported as a current liability.
3. Which of the following should not be included in the physical inventory of a company?
A. Goods held on consignment from another company. C. Goods shipped on
consignment
B. Goods in transit from another company shipped FOB shipping point. D. None of the above
4. Additions to plant assets are:
A. revenue expenditures. B. debited to the Maintenance Expense C. capital expenditures D. All
5. Which inventory costing method assigns to ending inventory the newest—the most recent—costs
incurred during the period?
A. First-in, first-out (FIFO) B. Average-cost C. Specific-unit-cost D. Last-in, first-out
6. Expenditures that adds utility to plant assets for more than one accounting period is referred to as
A. Revenue expenditures B. Expenses C. capital expenditure D. None
7. Comp A has sales of £150,000 and cost of goods available for sale of £135,000. If the gross
profit rate is 30%, the estimated cost of the ending inventory under the gross profit method is:
A. £15,000. B. £30,000. C. £45,000. D. £75,000.
8. In a perpetual inventory system:
A. specific identification is always used.
B. a new average is computed under the average-cost method after each sale.
C. average costs are computed by average of unit costs incurred.
D. In FIFO, CGS is the same as in periodic system
9. Which of the following inventories carried by a manufacturer is similar to the merchandise
inventory of a retailer?
A. Raw materials. B. Work-in-process. C. Finished goods. D. Supplies.
10.Which of the following is included in inventory costs?
A. Product costs. B. Period costs. C. Product and period costs. D. Neither of them
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11. XY Co. accepted delivery of merchandise which it purchased and had recorded the transaction,
but did not include the merchandise in its inventory. The effect of this on its financial statements
would be
A. net income, current assets, and retained earnings were understated.
B. net income was correct and current assets were understated.
C. net income was understated and current liabilities were overstated.
D. net income was overstated and current assets were understated.
Part-II: descriptive Questions (8%)

1. Describe what you have understand from Intermediate financial accounting I? (5 pts)
2. Explain why/ for what purpose firms hold assets? Give an example (3 pts)
Part-III: workout Questions (12%): show necessary steps
1. The following information is available for Chamo fish corporation, as of May 31, 2011:
a. Cash on the books as of May 31 amounted to $43,784.16. Cash on the bank statement for the
same date was $53,451.46.
b. A deposit of $5,220.94, representing cash receipts of May 31, did not appear on the bank.
c. Outstanding checks totaled $3,936.80.
d. A check for $1,920.00 returned with the statement was recorded incorrectly in the check
register as $1,380.00.
e. The bank service charge for May amounted to $30.
f. The bank collected $12,200.00 for Chamo fish corporation with face value of $12,000.00.
g. An NSF check for $178.56 from a customer, XYZ, was returned with the statement.
h. The bank mistakenly charged to the company account a check for $750.00 drawn.
i. The bank reported that it had credited the account for $250.00 in interest for May.
Required: A. Prepare bank reconciliation (to the correct balance) at May 31 (4 pts).
B. Prepare any journal entries required to adjust the cash account at May 31 (2 pts).
2. ABC Furnace Corp. purchased machinery for $279,000 on January 1, 2015. It is estimated that it
will have a useful life of 10 years, residual value of $15,000, production of 240,000 units, and
working hours of 25,000. During 2017, ABC Corp. uses the machinery for 2,650 hours, and the
machinery produces 25,500 units.
Required: From the information given, compute the depreciation charge for 2017 under each of
the following methods. (Round to the nearest dollar.)
A. Units-of-output (2 pts).
B. Double-declining-balance (2 pts).
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C. Sum-of-the-years’-digits (2 pts).
3. At the end of 2015, Hawasa Textile Factory S.C tests a machine for impairment. The machine
has a carrying amount of Br 400,000. It has an estimated remaining useful life of five years.
Because there is little market-related information on which to base a recoverable amount based on
fair value, LSSC determines the machine’s recoverable amount should be based on value-in-use.
LSSC uses a discount rate of 8 percent. Hawasa Textile Factory’s analysis indicates that its future
cash flows will be Br 80,000 each year for five years, and it will receive a residual value of Br
20,000 at the end of the five years. It is assumed that all cash flows occur at the end of the year.
Instructions: a) Compute the amount of the impairment loss at December 31, 2015. (2pts)
b) Prepare the journal entry to record the impairment loss, if any, at December 31, 2015.(2pt)
4. 4. On January 1, 2015, Botosan Company issued a €1,200,000, 5-year, zero interest-bearing note
to National Organization Bank. The note was issued to yield 8% annual interest. Unfortunately,
during 2016, Botosan fell into financial trouble due to increased competition. After reviewing all
available evidence on December 31, 2016, National Organization Bank decided that the loan was
impaired. Botosan will probably pay back only €800,000 of the principal at maturity.
Instructions
a. Prepare journal entries for both Botosan Company and National Organization Bank to record
the issuance of the note on January 1, 2015. (Round to the nearest €10.)
b. Assuming that both Botosan Company and National Organization Bank use the effective-
interest method to amortize the discount, prepare the amortization schedule for the note
c. Under what circumstances can National Organization Bank consider Botosan’s note to be
impaired?
d. Compute the loss National Organization Bank will suffer from Botosan’s financial distress on
December 31, 2016. What journal entries should be made to record this loss?
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PART-I: Multiple Choices

Choose The Correct Answer from the give alternative

Part-II: descriptive Questions (8%)

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