Accounting homework task

Show your work for each question

 

• step by step for all calculation related questions
• provide 1-2 sentences justification for your answer to True/false or multiple-choice questions. Zero credit if explanation is wrong
• feel free to adjust the size of this table.
• Mark all your answers in red letters in you type your answers OR
• Highlight all your answer if you choose to hand-write all your answers and scan your document for submission.

 

 

Question 1 (true/false)2 mark / each, 10 in total

	True/false
a) The primary function of financial accounting is to provide relevant financial information to parties internal and external to business enterprises.
b) Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow.
c) Materiality can be affected by the dollar amount of an item, the nature of the item, or both.
d) Gains or losses result, respectively, from sales of inventory to customers, depending on whether inventory sold at price higher or lower than its cost.
e) The revenue/expense approach emphasizes determining the appropriate amounts of revenue and expense in each reporting period.

 

 

Question 2 (8 marks)

 

MAT Corporation had revenues of $200,000 in its first year of operations. The company has not collected on $20,000 of its sales and still owes $25,000 on $70,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $15,000 in salaries. Owners invested $20,000 in the business and $20,000 was borrowed on a five-year note. The company paid $2,000 in interest that was the amount owed for the year, and paid $6,000 for a two-year insurance policy on the first day of business. MAT has an effective income tax rate of 40%.

 

Compute net income for the first year for MAT Corporation.

 

 

 

 

 

Question 3 (6 marks)

For each of the following situations, state whether you agree or disagree with the financial reporting practice employed, and briefly explain the reason for your answer.

 

1. Panther Corporation’s accountant increased the book value of a patent from its original cost of $1 million to its recently appraised value of $6 million.

 

 

 

 

1. Hartford Corporation paid for the personal travel of its chief financial officer and charged travel expense.

 

 

 

1. At the end of its 2021 fiscal year, TNP, Inc., received an order from a customer for $60,000. The merchandise will ship early in 2022. Because the sale was made to a long-time customer and the invoice was paid in 2021, the controller recorded the sale in 2021.

 

 

 

2021. In the middle of its 2021 fiscal year, Sagitta Inc. paid $12,000 to its insurance company for one-year comprehensive insurance coverage. Sagitta recorded the entire expenditure as an expense in 2021.

 

 

 

1. The Windmill Pharmaceutical Company included a note in its financial statements that described a pending lawsuit against the company.

 

 

 

1. The ABC Corporation, a company whose securities are publicly traded, prepares monthly, quarterly, and annual financial statements for internal use but disseminates to external users only the annual financial statements.

 

 

 

 

 

 

 

 

Question 4 (3 marks / each, 9 marks total)

 

The following information ($ in millions) comes from a recent annual report of Amazing.com, Inc.:

 

Gross profit                                                                    6,321

Net sales revenue                                                       $10,119

Other income (expense), net                      (12)

Total assets                                                                   14,363

Net operating cash flow                                                 3,102

End of year balance in cash                                         21,022

Total stockholders’ equity                                              5,431

Net increase in cash for the year                                       900

Operating expenses                                                        2,067

 

1. What is the beginning balance of cash?
2. What is the total liabilities at the end of the year
3. What is the cost of good sold during the year

 

 

 

Question 5 (3 marks/each)

 

Land was acquired in 2020 for a future building site at a cost of $80,000. The assessed valuation for tax purposes is $54,000, a qualified appraiser placed its value at $96,000, and a recent firm offer for the land was for a cash payment of $92,000.

 

The land should be reported in the financial statements at what amount? Please provide explanation/calculation to justify your answer

 

 

 

Question 6 (5 marks)

 

Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $315,000; Cash paid for rent, $35,000; Cash paid to employees for services rendered during the year, $115,000; Cash paid for utilities, $45,000.

In addition, you determine that customers owed the company $55,000 at the end of the year and no bad debts were anticipated. Also, the company owed the gas and electric company $1,500 at year-end, and the rent payment was for a two-year period.

Calculate accrual net income for the year.

 

 

 

 

 

Question 7 (10 marks)

 

 

Question 8 (10 marks)

 

 

Question 9 (10 marks)

 

 

 

Question 10 (10 marks)

 

 

Question 11 (2 marks each; 22 in total)

	Your answer	justification
11a
11b
11c
11d
11e
11f
11g
11h
11i
11j
11k

 

11a) External decision makers would not look primarily to financial accounting information to assist them in making decisions on:

1. A) Granting credit.
2. B) Capital budgeting.
3. C) Selecting stocks.
4. D) Mergers and acquisitions.

 

11b) Which of the following groups is not among the external users for whom financial statements are prepared?

1. A) Customers.
2. B) Managers
3. C) Analyst
4. D) Suppliers

 

11c) Which of the following groups is not among financial intermediaries?

1. A) Mutual fund managers.
2. B) Financial analysts.
3. C) CPAs.
4. D) Credit rating organizations.

 

11d) General Machine Company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash. General Machine practice is an example of:

1. A) Cash basis accounting.
2. B) Accrual accounting.
3. C) The matching principle.
4. D) Economic entity.

 

11e) General Machine Company recognizes revenue in the period when the payment is received. General Machine practice is an example of:

1. A) Cash basis accounting.
2. B) Accrual accounting.
3. C) The matching principle.
4. D) Economic entity.

 

11f) Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting?

1. A) Timeliness.
2. B) Better reflecting economic activity.
3. C) Accuracy
4. D) Better matching of revenues and expenses.

 

11g) Cash dividends are an example of which of the following elements?

1. A) Distribution to owners
2. B) Expenses
3. C) Equity
4. D) Investment by owners

 

11h) TDK Corporation has started placing its quarterly financial statements on its web page, thereby reducing by 10 days the time to get information to investors and creditors. The qualitative concept improved is:

1. A) Comparability.
2. B) Consistency.
3. C) Timeliness.
4. D) Faithful representation.

 

 

 

 

11i) Four different competent accountants independently agree on the amount and method of reporting an economic event. The concept demonstrated is:

1. A) Reliability.
2. B) Comparability.
3. C) Completeness.
4. D) Verifiability.

 

11j) Disclosure notes to a company’s financial statements:

1. A) Are relatively unimportant facts that don’t belong in the basic financial statements.
2. B) Document the source of financial statement facts, like literary footnotes.
3. C) Are an integral part of a company’s financial statements.
4. D) Are irrelevant facts that are immaterial in amount.

 

11k) Revenue should not be recognized until:

1. A) The seller has transferred goods or services to a customer.
2. B) Contracts have been signed and payment has been received.
3. C) Work has been performed and customer has been billed.
4. D) Collection has been made and warrantees have expired.