Midterm Exam Review
1.The revenue recognition principle provides that revenue is recognized when? Pages 907-8
Dot Point, Inc. is a retailer of washers and dryers and offers a three-year service contract on each appliance sold. Although Dot Point sells the appliances on an installment basis, all service contracts are cash sales at the time of purchase by the buyer. Collections received for service contracts should be recorded when?
An alternative available when the seller is exposed to continued risks of ownership through return of the product is what? Page 910
2. In selecting an accounting method for a newly-contracted long-term construction project, the principal factor to be considered ...view middle of the document...
600,000 1,500,000 1,000,000 820,000 1,880,000
3 3,300,000 1,900,000 1,800,000 2,250,000 1,200,000
Which of the following should be shown on the balance sheet at December 31, 2010 related to Contract 2?
(TCO A) During 2010, Steele Corporation sold merchandise costing $1,500,000 on an installment basis for $2,000,000. The cash receipts related to these sales were collected as follows:
What is the rate of gross profit on the installment sales made by Steele Corporation during 2010?
4. Smiley Corporation purchased a machine on January 2, 2009, for $2,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes:
2009 $400,000 2012 $230,000
2010 $640,000 2013 $230,000
2011 $384,000 2014 $116,000
Assuming an income tax rate of 30% for all years, the net deferred tax liability that should be reflected on Smiley's balance sheet at December 31, 2010, should be
Larsen Corporation reported $100,000 in revenues in its 2010 financial statements, of which $44,000 will not be included in the tax return until 2011. The enacted tax rate is 40% for 2010 and 35% for 2011. What amount should Larsen report for deferred income tax liability in its balance sheet at December 31, 2010?
Markes Corporation's partial income statement after its first year of operations is as follows:
Income before Income Taxes $3,750,000
Income Tax expense
Net Income $2,625,000
Markes uses the straight-line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $1,500,000. No other differences existed between book income and taxable income except for the amount of depreciation. [page 984])
Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?
5. Machinery was acquired at the beginning of the year. Depreciation recorded during the life of the machinery could result in (Page 1002)
Taxable Amounts Deductible Amounts
a. Yes Yes
b. Yes No
c. No Yes
d. No No
Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if
A temporary difference arises when a revenue item is reported for tax purposes in a period After it is...