Assuming no other information is provided all of the followi

Assuming no other information is provided, all of the following are examples of extraordinary items EXCEPT: (Points : 2) Write-down or write-off of receivables or inventory. expropriation of property by a foreign government. Significant agricultural loss due to a rare hail storm. Uninsured losses from an earthquake. Question 2.2. How should a gain from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method? (Points : 2) In operating activities as a deduction from income. In investment activities as a cash outflow. In investment activities as a reduction of the cash inflow from the sale. In operating activities as an addition to income. Question 3.3. When a fixed asset is sold, the gain/loss on disposal is the difference between: (Points : 2) selling price and accumulated depreciation. selling price and book value. fair value and selling price. fair value and accumulated depreciation. Question 4.4. On January 1, Year 1, Company X purchases equipment for $240,000 with an expected useful life of 12 years. The straight-line method is applied. During Year 4, entity officials decide to switch to the double-declining balance method. No other change is made. What amount of depreciation expense is recognized by the entity for Year 4? (Points : 2) $27,778. $30,000. $23,148. $40,000. Question 5.5. Gil Corp. has current assets of $90,000 and current liabilities of $180,000. Which of the following transactions would improve Gil\'s current ratio? (Points : 2) Collecting $10,000 of short-term accounts receivable. Purchasing $50,000 of merchandise inventory with a short-term account payable. Refinancing a $30,000 long-term mortgage with a short-term note. Paying $20,000 of short-term accounts payable. Question 6.6. Which of the following should be disclosed in the summary of significant accounting policies? Composition of inventories / Maturity dates of long-term debt (Points : 2) No No Yes Yes No Yes Yes No Question 7.7. The principal advantage of the completed contract method over the percentage-of-completion method is it: (Points : 2) provides more predictable earnings. is suitable for a wider range of long-term contracts. provides more conservative earnings. provides a better reflection of the earnings process. Question 8.8. If a corporation that uses the cost method of recording treasury stock transactions sells some of its treasury stock at a price that exceeds its cost, this excess should be (Points : 2) Credited to additional paid-in capital. Credited to retained earnings. Treated as a reduction in the carrying amount of remaining treasury stock. Reported as a gain in the income statement. Question 9.9. An entity reports net income before income taxes this year of $300,000. The enacted tax rate is 30%. The entity has reported a $40,000 gain on an installment sale that will not be taxed for two years. The entity has also reported $50,000 in interest revenue from State of Maine bonds. On the entity’s income statement, what is reported as current income tax expense? (Points : 2) $75,000. $90,000. $63,000. $78,000. Question 10.10. If $10,000 is invested in a mutual fund that returns 12 percent per year, compounded monthly, after 30 years the investment will be worth: n i FV of $1 360 1% 35.9496 60 6% 32.9877 30 12% 29.9599 (Points : 2) $299,599. $359,496. $46,000. $11,200.

Solution

(1) Option (a)

Write-off of inventory is not an extraordinary item.

(2) Option (a)

Gain from sale is included within Net income as an earnings, so it is deducted from Net income in Operating cash flow section.

(3) Option (b)

Gain/loss from sale of fixed asset = Selling price - Book value of the asset

(4) Option (d)

SLM depreciation rate = 1/12 = 0.0833 = 8.33%

DDB depreciation rate = 8.33% x 2 = 16.66%

Year 4 (DDB) Depreciation expense = $240,000 x 16.66% = $40,000

(5) Option (d)

Current ratio (CR) = Current assets / Current liabilities

CR improves when current assets increase and/or current liabilities decrease. Out of given options, it only happens when a short-term accounts payable is paid up, reducing current liabilities.

NOTE: First 5 questions are answered.