Intermediate Accounting 2 Final exam review

Lifeline Biofuels built an oil rig at a cost of​ $4.5 million. At the time that construction was​ complete, the company estimated the oil rig would have a useful life of 20 years​ (with no salvage​ value), after which Federal regulations would require that the oil rig be dismantled and the land area restored. The fair value of this asset retirement project was $825,000 and the present value of these asset retirement costs was $177,000 based on the 88​% after−tax discount rate. At the end of the 20 year​ life, the company dismantles the oil rig and restores the land at a cost of $900,000. Following U.S.​ GAAP, the journal entry to record the completion of the restoration process would​ include: ANS: - debit Loss on Settlement of Asset Retirement Obligation for $75000 Onopea Inc. considered two contingencies at the end of​ 2016: ​** a probable loss in the range of $300,000 to $ 500 comma 000$500,000 ​** a reasonably possible loss of $150,000 Under U.S.​ GAAP, what is the balance for contingent liabilities at the end of​ 2016? ANS: - $300000 In​ December, 2018, Shooger Candy Company began including one coupon in each package of candy and offered customers a Stuffed Shooger Bear in exchange for​ $5 and five coupons. The stuffed bears cost Shooger $5.30 each.​ Eventually, it is expected that 40​% of the coupons will be redeemed. During​ December, Shooger sold 210,000 packages of candy and no coupons were redeemed. In its December​ 31, 2018 balance​ sheet, what amount should Shooger report as estimated liability for the​ coupons? ANS: - 5040 when bonds are sold at a discount between interest dates, the buyer ___. ANS: - pays the issuer interest from the date on the bonds to the purchase date ​Kool's Stores made cash sales during the month of May of $79,600. The sales are subject to a 66​% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the May sales​ transactions? ANS: - credit sales tax payable for 4776 A company has a probable loss that can only be reasonably estimated within a range of outcomes. No single amount within the range is a better estimate than any other amount. Under U.S.​ GAAP, what amount of loss contingency should be​ accrued? ANS: - the minimum amount of the range ​$100,000 of five−year bonds are sold for $98,200 on the issue date. Interest of $3,900 is paid each year until the bonds are repaid. What is the total interest expense to the company for issuing these​ bonds? ANS: - 21300 Harrison Corporation borrowed $37,000 from​ F&M Bank on June 1 of the current year. The bank required 77​% interest. Interest will be paid when the nine−month note becomes due. What is the interest expense for the current​ year? (Do not round intermediate calculations. Only round your final answer to the nearest​ dollar.) ANS: - 1511 For U.S. GAAP​ reporters, short−term debt can be reclassified as long−term when the company intends to refinance on a long−term basis and the company can​ ________. ANS: - demonstrate the ability to consummate the refinancing Zambrano Corp. decided to go into the market to repurchase bonds before their due date. The following are the balances of the accounts on the date of the​ retirement: Bonds Payable ​$5,000,000 Discount on Bonds Payable $80,000 If Zambrano pays $4,880,000 to retire the​ bond, what is the gain or loss on the early extinguishment of the​ debt? ANS: - 40000 gain Pegasus Corp. signed a three−​month, 55​% note on November​ 1, 2019 for the purchase of $271,000 of inventory. If Pegasus makes adjusting entries only at the end of the​ year, the adjusting entry made at December​ 31, 2019 will include a​ ________. (Do not round any intermediary calculations. Round your final answer to the nearest​ dollar.) ANS: - debit to interest expense for 2249 The Hudson Company borrowed $150,000 to purchase machinery and agreed to pay 66​% interest for six years on an installment note. Each note payment is $30,504. How much interest is Hudson paying over the life of the​ loan? (Do not round intermediate calculations. Only round your final answer to the nearest​ dollar.) ANS: - 33024 Which of the following represents amounts owed for​ goods, supplies, or services​ purchased? ANS: - accounts payable What is the main difference in computing the selling price of a zero−coupon