Question

1) Thomas Company receives information that requires the company to increase its expectations of uncollectible accounts receivable.

Which of the following does not occur on the company’s financial statements?

Group of answer choices

A) Bad debt expense is increased

B) Accounts receivables (gross) is reduced

C) Net income is reduced

D) The allowance account is increased

E) None of the above

2)

On its 2016 income statement, Abbott Laboratories reported research and development expense of $1,422,000,000.

Which of the following statements must be true?

Group of answer choices

A) Abbott Laboratories spent $1,422,000,000 in cash to develop new products and improve old products.

B) Research and development expense reduced Abbott Laboratories 2016 pre-tax income by $1,422,000,000.

C) Abbott Laboratories capitalized at least $1,422,000,000 of research and development costs in 2016.

D) The $1,422,000,000 included amortized research and development costs from prior years that were not previously expensed, because Abbott Laboratories incurs such expenses each year.

3.

The 2016 financial statements of Willamette Valley Vineyards, Inc. include the following footnote:

Note 4. Property and Equipment	December 31, 2016	December 31, 2015
Construction in progress	$     449,409	$     482,284
Land	8,063,716	5,089,472
Winery buildings and hospitality center	14,458,309	13,756,320
Equipment	10,122,593	9,055,987
	33,094,027	28,384,063
Less accumulated depreciation	(12,897,082)	(11,654,901)
	$20,196,945	16,729,162
Depreciation expense	$ 1,254,455	$ 1,194,191

The average useful life of Willamette’s depreciable assets at the end of fiscal 2016 is:

A) 14.2 years

B) 19.6 years

C) 2.4 years

D) 21.7 years

E) None of the above

Answer 1

Answer : 1) Correct Option is B) Accounts receivables (gross) is reduced.

Reason :

If the company wants to increase its expectations of uncollectible accounts receivable then there will be no effect on Accounts Receivable (Gross) as no asjustment os done in accounts receivable.

Answer : 2) Correct Option is None of the above.

Reason :

Research and development expensiture may include some non cash item , Net Income after tax will be effected from it , Under U.S GAAP capitalization of Research and development expenditure not allowed and the fourth statement The $1,422,000,000 included amortized research and development costs from prior years that were not previously expensed, because Abbott Laboratories incurs such expenses each year is also false.Therefore we can say that none of these above is true Statement.

Answer : 3) Correct Option is (B.) 19.6 years

Reason :

Average Useful Life = Depreciable Asset / Depreciation Expense

= (14458309 + 10122593) / 1254455

= 19.60