Question

1. On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:

   January 1, 2018	$	300,000
   September 1, 2018	$	450,000
   December 31, 2018	$	450,000
   March 31, 2019	$	450,000

   Dreamworld had the following debt obligations outstanding during both years:

   Construction loan, 10%             $500,000

                Long-term note, 12%                      $2,500,000

   Required: What would Dreamworld's capitalized interest be in 2018?

   		$45,000
   		$134,000
   		$52,500
   		$50,000
   		None of the above

4 points   

QUESTION 25

1. Data below for the year ended December 31, 2018, relates to Houdini Inc., which began operations on January 1, 2018. The retail price index at the end of 2018 was 1.10.

   	Cost					Retail
   Beginning inventory	$	66,000					$	104,000
   Net purchases		280,000						420,000
   Net markups								20,000
   Net markdowns								40,000
   Net sales								375,000

   Required: Calculate estimated ending inventory at cost assuming Houdini uses the Dollar-Value LIFO retail method.

   		$75,112
   		$75,291
   		$76,220
   		$83,500
   		$82,091

4 points   

QUESTION 26

1. Which of the following statements about Asset retirement obligations (AROs) is false:

   		AROs are liabilities associated with the retirement or disposal of a long-term asset
   		AROs are offset with an increase the balance in the related asset account
   		AROs are valued at the present value of an annuity
   		AROs are measured at fair value in the balance sheet
   		None of the above answers are false

4 points   

QUESTION 27

1. The changes in fair value for which type of investment securities is reported in Other Comprehensive Income?

   		Securities reported under the equity method
   		Available-for-sale securities
   		Trading securities
   		Held-to-maturity securities

4 points   

QUESTION 28

1. Cumulative Question:

   Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/2018:

   Currency and coins	$	650
   Balance in checking account		2,600
   Customer checks waiting to be deposited		1,200
   Treasury bills, purchased on 11/1/2018, mature on 5/13/2019		3,000
   Marketable equity securities		10,200
   Commercial paper, purchased on 11/1/2018, mature on 1/30/2019		5,000

   What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents?

   		$17,650
   		$9,450
   		None of the above
   		$10,450
   		$7,450

5 points   

QUESTION 29

1. Lake Incorporated purchased all of the outstanding stock of Huron Company paying $950,000 cash. Lake assumed all of the liabilities of Huron. Book values and fair values of acquired assets and liabilities were:

   	Book Value				Fair Value
   Current assets (net)	$	130,000			$	125,000
   Property, plant, equip. (net)		600,000				750,000
   Liabilities		150,000				175,000

   Lake would record goodwill of:

   		$250,000
   		$75,000
   		$0
   		None of the above
   		$445,000

Answer 1

Answer:

The correct answer is the 4th Option i.e $50,000

Workings: