IAS 34, interim Financial Reporting, provides guidelines for interim reporting stating that enterprises
Answer(s): A
Essentially the same reporting methods should be used for interim and annual financial statements. However, the preparation of interim financial reports ordinarily requires a greater use of estimates. For example. IAS 34 states that complete inventory-taking and valuation may not be required at interim dates. Estimates based on sales margins may suffice. Copper Co. had the pre-closing trial balance at December 31 shown below. Additional information: The balance of opening inventory was US $140, 000. The long- term debt pays interest at a rate of 10% per annum, payable every 12 months. The debt was issued on July 1 of the current year and originally had 5 years to maturity. The assets classified as property, plant, and equipment have a 10-year estimated useful life and were 1 year old at the start of the current year Straight-line depreciation is used.
The enterprise uses straight-line depreciation for financial reporting purposes, but uses accelerated depreciation for tax purposes. Which of the following account balances would be lower in the financial statements used for tax purposes than it would be in the general purpose financial statements?
Answer(s): C
Because the tax basis uses an accelerated method, depreciation expense and accumulated depreciation will be greater. Moreover, taxable income will be lower than financial net income. Consequently. tax-basis retained earnings will be less than that in the general purpose financial statements. Copper Co. had the pre-closing trial balance at December 31 shown below. Additional information: The balance of opening inventory was US $140, 000. The long-term debt pays interest at a rate of 10% per annum, payable every 12 months. The debt was issued on July 1 of the current year and originally had 5 years to maturity. The assets classified as property, plant, and equipment have a 10-year estimated useful life and were 1 year old at the start of the current year Straight-line depreciation is used.
Copper Co will report year-end total assets of
Answer(s): B
The year-end total assets can be determined by summing all of the assets and deducting accumulated depreciationincluding the current year's depreciation). Total accumulated depreciation at the end of the second year is US $120, 000 [($600, 000 - 10 years) x 2 years]. Total assets equal US $890, 000$80, 000 cash + $100, 000 A/R + $230, 000 El + $600, 000 gross property, plant, and equipment- $120, 000 accumulated depreciation). Copper Co. had the pre-closing trial balance at December 31 shown below. Additional information: The balance of opening inventory was US $140, 000. The long-term debt pays interest at a rate of 10% per annum, payable every 12 months. The debt was issued on July 1 of the current year and originally had 5 years to maturity. The assets classified as property, plant, and equipment have a 10-year estimated useful life and were 1 year old at the start of the current year Straight-line depreciation is used.
Which adjusting entry should be used at year-end to account for interest expense on the long-term debt?
Answer(s): D
The debt was issued on July 1 and has been outstanding for only 6 months. Interest expense equals the face amount of the debt multiplied by the interest rate and the fraction of the year the debt was outstanding [US $1.000.000 x 10% x6 - 12) = US $50, 000]. Because interest is payable on July 1. 6 months' interest is accrued and expensed in the current period. The payable is also recognized in the current p-riod. Thus, the adjusting entry should beInterest expense US $50, 000Interest payable US $50.000Copper Co. had the pre-closing trial balance at December 31 shown below. Additional information: The balance of opening inventory was US $140, 000. The long-term debt pays interest at a rate of 10% per annum, payable every 12 months. The debt was issued on July 1 of the current year and originally had 5 years to maturity. The assets classified as property, plant, and equipment have a 10-year estimated useful life and were 1 year old at the start of the current year Straight-line depreciation is used.
Assume that the enterprise reports cost of goods sold of US $200, 000 and interest expense of US $10, 000 for the current period. Also assume a 50% tax rate on corporate earnings. The final closing entry required to ensure that current earnings are incorporated into year-end retained earnings is
Current period pretax net income equals US $280, 000$750, 000 sales $200, 000 CGS - $60, 000 depreciation - $10, 000 interest - $200, 000 administrative expenses. Thus, after- tax net income credited to retained earnings equals US $140.000 [(10 - .5) x $280, 000.
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