ACC 304 Extraordinary Success |snaptutorial.com

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ACC 304 Final Exam Part 1 (3 Sets) For more
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This Tutorial contains 3 Set of Finals ACC 304
Final Exam Part 1 (3 Sets) 1 1) Swing High Inc.
offers its 100 employees to participate in an
employee share-purchase plan. Under the terms of
plan, employees are entitled to purchase 10
shares at 10 discount. The par values of shares
were 10. Overall, 60 employees accepted the
offer and each employee purchased six shares. The
market price on purchase date was 100. What is
the compensation expense recorded by Swing High
Inc.?
2
The interest rate written in the terms of the
bond indenture is known as the 3) Which of the
following methods of amortization is normally
used for intangible assets?
4) If bonds are initially sold at a discount
and the straight-line method of amortization is
used, interest expense in the earlier years
will 5) The distribution of stock rights to
existing common stockholders will increase
paid-in capital at the 6) Treasury shares are
shares 7) Which of the following is a
contract-related intangible assets? 8) Which
of the following taxes does not represent a
common employee payroll deduction?
9) On January 1, 2014, Ellison Co. issued
eight-year bonds with a face value of 4,000,000
and a stated interest rate of 6, payable
semiannually on June 30 and December 31. The
bonds were sold to
yield 8. Table values are Present value of 1
for 8 periods at 6 .627 Present value of 1
for 8 periods at 8 .540 Present value of 1
for 16 periods at 3 .623 Present value of 1
for 16 periods at 4 .534
Present value of annuity for 8 periods at
6 6.210 Present value of annuity for 8 periods
at 8 5.747
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Present value of annuity for 16 periods at
3 12.561 Present value of annuity for 16 periods
at 4 11.652 The present value of the interest
is 10) Which of the following would be
considered research and development costs? 11)
On January 1, 2015, Evans Company granted Tim
Telfer, an employee, an option to buy 3,000
shares of Evans Co. stock for 25 per share, the
option exercisable for 5 years from date of
grant. Using a fair value option pricing model,
total compensation expense is determined to be
22,500. Telfer exercised his option on September
1, 2015, and sold his 1,000 shares on December 1,
2015. Quoted market prices of Evans Co. stock
during 2015 were January 1 25 per
share September 1 30 per share December 1
34 per share
The service period is for three years beginning
January 1, 2015. As a result of the option
granted to Telfer, using the fair value method,
Evans should recognize compensation expense for
2015 on its books in the amount of 12) Presented
below is information related to Hale
Corporation Common Stock, 1 par
4,500,000 Paid-in Capital in Excess of
ParCommon Stock 550,000 Preferred 8 1/2 Stock,
50 par 2,000,000 Paid-in Capital in Excess of
ParPreferred Stock 400,000 Retained Earnings
1,500,000 Treasury Common Stock (at cost)
150,000 The total paid-in capital (cash
collected) related to the common stock is
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13) On October 1, 2014 Macklin Corporation
issued 5, 10-year bonds with a face value of
4,000,000 at 104. Interest is paid on October 1
and April 1, with any premiums or discounts
amortized on a straight-line basis. Bond interest
expense reported on the December 31, 2014 income
statement of Macklin Corporation would be 14)
Gannon Company acquired 10,000 shares of its own
common stock at 20 per share on February 5,
2014, and sold 5,000 of these shares at 27 per
share on August 9, 2015. The fair value of
Gannon's common stock was 24 per share at
December 31, 2014, and 25 per share at December
31, 2015. The cost method is used to record
treasury stock transactions. What account(s)
should Gannon credit in 2015 to record the sale
of 5,000 shares?
15) When computing diluted earnings per share,
convertible bonds are 16) Jeff Corporation
purchased a limited-life intangible asset for
225,000 on May 1, 2013. It has a useful life of
10 years. What total amount of amortization
expense should have been recorded on the
intangible asset by December 31, 2015?
17) A corporation called an outstanding bond
obligation four years before maturity. At that
time there was an unamortized discount of
750,000. To extinguish this debt, the company
had to pay a call premium of 250,000. Ignoring
income tax considerations, how should these
amounts be treated for accounting purposes?
18) Slack Inc. borrowed 320,000 on April 1. The
note requires interest at 12 and principal to be
paid in one year. How much interest is recognized
for the period from April 1 to December 31?
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19) Venible newspapers sold 6,000 of annual
subscriptions at 125 each on June 1. How much
unearned revenue will exist as of December 31?
20) Hanson Co. had 200,000 shares of common
stock, 20,000 shares of convertible preferred
stock, and 1,000,000 of 5 convertible bonds
outstanding during 2015. The preferred stock is
convertible into 40,000 shares of common stock.
During 2015, Hanson paid dividends of .60 per
share on the common stock and 2 per share on the
preferred stock. Each 1,000 bond is convertible
into 45 shares of common stock. The net income
for 2015 was 400,000 and the income tax rate was
30. Basic earnings per share for 2015 is
(rounded to the nearest penny)
21) Sealy Corporation had the following
information in its financial statements for the
years ended 2014 and 2015 Cash dividends for the
year 2015 5,000 Net income for the year ended
2015 87,000 Market price of stock, 12/31/14
10 Market price of stock, 12/31/15 12 Common
stockholders' equity, 12/31/14
1,000,000 Common stockholders' equity, 12/31/15
1,200,000 Outstanding shares, 12/31/15
100,000 Preferred dividends for the year ended
2015 10,000 What is the payout ratio for Sealy
Corporation for the year ended 2015?
22) Jenks Corporation acquired Linebrink Products
on January 1, 2015 for 8,000,000, and recorded
goodwill of 1,500,000 as a result of that
purchase. At December 31, 2015, Linebrink
Products had a fair value of 6,800,000. The net
identifiable assets of the Linebrink (excluding
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goodwill) had a fair value of 5,800,000 at that
time. What amount of loss on impairment of
goodwill should Jenks record in 2015?
23) On December 31, 2014, the stockholders'
equity section of Arndt, Inc., was as
follows Common stock, par value 10 authorized
30,000 shares issued and outstanding 9,000
shares 90,000 Additional paid-in capital 116,000
Retained earnings 184,000 Total stockholders'
equity 390,000 On March 31, 2015, Arndt declared
a 10 stock dividend, and accordingly 900
additional shares were issued, when the fair
value of the stock was 18 per share. For the
three months ended March 31, 2015, Arndt
sustained a net loss of 32,000. The balance of
Arndts retained earnings as of March 31, 2015,
should be 24) On September 1, 2014, Halley Co.
issued a note payable to Fidelity Bank in the
amount of 1,800,000, bearing interest at 10,
and payable in three equal annual principal
payments of 600,000. On this date, the bank's
prime rate was 11. The first payment for
interest and principal was made on September 1,
2015. At December 31, 2015, Halley should record
accrued interest payable of ACC 304 Final Exam
Part 1 (3 Sets) 2 1) We have also attached
download of Chapter 12, 13, 14, 15, 16 (download
it from my account section) Please use those as
well for your finals and please either use the
question number or some data from question to
search as they usually change the company keeping
the data same
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2) Convertible bonds 3) Litke Corporation
issued at a premium of 5,000 a 100,000 bond
issue convertible into 2,000 shares of common
stock (par value 20). At the time of the
conversion, the unamortized premium is 2,000,
the market value of the bonds is 110,000, and
the stock is quoted on the market at 60 per
share. If the bonds are converted into common,
what is the amount of paid-in capital in excess
of par to be recorded on the conversion of the
bonds?
4) Didde Co. had 300,000 shares of common
stock issued and outstanding at December 31,
2014. No common stock was issued during 2015. On
January 1, 2015, Didde issued 200,000 shares of
nonconvertible preferred stock. During 2015,
Didde declared and paid 75,000 cash dividends on
the common stock and 60,000 on the preferred
stock. Net income for the year ended December 31,
2015 was 465,000. What should be Didde's 2015
earnings per common share? 5) Weiser Corp. on
January 1, 2012, granted stock options for 40,000
shares of its 10 par value common stock to its
key employees. The market price of the common
stock on that date was 23 per share and the
option price was 20. The Black-Scholes option
pricing model determines total compensation
expense to be 420,000. The options are
exercisable beginning January 1, 2015, provided
those key employees are still in Weisers employ
at the time the options are exercised. The
options expire on January 1, 2016.
On January 1, 2015, when the market price of the
stock was 29 per share, all 40,000 options were
exercised. The amount of compensation expense
Weiser should record for 2015 under the fair
value method is 6) Carr Corporation retires its
300,000 face value bonds at 105 on January 1,
following the payment of interest. The carrying
value of the
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bonds at the redemption date is 311,235. The
entry to record the redemption will include a 7)
On October 1, 2014 Macklin Corporation issued
5, 10-year bonds with a face value of 4,000,000
at 104. Interest is paid on October 1 and April
1, with any premiums or discounts amortized on a
straightline basis. The entry to record the
issuance of the bonds would include a credit
of 8) Farmer Company issues 25,000,000 of
10-year, 9 bonds on March 1, 2014 at 97 plus
accrued interest. The bonds are dated January 1,
2014, and pay interest on June 30 and December
31. What is the total cash received on the issue
date?
9) On its December 31, 2014 balance sheet,
Emig Corp. reported bonds payable of 3,000,000
and related unamortized bond issue costs of
160,000. The bonds had been issued at par. On
January 2, 2015, Emig retired 1,500,000 of the
outstanding bonds at par plus a call premium of
35,000. What amount should Emig report in its
2015 income statement as loss on extinguishment
of debt (ignore taxes)? 10) Feller Company
issues 15,000,000 of 10-year, 9 bonds on March
1, 2014 at 97 plus accrued interest. The bonds
are dated January 1, 2014, and pay interest on
June 30 and December 31. What is the total cash
received on the issue date?
11) Where is debt callable by the creditor
reported on the debtor's financial statements?
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12) Sawyer Company self-insures its property
for fire and storm damage. If the company were to
obtain insurance on the property, it would cost
them 1,500,000 per year. The company estimates
that on average it will incur losses of
1,200,000 per year. During 2014, 525,000 worth
of losses were sustained. How much total expense
and/or loss should be recognized by Sawyer
Company for 2014? 13) A liability for
compensated absences such as vacations, for which
it is expected that employees will be paid,
should 14) On September 1, Horton purchased
13,300 of inventory items on credit with the
terms 1/15, net 30, FOB destination. Freight
charges were 280. Payment for the purchase was
made on September 18. Assuming Horton uses the
perpetual inventory system and the net method of
accounting for purchase discounts, what amount is
recorded as inventory from this purchase?
15) What is a discount as it relates to
zero-interest-bearing notes payable? 16) Which
of the following legal fees should be
capitalized? 17) Which of the following costs
of goodwill should be amortized over their
estimated useful lives? 18) MaBelle
Corporation incurred the following costs in 2015
Acquisition of RD equipment with a useful life
of 4 years in RD projects 800,000 Start-up
costs incurred when opening a new plant 140,000
Advertising expense to introduce a new product
700,000 Engineering costs incurred to advance a
product to full production stage 500,000 What
amount should MaBelle record as research
development expense in 2015?
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19) Jenks Corporation acquired Linebrink
Products on January 1, 2015 for 8,000,000, and
recorded goodwill of 1,500,000 as a result of
that purchase. At December 31, 2015, Linebrink
Products had a fair value of 6,800,000. The net
identifiable assets of the Linebrink (excluding
goodwill) had a fair value of 5,800,000 at that
time. What amount of loss on impairment of
goodwill should Jenks record in 2015? 20) The
general ledger of Vance Corporation as of
December 31, 2015, includes the following
accounts Copyrights 30,000 Deposits with
advertising agency (will be used to promote
goodwill) 27,000 Discount on bonds payable
70,000 Excess of cost over fair value of
identifiable net assets of Acquired subsidiary
480,000 Trademarks 90,000 In the preparation of
Vance's balance sheet as of December 31, 2015,
what should be reported as total intangible
assets? 21) Sealy Corporation had the
following information in its financial statements
for the years ended 2014 and 2015 Cash dividends
for the year 2015 5,000 Net income for the
year ended 2015 87,000 Market price of stock,
12/31/14 10 Market price of stock, 12/31/15
12 Common stockholders' equity, 12/31/14
1,000,000 Common stockholders' equity, 12/31/15
1,200,000 Outstanding shares, 12/31/15
100,000 Preferred dividends for the year ended
2015 10,000 What is the rate of return on common
stock equity for Sealy Corporation for the year
ended 2015? 22) An entry is not made on the
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23) The issuer of a 5 common stock dividend
to common stockholders should transfer from
retained earnings to paid-in capital an amount
equal to the 24) Layne Corporation had the
following information in its financial statements
for the years ended 2014 and 2015 Cash dividends
for the year 2015 10,000 Net income for the
year ended 2015 83,000 Market price of stock,
12/31/14 10 Market price of stock, 12/31/15
12 Common stockholders' equity, 12/31/14
1,600,000 Common stockholders' equity, 12/31/15
1,980,000 Outstanding shares, 12/31/15
180,000 Preferred dividends for the year ended
2015 15,000 What is the book value per share for
Layne Corporation for the year ended 2015? 25)
The pre-emptive right of a common stockholder is
the right to
ACC 304 Final Exam Part 1 (3 Sets)
1) Swing High Inc. offers its 100 employees to
participate in an employee share-purchase plan.
Under the terms of plan, employees are entitled
to purchase 10 shares at 10 discount. The par
values of shares were 10. Overall, 60 employees
accepted the offer and each employee purchased
six shares. The market price on purchase date was
100.
2) Didde Co. had 300,000 shares of common stock
issued and outstanding at December 31, 2014. No
common stock was issued during
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2015. On January 1, 2015, Didde issued 200,000
shares of nonconvertible preferred stock. During
2015, Didde declared and paid 75,000 cash
dividends on the common stock and 60,000 on the
preferred stock. Net income for the year ended
December 31, 2015 was 465,000. What should be
Didde's 2015 earnings per common share? 3)
When convertible debt is retired by the issuer,
any material difference between the cash
acquisition price and the carrying amount of the
debt should be 4) On July 1, 2014, an interest
payment date, 90,000 of Parks Co. bonds were
converted into 1,800 shares of Parks Co. common
stock each having a par value of 45 and a market
value of 54. There is 3,600 unamortized
discount on the bonds. Using the book value
method, Parks would record 5) Convertible
bonds 6) Paige Co. took advantage of market
conditions to refund debt. This was the fourth
refunding operation carried out by Paige within
the last three years. The excess of the carrying
amount of the old debt over the amount paid to
extinguish it should be reported as a 7) Under
the effective-interest method of bond discount or
premium amortization, the periodic interest
expense is equal to 8) When a business
enterprise enters into what is referred to as
off-balance-sheet financing, the company 9)
When the interest payment dates of a bond are May
1 and November 1, and a bond issue is sold on
June 1, the amount of cash received by the issuer
will be 10) On October 1, 2014 Macklin
Corporation issued 5, 10-year bonds with a face
value of 4,000,000 at 104. Interest is paid on
October 1 and
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April 1, with any premiums or discounts amortized
on a straight-line basis. 11) Which of the
following taxes does not represent a common
employee payroll deduction? 12) Which of the
following is an example of a contingent
liability? 13) Sawyer Company self-insures its
property for fire and storm damage. If the
company were to obtain insurance on the property,
it would cost them 1,500,000 per year. The
company estimates that on average it will incur
losses of 1,200,000 per year. During 2014,
525,000 worth of losses were sustained. How much
total expense and/or loss should be recognized by
Sawyer Company for 2014? 14) Greeson Corp.
signed a three-month, zero-interest-bearing note
on November 1, 2014 for the purchase of 250,000
of inventory. The face value of the note was
253,900. Greeson used a "Discount on Note
Payable" account to initially record the note.
Assuming that the discount will be amortized
equally over the 3-month period and that there
was no adjusting entry made for November, the
adjusting entry made at December 31, 2012 will
include a
15) Presented below is information available for Marley Company. 15) Presented below is information available for Marley Company.
Current Assets Cash 4,000 Short-term investments 65,000
Accounts receivable 61,000
Inventories 110,000
Prepaid expenses 30,000
Total current assets 270,000
16) In accounting for internally generated intangible assets, U.S. GAAP 16) In accounting for internally generated intangible assets, U.S. GAAP
requires that
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17) One factor that is not considered in
determining the useful life of an intangible
asset is 18) In 2015, Edwards Corporation
incurred research and development costs as
follows Materials and equipment 110,000
Personnel 130,000 Indirect costs 150,000
390,000 These costs relate to a product that
will be marketed in 2016. It is estimated that
these costs will be recouped by December 31,
2018. The equipment has no alternative future
use. What is the amount of research and
development costs that should be expensed in 2015?
19) The carrying value of an intangible is 20)
Under current accounting practice, intangible
assets are classified as 21) The statement of
changes in equity has columns for each of the
following except 22) The pre-emptive right of
a common stockholder is the right to
23) Total stockholders' equity represents 24)
The issuer of a 5 common stock dividend to
common stockholders should transfer from retained
earnings to paid-in capital an amount equal to
the 25) Which of the following features of
preferred stock makes it more like a debt than an
equity instrument?
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ACC 304 Final Exam Part 2 (2 Sets) For more
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ACC 304 Final Exam Part 2 (2 Sets) 1 1) On
January 1, 2015, Piper Co. issued ten-year bonds
with a face value of 3,000,000 and a stated
interest rate of 10, payable semiannually on
June 30 and December 31. The bonds were sold to
yield 12. Table values are Present value of 1
for 10 periods at 10 .386 Present value of
1 for 10 periods at 12 .322 Present value
of 1 for 20 periods at 5 .377 Present
value of 1 for 20 periods at 6
.312 Present value of annuity for 10 periods
at 10 6.145 Present value of annuity for 10
periods at 12 5.650 Present value of
annuity for 20 periods at 5 12.462 Present
value of annuity for 20 periods at 6 11.470
2) Without prejudice to your solution in part
(a), assume that the issue price was 2,652,000.
Prepare the amortization table for 2015, assuming
that amortization is recorded on interest payment
dates using the effective-interest method. 3)
The following information pertains to Parsons
Co. Preferred stock, cumulative Par value per
share 100
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Dividend rate 8
Shares outstanding 9,000
Dividends in arrears none
Common stock
Par value per share 10
Shares issued 100,000
Dividends paid per share 2.00
Market price per share 47
Additional paid-in capital 480,000
Unappropriated retained earnings (after closing) Unappropriated retained earnings (after closing) 250,000
Retained earnings appropriated for contingencies Retained earnings appropriated for contingencies 280,000
Common treasury stock
Number of shares 9,000
Total cost 240,000 Total cost 240,000
Net income 610,000 Net income 610,000
Compute (assume no changes in balances during the
past year) (Round per share and ratios to 2
decimal places, e.g. 15.75 or 15.75.) (a)
Total amount of stockholders' equity in the
balance sheet
(b) per share Earnings per share of common stock
(c) per share Book value per share of common stock
(d) Payout ratio of common stock

(e) Return on common stock equity

4) Sisco Co. purchased a patent from Thornton Co.
for 620,000 on July 1, 2012. Expenditures of
119,000 for successful litigation in defense of
the patent were paid on July 1, 2015. Sisco
estimates that the useful life of the patent will
be 20 years from the date of acquisition.
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Prepare a computation of the carrying value of
the patent at December 31, 2015.
5) On August 31, Latty Co. partially refunded
401,000 of its outstanding 10 note payable made
one year ago to Dugan State Bank by paying
401,000 plus 40,100 interest, having obtained
the 441,100 by using 126,240 cash and signing a
new one-year 346,000 note discounted at 9 by
the bank. 6) Make the entry to record the
partial refunding. Assume Latty Co. makes
reversing entries when appropriate. (Credit
account titles are automatically indented when
the amount is entered. Do not indent
manually.) 6) 7) Prepare the adjusting entry
at December 31, assuming straight-line
amortization of the discount. (Credit account
titles are automatically indented when the amount
is entered. Do not indent manually.)
ACC 304 Final Exam Part 2 (2 Sets)
1) The following information pertains to Parsons
Co. Preferred stock, cumulative
Par value per share 100
Dividend rate 8
Shares outstanding 9,000
Dividends in arrears none
ommon stock
Par value per share 10
Shares issued 100,000
Dividends paid per share 2.00
Market price per share 47
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Additional paid-in capital 480,000 Unappropria
ted retained earnings (after closing)
250,000 Retained earnings appropriated for
contingencies 280,000 Common treasury
stock Number of shares 9,000 Total cost
240,000 Net income 610,000 Compute (assume
no changes in balances during the past year)
(Round per share and ratios to 2 decimal places,
e.g. 15.75 or 15.75.) (a) Total amount of
stockholders' equity in the balance sheet
(b) per share Earnings per share of common stock
(c) per share Book value per share of common stock
(d) Payout ratio of common stock

(e) Return on common stock equity

2) On January 1, 2015, Piper Co. issued ten-year
bonds with a face value of 3,000,000 and a
stated interest rate of 10, payable semiannually
on June 30 and December 31. The bonds were sold to
yield 12. Table values are Present value of 1
for 10 periods at 10 .386 Present value of 1
for 10 periods at 12 .322 Present value of 1
for 20 periods at 5 .377 Present value of 1
for 20 periods at 6 .312 Present value of
annuity for 10 periods at 10 6.145 Present
value of annuity for 10 periods at 12
5.650 Present value of annuity for 20 periods at
5 12.462 Present value of annuity for 20
periods at 6 11.470
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3) Calculate the issue price of the
bonds. Issue price of bond 4) Without
prejudice to your solution in part (a), assume
that the issue price was 2,652,000. Prepare the
amortization table for 2015, assuming that
amortization is recorded on interest payment
dates using the effective-interest method. 5)
Sisco Co. purchased a patent from Thornton Co.
for 620,000 on July 1, 2012. Expenditures of
119,000 for successful litigation in defense of
the patent were paid on July 1, 2015. Sisco
estimates that the useful life of the patent will
be 20 years from the date of acquisition. Prepare
a computation of the carrying value of the patent
at December 31, 2015. 6) On August 31, Latty
Co. partially refunded 443,000 of its
outstanding 10 note payable made one year ago to
Dugan State Bank by paying 443,000 plus 44,300
interest, having obtained the 487,300 by using
134,220 cash and signing a new one-year 388,000
note discounted at 9 by the bank. 7) Make the
entry to record the partial refunding. Assume
Latty Co. makes reversing entries when
appropriate. (Credit account titles are
automatically indented when the amount is
entered. Do not indent manually.) 8) Prepare
the adjusting entry at December 31, assuming
straight-line amortization of the discount.
(Credit account titles are automatically indented
when the amount is entered. Do not indent
manually.) Date Account Titles and Explanation
Debit Credit
ACC 304 Week 1 Chapter 8 Homework
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ACC 304 Week 1 Chapter 8 Homework 1) Matlock
Company uses a perpetual inventory system. Its
beginning inventory consists 50 units that cost
34 each. During June , (1) the company purchased
units at 34 each, (2) returned 6 units for
credit ,and (3) sold 125 unit at 50 each.
Journalize the June transactions. 2) Amsterdam
Company uses a periodic inventory system. For
April, When the company sold 600 units, The
following information is available. calculate
weighted average cost per unit. 3) Arna, Inc.
uses the dollar value LIFO method of computing
its inventory. Data for the past 3 year follow.
Compute the value of the 2014 and 2015
inventories using the dollar-value LIFE
method. 4) Craig Company asks you to review
its December 31, 2014, inventory values and
prepare the necessary adjustments to the book.
The following information is given to u.
determine the proper inventory balance for Craig
Company at December 31, 2014. 5) Prepare any
correcting entries to adjust inventory to its
proper amount at December 31, 2014. Assume the
books have not been closed. 6) The net income
per books of Linda Patrick Company was determined
without knowledge of the errors indicated below.
Prepare work sheet to show the adjusted net
income figure for each of the 6 years after
taking into account the inventory errors. 7)
Presented below the information related to Dino
Radja Company. Compute the ending inventory for
Dino Radja Company for 2011 throw 2016 using the
Dollar value LIFO method. 8) Under IFRS, an
entity should initially recognize inventory when
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9) With respect to accounting of inventories,
which of the following is a difference that
exists for IFRS, as opposed to U.S GAAP? 10)
Some of the transactions of Torres Company during
August are listed below. Torres uses the periodic
inventory method. 11) Assuming that purchases
are recorded at gross amounts and that discounts
are to be recorded when taken prepare general
journal entries to record the transactions 12)
Assuming that purchases are recorded at net
amounts and that discounts lost are treated as
financial expenses prepare general journal
entries to record the transactions 13)
Assuming that purchases are recorded at net
amounts and that discounts lost are treated as
financial expenses prepare the adjusting entry
necessary on August 31 if financial statements
are to be prepared at that time. 14) Under
IFRS, which of the following would be included in
the cost of inventories? 15) Under IFRS,
inventories are classified as 16) Which of the
following best describes the IFRS requirement for
applying the same cost formula to all inventories?
ACC 304 Week 2 Chapter 8 Quiz (All
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ACC 304 Week 2 Quiz - Strayer NEW
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CHAPTER 8 VALUATION OF INVENTORIESA COST-BASIS
APPROACH IFRS questions are available at the end
of this chapter. TRUE FALSEConceptual 1. A
manufacturing concern would report the cost of
units only partially processed as inventory in
the balance sheet.
2. Both merchandising and manufacturing companies
normally have multiple inventory accounts.
3. When using a perpetual inventory system,
freight charges on goods purchased are debited to
Freight-In.
4. If a supplier ships goods f.o.b.
destination, title passes to the buyer when the
supplier delivers the goods to the common carrier.
5. If ending inventory is understated, then net
income is understated.
6. If both purchases and ending inventory are
overstated by the same amount, net income is not
affected.
7. Freight charges on goods purchased are
considered a period cost and therefore are not
part of the cost of the inventory.
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8. Purchase Discounts Lost is a financial
expense and is reported in the other expenses
and losses section of the income statement. 9.
The cost flow assumption adopted must be
consistent with the physical movement of the
goods. 10. In all cases when FIFO is used, the
cost of goods sold would be the same whether a
perpetual or periodic system is used. 11. The
change in the LIFO Reserve from one period to the
next is recorded as an adjustment to Cost of
Goods Sold. 12. Many companies use LIFO for
both tax and internal reporting purposes. 13.
LIFO liquidation often distorts net income, but
usually leads to substantial tax savings. 14.
LIFO liquidations can occur frequently when using
a specific-goods approach. 15. Dollar-value
LIFO techniques help protect LIFO layers from
erosion.
24
16. The dollar-value LIFO method measures any
increases and decreases in a pool in terms of
total dollar value and physical quantity of the
goods. 17. A disadvantage of LIFO is that it
does not match more recent costs against current
revenues as well as FIFO. 18. The LIFO
conformity rule requires that if a company uses
LIFO for tax purposes, it must also use LIFO for
financial accounting purposes. 19. Use of LIFO
provides a tax benefit in an industry where unit
costs tend to decrease as production
increases. 20. LIFO is inappropriate where
unit costs tend to decrease as production
increases. True False AnswersConceptual MULTIPLE
CHOICEConceptual 21. Which of the following
inventories carried by a manufacturer is similar
to the merchandise inventory of a retailer? a.
Raw materials. b. Work-in-process. c.
Finished goods.
25
d. Supplies. 22. Where should raw materials be
classified on the balance sheet? a. Prepaid
expenses. b. Inventory. c. Equipment. d.
Not on the balance sheet. 23. Which of the
following accounts is not reported in
inventory? a. Raw materials. b.
Equipment. c. Finished goods. d.
Supplies. 24. Why are inventories included in
the computation of net income? a. To determine
cost of goods sold. b. To determine sales
revenue. c. To determine merchandise
returns. d. Inventories are not included in
the computation of net income.
26
25. Which of the following is a characteristic of
a perpetual inventory system? a. Inventory
purchases are debited to a Purchases account. b.
Inventory records are not kept for every
item. c. Cost of goods sold is recorded with
each sale. d. Cost of goods sold is determined
as the amount of purchases less the change in
inventory.
26. How is a significant amount of consignment
inventory reported in the balance sheet? a.
The inventory is reported separately on the
consignor's balance sheet. b. The inventory is
combined with other inventory on the consignor's
balance sheet. c. The inventory is reported
separately on the consignee's balance sheet. d.
The inventory is combined with other inventory
on the consignee's balance sheet. 27. Where
should goods in transit that were recently
purchased f.o.b. destination be included on the
balance sheet? a. Accounts payable. b.
Inventory.
27
c. Equipment. d. Not on the balance
sheet. 28. If a company uses the periodic
inventory system, what is the impact on net
income of including goods in transit f.o.b.
shipping point in purchases, but not ending
inventory? a. Overstate net income. b.
Understate net income. c. No effect on net
income. d. Not sufficient information to
determine effect on net income. 29. If a
company uses the periodic inventory system, what
is the impact on the current ratio of including
goods in transit f.o.b. shipping point in
purchases, but not ending inventory? a.
Overstate the current ratio. b. Understate the
current ratio. c. No effect on the current
ratio. d. Not sufficient information to
determine effect on the current ratio. 30.
What is consigned inventory? a. Goods that are
shipped, but title transfers to the receiver.
28
b. Goods that are sold, but payment is not
required until the goods are sold. c. Goods
that are shipped, but title remains with the
shipper. d. Goods that have been segregated
for shipment to a customer. 31. When using a
perpetual inventory system, a. no Purchases
account is used. b. a Cost of Goods Sold
account is used. c. two entries are required
to record a sale. d. all of these. 32.
Goods in transit which are shipped f.o.b.
shipping point should be a. included in the
inventory of the seller. b. included in the
inventory of the buyer. c. included in the
inventory of the shipping company. d. none of
these. 33. Goods in transit which are shipped
f.o.b. destination should be
29
a. included in the inventory of the seller. b.
included in the inventory of the buyer. c.
included in the inventory of the shipping
company. d. none of these.
34. Which of the following items should be
included in a company's inventory at the balance
sheet date? a. Goods in transit which were
purchased f.o.b. destination. b. Goods
received from another company for sale on
consignment. c. Goods sold to a customer which
are being held for the customer to call for at
his or her convenience. d. None of these.
Use the following information for questions 35
and 36. During 2012 Carne Corporation transferred
inventory to Nolan Corporation and agreed to
repurchase the merchandise early in 2013. Nolan
then used the inventory as collateral to borrow
from Norwalk Bank, remitting the proceeds to
Carne. In 2013 when Carne repurchased the
inventory, Nolan used the proceeds to repay its
bank loan.
35. This transaction is known as a(n) a.
consignment.
30
b. installment sale. c. assignment for the
benefit of creditors. d. product financing
arrangement. 36. On whose books should the
cost of the inventory appear at the December 31,
2012 balance sheet date? a. Carne
Corporation b. Nolan Corporation c. Norwalk
Bank d. Nolan Corporation, with Carne making
appropriate note disclosure of the
transaction 37. Goods on consignment are a.
included in the consignee's inventory. b.
recorded in a Consignment Out account which is an
inventory account. c. recorded in a
Consignment In account which is an inventory
account. d. all of these S38. Valuation of
inventories requires the determination of all of
the following except
31
a. the costs to be included in inventory. b.
the physical goods to be included in
inventory. c. the cost of goods held on
consign-ment from other companies. d. the cost
flow assumption to be adopted. P39. The
accountant for the Pryor Sales Company is
preparing the income statement for 2012 and the
balance sheet at December 31, 2012. Pryor uses
the periodic inventory system. The January 1,
2012 merchandise inventory balance will appear a.
only as an asset on the balance sheet. b.
only in the cost of goods sold section of the
income statement. c. as a deduction in the
cost of goods sold section of the income
statement and as a current asset on the balance
sheet. d. as an addition in the cost of goods
sold section of the income statement and as a
current asset on the balance sheet.
P40. If the beginning inventory for 2012 is
overstated, the effects of this error on cost of
goods sold for 2012, net income for 2012, and
assets at December 31, 2013, respectively, are a.
overstatement, understatement,
overstatement. b. overstatement,
understatement, no effect.
32
c. understatement, overstatement,
overstatement. d. understatement,
overstatement, no effect. S41. The failure to
record a purchase of mer-chandise on account even
though the goods are properly included in the
physical inven-tory results in a. an
overstatement of assets and net income. b. an
understatement of assets and net income. c. an
understatement of cost of goods sold and
liabilities and an overstatement of assets. d.
an understatement of liabilities and an
overstatement of owners' equity.
42. Dolan Co. received merchandise on
consignment. As of March 31, Dolan had recorded
the transaction as a purchase and included the
goods in inventory. The effect of this on its
financial statements for March 31 would be a.
no effect. b. net income was correct and
current assets and current liabilities were
overstated. c. net income, current assets, and
current liabilities were overstated. d. net
income and current liabilities were overstated.
33
43. Green Co. received merchandise on
consignment. As of January 31, Green included the
goods in inventory, but did not record the
transaction. The effect of this on its financial
statements for January 31 would be a. net
income, current assets, and retained earnings
were overstated. b. net income was correct and
current assets were understated. c. net income
and current assets were overstated and current
liabilities were understated. d. net income,
current assets, and retained earnings were
understated. 44. Feine Co. accepted delivery
of merchandise which it purchased on account. As
of December 31, Feine had recorded the
transaction, but did not include the merchandise
in its inventory. The effect of this on its
financial statements for December 31 would be a.
net income, current assets, and retained
earnings were understated. b. net income was
correct and current assets were understated. c.
net income was understated and current
liabilities were overstated. d. net income was
overstated and current assets were understated.
45. On June 15, 2012, Wynne Corporation accepted
delivery of merchandise which it pur-chased on
account. As of June 30, Wynne had not recorded
the transaction or included the merchandise in
its inventory. The effect of this on its balance
sheet for June 30, 2012 would be
34
a. assets and stockholders' equity were
overstated but liabilities were not affected. b.
stockholders' equity was the only item affected
by the omission. c. assets, liabilities, and
stockholders' equity were understated. d. none
of these. 46. What is the effect of a 50,000
overstatement of last year's inventory on current
years ending retained earning balance? a.
Understated by 50,000. b. No effect. c.
Overstated by 50,000. d. Need more
information to determine. 47. Which of the
following is a product cost as it relates to
inventory? a. Selling costs. b. Interest
costs. c. Raw materials. d. Abnormal
spoilage. 48. Which of the following is a
period cost?
35
a. Labor costs. b. Freight in. c.
Production costs. d. Selling costs. 49.
Which method may be used to record cash discounts
a company receives for paying suppliers
promptly? a. Net method. b. Gross
method. c. Average method. d. a and b. 50.
Which of the following is included in inventory
costs? a. Product costs. b. Period
costs. c. Product and period costs. d.
Neither product or period costs. 51. Which of
the following is correct?
36
a. Selling costs are product costs. b.
Manufacturing overhead costs are product
costs. c. Interest costs for routine
inventories are product costs. d. All of these.
52. All of the following costs should be
charged against revenue in the period in which
costs are incurred except for a. manufacturing
overhead costs for a product manufactured and
sold in the same accounting period. b. costs
which will not benefit any future period. c.
costs from idle manufacturing capacity resulting
from an unexpected plant shutdown. d. costs of
normal shrinkage and scrap incurred for the
manufacture of a product in ending inventory. 53.
Which of the following types of interest cost
incurred in connection with the purchase or
manufacture of inventory should be capitalized as
a product cost? a. Purchase discounts lost b.
Interest incurred during the production of
discrete projects such as ships or real estate
projects c. Interest incurred on notes payable
to vendors for routine purchases made on a
repetitive basis
37
d. All of these should be capitalized. 54. The
use of a Discounts Lost account implies that the
recorded cost of a purchased inventory item is
its a. invoice price. b. invoice price plus
the purchase discount lost. c. invoice price
less the purchase discount taken. d. invoice
price less the purchase discount allowable
whether taken or not. 55. The use of a
Purchase Discounts account implies that the
recorded cost of a purchased inventory item is
its a. invoice price. b. invoice price plus
any purchase discount lost. c. invoice price
less the purchase discount taken. d. invoice
price less the purchase discount allowable
whether taken or not. Use the following
information for questions 56 and 57. During 2012,
which was the first year of operations, Oswald
Company had merchandise purchases of 985,000
before cash discounts. All
38
purchases were made on terms of 2/10, n/30.
Three-fourths of the items purchased were paid
for within 10 days of purchase. All of the goods
available had been sold at year end. 56. Which
of the following recording procedures would
result in the highest cost of goods sold for
2012? 1. Recording purchases at gross
amounts 2. Recording purchases at net amounts,
with the amount of discounts not taken shown
under "other expenses" in the income statement a.
1 b. 2 c. Either 1 or 2 will result in
the same cost of goods sold. d. Cannot be
determined from the information provided. 57.
Which of the following recording procedures would
result in the highest net income for 2012? 1.
Recording purchases at gross amounts
2. Recording purchases at net amounts, with the
amount of discounts not taken shown under "other
expenses" in the income statement a. 1 b.
2 c. Either 1 or 2 will result in the same net
income.
39
d. Cannot be determined from the information
provided.
58. When using the periodic inventory system,
which of the following generally would not be
separately accounted for in the computation of
cost of goods sold? a. Trade discounts
applicable to purchases during the period b.
Cash (purchase) discounts taken during the
period c. Purchase returns and allowances of
merchandise during the period d. Cost of
transportation-in for merchandise purchased
during the period
S59. Costs which are inventoriable include all of
the following except a. costs that are
directly connected with the bringing of goods to
the place of business of the buyer. b. costs
that are directly connected with the converting
of goods to a salable condition. c. buying
costs of a purchasing department. d. selling
costs of a sales department. P60. Which inventory
costing method most closely approximates current
cost for each of the following
40
Ending Inventory Cost of Goods Sold a. FIFO
FIFO b. FIFO LIFO c. LIFO FIFO d.
LIFO LIFO for
ACC 304 Week 2 Chapter 9 Homework For more
classes visit
www.snaptutorial.com
ACC 304 Week 2 Chapter 9 Homework 1) Floyd
Corporation has the following four items in its
ending inventory. Determine the final
lower-of-cost-or-market inventory value for each
item. 2) Bell, Inc. buys 1,000 computer game
CDs from a distributor who is disconnecting those
games. The purchase price for the lot is
8,000.Bell will group the CDs into three price
categories for resale, as indicated bellow.
Determine the cost per CD for each group, using
the relative sales value method. 3) Boyne Inc.
had beginning inventory of 12,000 at cost and
20,000 t retail. Net purchase were 12,000 at
cost and 17,000 at retail. Net markups were
10,000 net markdowns were 7,000 and sales
41
revenue was 147,000.compute ending inventory at
cost using the conventional retail method. 4)
Marvin Gaye Company has been having difficulty
obtaining key raw materials for its manufacturing
process. The Company therefore signed a long-term
non cancelable purchase commitment with its
largest supplier of this raw material on November
30, 2014,at an agreed price of 400,0000. At
December 31, 2014, the raw material had declined
in price to 365,000. What entry would you make
on December 31, 2014, to recognize these
facts? 5) Tim Legler requires an estimate of
the cost of goods loat by fire on March 9.
Merchandise on hand on January 1 was 38,000.
Purchases since January 1 were 72,000
freight-in 3,400 purchases returns and
allowances, 2,400. Sales are made at 33 1/3
above cost and totaled 100,000 to March 9. Goods
coasting 10,900 were left undamaged by the fire
remaining goods were destroyed. (a). compute the
cost goods destroyed. (b). compute the cost goods
destroyed, assuming that the gross profit 33 1/3
of sales. 6) Presented below is information
related to Ricky Henderson Company. Compute the
inventory by the conventional retail inventory
method. 7) The inventory section of Maddoxs
balance sheet as of November 30,2014, including
required foot notes, is presented below are the
inventory section supporting calculations. 8)
All of the following are key similarities between
GAAP and IFRS with respect to accounting for
inventories except 9) Starfish Company (a
Company using Gap and LIFO inventory method) is
considering changing to IFRS and the FIFO
inventory method. How would a comparison of these
methods affect Starfishs financials? 10)
Assume that Darcy industry had the following
inventory values. 1. Inventory cost (on
December 31,2014)1,500 2. Inventory sales
value (on December 31,2014)1,350 3. Inventory
net realizable value (on December 31,2014)1,320
Under IFRS, what is the inventory carrying value
on December 31, 2014 ?
42
11) Under IFRS, agricultural activity results in
which of the following types of assets? 1.
Agricultural produce 2. Biological assets
ACC 304 Week 3 Chapter 9 Quiz (All
Possible Questions)
For more classes visit
www.snaptutorial.com
43
1. A company should abandon the historical cost
principle when the future utility of the
inventory item falls below its original cost. 2.
The lower-of-cost-or-market method is used for
inventory despite being less conservative than
valuing inventory at market value. 3. The
purpose of the floor in lower-of-cost-or-market
considerations is to avoid overstating
inventory. 4. Application of the
lower-of-cost-or-market rule results in
inconsistency because a company may value
inventory at cost in one year and at market in
the next year. 5. GAAP requires reporting
inventory at net realizable value, even if above
cost, whenever there is a controlled market with
a quoted price applicable to all quantities. 6.
A reason for valuing inventory at net realizable
value is that sometimes it is too difficult to
obtain the cost figures. 7. In a basket
purchase, the cost of the individual assets
acquired is determined on the basis of their
relative sales value. 8. A basket purchase
occurs when a company agrees to buy inventory
weeks or months in advance. 9. Most purchase
commitments must be recorded as a liability. 10.
If the contract price on a noncancelable purchase
commitment exceeds the market price, the buyer
should record any expected losses on the
commitment in the period in which the market
decline takes place.
44
11. When a buyer enters into a formal,
noncancelable purchase contract, an asset and a
liability are recorded at the inception of the
contract. 12. The gross profit method can be
used to approximate the dollar amount of
inventory on hand. 13. In most situations, the
gross profit percentage is stated as a percentage
of cost. 14. A disadvantage of the gross
profit method is that it uses past percentages in
determining the markup.
15. When the conventional retail method
includes both net markups and net markdowns in
the cost-to-retail ratio, it approximates a
lower-of-cost-or-market valuation. 16. In the
retail inventory method, the term markup means a
markup on the original cost of an inventory
item. 17. In the retail inventory method,
abnormal shortages are deducted from both the
cost and retail amounts and reported as a loss.
18. The inventory turnover ratio is computed
by dividing the cost of goods sold by the ending
inventory on hand. 19. The average days to
sell inventory represents the average number of
days sales for which a company has inventory on
hand. 20. The LIFO retail method assumes that
markups and markdowns apply only to the goods
purchased during the period. True False
AnswersConceptual
45
MULTIPLE CHOICEConceptual
21. Which of the following is true about
lower-of-cost-or-market? a. It is inconsistent
because losses are recognized but not gains. b.
It usually understates assets. c. It can
increase future income. d. All of these. 22.
The primary basis of accounting for inventories
is cost. A departure from the cost basis of
pricing the inventory is required where there is
evidence that when the goods are sold in the
ordinary course of business their a. selling
price will be less than their replacement
cost. b. replacement cost will be more than
their net realizable value. c. cost will be
less than their replacement cost. d. future
utility will be less than their cost. 23. When
valuing raw materials inventory at
lower-of-cost-or-market, what is the meaning of
the term "market"? a. Net realizable value b.
Net realizable value less a normal profit
margin c. Current replacement cost
46
d. Discounted present value
24. In no case can "market" in the
lower-of-cost-or-market rule be more than a.
estimated selling price in the ordinary course of
business. b. estimated selling price in the
ordinary course of business less reasonably
predictable costs of completion and disposal. c.
estimated selling price in the ordinary course
of business less reasonably predictable costs of
completion and disposal and an allowance for an
approximately normal profit margin. d.
estimated selling price in the ordinary course of
business less reasonably predictable costs of
completion and disposal, an allowance for an
approximately normal profit margin, and an
adequate reserve for possible future losses. 25.
Designated market value a. is always the
middle value of replacement cost, net realizable
value, and net realizable value less a normal
profit margin. b. should always be equal to
net realizable value. c. may sometimes exceed
net realizable value. d. should always be
equal to net realizable value less a normal
profit margin.
26. Lower-of-cost-or-market
47
a. is most conservative if applied to the
total inventory. b. is most conservative if
applied to major categories of inventory. c.
is most conservative if applied to individual
items of inventory. d. must be applied to
major categories for taxes. 27. An item of
inventory purchased this period for 15.00 has
been incorrectly written down to its current
replacement cost of 10.00. It sells during the
following period for 30.00, its normal selling
price, with disposal costs of 3.00 and normal
profit of 12.00. Which of the following
statements is not true? a. The cost of sales
of the following year will be understated. b.
The current year's income is understated. c.
The closing inventory of the current year is
understated.
d. Income of the following year will be
understated. S28. When the cost-of-goods-sold
method is used to record inventory at market a.
there is a direct reduction in the selling price
of the product that results in a loss being
recorded on the income statement prior to the
sale. b. a loss is recorded directly in the
inventory account by crediting inventory and
debiting loss on inventory decline.
48
c. only the portion of the loss attributable
to inventory sold during the period is recorded
in the financial statements. d. the market
value figure for ending inventory is substituted
for cost and the loss is buried in cost of goods
sold.
29. Lower-of-cost-or-market as it applies to
inventory is best described as the a. drop of
future utility below its original cost. b.
method of determining cost of goods sold. c.
assumption to determine inventory flow. d.
change in inventory value to market value. 30.
The floor to be used in applying the
lower-of-cost-or-market method to inventory is
determined as the a. net realizable value. b.
net realizable value less normal profit
margin. c. replacement cost. d. selling
price less costs of completion and disposal. 31.
What is the rationale behind the ceiling when
applying the lower-of-cost-or-market method to
inventory? a. Prevents understatement of the
inventory value.
49
b. Allows for a normal profit to be earned. c.
Allows for items to be valued at replacement
cost. d. Prevents overstatement of the value
of obsolete or damaged inventories. 32. Why
are inventories stated at lower-of-cost-or-market?
a. To report a loss when there is a decrease
in the future utility. b. To be
conservative. c. To report a loss when there
is a decrease in the future utility below the
original cost. d. To permit future profits to
be recognized. 33. Which of the following is
not an acceptable approach in applying the
lower-of-cost-or-market method to inventory? a.
Inventory location. b. Categories of
inventory items. c. Individual item. d.
Total of the inventory. 34. Which method(s)
may be used to record a loss due to a price
decline in the value of inventory?
50
a. Cost-of-goods-sold. b. Sales method. c.
Loss method d. Both a and c. 35. Why might
inventory be reported at sales prices (net
realizable value or market price) rather than
cost? a. When there is a controlled market
with a quoted price applicable to all quantities
and when there are no significant costs of
disposal. b. When there are no significant
costs of disposal. c. When a non-cancellable
contract exists to sell the inventory. d. When
there is a controlled market with a quoted price
applicable to all quantities.
S36. Recording inventory at net realizable value
is permitted, even if it is above cost, when
there are no significant costs of disposal
involved and a. the ending inventory is
determined by a physical inventory count. b. a
normal profit is not anticipated. c. there is
a controlled market with a quoted price
applicable to all quantities.
51
d. the internal revenue service is assured that
the practice is not used only to distort reported
net income. 37. When inventory declines in
value below original (historical) cost, and this
decline is considered other than temporary, what
is the maximum amount that the inventory can be
valued at? a. Sales price b. Net realizable
value c. Historical cost d. Net realizable
value reduced by a normal profit margin 38.
Net realizable value is a. acquisition cost
plus costs to complete and sell. b. selling
price. c. selling price plus costs to complete
and sell. d. selling price less costs to
complete and sell. 39. If a unit of inventory
has declined in value below original cost, but
the market value exceeds net realizable value,
the amount to be used for purposes of inventory
valuation is a. net realizable value. b.
original cost.
52
c. market value. d. net realizable value
less a normal profit margin. 40. Inventory may
be recorded at net realizable value if a.
there is a controlled market with a quoted
price. b. there are no significant costs of
disposal. c. the inventory consists of
precious metals or agricultural products. d.
all of these. 41. If a material amount of
inventory has been ordered through a formal
purchase contract at the balance sheet date for
future delivery at firm prices, a. this fact
must be disclosed. b. disclosure is required
only if prices have declined since the date of
the order. c. disclosure is required only if
prices have since risen substantially. d. an
appropriation of retained earnings is
necessary. 42. The credit balance that arises
when a net loss on a purchase commitment is
recognized should be a. presented as a current
liability.
53
b. subtracted from ending inventory. c.
presented as an appropriation of retained
earnings. d. presented in the income statement.
P43. In 2012, Orear Manufacturing signed a
contract with a supplier to purchase raw
materials in 2013 for 700,000. Before the
December 31, 2012 balance sheet date, the market
price for these materials dropped to 510,000.
The journal entry to record this situation at
December 31, 2012 will result in a credit that
should be reported a. as a valuation account
to Inventory on the balance sheet. b. as a
current liability. c. as an appropriation of
retained earnings. d. on the income statement.
44. At the end of the fiscal year, Apha Airlines
has an outstanding non-cancellable purchase
commitment for the purchase of 1 million gallons
of jet fuel at a price of 4.10 per gallon for
delivery during the coming summer. The company
prices its inventory at the lower of cost or
market. If the market price for jet fuel at the
end of the year is 4.50, how would this
situation be reflected in the annual financial
statements? a. Record unrealized gains of
400,000 and disclose the existence of the
purchase commitment. b. No impact.
54
c. Record unrealized losses of 400,000 and
disclose the existence of the purchase
commitment. d. Disclose the existence of the
purchase commitment. 45. At the end of the fiscal
year, Apha Airlines has an outstanding purchase
commitment for the purchase of 1 million gallons
of jet fuel at a price of 4.60 per gallon for