1) Unique Aged Cheeses, Inc. specializes in producing two varieties of cheese wh
ID: 2565888 • Letter: 1
Question
1) Unique Aged Cheeses, Inc. specializes in producing two varieties of cheese which require a 1-month setup process to procure and prepare the necessary raw materials, then an 18-month aging process before the products are ready for sale to customers, who typically pay within 30 days. These two cheeses are Unique’s only products. For the purpose of classifying assets and liabilities on the balance sheet, what will be the length of the time period used to draw the current vs. noncurrent distinction?
Multiple Choice
a. One year.
b. 18 months.
c. 19 months.
d. 20 months.
2) On December 31, 2018, Supremo Co., paid in advance for a 3-year insurance policy, covering the years 2019 through 2021. The policy cost was $1,200. If the policy had been purchased on a year-to-year basis, the total cost would have been $1,800 at current rates. Supremo Co.’s normal operating cycle is 9 months long. How will the $1,200 be reported on Supremo’s balance sheet dated December 31, 2018?
Multiple Choice
a. $400 as a current asset, $800 as a noncurrent asset.
b. $300 as a current asset, $900 as a noncurrent asset.
c. $600 as a current asset, $1,200 as a noncurrent asset.
d. $300 as a current liability, $800 as a noncurrent liability.
3) Capsule Corp. reported the following in 2018:
What was Capstone’s comprehensive income for 2018?
Multiple Choice
a. $125,000
b. $55,000
c. $115,000
d. $65,000
4) A company reports the following information as of December 31st:
Ignoring income taxes, what amount should the company report as comprehensive income as of December 31st?
Multiple Choice
a. $90,000
b. $125,000
c. $150,000
d. $115,000
Beginning retained earnings $ 260,000 Ending retained earnings $ 290,000 Cash dividends declared $ 90,000 Beginning accumulated other comprehensive income $ 20,000 Ending accumulated other comprehensive income $ 15,000Explanation / Answer
1. The answer is d.
1 month set-up process + 18 month aging process + 1 month collection process
= 20 months
2. Since the expense have been paid in advance, hence this is an asset.
Prepaid expense as current asset = $1200 x 9/36 = $300
Prepaid expense as non-current asset = $1200 x 27/36 = $900
The answer is b.
3. Comprehensive income for 2018
= Ending retained earnings + Dividends declared - Beginning retained earnings + Ending accumulated other comprehensive income - Beginning accumulated other comprehensive income
= $290000 + 90000 - 260000 + 15000 - 20000
= $115000
The answer is c.
4.
Comprehensive income = Sales revenue - Cost of goods sold - Operating expenses + Foreign currency translation adjustment
= $350000 - 150000 - 110000 + 25000
= $115000
The answer is d.
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