Baruch College Harry Davis Online Accounting Acc 2101 Midterm Questions And Solutions

The computer systems include, but are not limited to, those housing the depletion schedules, recoverable reserve schedules, revenue and expense ledgers, and production data. Allowable depletion deductions reduce the taxpayer’s remaining basis for cost depletion computations. Accounts should be maintained so that all capitalized cost and all allowable depletion is accumulated. 75–451, 1975–2 CB 330, and Treas.

• Many companies that experience increasing stock values over time will choose to split their stock simply to keep a lower per share trading price available to investors in the secondary stock markets.
• Before a lot of time is spent on this item, its significance in terms of tax impact should be considered.
• The IRS also holds that a production payment is not like kind property when compared with continuing interest in real estate.
• When probabilistic methods are used, there should be at least a 50 percent probability that the actual quantities recovered will equal or exceed the proved plus probable reserves estimates.
• Due to the current price of crude oil and natural gas, this section will not have an immediate effect on examinations.
• The amortization deductions are subject to recapture to the extent of any gain on the sale of the facility; see IRC 1245.
• Relative to the transportation of persons or cancellation.

A liability goes down because of cash payments that reduce the obligation. However, they also shrink the amount of cash held. This effect is mirrored by subtracting the decrease in the liability from net income.

Capital Assets

The information states that Ashe Corporation issued stock to an investor for $5,000. That contribution created this account change. Equipment increased by $14,000 ($36,000 to $50,000). The provided information states that one piece of equipment was purchased during the year for $44,000. This transaction identifies another cash outflow to be reported. Taxes payable—decrease of $1,000.

Did the company do poorly during 2008 or wonderfully well? That is the problem with relying on only a few of the numbers in a set of financial statements without a closer and more complete inspection. What caused this company to lose over $1.2 billion dollars?

Unless there is evidence to the contrary, GAAP assumes all of a company’s transactions are made on an arm’s-length basis. As a result, the price paid for an asset, or its historical cost, is also the asset’s fair market value at the time of acquisition. If an asset is not purchased in an arm’s-length transaction, GAAP may require an exception to the asset’s valuation at historical cost. The means whereby a company’s financial transactions are identified, recorded, summarized and reported for the benefit of those who have an interest in the business.

Service Business

That $40,000 increase in contributed capital must have been created by this sale. The shares were sold for more than their purchase price. At this point, the changes in all related accounts have been utilized to determine the two transactions for the period and the cash inflows and outflows. In the statement of cash flows for this company, the investing activities are listed as follows. The equipment account began the year with a $730,000 balance. The sale of equipment costing $600,000 was just discussed.

Leases are frequently acquired in what is known as blocks. The usual procedure is for geologists and geophysicists to make certain preliminary surveys of the surface conditions. Core drilling along public highways and other forms of study of the topmost layers of the earth may be indicative of the patterns of folds in the earth’s strata at greater depths. If the survey indicates the area is promising for https://accounting-services.net/ the development of oil or gas, oil company agents acquire leases covering the desired area. Further geological and geophysical work is performed to determine the most favorable portions of the area and whether subsurface structures appear favorable for drilling. Based on this information, certain portions of the acreage may be dropped, and the remainder retained for future development and operation.

Section 1 Oil And Gas Handbook

Transfers of products intracompany may be recorded at cost basis and reported in the cost of sales of the respective divisions or recorded at “arm’s-length” value and reported as a sale of products transaction. When refinery products are transferred to an intracompany division or to a related domestic company at cost, or at a stated value, the impact on the taxable income should be considered.

A record in either written or electronic form used to originally record a company’s transactions through appropriate debit and credit entries to the company’s accounts. Journals also serve as the original record for a company’s adjusting and closing entries. Most companies maintain special journals as well as a general journals to record their transactions. The amount of interest paid plus the amount of any interest to be paid in the future as a result of any borrowing of assets for current period use. The review of a the usual balance in a contra-dividend account is a: company’s general purpose financial statements conducted in conjunction with the financial analysis of the company. This review includes the use of ratios, vertical analysis and horizontal analysis in evaluating a company’s liquidity, leverage and management performance in an attempt to project the company’s prospects for the future. When merchandise is shipped to a customer, whether revenues are recognized at the time of shipment or at the time of subsequent customer receipt, will depend on the term of the contract.

What Are Account Adjustments?

Take a look at Alphabet’s quarter ended March 31, 2018, financial statements from the SEC Form 10-Q. You will not see a similarity between the 10-column worksheet and the balance sheet, because the 10-column worksheet is categorizing all accounts by the type of balance they have, debit or credit. This leads to a final balance of $30,140. Next you will take all of the figures in the adjusted trial balance columns and carry them over to either the income statement columns or the balance sheet columns. For example, Celadon Group misreported revenues over the span of three years and elevated earnings during those years. The total overreported income was approximately $200–$250 million.

These costs include any freight or other costs incurred in actually obtaining the materials or supplies from vendors. Indirect material costs are included in a manufacturing company’s raw materials inventory until the materials are requisitioned and used in support of the manufacturing process.

If the administrator or trustee allocates net income to the beneficiaries, they will be considered to have received their pro-rata share of the depletion. The depletion would again be subject to the limitations of IRC 613A and at the beneficiaries’ level. 1.613A–3 explains the distribution of oil income and depletion with a trust. The beneficiary is entitled to claim cost depletion, in any event, if cost exceeds the share of percentage depletion. To the payee , the bonus payment is ordinary income subject to cost depletion.

Fica Taxes

Be retained as determined by the management of each company. Equipment retirement losses, and other items of a general nature. Services which are specialized in nature and in cost characteristics.

Safety and equal opportunity programs, and related activities. Sales–Traffic solicitation and related sales efforts. The repair, maintenance and servicing of freight cars.

Cost Of Services Provided

A) False B) True 51) Purchasing office equipment on account has what impact on the accounting equation? A) Stockholders’ equity decreases and assets increase. B) Assets increase and stockholders’ equity increases. C) Liabilities increase and assets increase. D) Assets decrease and liabilities decrease. In addition, an example of a balance sheet is a form that is filled in automatically by an accounting program.

Accounts Receivable Turnover

Depletion schedules are useful when comparing gross income. A. IRC 1031 provides that no gain or loss shall be recognized if property held for productive use in a trade or business is exchanged solely for property of a like kind. Therefore, the exchanges of property interests will be deemed to be exchanges of property of a like kind, even though one property may be developed and the other property undeveloped. If existence of a production payment is discovered and appears material, the agent should study the documents that created the production payment to decide its proper treatment. The agent should then check the taxpayer’s treatment to see that it is proper.

Taxpayer Smith’s percentage depletion schedule for R. Licker Lease shows gross income of $200,000, net income of $80,000, with an allowable percentage depletion of $80,000. The schedule of dry-hole costs totaling $126,000 may include an R. Licker Well No. 7 at $38,500.

Charges such as insurance, fees, and taxes not included in the Worldscale will be allowed to the U.S. importer or to the shipper in accordance with industry practice. A. The importer is not responsible for vessel related delays such as vessel equipment malfunctions, fueling, late arrival or vessel operations. Storm delays may be shared by both parties. Worldscale volumes include standard tables giving demurrage rates for various size ships. These rates can be used in conjunction with the assessments to determine the amount of demurrage on a particular shipment.

Accounting

Relate primarily to liabilities and shareholders’ equity in transactions that are separate from the central, day-to-day activities of the organization. Cash inflows from financing activities usually include issuing capital stock or incurring liabilities such as bonds or notes payable. Outflows are created by the distribution of dividends, the acquisition of treasury stock, the payment of noncurrent liabilities, and the like. The net number is presented as the cash flows generated from operating activities.