Newton Corporation Entered into the Following Transactions During Its First

question 125

Multiple Choice

Newton Corporation entered into the following transactions during its first year of operations.(Assume all transactions involve cash.)
1) Acquired $2,000 of capital from the owners.
2) Purchased $600 of direct raw materials.
3) Used $400 of these direct raw materials in the production process.
4) Paid production workers $800 cash.
5) Paid $400 for manufacturing overhead (applied and actual overhead are the same) .
6) Started and completed 200 units of inventory.
7) Sold 50 units at a price of $12 each.
8) Paid $80 for selling and administrative expenses.
The amount of net income for the year was:

• A)$100.
• B)$75.
• C)$50.
• D)$120.

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Definitions:

Capital Leases

Leases that are treated like asset purchases for accounting purposes because they transfer substantially all risks and rewards of ownership.

Minimum Operating Lease Payments

The lowest total amount that a lessee is obliged to pay over the lease term for the right to use an underlying asset, excluding contingent rent and lease incentives.

Discount Rate

The interest rate utilized in calculating the current value of future cash flows through discounted cash flow analysis.

IFRS

International Financial Reporting Standards are globally accepted principles that dictate how companies must maintain and report their financial statements.