1) The statement of cash flows provides answers to all of the following questions except
a. where did the cash come from during the period?
b. what was the cash used for during the period?
c. what is the impact of inflation on the cash balance at the end of the year?
d. what was the change in the cash balance during the period?
Answer: View Answer
2) 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?
a. $65,000
b. $62,000
c. $72,000
d. $60,000
Answer: View Answer
3) Jones Company was formed on December 1, 2013 . The following information is available from Jones’s inventory record for Product X.
Units Unit Cost
January 1, 2014 (beginning inventory) 1,600 $18.00
Purchases:
January 5, 2014 2,600 $20.00
January 25, 2014 2,400 $21.00
February 16, 2014 1,000 $22.00
March 15, 2014 1,800 $23.00
A physical inventory on March 31, 2014, shows 2,000 units on hand.
Instructions
Prepare schedules to compute the ending inventory at March 31, 2014, under each of the following inventory methods:
(a) FIFO.
(b) LIFO.
(c) Weighted-average.
Show supporting computations in good form.
Answer: View Answer
4) Which of the following is not a publication of the FASB?
a. Statements of Financial Accounting Concepts
b. Accounting Research Bulletins
c. Interpretations
d. Technical Bulletins
Answer: View Answer
5) Presented below is information related to Jones Department Stores, Inc. pension plan for 2015 .
Accumulated benefit obligation (at year-end) $600,000
Service cost 540,000
Funding contribution for 2015 480,000
Settlement rate used in actuarial computation 10%
Expected return on plan assets 9%
Amortization of PSC (due to benefit increase) 100,000
Amortization of net gains 48,000
Projected benefit obligation (at beginning of period) 470,000
Fair value of plan assets (at beginning of period) 360,000
Instructions
(a) Compute the amount of pension expense to be reported for 2015 . (Show computations.)
(b) Prepare the journal entry to record pension expense and the employer’s contribution for 2015 .
Answer: View Answer
6) The following information relates to Windom Company for 2015:
Realized gain on sale of available-for-sale securities $30,000
Unrealized holding gains arising during the period on
available-for-sale securities 60,000
Reclassification adjustment for gains included in net income 20,000
Windoms 2015 other comprehensive income is
a. $50,000
b. $70,000
c. $90,000
d. $110,000
Answer: View Answer
7) Sun Inc assigns $3,000,000 of its accounts receivables as collateral for a $1 million 8% loan with a bank. Sun Inc. also pays a finance fee of 1% on the transaction upfront. What would be recorded as a gain (loss) on the transfer of receivables?
a. Loss of $30,000
b. Loss of $240,000
c. Loss of $270,000
d. $0
Answer: View Answer
8) What would be an advantage of having all countries adopt and follow the same accounting standards?
a. Agreement
b. Comparability
c. Lower preparation costs
d. Comparability and lower preparation costs
Answer: View Answer
9) The main purpose of the Pension Benefit Guaranty Corporation is to
a. require minimum funding of pensions
b. require plan administrators to publish a comprehensive description and summary of their plans
c. administer terminated plans and to impose liens on the employer’s assets for certain unfunded pension liabilities
d. All of these answers are correct
Answer: View Answer
10) Which of the following would not be considered an R & D activity?
a. Adaptation of an existing capability to a particular requirement or customer’s need
b. Searching for applications of new research findings
c. Laboratory research aimed at discovery of new knowledge
d. Conceptual formulation and design of possible product or process alternatives
Answer: View Answer
11) Rowen, Inc. had pre-tax accounting income of $1,800,000 and a tax rate of 40% in 2015, its first year of operations. During 2015 the company had the following transactions:
| Received rent from Jane, Co. for 2016 | $64,000 |
| Municipal bond income | $80,000 |
| Depreciation for tax purposes in excess of book depreciation | $40,000 |
| Installment sales revenue to be collected in 2016 | $108,000 |
For 2015, what is the amount of income taxes payable for Rowen, Inc?
a. $603,200
b. $654,400
c. $686,400
d. $772,800
Answer: View Answer
12) Which of the following is considered a pervasive constraint by Statement of Financial Accounting Concepts No. 8?
a. Conservatism
b. Timeliness
c. Verifiability
d. Cost-constraint
Answer: View Answer
13) McDonald Company acquired machinery on January 1, 2009 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value. On January 1, 2014, McDonald estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by McDonald?
a. As a prior period adjustment
b. As the cumulative effect of a change in accounting principle in 2014
c. By setting future annual depreciation equal to one-sixth of the book value on January 1, 2014
d. By continuing to depreciate the machinery over the original fifteen year life
Answer: View Answer
14) Garber, Inc. accounts for all sales of its merchandise on the installment basis. Following is the unadjusted trial balance at 12/31/16:
Cash $ 64,200
Installment Accounts Receivable2014 170,000
Installment Accounts Receivable2015 400,000
Installment Accounts Receivable2016 750,000
Inventory, 1/1/16 103,000
Repossessed Merchandise 22,000
Accounts Payable $ 136,000
Deferred Gross Profit2014 84,000
Deferred Gross Profit2015 175,000
Common Stock 600,000
Retained Earnings 406,200
Installment Sales 1,000,000
Purchases 738,000
Loss on Repossession 4,000
Operating Expenses 150,000
$2,401,200 $2,401,200
Additional Data: 2014 Gross Profit Rate = 32%; Inventory 12/31/16 = $159,000; Repossessed merchandise 12/31/16 = $14,000;
Merchandise sold in 2015 was repossessed in 2016 and the following entry was prepared (assume correctly):
Deferred Gross Profit2015………………………………. 14,000
Repossessed Merchandise…………………………………. 22,000
Loss on Repossession ……………………………………….. 4,000
Installment Accounts Receivable2015……… 40,000
Instructions
(a) Determine collections during 2016 on Installment A/R for each of the years 2014, 2015, and 2016 .
(b) Without prejudice to your answer in Part (a), assume that total collections on Installment Accounts Receivable during 2016 were $1,060,000; $220,000 from 2014, $300,000 from 2015, and $540,000 from 2016 . Prepare all necessary adjusting and closing entries at 12/31/16.
Answer: View Answer
15) Frank Company reported the following data:
2014 2015
Sales $3,000,000 $4,200,000
Net Income 300,000 400,000
Assets at year end 1,800,000 2,500,000
Liabilities at year end 1,100,000 1,500,000
What is Franks asset turnover for 2015?
a. 1.68
b. 1.72
c. 1.95
d. 2.33
Answer: View Answer
16) Which of the following costs of goodwill should be amortized over their estimated useful lives?
Costs of goodwill from a Costs of developing
business combination goodwill internally
a. No No
b. No Yes
c. Yes Yes
d. Yes No
Answer: View Answer
17) Ewing Company sells household furniture. Customers who purchase furniture on the installment basis make payments in equal monthly installments over a two-year period, with no down payment required. Ewing’s gross profit on installment sales equals 40% of the selling price of the furniture.
For financial accounting purposes, sales revenue is recognized at the time the sale is made. For income tax purposes, however, the installment method is used. There are no other book and income tax accounting differences, and Ewing’s income tax rate is 30%.
If Ewing’s December 31, 2015, balance sheet includes a deferred tax liability of $600,000 arising from the difference between book and tax treatment of the installment sales, it should also include installment accounts receivable of
a. $5,000,000
b. $2,000,000
c. $1,500,000
d. $450,000
Answer: View Answer
18) The accountant for the Pryor Sales Company is preparing the income statement for 2014 and the balance sheet at December 31, Pryor uses the periodic inventory system. The January 1, 2014 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
Answer: View Answer
19) A decrease in net assets arising from peripheral or incidental transactions is called a(n)
a. capital expenditure
b. cost
c. loss
d. expense
Answer: View Answer
20) In a statement of cash flows, payments to acquire debt instruments of other entities (other than cash equivalents) should be classified as cash outflows for
a. operating activities
b. investing activities
c. financing activities
d. lending activities
Answer: View Answer
21) Floyd Company purchases Haeger Company for $1,600,000 cash on January 1, 2015. The book value of Haeger Companys net assets, as reflected on its December 31, 2014 balance sheet is $1,240,000. An analysis by Floyd on December 31, 2012 indicates that the fair value of Haegers tangible assets exceeded the book value by $120,000, and the fair value of identifiable intangible assets exceeded book value by $90,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company?
a. $ -0-
b. $360,000
c. $240,000
d. $150,000
Answer: View Answer
22) a. $
Answer: View Answer
23) The following information was extracted from the accounts of Essex Corporation at December 31, 2014:
CR(DR)
Total reported income since incorporation $3,200,000
Total cash dividends paid (1,600,000)
Unrealized holding loss on available-for-sale securities (240,000)
Total stock dividends distributed (400,000)
Prior period adjustment, recorded January 1, 2014 150,000
What should be the balance of retained earnings at December 31, 2014?
a. $1,110,000
b. $1,200,000
c. $1,960,000
d. $1,350,000
Answer: View Answer
24) The income statement of Dolan Corporation for 2014 included the following items:
Interest revenue $121,000
Salaries and wages expense 180,000
Insurance expense 18,200
The following balances have been excerpted from Dolan Corporation’s balance sheets:
December 31, 2014 December 31, 2013
Interest receivable $18,200 $15,000
Salaries and wages payable 17,800 8,400
Prepaid insurance 2,200 3,000
The cash paid for salaries and wages during 2014 was
a. $189,400
b. $170,600
c. $171,600
d. $197,800
Answer: View Answer
25) The following information relates to the pension plan for the employees of Turner Co.:
1/1/14 12/31/14 12/31/15
Accum. benefit obligation $6,160,000 $6,440,000 $8,400,000
Projected benefit obligation 6,510,000 6,972,000 9,338,000
Fair value of plan assets 5,950,000 7,280,000 8,036,000
AOCI net (gain) or loss -0- (1,008,000) (1,120,000)
Settlement rate (for year) 11% 11%
Expected rate of return (for year) 8% 7%
Turner estimates that the average remaining service life is 16 years. Turner’s contribution was $882,000 in 2015 and benefits paid were $658,000.
The corridor for 2015 is
a. $722,400
b. $728,000
c. $791,000
d. $933,800
Answer: View Answer
26) On its December 31, 2014, balance sheet, Trump Company reported its investment in available-for-sale securities, which had cost $600,000, at fair value of $550,000. At December 31, 2015, the fair value of the securities was $585,000. What should Trump report on its 2015 income statement as a result of the increase in fair value of the investments in 2015?
a. $0
b. Unrealized loss of $15,000
c. Realized gain of $35,000
d. Unrealized gain of $35,000
Answer: View Answer