1) kern company purchased bonds with a face amount of $600,000 between interest
payment dates. kern purchased the bonds at 102, paid brokerage costs of $9,000, and
paid accrued interest for three months of $15,000. the amount to record as the cost of
this long-term investment in bonds is
a.$636,000
b.$621,000
c.$612,000
d.$600,000
2) sun inc. factors $3,000,000 of its accounts receivables with recourse for a finance
charge of 3%. the finance company retains an amount equal to 10% of the accounts
receivable for possible adjustments. sun estimates the fair value of the recourse liability
at $150,000. what would be recorded as a gain (loss) on the transfer of receivables?
a.gain of $90,000
b.loss of 240,000
c.gain of $540,000
d.loss of $150,000.
3) prepare journal entries to record the following transactions relating to long-term
bonds of kirby, inc. (show computations.)
(a)on june 1, 2011, kirby, inc. issued $3,000,000, 6% bonds for $2,938,200, which
includes accrued interest. interest is payable semiannually on february 1 and august 1
with the bonds maturing on february 1, 2021. the bonds are callable at 102.
(b)on august 1, 2011, kirby paid interest on the bonds and recorded amortization. kirby
uses straight-line amortization.
(c)on february 1, 2013, kirby paid interest and recorded amortization on all of the
bonds, and purchased $1,800,000 of the bonds at the call price. assume that a reversing
entry was made on january 1, 2013.
4) which of the following relates to both relevance and faithful representation?
a.cost constraint
b.predictive value
c.verifiability
d.neutrality
5) according to the fasb’s conceptual framework, the process of reporting an item in the
financial statements of an entity is
a.recognition
b.realization
c.allocation
d.matching
6) which gives rise to the requirement to accrue a liability for the cost of compensated
absences?
a.payment is probable
b.employee rights vest or accumulate
c.amount can be reasonably estimated
d.all of the above
7) roark co., which has a taxable payroll of $600,000, is subject to futa tax of 6.2% and
a state contribution rate of 5.4%. however, because of stable employment experience,
the companys state rate has been reduced to 2%. what is the total amount of federal and
state unemployment tax for roark co.?
a.$70,200
b.$49,200
c.$24,000
d.$16,800
8) equipment that cost $350,000 and had a book value of $156,000 was sold for
$180,000. data from the comparative balance sheets are:
depreciation expense for 2013 was
a.$308,000
b.$284,000
c.$54,000
d.$36,000
9) which of the following is not generally correct about recording a sale of a debt
security before maturity date?
a.accrued interest will be received by the seller even though it is not an interest payment
date
b.an entry must be made to amortize a discount to the date of sale
c.the entry to amortize a premium to the date of sale includes a credit to the premium on
investments in debt securities
d.a gain or loss on the sale is not extraordinary
10) treasury bonds should be shown on the balance sheet as
a.an asset
b.a deduction from bonds payable issued to arrive at net bonds payable and outstanding
c.a reduction of stockholders’ equity
d.both an asset and a liability
11) 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
12) barton company, a company who maintains its accounting records using ifrs,
manufactures furniture. barton sells a $75,000 order to save-a lot furniture in exchange
for a zero-interest-bearing note due from the customer in two years. since there is no
stated interest rate on the note, the controller uses the current market rate of 8% to
derive the present value factor. based on this information and the incorporation of the
time value of money, which of the following would be recorded by barton to recognize
this sale?
a.a credit to discount on notes receivable for $10,699.
b.a credit to sales revenue for $75,000.
c.a debit to notes receivable for $64,301.
d.a debit to discount on notes receivable for $6,000.
13) matile co. purchased machinery that was installed and ready for use on january 3,
2012, at a total cost of $115,000. salvage value was estimated at $15,000. the
machinery will be depreciated over five years using the double-declining balance
method. for the year 2013, matile should record depreciation expense on this machinery
of
a.$24,000
b.$27,600
c.$30,000
d.$46,000
14) on march 1, mocl co. began construction of a small building. the following
expenditures were incurred for construction:
the building was completed and occupied on july 1. to help pay for construction
$100,000 was borrowed on march 1 on a 12%, three-year note payable. the only other
debt outstanding during the year was a $1,000,000, 10% note issued two years ago.
instructions
(a)calculate the weighted-average accumulated expenditures.
(b)calculate avoidable interest.
15) pember corporation started business in 2007 by issuing 200,000 shares of $20 par
common stock for $36 each. in 2012, 30,000 of these shares were purchased for $52 per
share by pember corporation and held as treasury stock. on june 15, 2013, these 30,000
shares were exchanged for a piece of property that had an assessed value of $810,000.
perbers stock is actively traded and had a market price of $60 on june 15, 2013. the cost
method is used to account for treasury stock. the amount of paid-in capital from
treasury stock transactions resulting from the above events would be
a.$1,200,000
b.$720,000
c.$585,000
d.$240,000
16) which of the following does not demonstrate evidence regarding the ability to
consummate a refinancing of short-term debt?
a.management indicated that they are going to refinance the obligation
b.actually refinance the obligation
c.have capacity under existing financing agreements that can be used to refinance the
obligation
d.enter into a financing agreement that clearly permits the entity to refinance the
obligation
17) goods in transit which are shipped f.o.b. destination 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
18) valuation of inventories requires the determination of all of the following except
a.the costs to be included in inventory
b.the physical goods to be included in inventory
c.the cost of goods held on consignment from other companies
d.the cost flow assumption to be adopted