How should liabilities (except for deferred income taxes) be reported by a company
using fresh start accounting?
A.at the undiscounted sum of future cash payments.
B.at book value prior to the reorganization.
C.as partially secured liabilities.
D.at the present value of future cash payments.
E.as unsecured liabilities.
Capital investment decisions involve all of the following, except:
A.the acquisition of short-term operational assets.
B.projects requiring relatively long periods of time and large cash flows.
C.the acquisition of long-term operational assets.
D.none of these answers is correct.
During a reorganization, how should interest expense be reported on the financial
statements?
A.on the income statement, but not classified as a reorganization item.
B.on the income statement as a separate reorganization item.
C.on the balance sheet as a prepaid expense.
D.as a debit directly to retained earnings.
E.on the balance sheet as an intangible asset.
Which of the following represents effects of an asset use transaction on a company’s
financial statements?
A.
B.
C.
D.
An asset use transaction decreases assets and decreases either liabilities (in the case of
repaying debt) or equity (in the case of paying dividends or expenses). It may or may
not increase expenses and decrease net income. If the asset that decreased is cash, it will
be reported as an outflow for financing or operating activities on the statement of cash
flows.
The types of differences that exist between IFRS and U.S. GAAP would not generally
include:
A.Presentation differences.
B.Measurement differences.
C.Disclosure differences.
D.Comparability differences.
E.Recognition differences.
Fenwick Company is considering purchase of equipment that costs $60,000 and is
expected to offer annual cash inflows of $16,000 for 5 years. Fenwick Company’s
required rate of return is 10%. What is the internal rate of return of this investment
project?
A.11.56%
B.26.67%
C.16.67%
D.11.00%
Classify each of the following transactions for the purpose of the statement of cash flow
as operating activities (OA), investing activities (IA), financing activities (FA), or not
reported on the statement of cash flows (NA).
1) ____ Made adjusting entry to recognize interest revenue on investments.
2) ____ Borrowed funds from the bank.
3) ____ Paid rent in advance for the next six months.
4) ____ Paid cash to settle accrued salary expense.
5) ____ Purchased supplies on account.
6) ____ Collected accounts receivable.
7) ____ Sold land.
The SEC’s role in the initial registration of securities to be publicly issued is:
A.to ensure that the content of the registration filing is in compliance with securities
regulations.
B.to ensure that securities issued are quality investments.
C.to provide data to the public regarding first-time issuance of securities.
D.to give permission to an independent CPA firm to audit the registrant’s financial
statements.
E.to make the registrant’s annual report available for public viewing.
The partnership of Clapton, Seidel, and Thomas was insolvent and will be unable to pay
$30,000 in liabilities currently due. What recourse was available to the partnership’s
creditors?
A.they must present equal claims to the three partners as individuals.
B.they must try obtain a payment from the partner with the largest capital account
balance.
C.they cannot seek remuneration from the partners as individuals.
D.they may seek remuneration from any partner they choose.
E. they must present their claims to the three partners in the order of the partners’ capital
account balances.
As of December 31, 2013, Gant Corporation had a current ratio of 1.29, quick ratio of
1.05, and working capital of $18,000. The company uses a perpetual inventory system
and sells merchandise for more than it cost. On January 1, 2014 Gant paid $3,600 on
accounts payable. Which of the following statements is incorrect?
A.Gant’s quick ratio will increase and its current ratio will decrease.
B.Gant’s quick ratio will increase.
C.Gant’s working capital will remain the same.
D.Gant’s current ratio will increase.
The following information pertains to inventory held by a company on December 31,
2013.
What is the amount of inventory loss shown on the income statement under U.S.
GAAP?
A.$0.
B.$3,000.
C.$14,000.
D.$10,000.
E.$8,400.
You are considering an investment in Frontier Airlines stock and wish to assess the
firm’s earnings performance. All of the following ratios can be used to assess
profitability except:
A.Average days to collect receivables.
B.Asset turnover.
C.Return on investment.
D.Net margin.
The following information pertains to inventory held by a company at December 31,
2013.
What is the amount of inventory loss shown on the income statement under IFRS?
A.$1,000.
B.$2,000.
C.$4,000.
D.$5,000.
E.$6,000.
Jerry, a partner in the JSK partnership, begins the year on January 1, 2013 with a capital
balance of $20,000. The JSK partnership agreement states that Jerry receives 6%
interest on this weighted average capital balance.
– On March 1, 2013, when the partnership tax return for 2012 was completed, Jerry’s
capital account was credited for his share of 2012 profit of $120,000.
– Jerry withdrew $5,000 quarterly, beginning March 31st.
– On September 1, Jerry’s capital account was credited with a special bonus of $60,000
for business he brought to the partnership.
What amount of interest will be attributed to Jerry for year 2013 that will go toward his
profit distribution for the year? (Use a 360-day year for calculations.)
A.$5,250
B.$6,000
C.$6,400
D.$7,000
E.$7,200
The following information pertains to inventory held by a company on December 31,
2013.
What amount of inventory should be reported under IFRS?
A.$25,000.
B.$27,000.
C.$30,000.
D.$5,000.
E.$2,000.
Petras Company engaged in the following transactions during 2012, its first year in
operations: (Assume all transactions are cash transactions)
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $600 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During 2013, Petras engaged in the following transactions: (Assume all transactions are
cash transactions)
1) Issued an additional $325 of common stock.
2) Repaid $220 of its debt to the bank.
3) Earned revenues of $750.
4) Incurred expenses of $360.
5) Paid dividends of $100.
The net cash inflow from financing activities on Petras’s 2013 statement of cash flows
is
A.$5.
B.$325.
C.$225.
D.$955.
Randall Company manufactures chocolate bars. The following were among Randall’s
2013 manufacturing costs:
Randall’s 2013 direct materials amounted to:
A.$25,000
B.$225,000
C.$250,000
D.$475,000
Indicate whether each of the following statements is true or false.
_____ a) A flexible budget can be viewed as an extension of a company’s master
budget.
_____ b) The master budget is a static budget because it generally is prepared for a
single volume of activity.
_____ c) Standards are established for a company’s costs but not for the selling prices
of its goods and services.
_____ d) If direct materials are budgeted at $34,000 for 10,000 units, direct materials
would also be budgeted at $34,000 for 11,000 units.
_____ e) Flexible and static budgets use different per unit standard amounts for variable
costs.
Select the incorrect statement regarding the relationship between type of user and type
of information.
A.Middle managers need more nonfinancial, or operational data than do senior
executives.
B.Assembly line supervisors need more immediate feedback on performance than do
senior executives.
C.Senior executives need less aggregated information than do lower-level managers.
D.Senior executives use general economic information as well as financial information.