1) the units-of-production approach to depreciation is appropriate when depreciation is
a function of time instead of activity.
2) under ifrs, the discount rate should reflect risks for which future cash flow estimates
have been adjusted.
3) the direct method, also called the reconciliation method, reports cash receipts and
cash disbursements from operating activities.
4) a company that reports a discontinued operation or an extraordinary item has the
option of reporting per share amounts for these items.
5) an individual deferred tax asset or liability is classified as current or noncurrent
based on the classification of the related asset/liability for financial reporting purposes.
6) a company can classify a debt security as held-to-maturity if it has the positive intent
to hold the securities to maturity.
7) a possible source of taxable income that may be available to realize a tax benefit for
loss carryforwards is future reversals of existing taxable temporary differences.
8) an impairment loss is the amount by which the carrying amount of the asset exceeds
the sum of the expected future net cash flows from the use of that asset.
9) the sec requires companies to disclose their dividend policy in their annual report.
10) classification as an extraordinary item on the income statement would be
appropriate for the
a.gain or loss on disposal of a component of the business
b.substantial write-off of obsolete inventories
c.loss from a strike
d.none of these
11) financial statements for kiner company are given below:
kiner company
balance sheet
january 1, 2013
kiner company
balance sheet
january 1, 2013
total assets on the balance sheet at december 31, 2013 are $2,216,000. accumulated
deprecia-tion on the equipment sold was $112,000.
when the equipment was sold, the buildings and equipment account received a credit of
a.$96,000
b.$208,000
c.$160,000
d.$112,000
12) lyons company deducts insurance expense of $105,000 for tax purposes in 2012,
but the expense is not yet recognized for accounting purposes. in 2013, 2014, and 2015,
no insurance expense will be deducted for tax purposes, but $35,000 of insurance
expense will be reported for accounting purposes in each of these years. lyons company
has a tax rate of 40% and income taxes payable of $90,000 at the end of 2012. there
were no deferred taxes at the beginning of 2012.
what is the amount of the deferred tax liability at the end of 2012?
a.$42,000
b.$36,000
c.$15,000
d.$0
13) the accounting exchanges of nonmonetary assets has recently converged between
ifrs and u.s. gaap, per sfas no. 153, now requires
a.that gains on exchanges of nonmonetary assets be recognized if the exchange has
commercial substance
b.that gains on exchanges of nonmonetary assets be recognized if the exchange does not
have commercial substance
c.that gains on exchanges of nonmonetary assets be recognized if the exchange does not
have commercial substance, and has never been impaired
d.all of the above
14) the retail inventory method is based on the assumption that the
a.final inventory and the total of goods available for sale contain the same proportion of
high-cost and low-cost ratio goods
b.ratio of gross margin to sales is approximately the same each period
c.ratio of cost to retail changes at a constant rate
d.proportions of markups and markdowns to selling price are the same
15) what best describes the time value of money?
a.the interest rate charged on a loan
b.accounts receivable that are determined uncollectible
c.an investment in a checking account
d.the relationship between time and money
16) general-purpose financial statements are the product of
a.financial accounting
b.managerial accounting
c.both financial and managerial accounting
d.neither financial nor managerial accounting
17) how is a significant amount of consignment inventory reported in the balance sheet?
a.the inventory is reported separately on the consignor’s balance sheet
b.the inventory is combined with other inventory on the consignor’s balance sheet
c.the inventory is reported separately on the consignee’s balance sheet
d.the inventory is combined with other inventory on the consignee’s balance sheet
18) when preparing a bank reconciliation, bank credits are
a.added to the bank statement balance
b.deducted from the bank statement balance
c.added to the balance per books
d.deducted from the balance per books
19) on september 10, 2012, jenks co. incurred the following costs for one of its printing
presses:
neither the attachment nor the renovation increased the estimated useful life of the
press. however, the renovation resulted in significantly increased productivity. what
amount of the costs should be capitalized?
a.$0
b.$77,000
c.$88,000
d.$95,000
20) on december 31, 2010, nolte co. is in financial difficulty and cannot pay a note due
that day. it is a $1,200,000 note with $120,000 accrued interest payable to piper, inc.
piper agrees to accept from nolte equipment that has a fair value of $580,000, an
original cost of $960,000, and accumulated depreciation of $460,000. piper also
forgives the accrued interest, extends the maturity date to december 31, 2013, reduces
the face amount of the note to $500,000, and reduces the interest rate to 6%, with
interest payable at the end of each year.
nolte should recognize a gain or loss on the transfer of the equipment of
nolte should record interest expense for 2013 of
a.$0
b.$30,000
c.$60,000
d.$90,000
21) at the end of 2012, drew company made four adjusting entries for the following
items:
1>.depreciation expense, $25,000.
2>.expired insurance, $2,200 (originally recorded as prepaid insurance.)
3>.interest payable, $6,000.
4>.rent receivable, $10,000.
in the normal situation, to facilitate subsequent entries, the adjusting entry or entries
that may be reversed is (are)
a.entry no. 3
b.entry no. 4
c.entry no. 3 and no. 4
d.entry no. 2, no. 3 and no. 4
22) lawson manufacturing company has the following account balances at year end:
what amount should lawson report as inventories in its balance sheet?
a.$97,000
b.$101,000
c.$183,000
d.$187,000
23) the sales price for a product provides a gross profit of 20% of sales price. what is
the gross profit as a percentage of cost?
a.20%
b.17%
c.25%
d.not enough information is provided to determine.
24) which of the following principles best describes the conceptual rationale for the
methods of matching depreciation expense with revenues?
a.associating cause and effect
b.systematic and rational allocation
c.immediate recognition
d.partial recognition
25) in 2013, fargo corporation began construction work under a three-year contract. the
contract price is $3,600,000. fargo uses the percentage-of-completion method for
financial accounting purposes. the income to be recognized each year is based on the
proportion of costs incurred to total estimated costs for completing the contract. the
financial statement presentations relating to this contract at december 31, 2013, follow:
what was the initial estimated total income before tax on this contract?
a.$450,000
b.$480,000
c.$600,000
d.$720,000