1) On January 1, 2011, Russell Company purchased a copyright for $1,500,000, having
an estimated useful life of 16 years. In January 2015, Russell paid $225,000 for legal
fees in a successful defense of the copyright. Copyright amortization expense for the
year ended December 31, 2015, should be
a.$0
b.$93,750
c.$107,812
d.$112,500
2) What is not a reason that accounting standards may differ across countries?
a.Governments
b.Language
c.Culture
d.Past practice
3) A plant site donated by a township to a manufacturer that plans to open a new factory
should be recorded on the manufacturer’s books at
a.the nominal cost of taking title to it
b.its fair value
c.one dollar (since the site cost nothing but should be included in the balance sheet)
d.the value assigned to it by the company’s directors
4) How does accounting help the capital allocation process attract investment capital?
a.By providing timely, relevant information
b.By encouraging innovation
c.By promoting productivity
d.By providing timely, relevant information and by encouraging innovation
5) Roman Company leased equipment from Koenig Company on July 1, 2015, for an
eight-year period expiring June 30, 2023 . Equal annual payments under the lease are
$600,000 and are due on July 1 of each year. The first payment was made on July 1,
2015 . The rate of interest contemplated by Roman and Koenig is 8%. The cash selling
price of the equipment is $3,723,750 and the cost of the equipment on Koenigs
accounting records was $3,300,000. Assuming that the lease is appropriately recorded
as a sale for accounting purposes by Koenig, what is the amount of profit on the sale
and the interest income that Koenig would record for the year ended December 31,
2015?
a.$0 and $0
b.$0 and $124,950
c.$423,750 and $124,950
d.$423,750 and $148,950
6) Robust Inc. has the following information related to an item in its ending inventory.
Packit (Product # 874) has a cost of $131, a replacement cost of $101, a net realizable
value of $117, and a normal profit margin of $5. What is the final
lower-of-cost-or-market inventory value for Packit?
a.$112
b.$131
c.$101
d.$117
7) It is mandatory that the essential provisions of which of the following be clearly
stated in the notes to the financial statements?
a.Stock option plans
b.Pension obligations
c.Lease contracts
d.All of these answer choices are correct
8) Muggs Co. includes one coupon in each bag of dog food it sells. In return for eight
coupons, customers receive a leash. The leashes cost Muggs $3 each. Muggs estimates
that 45 percent of the coupons will be redeemed. Data for 2014 and 2015 are as follows:
2014 2015
Bags of dog food sold500,000600,000
Leashes purchased18,00022,000
Coupons redeemed120,000150,000
The premium liability at December 31, 2015 is
a.$22,500
b.$39,375
c.$45,000
d.$84,375
9) Which of the following is not a characteristic of a defined-contribution pension plan?
a.The employer’s contribution each period is based on a formula
b.The benefits to be received by employees are determined by an employees highest
compensation level defined by the terms of the plan
c.The accounting for a defined-contribution plan is straightforward and uncomplicated
d.The benefit of gain or the risk of loss from the assets contributed to the pension fund
is borne by the employee
10) Advertising costs may be accrued or deferred to provide an appropriate expense in
each period for
InterimYear-end
Financial ReportingFinancial Reporting
a.YesNo
b.YesYes
c.NoNo
d.NoYes
11) In the On the Horizon feature in the text, which of the following is discussed
regarding convergence of U.S. GAAP with IFRS?
a.Noncash investing and financing activities will be disclosed only in the notes
b.Bank overdrafts will be classified as part of financing activities
c.The statement of cash flows will present only changes in cash and will exclude
changes in cash equivalents
d.All of the above are in On the Horizon regarding converging U.S. GAAP and IFRS
12) Under IFRS, the characteristics that would imply segregation of receivables would
include
a.past-due status
b.industry
c.collateral type
d.All of these answer choices are correct
13) Icon International, a software company, incorporated on January 1, 2013 is planning
to convert to IFRS. The company decided to present its first IFRS statements for the
year ended December 31, 2015 . What is the reporting date of Icon International?
a.January 1, 2013
b.January 1, 2015
c.December 31, 2015
d.December 31, 2013
14) Operating profits and losses for the 4 industry segments of Brittle Company are as
follows:
Candy($590,000)
Stix$ 20,000
Chips$ 85,000
Gum$ 9,000
Brittle Company uses IFRS for its external financial reporting. Using only the operating
profits (loss) test, which of the segments are reportable?
a.Under IFRS, all four segments must be reported
b.Stix, Chips, and Gum only
c.Candy and Chips only
d.Candy only
15) Which of the following is a general rule of classifying receivables?
a.Disclose any loss contingencies that exists on the receivables
b.Indicate the receivables classified as current and noncurrent
c.Disclose any receivables designated or pledged as collateral
d.All of these answers are correct
16) On January 1, 2015 Reese Company granted Jack Buchanan, an employee, an
option to buy 300 shares of Reese Co. stock for $40 per share, the option exercisable
for 5 years from date of grant. Using a fair value option pricing model, total
compensation expense is determined to be $3,600. Buchanan exercised his option on
September 1, 2015, and sold his 100 shares on December 1, 2015. Quoted market prices
of Reese Co. stock during 2015 were:
January 1$40 per share
September 1$48 per share
December 1$54 per share
The service period is for two years beginning January 1, 2015 . As a result of the option
granted to Buchanan, using the fair value method, Reese should recognize
compensation expense for 2015 on its books in the amount of
a.$0
b.$1,800
c.$3,600
d.$4,200
17) Deferred taxes should be presented on the balance sheet
a.as one net debit or credit amount
b.in two amounts: one for the net current amount and one for the net noncurrent amount
c.in two amounts: one for the net debit amount and one for the net credit amount
d.as reductions of the related asset or liability accounts
18) On September 1, 2014, Valdez Company reacquired 20,000 shares of its $10 par
value common stock for $15 per share. Valdez uses the cost method to account for
treasury stock. The journal entry to record the reacquisition of the stock should debit
a.Treasury Stock for $200,000
b.Common Stock for $200,000
c.Common Stock for $200,000 and Paid-in Capital in Excess of Par for $75,000
d.Treasury Stock for $300,000
19) Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The
truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles.
It was driven 21,000 miles in 2014 and 29,000 miles in 2015 . What is the depreciation
expense for 2015?
a.$23,490
b.$6,000
c.$21,750
d.$37,500