Which of the following is a correct statement concerning the reporting of the pension
plan on the face of the employer’s balance sheet? A. Only the plan assets are separately
reported.
B. Only the PBO is separately reported.
C. Both the PBO and the plan assets are separately reported.
Answer:
At times, businesses require advance payments from customers that will be applied to
the purchase price when goods are delivered or services provided. These customer
advances represent:A. Liabilities until the product or service is provided.
B. A component of shareholders’ equity.
C. Long-term assets until the product or service is provided.
D. Revenue upon receipt of the advance payment.
Answer:
Alliance Software began 2013 with accounts receivable of $115,000. All sales are made
on credit. Sales and cash collections from customers for the year were $780,000 and
$700,000, respectively. Cost of goods sold for the year was $450,000. What was
Alliance’s receivables turnover ratio (rounded) for 2013? A. 4.00.
B. 5.03.
C. 2.90.
D. 6.78.
Answer:
Liddy Corp. began constructing a new warehouse for its operations during the current
year. In the year Liddy incurred interest of $30,000 on a working capital loan, and
interest on a construction loan for the warehouse of $60,000. Interest computed on the
average accumulated expenditures for the warehouse construction was $50,000. What
amount of interest should Liddy expense for the year? A. $30,000.
B. $40,000.
C. $90,000.
D. $140,000.
Answer:
Ending inventory is equal to the cost of items on hand plus: A. Items in transit sold
f.o.b. shipping point.
B. Purchases in transit f.o.b. destination.
C. Items in transit sold f.o.b. destination.
D. None of the above.
Answer:
Janson Corporation Co.’s trial balance included the following account balances at
December 31, 2013:
Investments consist of treasury bills that were purchased in November and mature in
January. Prepaid insurance is for the next two years. What amount should be included in
the current asset section of Janson’s December 31, 2013, balance sheet? A. $88.000.
B. $85,000.
C. $55,000.
D. $135,000.
Answer:
External decision makers would not look primarily to financial accounting information
to assist them in making decisions on: A.Granting credit.
B.Capital budgeting.
C.Selecting stocks.
D.Mergers and acquisitions.
Answer:
On January 1, 2013, Hage Corporation granted incentive stock options to purchase
18,000 of its common shares at $7 each. The options are exercisable after one year. The
market price of common averaged $9 per share during the quarter ending on March 31,
2013. There was no change in the 100,000 shares of outstanding common stock during
the quarter ended March 31, 2013. Net income for the quarter was $8,268. The number
of shares to be used in computing diluted earnings per share for the quarter is: A.
100,000.
B. 104,000.
C. 106,000.
D. 118,000.
Answer:
The corporate charter sometimes is known as (a): A. Articles of incorporation.
B. Statement of organization.
C. By-laws.
D. Registration statement.
Answer:
An asset acquired January 1, 2013, for $15,000 with an estimated 10-year life and no
residual value is being depreciated in an equipment group asset account that has an
average service life of eight years. The asset is sold on December 31, 2014, for $6,000.
The entry to record the sale would be: A.
B.
C.
D.
Answer:
An underfunded pension plan means that the: A. PBO is less than plan assets.
B. PBO exceeds plan assets.
C. ABO is less than plan assets.
D. ABO exceeds plan assets.
Answer:
Lake Co. receives nonrefundable advance payments with special orders for containers
constructed to customer specifications. Related information for 2013 is as follows ($ in
millions):
What amount should Lake report as a current liability for advances from customers in
its Dec. 31, 2013, balance sheet? A. $0.
B. $80.
C. $125.
D. $170.
Answer:
Fulbright Corp. uses the periodic inventory system. During its first year of operations,
Fulbright made the following purchases (listed in chronological order of acquisition):
– 40 units at $100
– 70 units at $80
– 170 units at $60
Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.
Ending inventory using the average cost method (rounded) is: A. $650.
B. $1,000.
C. $707.
D. $600.
Answer:
Listed below are five terms followed by a list of phrases that describe or characterize
each of the terms. Match each phrase with the correct term. 1)Double-declining balance
2)Composite method
3)Straight-line method
4)Activity-based method
5)Write-down of asset
A. Occurs with a significant decline in value.
B. Produces a level amount of annual depreciation
C. Aggregates assets that are physically dissimilar when calculating depreciation.
D. Does not subtract residual value from cost when calculating depreciation
E. Estimates service life in units of output
Answer:
When the amount of revenue collected in advance decreases during an accounting
period: A. Accrual-basis revenues exceed cash collections from customers.
B. Accrual-basis net income exceeds cash-basis net income.
C. Accrual-basis revenues are less than cash collections from customers.
D. Accrual-basis net income is less than cash-basis net income.
Answer:
Griggs Co. failed to amortize the premium on an outstanding five-year bond issue.
What is the resulting effect on interest expense and the bond carrying value,
respectively?A. Understated, understated.
B. Understated, overstated.
C. Overstated, understated.
D. Overstated, overstated.
Answer:
Listed below are five terms followed by a list of phrases that describe or characterize
five of the terms related to accounting for contingent liabilities under IFRS. Match each
phrase with the most correct term. 1)mid-point of the range
2)provision
3)contingent gains are not accrued unless virtually certain
4)report at present value whenever time value of money is material
5)more likely than not
A. Treatment of contingent gains under IFRS
B. Definition of “probable” under IFRS
C. The amount IFRS would accrue given a range of equally likely outcomes
D. How present values affect the measurement of contingent liabilities under IFRS
E. How IFRS refers to an accrued liability that would generally be referred to as an
“accrued contingent loss” under U.S. GAAP
Answer:
Listed below are 5 terms followed by a list of phrases that describe or characterize each
of the terms. Match each phrase with the correct term. 1)Net purchases
2)LIFO conformity rule
3)Periodic inventory system
4)Finished goods
5)Cost of Goods available for sale
A. Adjusts inventory at the end of the period
B. LIFO must be used for financial reporting if elected for taxes
C. Reduced by discounts taken under both gross and net methods
D. Inventory ready for sale
E. Allocated between ending inventory and cost of goods sold
Answer:
Share issue costs refer to the costs of obtaining the legal, promotional, and accounting
services necessary to effect the sale of shares. The costs reduce the net cash proceeds
from selling the shares and thus paid-in capitalexcess of par, and are: A. Not recorded
separately.
B. Recorded as an asset.
C. Recorded as a liability.
D. Amortized over time.
Answer:
The following incomplete (columns have missing amounts) pension spreadsheet is for
Old Tucson Corporation (OTC).
What was the balance of the net pension asset/liability reported in the balance sheet at
the end of the previous year? A. Net pension asset of $250.
B. Net pension asset of $442.
C. Net pension liability of $250.
D. Net pension liability of $442.
Answer:
Current assets include cash and all other assets expected to become cash or be
consumed: A. Within one year.
B. Within one operating cycle.
C. Within one year or one operating cycle, whichever is shorter.
D. Within one year or one operating cycle, whichever is longer.
Answer:
Cutter Enterprises purchased equipment for $72,000 on January 1, 2013. The equipment
is expected to have a five-year life and a residual value of $6,000.
Using the sum-of-the-years’-digits method, depreciation for 2013 and book value at
December 31, 2013, would be: A. $22,000 and $44,000.
B. $22,000 and $50,000.
C. $24,000 and $48,000.
D. $24,000 and $42,000.
Answer:
Under U.S. GAAP, a deferred tax asset for stock options: A. Is created for the
cumulative amount of the fair value of the options the company has recorded for
compensation expense.
B. Is the portion of the options’ intrinsic value earned to date times the tax rate.
C. Is the tax rate times the fair value of all the options.
D. Isn’t created if the award is “in the money;” that is, it has intrinsic value.
Answer:
Prescott Corporation issued ten thousand $1,000 bonds on January 1, 2013. The bonds
have a 10-year term and pay interest semiannually. This is the partial bond amortization
schedule for the bonds.
What is the effective annual rate of interest on the bonds? A. 3%.
B. 4%.
C. 6%.
D. 8%.
Answer:
Which of the following will require a recalculation of weighted-average shares
outstanding for all years presented? A. Stock dividends and stock splits.
B. Stock dividends but not stock splits.
C. Stock splits but not stock dividends.
D. Stock rights.
Answer:
National Hoopla Company switches from sum-of-the-years’ digits depreciation to
straight-line depreciation. As a result:A. Current income tax payable increases.
B. The cumulative effect decreases current period earnings.
C. Prior periods’ financial statements are restated.
D. None of the above is correct.
Answer:
Under the net method, purchase discounts lost are: A. Included in purchases.
B. Added to accounts payable.
C. Included in interest expense.
D. Deducted from discount income.
Answer:
Which of the following is the best definition of a current liability? A. An obligation
payable within one year.
B. An obligation payable within one year of the balance sheet date.
C. An obligation payable within one year or within the normal operating cycle,
whichever is longer.
D. An obligation expected to be satisfied with current assets or by the creation of other
current liabilities.
Answer:
Brockton Carpet Cleaning prepares a bank reconciliation at the end of every month. At
the end of July, the balance in the general ledger checking account was $2,750 and the
bank balance on the bank statement was $2,980. Outstanding checks totaled $680 and
deposits in transited were $400. The bank statement revealed that a check written for
$120 was incorrectly recorded by Brockton as a $220 disbursement. The bank statement
listed service charges and NSF check charges totaling $150. The corrected cash balance
is: A. $2,270.
B. $2,550.
C. $2,470.
D. $2,700.
Answer:
Listed below are account balances (in $ millions) taken from the records of Symphony
Stores. All of these are permanent accounts, except the last two that have yet to be
closed. The installment receivables are current. Symphony uses a perpetual inventory
system.
Assets do not include:
A. Property, plant, and equipment.
B. Investments.
C. Paid-in capital.
D. Unexpired insurance.
Answer:
Accounting for costs of incentive programs for frequent customer purchases
involves:A. Recording an expense and a liability each period.
B. Recording a liability and a reduction of revenue each period.
C. Recording an expense and an asset reduction each period.
D. Recording an expense and revenue each period.
Answer:
During 2013, Deluxe Leather Goods sold 800,000 reversible belts under a new sales
promotional program. Each belt carried one coupon, which entitles the customer to a
$5.00 cash rebate. Deluxe estimates that 70% of the coupons will be redeemed, even
though only 350,000 coupons had been processed during 2013. At December 31, 2013,
Deluxe should report a liability for unredeemed coupons of: A. $560,000.
B. $1,050,000.
C. $1,225,000.
D. $1,750,000.
Answer:
A reconciliation of pretax financial statement income to taxable income is shown below
for Fieval Industries for the year ended December 31, 2013, its first year of operations.
The income tax rate is 40%.
What amount(s) should Fieval report related to deferred income taxes in its 2013
balance sheet? A. Current asset of $10,000 and noncurrent liability of $28,000.
B. Noncurrent liability of $18,000.
C. Current asset of $4,000 and noncurrent liability of $28,000.
D. Noncurrent liability of $24,000.
Answer:
If a company’s deferred tax asset is not reduced by a valuation allowance, the company
believes it is more likely than not that: A. Sufficient accounting income will be
generated in future years to realize the full tax benefit.
B. Sufficient accounting and taxable income will exist in future years to realize the full
tax benefit.
C. Sufficient taxable income will be generated in future years to realize the full tax
benefit.
D. Tax rates will not change in future years.
Answer:
Data related to the inventories of Costco Medical Supply are presented below:
In applying the LCM rule, the inventory of surgical supplies would be valued at: A.
$115.
B. $90.
C. $80.
D. $69.
Answer:
Paris Company reported the following items in its December 31, 2013, year-end
adjusted trial balance:
Paris is subject to a 40% income tax rate.
Required:
Prepare the December 31, 2013, income statement for Paris Company starting with
income from continuing operations before income taxes.
Answer:
Answer:
The chief accountant for Julius Co. provides you with the company’s most recent
income statement and comparative balance sheets below. The accountant has asked for
your help in preparing part of the company’s 2013 statement of cash flows.
Required:
In the space provided below, determine the cash flow from operating activities for
Julius Co., using the direct method. Cash flows from operating activities:
Answer:
The adjusted trial balance for China Tea Company at December 31, 2013, is presented
below:
Prepare an income statement for China Tea Company for the year ended December 31,
2013.
Answer:
When a new tax rate is enacted, what adjustment, if any, is made to the retained
earnings account as a result of the change?
Answer:
The following information comes from the 2010 Occidental Petroleum Corporation
annual report to shareholders:
NOTE 4 INVENTORIES
Net carrying values of inventories valued under the LIFO method were approximately
$177 million and $175 million at December 31, 2010 and 2009, respectively.
Inventories in continuing operations consisted of the following: ($ in millions)
The LIFO reserve indicates that inventories would have been $72 million and $81
million higher at the end of 2010 and 2009, respectively, if Occidental Petroleum had
used FIFO to value its entire inventory.
Required:
If Occidental Petroleum had used FIFO to value its entire inventory how would its 2010
pre-tax income be affected?
Answer:
What is the treasury stock method of accounting for stock options, warrants, and rights?
Answer:
The current asset section of Seifert & Seifert, CPA’s balance sheet consists of cash,
accounts receivable, investments, and prepaid expenses. The 2013 balance sheet
reported the following: cash, $110,000; investments, $22,000; prepaid expenses,
$18,000; noncurrent assets, $422,000; and shareholders’ equity, $350,000. The current
ratio at the end of the year was 1.6 and the debt to equity ratio was .8.
Required:
Determine the following 2013 amounts and ratios:
1) Current liabilities.
2) Long-term liabilities.
3) Accounts receivable.
4) The acid-test ratio.
Answer:
The following information is taken from the accounting records of Madeline Inc. for the
year 2013. Missing information has been left blank. Inventory is the only supply that
Madeline purchases on credit.
Required:
Compute the missing amounts.
Answer:
Briefly explain the criteria for recognition of initial franchise fees by the franchisor.
Answer:
What is the EITF and what is its purpose?
Answer:
The following information ($ in millions) comes from a recent annual report of
Amazon.com, Inc.:
Compute Amazon’s total liabilities at the end of the year.
Answer:
Bascomb Company purchased $420,000 in merchandise on account during the month
of April, and merchandise costing $350,000 was sold on account for $425,000.
Required:
1. Prepare journal entries to record the purchases and sales assuming Bascomb uses a
perpetual inventory system.
2. Prepare journal entries to record the purchases and sales assuming Bascomb uses a
periodic inventory system.
Answer:
Answer:
The accounting records of Rockness Company provided the data below ($ in 000s).
Required:
Prepare a reconciliation of net income to net cash flows from operating activities.
Answer:
On July 1, 2013, Clearwater Inc. purchased 6,000 shares of the outstanding common
stock of Mountain Corporation at a cost of $140,000. Mountain had 30,000 shares of
outstanding common stock. Assume the total book value and fair value of net assets is
$650,000. Both companies have a January through December fiscal year. The following
data pertains to Mountain Corporation during 2013:
Required:
1) Prepare the entry to record the original investment in Mountain.
2) Compute the goodwill (if any) on the acquisition.
3) Prepare the necessary entries (other than acquisition) for 2013 under the equity
method.
Answer:
On January 1, 2013, Mania Enterprises issued 12% bonds dated January 1, 2013, with a
face amount of $20 million. The bonds mature in 2022 (10 years). For bonds of similar
risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and
December
Required:
1) Determine the price of the bonds at January 1, 2013.
2) Prepare the journal entry to record the bond issuance by Mania on January 1, 2013.
3) Prepare the journal entry to record interest on June 30, 2013, using the effective
interest method.
4) Prepare the journal entry to record interest on December 31, 2013, using the effective
interest method.
Answer: