1) companies should recognize the expense and related liability for compensated
absences in the year earned by employees.
2) on the balance sheet, an adjunct account reduces either an asset, a liability, or an
owners equity account.
3) under ifrs, the rate implicit in the lease is generally used to discount minimum lease
payments.
4) the first step in the accounting cycle is the journalizing of transactions and selected
other events.
5) dividends declared on common and preferred stock are subtracted from net income in
the computation of earnings per share.
6) the rules-based standards of ifrs are more detailed than the simpler, principles-based
standards of u.s. gaap.
7) an unrealized holding gain or loss is the net change in the fair value of the liability
from one period to another, exclusive of interest expense recognized but not recorded.
8) a manufacturing concern would report the cost of units only partially processed as
inventory in the balance sheet.
9) while ifrs requires an impairment test at each reporting date for long-lived assets, it
requires no such test for intangibles once a legal or useful life has been determined.
10) ifrs records market in the lower-of-cost-or-market differently than u.s. gaap.
11) which of the following must be considered in estimating depreciation on an asset
for an accounting period?
a.the original cost of the asset
b.its useful life
c.the decline of its fair market value
d.both the original cost of the asset and its useful life
12) indicate for each of the following what should be disclosed on a statement of cash
flows (scf) (indirect method). if not disclosed, write “not shown.” if an item is a
noncash transaction that should be shown separately, write “noncash.” if an item is
added to net income, write “add,” and if an item is deducted from net income, write
“deduct.” show financing and investing outflows in parentheses. for example, an answer
might be: deduct $4,700 or investing ($31,000). there is more than one answer for some
items.
(a)for 2013, income before an extraordinary loss was $460,000. a tornado damaged a
building and its contents. the proceeds from insurance companies totaled $120,000,
which was $40,000 less than the book values. the tax rate was 30%. (show the
calculation of the net income shown on the scf, and indicate how other items should be
shown on the scf.)
(b)amortization of bond premium, $1,100.
(c)the balance in retained earnings was $875,000 on december 31, 2012 and $1,310,000
on december 31, 2013. net income was $1,170,000. a stock dividend was declared and
distributed which increased common stock $325,000 and paid-in capital $150,000.
(show calculation of the cash dividend and indicate how it and the stock dividend
would be shown on the scf.)
(d)equipment, which cost $115,000 and had accumulated depreciation of $53,000, was
sold for $65,000.
(e)the deferred tax liability increased $18,000.
(f)issued 3,000 shares of preferred stock, $50 par, with a market value of $110 per share
for land. (show the amount, too.)
13) archer company purchased equipment in january of 2002 for $150,000. the
equipment was being depreciated on the straight-line method over an estimated useful
life of 20 years, with no salvage value. at the beginning of 2012, when the equipment
had been in use for 10 years, the company paid $25,000 to overhaul the equipment. as a
result of this improvement, the company estimated that the useful life of the equipment
would be extended an additional 5 years. what should be the depreciation expense
recorded for this equipment in 2012.
a.$5,000
b.$6,667
c.$7,500
d.$9,167
14) at the date of the financial statements, common stock shares issued would exceed
common stock shares outstanding as a result of the
a.declaration of a stock split
b.declaration of a stock dividend
c.purchase of treasury stock
d.payment in full of subscribed stock
15) floyd company purchases haeger company for $3,200,000 cash on january 1, 2013.
the book value of haeger companys net assets, as reflected on its december 31, 2012
balance sheet is $2,480,000. an analysis by floyd on december 31, 2012 indicates that
the fair value of haegers tangible assets exceeded the book value by $240,000, and the
fair value of identifiable intangible assets exceeded book value by $180,000. how much
goodwill should be recognized by floyd company when recording the purchase of
haeger company?
a.$ -0-
b.$720,000
c.$480,000
d.$300,000
16) beeman company exchanged machinery with an appraised value of $2,925,000, a
recorded cost of $4,500,000 and accumulated depreciation of $2,250,000 with lacey
corporation for machinery lacey owns. the machinery has an appraised value of
$2,825,000, a recorded cost of $5,400,000, and accumulated depreciation of
$2,970,000. lacey also gave beeman $100,000 in the exchange. assume depreciation has
already been updated.
instructions
(a)prepare the entries on both companies’ books assuming that the exchange had
commercial substance. (round all computations to the nearest dollar.)
(b)prepare the entries on both companies’ books assuming that the exchange lacked
commercial substance. (round all computations to the nearest dollar.)
17) at december 31, 2012, sager co. had 1,200,000 shares of common stock outstanding.
in addition, sager had 450,000 shares of preferred stock which were convertible into
750,000 shares of common stock. during 2013, sager paid $750,000 cash dividends on
the common stock and $500,000 cash dividends on the preferred stock. net income for
2013 was $4,250,000 and the income tax rate was 40%. the diluted earnings per share
for 2013 is (rounded to the nearest penny)
a.$1.55
b.$2.18
c.$3.14
d.$3.55
18) turner corporation had the following information in its financial statements for the
year ended 2012 and 2013:
what is the book value per share for turner corporation for the year ended 2013?
a.$14.81
b.$15.00
c.$13.75
d.$14.38
19) presenting consolidated financial statements this year when statements of individual
companies were presented last year is
a.a correction of an error
b.an accounting change that should be reported prospectively
c.an accounting change that should be reported by restating the financial statements of
all prior periods presented
d.not an accounting change
20) the following information was derived from the 2012 accounting records of perez
co.:
perez’s 2012 cost of sales was
a.$470,000
b.$500,000
c.$534,000
d.$539,000