1) revenues are realizable when assets received or held are readily convertible into cash
or claims to cash.
2) the primary advantage of the multiple-step format lies in the simplicity of
presentation and the absence of any implication that one type of revenue or expense
item has priority over another.
3) accounting errors include changes in estimates that occur because a company
acquires more experience, or as it obtains additional information.
4) if market value of an impaired asset recovers after an impairment has been
recognized, the impairment may be reversed in a subsequent period.
5) if a new patent is acquired through modification of an existing patent, the remaining
book value of the original patent may be amortized over the life of the new patent.
6) ifrs requires that company a consolidate company b when it controls and owns at
least 50% of company b.
7) a controlling interest occurs when one corporation acquires a voting interest of more
than 50 percent in another corporation.
8) ifrs and u.s. gaap are dissimilar in their treatment of contingencies.
9) under u.s. gaap, impairment loss is measured as the excess of the carrying amount
over the assets discounted cash flow.
10) the lower-of-cost-or-market method is used for inventory despite being less
conservative than valuing inventory at market value.
11) the tax effect of a loss carryforward represents future tax savings and results in the
recognition of a deferred tax asset.
12) gorman construction co. began operations in 2013. construction activity for 2013 is
shown below. gorman uses the completed-contract method.
which of the following should be shown on the income statement for 2013 related to
contract 1?
a.gross profit, $450,000
b.gross profit, $1,000,000
c.gross profit, $1,050,000
d.gross profit, $600,000
13) during self-construction of an asset by samuelson company, the following were
among the costs incurred:
what amount of overhead should be included in the cost of the self-constructed asset?
a.$ -0-
b.$35,000
c.$50,000
d.$85,000
14) at december 31, 2012 rice company had 300,000 shares of common stock and
10,000 shares of 6%, $100 par value cumulative preferred stock outstanding. no
dividends were declared on either the preferred or common stock in 2012 or 2013. on
january 30, 2014, prior to the issuance of its financial statements for the year ended
december 31, 2013, rice declared a 100% stock dividend on its common stock. net
income for 2013 was $1,140,000. in its 2013 financial statements, rice’s 2013 earnings
per common share should be
a.$1.80
b.$1.89
c.$3.60
d.$3.80
15) the allowance for doubtful accounts, which appears as a deduction from accounts
receivable on a balance sheet and which is based on an estimate of bad debts, is an
application of the
a.consistency characteristic
b.expense recognition principle
c.materiality constraint
d.revenue recognition principle
16) manning company has the following items: write-down of inventories, $360,000;
loss on disposal of sports division, $555,000; and loss due to strike, $339,000. ignoring
income taxes, what total amount should manning company report as extraordinary
losses?
a.$ -0-
b.$555,000
c.$699,000
d.$894,000
17) a company has not declared a dividend on its cumulative preferred stock for the past
three years. what is the required accounting treatment or disclosure in this situation?
a.record a liability for cumulative amount of preferred stock dividends not declared
b.disclose the amount of the dividends in arrears
c.record a liability for the current year’s dividends only
d.no disclosure or recognition is required
18) equestrain roads accepted a customer’s $50,000 zero-interest-bearing six-month
note payable in a sales transaction. the product sold normally sells for $46,000. if the
sale was made on june 30, how much interest revenue from this transaction would be
recorded for the year ending december 31?
a.$0
b.$2,000
c.$4,000
d.$5,000
19) jamison company purchased the assets of booker company at an auction for
$2,800,000. an independent appraisal of the fair value of the assets is listed below:
assuming that specific identification costs are impracticable and that jamison allocates
the purchase price on the basis of the relative fair values, what amount would be
allocated to the building?
a.$1,059,460
b.$1,400,000
c.$2,550,000
d.$768,627
20) brown corporation earns $600,000 and pays cash dividends of $200,000 during
2012. dexter corporation owns 3,000 of the 10,000 outstanding shares of brown.
what amount should dexter show in the investment account at december 31, 2012 if the
beginning of the year balance in the account was $800,000?
a.$980,000
b.$800,000
c.$920,000
d.$1,200,000
21) a markup of 30% on cost is equivalent to what markup on selling price?
a.23%
b.30%
c.70%
d.77%
22) brown corporation earns $600,000 and pays cash dividends of $200,000 during
2012. dexter corporation owns 3,000 of the 10,000 outstanding shares of brown.
how much investment income should dexter report in 2012?
a.$200,000
b.$180,000
c.$120,000
d.$600,000
23) briefly describe some of the similarities and differences between u.s. gaap and ifrs
with respect to the accounting for liabilities.
24) mars, inc. follows ifrs for its external financial reporting, while jerome company
uses u.s. gaap for its external financial reporting. during the year ended december 31,
2013, both companies changed from using the completed-contract method of revenue
recognition for long-term construction contracts to the percentage-of-completion
method. both companies experienced an indirect effect, related to increased
profit-sharing payments in 2013, of $24,000. as a result of this change, how much
expense related to the profit-sharing payment must be recognized by each company on
the income statement for the year ended december 31, 2013?
a.$24,000$24,000
25) on july 4, 2012, chen company issued for $6,300,000 a total of 60,000 shares of
$100 par value, 7% noncumulative preferred stock along with one detachable warrant
for each share issued. each warrant contains a right to purchase one share of chen $10
par value common stock for $15 per share. the stock without the warrants would
normally sell for $6,150,000. the market price of the rights on july 1, 2012, was $2.50
per right. on october 31, 2012, when the market price of the common stock was $19 per
share and the market value of the rights was $3.00 per right, 24,000 rights were
exercised. as a result of the exercise of the 24,000 rights and the issuance of the related
common stock, what journal entry would chen make?
26) define temporary differences, future taxable amounts, and future deductible
amounts.
27) what interest rates should be used in determining the amount of interest to be
capitalized? how should the amount of interest to be capitalized be determined?
28)
29) potter variety store uses the lifo retail inventory method. information relating to the
computation of the inventory at december 31, 2012, follows:
instructions
assuming that there was no change in the price index during the year, compute the
inventory at december 31, 2012, using the lifo retail inventory method.
30) a company using a perpetual inventory system neglected to record a purchase of
merchandise on account at year end. this merchandise was omitted from the year-end
physical count. how will these errors affect assets, liabilities, and stockholders’ equity at
year end and net income for the year?
31) grider industries, inc. issued $8,000,000 of 8% debentures on may 1, 2012 and
received cash totaling $7,098,102. the bonds pay interest semiannually on may 1 and
november 1. the maturity date on these bonds is november 1, 2020. the firm uses the
effective-interest method of amortizing discounts and premiums. the bonds were sold to
yield an effective-interest rate of 10%.
instructions
calculate the total dollar amount of discount or premium amortization during the first
year (5/1/12 through 4/30/13) these bonds were outstanding. (show computations and
round to the nearest dollar.)
32) agee corp. acquired a 30% interest in trent co. on january 1, 2013, for $500,000. at
that time, trent had 1,000,000 shares of its $1 par common stock issued and
outstanding. during 2013, trent paid cash dividends of $160,000 and thereafter declared
and issued a 5% common stock dividend when the fair value was $2 per share. trent’s
net income for 2013 was $360,000. what is the balance in agees equity investment
account at the end of 2013?