1) harper company commonly issues long-term notes payable to its various lenders.
harper has had a pretty good credit rating such that its effective borrowing rate is quite
low (less than 8% on an annual basis). harper has elected to use the fair value option for
the long-term notes issued to barclays bank and has the following data related to the
carrying and fair value for these notes.
instructions
(a)prepare the journal entry at december 31 (harpers year-end) for 2011, 2012, and 2013
to record the fair value option for these notes.
(b)at what amount will the note be reported on harpers 2012 balance sheet?
(c)what is the effect of recording the fair value option on these notes on harpers 2013
income?
2) gott company adopted the dollar-value lifo inventory method on 12/31/11. on this
date, its inventory consisted of the following items.
instructions
(a)compute the price index for 2012. round to 2 decimal places.
(b)calculate the 12/31/12 inventory. label all numbers.
(c)compute the price index for 2013. round to 2 decimal places.
(d)calculate the 12/31/13 inventory. label all numbers.
3) which of the following statements best describes the purpose of closing entries?
a.to faciliate posting and taking a trial balance
b.to determine the amount of net income or net loss for the period
c.to reduce the balances of revenue and expense accounts to zero so that they may be
used to accumulate the revenues and expenses of the next period
d.to complete the record of various transactions that were started in a prior period
4) which of the following intangible assets should not be amortized?
a.copyrights
b.customer lists
c.perpetual franchises
d.all of these intangible assets should be amortized.
5) surf company follows ifrs for its external financial reporting. the following amounts
were available at december 31, 2013:
under ifrs, what is the maximum amount that could be reported for cash provided by
operating activities for surf company for the year ended december 31, 2013?
a.$-0-
b.$22,000
c.$16,000
d.$38,000
6) adjusting entries that should be reversed include those for prepaid or unearned items
that
a.create an asset or a liability account
b.were originally entered in a revenue or expense account
c.were originally entered in an asset or liability account
d.create an asset or a liability account and were originally entered in a revenue or
expense account
7) the financial accounting standards board employs a “due process” system which
a.is an efficient system for collecting dues from members
b.enables interested parties to express their views on issues under consideration
c.identifies the accounting issues that are the most important
d.requires that all accountants must receive a copy of financial standards
8) which of the following statements is not valid as it applies to inventory costing
methods?
a.if inventory quantities are to be maintained, part of the earnings must be invested
(plowed back) in inventories when fifo is used during a period of rising prices
b.lifo tends to smooth out the net income pattern by matching current cost of goods sold
with current revenue, when inventories remain at constant quantities
c.when a firm using the lifo method fails to maintain its usual inventory position
(reduces stock on hand below customary levels), there may be a matching of old costs
with current revenue
d.the use of fifo permits some control by management over the amount of net income
for a period through controlled purchases, which is not true with lifo
9) lantos company had a 40 percent tax rate. given the following pre-tax amounts, what
would be the income tax expense reported on the face of the income statement?
sales revenue$ 300,000
cost of goods sold180,000
salaries and wages expense24,000
depreciation expense33,000
dividend revenue27,000
utilities expense3,000
extraordinary loss30,000
interest expense6,000
a.$32,400
b.$20,400
c.$21,600
d.$ 9,600
10) jamar company purchased a depreciable asset for $225,000. the estimated salvage
value is $15,000, and the estimated useful life is 8 years. the double-declining balance
method will be used for depreciation. what is the depreciation expense for the second
year on this asset?
a.$26,250
b.$39,375
c.$42,188
d.$56,250
11) the costs of organizing a corporation include legal fees, fees paid to the state of
incorporation, fees paid to promoters, and the costs of meetings for organizing the
promoters. these costs are said to benefit the corporation for the entity’s entire life. these
costs should be
a.capitalized and never amortized
b.capitalized and amortized over 40 years
c.capitalized and amortized over 5 years
d.expensed as incurred
12) two independent companies, hager co. and shaw co., are in the home building
business. each owns a tract of land held for development, but each would prefer to build
on the other’s land. they agree to exchange their land. an appraiser was hired, and from
her report and the companies’ records, the following information was obtained:
the exchange was made, and based on the difference in appraised fair values, shaw paid
$90,000 to hager. the exchange lacked commercial substance.
for financial reporting purposes, hager should recognize a pre-tax gain on this exchange
of
a.$0
b.$18,000
c.$90,000
d.$144,000
13) under ifrs, which of the following would be included in the cost of inventories?
a.product specific designer costs
b.abnormal waste materials
c.selling costs
d.all of these would be included in the cost of inventories.
14) when making decisions, investors are interested in assessing
a.the companys ability to generate net cash inflows
b.managements ability to protect and enhance the capital providers investments
c.both a and b
d.the companys ability to generate net income
15) the principal advantage of the completed-contract method is that
a.reported revenue is based on final results rather than estimates of unperformed work
b.it reflects current performance when the period of a contract extends into more than
one accounting period
c.it is not necessary to recognize revenue at the point of sale
d.a greater amount of gross profit and net income is reported than is the case when the
percentage-of-completion method is used
16) which of the following statements about involuntary conversions is false?
a.an involuntary conversion may result from condemnation or fire
b.the gain or loss from an involuntary conversion may be reported as an extraordinary
item
c.the gain or loss from an involuntary conversion should not be recognized when the
enterprise reinvests in replacement assets
d.all of these
17) which of the following best describes the accrual method of accounting for
warranty costs?
a.expensed when paid
b.expensed when warranty claims are certain
c.expensed based on estimate in year of sale
d.expensed when incurred
18) rensing, inc., has $800,000 of 6% preferred stock and $1,200,000 of common stock
outstanding, each having a par value of $10 per share. no dividends have been paid or
declared during 2011 and 2012. as of december 31, 2013, it is desired to distribute
$396,000 in dividends.
instructions
how much will the preferred and common stockholders receive under each of the
following assumptions:
(a)the preferred is noncumulative and nonparticipating.
(b)the preferred is cumulative and nonparticipating.
(c)the preferred is cumulative and fully participating.
(d)the preferred is cumulative and participating to 12% total.
19) which of the following is not a publication of the fasb?
a.statements of financial accounting concepts
b.accounting research bulletins
c.interpretations
d.technical bulletins
20) on july 1, 2012, ed wynne signed an agreement to operate as a franchisee of kwik
foods, inc., for an initial franchise fee of $240,000. of this amount, $80,000 was paid
when the agreement was signed and the balance is payable in four equal annual
payments of $40,000 beginning july 1, 2013. the agreement provides that the down
payment is not refundable and no future services are required of the franchisor. wynne’s
credit rating indicates that he can borrow money at 14% for a loan of this type.
information on present and future value factors is as follows:
wynne should record the acquisition cost of the franchise on july 1, 2012 at
a.$174,400
b.$196,400
c.$240,000
d.$270,400