1) Use the code letters listed below (a l) to indicate, for each balance sheet item ( 1 13 )
listed below the usual valuation reported on the balance sheet.
1>Common stock8>Long-term bonds payable
2>Prepaid insurance9>Land (in use)
3>Natural resources10>Land (future plant site)
4>Property, plant, and equipment11>Patents
5>Accounts receivable12>Equity investments (trading)
6>Copyrights13>Accounts payable
7>Inventory
a.Par value
b.Current cost of replacement
c.Amount payable when due, less unamortized discount or plus unamortized premium
d.Amount payable when due
e.Market value at balance sheet date
f.Net realizable value
g.Lower of cost or market
h.Original cost less accumulated amortization
i.Original cost less accumulated depletion
j.Original cost less accumulated depreciation
k.Historical cost
l.Unexpired or unconsumed cost
2) Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with
a list price of $600,000 to Arch Inc. Arch Inc. will pay $650,000 in one year. Royal
Palm Corp. normally sells this type of equipment for 90% of list price. How much
should be recorded as revenue?
a.$540,000
b.$585,000
c.$600,000
d.$650,000
3) The current project of the IASB and the FASB related to financial statement
presentation indicates
a.that the IFRS statement of recognized income and expenses will most likely be
adopted by the FASB as a U.S. requirement in the near future
b.that the IFRS statement of recognized income and expenses will probably be
eliminated
c.that the U.S. GAAP standard for reporting comprehensive income will most likely be
adopted by the IASB for IFRS
d.that hybrid financial instruments are unacceptable
4) The stockholders’ equity of Howell Company at July 31, 2014 is presented below:
Common stock, par value $20, authorized 400,000 shares;
issued and outstanding 160,000 shares$3,200,000
Paid-in capital in excess of par160,000
Retained earnings 650,000
$4,010,000
On August 1, 2014, the board of directors of Howell declared a 10% stock dividend on
common stock, to be distributed on September 15th. The market price of Howell’s
common stock was $70 on August 1, 2014, and $76 on September 15, 2014 . What is
the amount of the debit to retained earnings as a result of the declaration and
distribution of this stock dividend?
a.$ 640,000
b.$1,120,000
c.$1,216,000
d.$ 800,000
5) Midland Company follows U.S. GAAP for its external financial reporting whereas
Bailey Company follows IFRS for its external financial reporting. The remaining
service lives of employees at both firms is estimated to be 10 years. The following
information is available for each company at December 31, 2015 related to their
respective defined-benefit pension plans.
MidlandBailey
Net of pension assets and liabilities$110,000$140,000
Prior service cost (after amortization, if any)$230,000$175,000
What is the amount of Prior Service Cost recognized by each company on its balance
sheet at December 31, 2015?
MidlandBailey
a.$230,000$175,000
b.$-0-$175,000
c.$-0-$-0-
d.$230,000$-0-
6) The following information was extracted from the 2014 financial statements of Max
Company:
Income from continuing operations before income tax$470,000
Selling and administrative expenses320,000
Income from continuing operations329,000
Gross profit900,000
Income before extraordinary item290,000
The amount reported for other expenses and losses is
a.$141,000
b.$39,000
c.$110,000
d.$150,000
7) The current assets section of a balance sheet should never include
a.a receivable from a customer not collectible for over one year
b.the premium paid on short-term bond investment
c.goodwill arising from the purchase of a going business
d.customers’ accounts with credit balances
8) Which of the following statements about property dividends is not true?
a.A property dividend is usually in the form of securities of other companies
b.A property dividend is also called a dividend in kind
c.The accounting for a property dividend should be based on the carrying value (book
value) of the nonmonetary assets transferred
d.All of these statements are true
9) During the year Tulip reported net sales of $800,000. The company had accounts
receivable of $75,000 at the beginning of the year and $120,000 at the end of the year
Compute Tulips average collection period (assume 365 days a year.)
a.34.2 day
b.44.5 days
c.54.8 days
d.89.0 days
10) The return on common stock equity is calculated by dividing
a.net income by average common stockholders equity
b.net income less preferred dividends by average common stockholders equity
c.net income by ending common stockholders equity
d.net income less preferred dividends by ending common stockholders equity
11) Black Corporation uses the FIFO method for internal reporting purposes and LIFO
for external reporting purposes. The balance in the LIFO Reserve account at the end of
2014 was $140,000. The balance in the same account at the end of 2015 is $210,000.
Blacks Cost of Goods Sold account has a balance of $1,050,000 from sales transactions
recorded during the year. What amount should Black report as Cost of Goods Sold in
the 2015 income statement?
a.$ 980,000
b.$1,050,000
c.$1,120,000
d.$1,260,000
12) During 2014, Vaughn Corporation sold merchandise costing $2,250,000 on an
installment basis for $3,000,000. The cash receipts related to these sales were collected
as follows: 2014, $1,200,000; 2015, $1,050,000; 2016, $750,000.
If expenses, other than the cost of the merchandise sold, related to the 2014 installment
sales amounted to $135,000, by what amount would Vaughns net income for 2014
increase as a result of installment sales?
a.$ 165,000
b.$ 266,250
c.$ 300,000
d.$1,065,000
13) In computing earnings per share for a simple capital structure, if the preferred stock
is cumulative, the amount that should be deducted as an adjustment to the numerator
(earnings) is the
a.preferred dividends in arrears
b.preferred dividends in arrears times (one minus the income tax rate)
c.annual preferred dividend times (one minus the income tax rate)
d.None of these answers are correct
14) When a corporation issues its capital stock in payment for services, the least
appropriate basis for recording the transaction is the
a.market value of the services received
b.par value of the shares issued
c.market value of the shares issued
d.Any of these provides an appropriate basis for recording the transaction
15) Bargain Surplus made cash sales during the month of October of $225,000. The
sales are subject to a 6% sales tax that was also collected. Which of the following
would be included in the summary journal entry to reflect the sale transactions?
a.Debit Accounts Receivable for $225,000
b.Credit Sales Taxes Payable for $12,736
c.Credit Sales Revenue for $208,490
d.Credit Sales Taxes Payable for $13,500
16) Equipment that cost $220,000 and has accumulated depreciation of $100,000 is
exchanged for equipment with a fair value of $160,000 and $40,000 cash is received.
The exchange lacked commercial substance.
The gain to be recognized from the exchange is
a.$16,000
b.$20,000
c.$60,000
d.$80,000
17) The installment-sales method of recognizing profit for accounting purposes is
acceptable if
a.collections in the year of sale do not exceed 30% of the total sales price
b.an unrealized profit account is credited
c.collection of the sales price is not reasonably assured
d.the method is consistently used for all sales of similar merchandise