1) the deposit method of revenue recognition is used when
a.the product can be marketed at quoted prices and units are interchangeable
b.cash is received before the sales transaction is complete
c.the contract is short-term or the percentage-of-completion method cant be used
d.there are no significant costs of distribution
2) it is mandatory that the essential provisions of which of the following be clearly
stated in the notes to the financial statements?
a.stock option plans
b.pension obligations
c.lease contracts
d.all of these
3) gates co. purchased machinery on january 2, 2007, for $660,000. the straight-line
method is used and useful life is estimated to be 10 years, with a $60,000 salvage value.
at the beginning of 2013 gates spent $144,000 to overhaul the machinery. after the
overhaul, gates estimated that the useful life would be extended 4 years (14 years total),
and the salvage value would be $30,000. the depreciation expense for 2013 should be
a.$42,375
b.$51,750
c.$60,000
d.$55,500
4) when a bond issuer offers some form of additional consideration (a sweetener) to
induce conversion, the sweetener is accounted for as a(n)
a.extraordinary item
b.expense
c.loss
d.none of these
5) in a troubled debt restructuring in which the debt is restructured by a transfer of
assets with a fair value less than the carrying amount of the debt, the debtor would
recognize
a.no gain or loss on the restructuring
b.a gain on the restructuring
c.a loss on the restructuring
d.none of these
6) which of the following is a current liability?
a.preferred dividends in arrears
b.a dividend payable in the form of additional shares of stock
c.a cash dividend payable to preferred stockholders
d.all of these
7) huff co. exchanged nonmonetary assets with sayler co. no cash was exchanged and
the exchange had no commercial substance. the carrying amount of the asset
surrendered by huff exceeded both the fair value of the asset received and sayler’s
carrying amount of that asset. huff should recognize the difference between the carrying
amount of the asset it surrendered and
a.the fair value of the asset it received as a loss
b.the fair value of the asset it received as a gain
c.sayler’s carrying amount of the asset it received as a loss
d.sayler’s carrying amount of the asset it received as a gain
8) a company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on january 1, 2012.
interest is paid on june 30 and december 31. the proceeds from the bonds are
$9,802,072. what is interest expense for 2013, using straight-line amortization?
a.$770,104
b.$780,000
c.$784,596
d.$789,896
9) the cost of an intangible asset includes all of the following except
a.purchase price
b.legal fees
c.other incidental expenses
d.all of these are included
10) keen company’s accounting records indicated the following information:
a physical inventory taken on december 31, 2012, resulted in an ending inventory of
$1,050,000. keen’s gross profit on sales has remained constant at 25% in recent years.
keen suspects some inventory may have been taken by a new employee. at december
31, 2012, what is the estimated cost of missing inventory?
a.$75,000
b.$225,000
c.$300,000
d.$375,000
11) allowing firms to estimate rather than physically count inventory at interim
(quarterly) periods is an example of a trade-off between
a.verifiability and faithful representation
b.faithful representation and comparability
c.timeliness and verifiability
d.neutrality and consistency
12) the sale of a depreciable asset resulting in a loss indicates that the proceeds from the
sale were
a.less than current fair value
b.greater than cost
c.greater than book value
d.less than book value
13) gains trading or cherry picking involves
a.moving securities whose value has decreased since acquisition from available-for-sale
to held-to-maturity in order to avoid reporting losses
b.reporting investment securities at fair value but liabilities at amortized cost
c.selling securities whose value has increased since acquisition while holding those
whose value has decreased since acquisition
d.all of the above are considered methods of gains trading or cherry picking
14) a primary source of stockholders’ equity is
a.income retained by the corporation
b.appropriated retained earnings
c.contributions by stockholders
d.both income retained by the corporation and contributions by stockholders
15) for income statement purposes, depreciation is a variable expense if the
depreciation method used is
a.units-of-production
b.straight-line
c.sum-of-the-years’-digits
d.declining-balance
16) perry corp. reports operating expenses in two categories: (1) selling and (2) general
and administrative. the adjusted trial balance at december 31, 2012, included the
following expense accounts:
one-half of the rented premises is occupied by the sales department.
how much of the expenses listed above should be included in perry’s selling expenses
for 2012?
a.$460,000
b.$610,000
c.$640,000
d.$790,000
17) web world began using dollar-value lifo for costing its inventory last year. the base
year layer consists of $350,000. assuming the current inventory at end of year prices
equals $483,000 and the index for the current year is 1.10, what is the ending inventory
using dollar-value lifo?
a.$483,000
b.$448,000
c.$439,091
d.$531,300
18) the december 31, 2012, balance sheet of hess corporation includes the following
items:
the bonds were issued on december 31, 2011, at 103, with interest payable on july 1 and
december 31 of each year. hess uses straight-line amortization. on march 1, 2013, hess
retired $800,000 of these bonds at 98 plus accrued interest. what should hess record as a
gain on retirement of these bonds? ignore taxes.
a.$37,600
b.$21,600
c.$37,200
d.$40,000