1) part a.judd company has a beginning inventory in year one of $500,000 and an
ending inventory of $605,000. the price level has increased from 100 at the beginning
of the year to 110 at the end of year one. calculate the ending inventory under the
dollar-value lifo method.
part b.at the end of year two, judd’s inventory is $713,000 in terms of a price level of
115 which exists at the end of year two. calculate the inventory at the end of year two
continuing the use of the dollar-value lifo method.
2) to arrive at net cash provided by operating activities, it is necessary to report
revenues and expenses on a cash basis. this is done by
a.re-recording all income statement transactions that directly affect cash in a separate
cash flow journal
b.estimating the percentage of income statement transactions that were originally
reported on a cash basis and projecting this amount to the entire array of income
statement transactions
c.eliminating the effects of income statement transactions that did not result in a
corresponding increase or decrease in cash
d.eliminating all transactions that have no current or future effect on cash, such as
depreciation, from the net income computation
3) the term “depreciable base,” or “depreciation base,” as it is used in accounting, refers
to
a.the total amount to be charged (debited) to expense over an asset’s useful life
b.the cost of the asset less the related depreciation recorded to date
c.the estimated market value of the asset at the end of its useful life
d.the acquisition cost of the asset
4) melverns corporation has an investment in 10,000 shares of wallace company
common stock with a cost of $436,000. these shares are used in a property dividend to
stockholders of melverns. the property dividend is declared on may 25 and scheduled to
be distributed on july 31 to stockholders of record on june 15. the fair value per share of
wallace stock is $63 on may 25, $66 on june 15, and $68 on july 31. the net effect of
this property dividend on retained earnings is a reduction of
a.$680,000
b.$660,000
c.$630,000
d.$436,000
5) assume that a manufacturing corporation has (1) good quality control, (2) a one-year
operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing
policy of guaranteeing new products against defects for three years that has resulted in
material but rather stable warranty repair and replacement costs. any liability for the
warranty
a.should be reported as long-term
b.should be reported as current
c.should be reported as part current and part long-term
d.need not be disclosed
6) solar products purchased a machine for $39,000 on july 1, 2012. the company
intends to depreciate it over 4 years using the double-declining balance method. salvage
value is $3,000. depreciation for 2013 is
a.$19,500
b.$9,750
c.$14,625
d.$9,000
7) on january 1, 2012, ball co. exchanged equipment for a $200,000
zero-interest-bearing note due on january 1, 2015. the prevailing rate of interest for a
note of this type at january 1, 2012 was 10%. the present value of $1 at 10% for three
periods is 0.75. what amount of interest revenue should be included in abel’s 2013
income statement?
a.$0
b.$15,000
c.$16,500
d.$20,000
8) the process of identifying, measuring, analyzing, and communicating financial
information needed by management to plan, evaluate, and control an organizations
operations is called
a.financial accounting
b.managerial accounting
c.tax accounting
d.auditing
9) layne co. has a machine that cost $425,000 on march 20, 2009. this old machine had
an estimated life of ten years and a salvage value of $25,000. on december 23, 2013, the
old machine is exchanged for a new machine with a fair value of $270,000. the
exchange lacked commercial substance. layne also received $30,000 cash. assume that
the last fiscal period ended on december 31, 2012, and that straight-line depreciation is
used.
instructions
(a) show the calculation of the amount of gain or loss to be recognized by layne co.
from the exchange. (round to the nearest dollar.)
(b) prepare all entries that are necessary on december 23, 2013. show a check of the
amount recorded for the new machine.
10) winter co. is being sued for illness caused to local residents as a result of negligence
on the company’s part in permitting the local residents to be exposed to highly toxic
chemicals from its plant. winter’s lawyer states that it is probable that winter will lose
the suit and be found liable for a judgment costing winter anywhere from $1,600,000 to
$8,000,000. however, the lawyer states that the most probable cost is $4,800,000. as a
result of the above facts, winter should accrue
a.a loss contingency of $1,600,000 and disclose an additional contingency of up to
$6,400,000
b.a loss contingency of $4,800,000 and disclose an additional contingency of up to
$3,200,000
c.a loss contingency of $4,800,000 but not disclose any additional contingency
d.no loss contingency but disclose a contingency of $1,600,000 to $8,000,000
11) in recent year cey corporation had net income of $350,000, interest expense of
$70,000, and a times interest earned ratio of 9. what was cey corporation’s income
before taxes for the year?
a.$700,000
b.$630,000
c.$560,000
d.none of the above.
12) the current assets section of the balance sheet should include
a.machinery
b.patents
c.goodwill
d.inventory
13) 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
14) transfers between categories
a.result in companies omitting recognition of fair value in the year of the transfer
b.are accounted for at fair value for all transfers
c.are considered unrealized and unrecognized if transferred out of held-to-maturity into
trading
d.will always result in an impact on net income
15) napier co. provided the following information on selected transactions during 2013:
the net cash provided by financing activities during 2013 is
a.$1,100,000
b.$1,300,000
c.$1,600,000
d.$1,800,000
16) in preparing its bank reconciliation for the month of april 2012, henke, inc. has
available the following information.
what should be the correct balance of cash at april 30, 2012?
a.$34,370
b.$33,940
c.$33,490
d.$33,470
17) historical cost is the basis advocated for recording the acquisition of property, plant,
and equipment for all of the following reasons except
a.at the date of acquisition, cost reflects fair market value
b.property, plant, and equipment items are always acquired at their original historical
cost
c.historical cost involves actual transactions and, as such, is the most reliable basis
d.gains and losses should not be anticipated but should be recognized when the asset is
sold