1) when the conventional retail method includes both net markups and net markdowns
in the cost-to-retail ratio, it approximates a lower-of-cost-or-market valuation.
2) the future value of an ordinary annuity table is used when payments are invested at
the beginning of each period.
3) an accelerated depreciation method is appropriate when the assets economic
usefulness is the same each year.
4) special assessments for local improvements such as street lights and sewers should
be accounted for as land improvements.
5) financial flexibility measures the ability of an enterprise to take effective actions to
alter the amounts and timing of cash flows.
6) if the compounding period is less than one year, the annual interest rate must be
converted to the compounding period interest rate by dividing the annual rate by the
number of compounding periods per year.
7) earnings per share should always be shown separately for
a.net income and gross margin
b.net income and pretax income
c.income before extraordinary items
d.extraordinary items and prior period adjustments
8) at december 31, 2012 the following balances existed on the books of foxworth
corporation:
if the bonds are retired on january 1, 2013, at 102, what will foxworth report as a loss
on redemption?
a.$555,000
b.$480,000
c.$405,000
d.$300,000
9) arreaga corp. has a tax rate of 40 percent and income before non-operating items of
$464,000. it also has the following items (gross amounts).
what is the amount of income tax expense arreaga would report on its income
statement?
a.$185,600
b.$162,400
c.$198,400
d.$124,000
10) rf company had january 1 inventory of $150,000 when it adopted dollar-value lifo.
during the year, purchases were $900,000 and sales were $1,500,000. december 31
inventory at year-end prices was $215,040, and the price index was 112.
what is rf companys ending inventory?
a.$150,000
b.$192,000
c.$197,040
d.$215,040
11) gibbs corporation owned 20,000 shares of oliver corporations $5 par value common
stock. these shares were purchased in 2009 for $180,000. on september 15, 2013, gibbs
declared a property dividend of one share of oliver for every ten shares of gibbs held by
a stockholder. on that date, when the market price of oliver was $21 per share, there
were 180,000 shares of gibbs outstanding. what net reduction in retained earnings
would result from this property dividend?
a.$162,000
b.$378,000
c.$108,000
d.$216,000
12) which of the following pronouncements were issued by the accounting principles
board?
a.accounting research bulletins
b. opinions
c. statements of position
d. statements of financial accounting concepts
13) fry corporations computation of cost of goods sold is:
the average days to sell inventory for fry are
a.43.5 days
b.50.3 days
c.54.5 days
d.65.2 days
14) free cash flow is calculated as net cash provided by operating activities less
a.capital expenditures
b.dividends
c.capital expenditures and dividends
d.capital expenditures and depreciation
15) goren corporation had the following amounts, all at retail:
what is gorens ending inventory at retail?
a.$44,400
b.$46,000
c.$47,600
d.$48,400
16) u.s. gaap allows all of the following statement formats to be used for reporting
comprehensive income except
a.statement of recognized income and expense
b.single income statement
c.combined income statement of comprehensive income
d.statement of stockholders’ equity
17) penner builders contracted to build a high-rise for $21,000,000. construction began
in 2012 and is expected to be completed in 2015. data for 2012 and 2013 are:
penner uses the percentage-of-completion method.
instructions
(a)how much gross profit should be reported for 2012? show your computation.
(b)how much gross profit should be reported for 2013?
(c)make the journal entry to record the revenue and gross profit for 2013.
18) on december 31, 2012, irey co. has $4,000,000 of short-term notes payable due on
february 14, 2013. on january 10, 2013, irey arranged a line of credit with county bank
which allows irey to borrow up to $3,000,000 at one percent above the prime rate for
three years. on february 2, 2013, irey borrowed $2,400,000 from county bank and used
$1,000,000 additional cash to liquidate $3,400,000 of the short-term notes payable. the
amount of the short-term notes payable that should be reported as current liabilities on
the december 31, 2012 balance sheet which is issued on march 5, 2013 is
a.$0
b.$600,000
c.$1,000,000
d.$1,600,000
19) which of the following should be recorded in accounts receivable?
a.receivables from officers
b.receivables from subsidiaries
c.dividends receivable
d.none of these
20) evolution of a statement of financial accounting standards.
in establishing financial accounting standards, two basic premises of the fasb are (1) the
fasb should be responsive to the needs and viewpoints of the entire economic
community, not just the accounting profession. (2) it should operate in full view of the
public through a “due process” system that gives interested persons ample opportunity
to make their views known. to ensure achievement of these goals, what are the steps
taken in the evolution of an fasb statement of financial accounting standards?
21) presented below are unrelated cases involving investments in equity securities.
case i.the fair value of the trading securities at the end of last year was 30% below
original cost, and this was properly reflected in the accounts. at the end of the current
year, the fair value has increased to 20% above cost.
case ii.the fair value of an available-for-sale security has declined to less than forty
percent of the original cost. the decline in value is considered to be other than
temporary.
case iii.an equity security, whose fair value is now less than cost, is classified as trading
but is reclassified as available-for-sale.
instructions
indicate the accounting required for each case separately.
22) early in 2012, dobbs corporation engaged kiner, inc. to design and construct a
complete modernization of dobbs’s manufacturing facility. construction was begun on
june 1, 2012 and was completed on december 31, 2012. dobbs made the following
payments to kiner, inc. during 2012:
in order to help finance the construction, dobbs issued the following during 2012:
1>$4,000,000 of 10-year, 9% bonds payable, issued at par on may 31, 2012, with
interest payable annually on may 31.
2>1,000,000 shares of no-par common stock, issued at $10 per share on october 1,
2012.
in addition to the 9% bonds payable, the only debt outstanding during 2012 was a
$1,000,000, 12% note payable dated january 1, 2008 and due january 1, 2018, with
interest payable annually on january 1.
instructions
compute the amounts of each of the following (show computations):
1>weighted-average accumulated expenditures qualifying for capitalization of interest
cost.
2>avoidable interest incurred during 2012.
3>total amount of interest cost to be capitalized during 2012.
23) prepare the necessary journal entries to record the following transactions relating to
the long-term issuance of bonds of pitts co.:
march 1
issued $2,000,000 face value pitts co. second mortgage, 8% bonds for $2,180,400,
including accrued interest. interest is payable semiannually on december 1 and june 1
with the bonds maturing 10 years from this past december 1. the bonds are callable at
102.
june 1
paid semiannual interest on pitts co. bonds. (use straight-line amortization of any
premium or discount.)
december 1
paid semiannual interest on pitts co. bonds and purchased $1,000,000 face value bonds
at the call price in accordance with the provisions of the bond indenture.
24) what two assumptions are central to the ifrs conceptual framework?
25) listed below in scrambled order are 13 income statement categories. use the
numerals 1 through 13 to indicate the order in which these categories should appear on
a multiple-step income statement.
discontinued operations.
cost of goods sold.
other revenues and gains.
net income.
income taxes.
sales revenue.
gross profit on sales.
income from operations.
income from continuing operations before income taxes.
operating expenses.
extraordinary item.
income before extraordinary items.
income from continuing operations.
26) sales salaries paid during 2012 were $75,000. advances to salesmen were $1,100 on
january 1, 2012, and $800 on december 31, 2012. sales salaries accrued were $1,360 on
january 1, 2012, and $1,880 on december 31, 2012. show the computation of sales
salaries on an accrual basis for 2012.
27) during 2013 equipment was sold for $73,000. this equipment cost $120,000 and had
a book value of $70,000. accumulated depreciation for equipment was $325,000 at
12/31/12 and $310,000 at 12/31/13.
instructions
what three items should be shown on a statement of cash flows (indirect method) from
this information? show your calculations.
28) how should the following costs affect a retailer’s inventory valuation?
29) on april 1, paine co. began construction of a small building. payments of $180,000
were made monthly for four months beginning on april 1. the building was completed
and ready for occupancy on august 1. for the purpose of determining the amount of
interest cost to be capitalized, calculate the weighted-average accumulated expenditures
on the building by completing the schedule below:
dateexpenditurescapitalization periodweighted-average expenditures