1) if an fasb standard creates a new principle, expresses preference for, or rejects a
specific accounting principle, the change is considered clearly acceptable.
2) one of two assumptions made by the iasb conceptual framework is that the reporting
entity is a going concern.
3) trading securities are securities bought and held primarily for sale in the near term to
generate income on short-term price differences.
4) the
5) examples of taxable temporary differences are subscriptions received in advance and
advance rental receipts.
6) discontinued operations, extraordinary items, and unusual gains and losses are all
reported net of tax in the income statement.
7) a disadvantage of the gross profit method is that it uses past percentages in
determining the markup.
8) the book value of any depreciable asset is the difference between its cost and its
salvage value.
9) the accounting profession has adopted a current operating performance approach to
income reporting.
10) under ifrs an affirmative judgment approach is used for recognizing deferred tax
assets by recognizing assets up to the amount that is probable to be realized.
11) mingenback company has 560,000 shares of $10 par value common stock
outstanding. during the year mingenback declared a 10% stock dividend when the
market price of the stock was $48 per share. two months later mingenback declared a
$.60 per share cash dividend. as a result of the dividends declared during the year,
retained earnings decreased by:
a.$352,000
b.$369,600
c.$2,688,000
d.$3,057,600
12) under statement of financial accounting concepts no. 2, free from error is an
ingredient of the fundamental quality of
faithful representation relevance
a. yes yes
b. no yes
c. yes no
d. no no
13) which of the following statements is correct?
a.changes in accounting principle are always handled in the current or prospective
period
b.prior statements should be restated for changes in accounting estimates
c.a change from expensing certain costs to capitalizing these costs due to a change in
the period benefited, should be handled as a change in accounting estimate
d.correction of an error related to a prior period should be considered as an adjustment
to current year net income
14) fugate company had 750,000 shares of common stock issued and outstanding at
december 31, 2012. on july 1, 2013 an additional 750,000 shares were issued for cash.
fugate also had stock options outstanding at the beginning and end of 2013 which allow
the holders to purchase 225,000 shares of common stock at $20 per share. the average
market price of fugate’s common stock was $25 during 2013. what is the number of
shares that should be used in computing diluted earnings per share for the year ended
december 31, 2013?
a.1,545,000
b.1,305,000
c.1,181,250
d.1,170,000
15) a trial balance may prove that debits and credits are equal, but
a.an amount could be entered in the wrong account
b.a transaction could have been entered twice
c.a transaction could have been omitted
d.all of these
16) on april 15 of the current year, a fire destroyed the entire uninsured inventory of a
retail store. the following data are available:
the amount of the inventory loss is estimated to be
a.$72,000
b.$36,000
c.$90,000
d.$60,000
17) on january 3, 2012, boyer corp. owned a machine that had cost $300,000. the
accumulated depreciation was $180,000, estimated salvage value was $18,000, and fair
value was $480,000. on january 4, 2012, this machine was irreparably damaged by pine
corp. and became worthless. in october 2012, a court awarded damages of $480,000
against pine in favor of boyer. at december 31, 2012, the final outcome of this case was
awaiting appeal and was, therefore, uncertain. however, in the opinion of boyers
attorney, pines appeal will be denied. at december 31, 2012, what amount should boyer
accrue for this gain contingency?
a.$480,000
b.$390,000
c.$300,000
d.$0
18) paige co. took advantage of market conditions to refund debt. this was the fourth
refunding operation carried out by paige within the last three years. the excess of the
carrying amount of the old debt over the amount paid to extinguish it should be reported
as a
a.gain, net of income taxes
b.loss, net of income taxes
c.part of continuing operations
d.deferred credit to be amortized over the life of the new debt
19) the rate of return on total assets is computed by dividing
a.net income by ending total assets
b.net sales by average total assets
c.net sales by ending total assets
d.net income by average total assets
20) peavys net cash provided by financing activities for 2013 was
a.$432,000
b.$520,000
c.$552,000
d.$640,000
21) a company is not required to report a per share amount on the face of the income
statement for which of the following items?
a.net income
b.prior period adjustment
c.extraordinary item
d.discontinued operations
22) balance sheet information is useful for all of the following except to
a.compute rates of return
b.analyze cash inflows and outflows for the period
c.evaluate capital structure
d.assess future cash flows
23) on december 1, 2012, richards company sold some machinery to fleming company.
the two companies entered into an installment sales contract at a predetermined interest
rate. the contract required four equal annual payments with the first payment due on
december 1, 2012, the date of the sale. what present value concept is appropriate for
this situation?
a.future amount of an annuity of 1 for four periods
b.future amount of 1 for four periods
c.present value of an ordinary annuity of 1 for four periods
d.present value of an annuity due of 1 for four periods.
24) the balance sheet data of kohler company at the end of 2013 and 2012 follow:
cash$100,000$140,000accounts receivable (net)240,000180,000merchandise
inventory280,000180,000prepaid expenses40,000100,000buildings and
equipment360,000300,000accumulated depreciation—buildings and
equipment-72,000-32,000land360,000160,000
land was acquired for $200,000 in exchange for common stock, par $200,000, during
the year; all equipment purchased was for cash. equipment costing $20,000 was sold for
$8,000; book value of the equipment was $16,000 and the loss was reported as an
ordinary item in net income. cash dividends of $40,000 were charged to retained
earnings and paid during the year; the transfer of net income to retained earnings was
the only other entry in the retained earnings account. in the statement of cash flows for
the year ended december 31, 2013, for naley company:
the net cash provided by operating activities was
a.$104,000
b.$132,000
c.$112,000
d.$96,000
25) what is the relationship between the securities and exchange commission and
accounting standard setting in the united states?
a.the sec requires all companies listed on an exchange to submit their financial
statements to the sec
b.the sec coordinates with the
c.the sec has a mandate to establish accounting standards for enterprises under its
jurisdiction
d.the sec reviews financial statements for compliance
26) which assumption or principle requires that all information significant enough to
affect a decision of reasonably informed users should be reported in the financial
statements?
a.matching
b.going concern
c.historical cost
d.full disclosure
27) siegle company exchanged 600 shares of guinn company common stock, which
siegle was holding as an investment, for equipment from mayo company. the guinn
company common stock, which had been purchased by siegle for $50 per share, had a
quoted market value of $58 per share at the date of exchange. the equipment had a
recorded amount on mayo’s books of $31,500. what journal entry should siegle make to
record this exchange?
28) both u.s. gaap and ifrs discuss income statement presentation using either a
single-step or multi-step approach.
29) crabbe company reported $80,000 of selling and administrative expenses on its
income statement for the past year. the company had depreciation expense and an
increase in prepaid expenses associated with the selling and administrative expenses for
the year. assuming use of the direct method, how would these items be handled in
converting the accrual based selling and administrative expenses to the cash basis?
30) what are the ifrs requirements with respect to expense classification?
31) the balance sheets for kinder company showed the following information.
additional information concerning transactions and events during 2013 are presented
below.
kinder company
balance sheet
additional data:
1>net income for the year 2013, $66,000.
2>depreciation on plant assets for the year, $12,700.
3>sold the long-term investments for $28,000 (assume gain or loss is ordinary).
4>paid dividends of $25,000.
5>purchased machinery costing $21,500, paid cash.
6>purchased machinery and gave a $60,000 long-term note payable.
7>paid a $40,000 long-term note payable by issuing common stock.
instructions
using the format provided on the next page, prepare a statement of cash flows (using the
indirect method) for 2013 for kinder company.
kinder company
statement of cash flows
for the year ended december 31, 2013
increase (decrease) in cash
32) at a lump-sum cost of $72,000, pratt company recently purchased the following
items for resale:
the appropriate cost per unit of inventory is:
33) a machine cost $140,000, has annual depreciation expense of $28,000, and has
accumulated depreciation of $70,000 on december 31, 2012. on april 1, 2013, when the
machine has a fair value of $56,000, it is exchanged for a similar machine with a fair
value of $168,000 and the proper amount of cash is paid. the exchange lacked
commercial substance.
instructions
prepare all entries that are necessary at april 1, 2013.
34) a depreciable asset has an estimated 15% salvage value. at the end of its estimated
useful life, the accumulated depreciation would equal the original cost of the asset
under which of the following depreciation methods?