1) in the united states, like many other countries, banks are major creditors as well as
the largest investors.
2) gross profit and income from operations are reported on a multiple-step but not a
single-step income statement.
3) if an employee forfeits a stock option because of failure to satisfy a service
requirement, the company should record paid-in capital from expired options.
4) all dividends, except for liquidating dividends, reduce the total stockholders equity of
a corporation.
5) the primary advantage of the multiple-step format lies in the simplicity of
presentation and the absence of any implication that one type of revenue or expense
item has priority over another.
6) ifrs and u.s. gaap are similar in the accounting for impairments of assets held for
disposal.
7) the declining-balance method does not deduct the salvage value in computing the
depreciation base.
8) when a closely held corporation issues preferred stock for land, the land should be
recorded at the
a.total par value of the stock issued
b.total book value of the stock issued
c.total liquidating value of the stock issued
d.fair value of the land
9) the category “trade receivables” includes
a.advances to officers and employees
b.income tax refunds receivable
c.claims against insurance companies for casualties sustained
d.none of these
10) tolan corp.’s trademark was licensed to eddy co. for royalties of 15% of sales of the
trademarked items. royalties are payable semiannually on march 15 for sales in july
through december of the prior year, and on september 15 for sales in january through
june of the same year. tolan received the following royalties from eddy:
eddy estimated that sales of the trademarked items would total $30,000 for july through
december 2012. in tolan’s 2012 income statement, the royalty revenue should be
a.$13,000
b.$14,500
c.$19,000
d.$20,500
11) which of the following costs incurred internally to create an intangible asset is
generally expensed?
a.research and development costs
b.filing costs
c.legal costs
d.all of the above
12) equipment which cost $213,000 and had accumulated depreciation of $114,000 was
sold for $121,000. this transaction should be shown on the statement of cash flows
(indirect method) as a(n)
a.addition to net income of $22,000 and a $121,000 cash inflow from financing
activities
b.deduction from net income of $22,000 and a $99,000 cash inflow from investing
activities
c.deduction from net income of $22,000 and a $121,000 cash inflow from investing
activities
d.addition to net income of $22,000 and a $99,000 cash inflow from financing activities
13) if a company constructs a laboratory building to be used as a research and
development facility, the cost of the laboratory building is matched against earnings as
a.research and development expense in the period(s) of construction
b.depreciation deducted as part of research and development costs
c.depreciation or immediate write-off depending on company policy
d.an expense at such time as productive research and development has been obtained
from the facility
14) which of the following costs incurred with developing computer software for
internal use should be capitalized?
a.evaluation of alternatives
b.coding
c.training
d.maintenance
15) on january 1, 2012, korsak, inc. established a stock appreciation rights plan for its
executives. it entitled them to receive cash at any time during the next four years for the
difference between the market price of its common stock and a pre-established price of
$20 on 80,000 sars. current market prices of the stock are as follows:
compensation expense relating to the plan is to be recorded over a four-year period
beginning january 1, 2012.
what amount of compensation expense should korsak recognize for the year ended
december 31, 2012?
a.$240,000
b.$360,000
c.$300,000
d.$1,440,000
16) assume there are two dilutive convertible securities. the one that should be used first
to recalculate earnings per share is the security with the
a.greater earnings adjustment
b.greater earnings per share adjustment
c.smaller earnings adjustment
d.smaller earnings per share adjustment
17) which of the following is shown on a statement of cash flows?
a.a stock dividend
b.a stock split
c.an appropriation of retained earnings
d.none of these
18) if the number of periods is known, the interest rate is determined by
a.dividing the future value by the present value and looking for the quotient in the
future value of 1 table
b.dividing the future value by the present value and looking for the quotient in the
present value of 1 table
c.dividing the present value by the future value and looking for the quotient in the
future value of 1 table
d.multiplying the present value by the future value and looking for the product in the
present value of 1 table
19) which of the following is not an acceptable way of displaying the components of
other comprehensive income?
a.combined statement of retained earnings
b.second income statement
c.combined statement of comprehensive income
d.as part of the statement of stockholders’ equity
20) at december 31, 2012 and 2013, plank corp. had outstanding 3,000 shares of $100
par value 8% cumulative preferred stock and 15,000 shares of $10 par value common
stock. at december 31, 2012, dividends in arrears on the preferred stock were $12,000.
cash dividends declared in 2013 totaled $45,000. what amounts were payable on each
class of stock?
21) when preparing a statement of cash flows, a decrease in prepaid insurance during a
period would require which of the following adjustments in determining cash flows
from operating activities?
22) wilcox decided to discontinue its stereo division in 2012. during the current year,
the loss on the disposal of this component of the business was $150,000 less applicable
taxes.
instructions
present in good form the income statement of wilcox corporation for 2012 starting with
“income from continuing operations.” assume that wilcox’s tax rate is 30% and 200,000
shares of com-mon stock were outstanding during the year.
23) on december 31, 2013, special insurance costs, incurred but unpaid, were not
recorded. if these insurance costs were related to work in process, what is the effect of
the omission on accrued liabilities and retained earnings in the december 31, 2013
balance sheet?
24) a material item which is unusual in nature or infrequent in occurrence, but not both
should be shown in the income statement
25) the following information is available for irwin company for 2013:
instructions
(1)determine other comprehensive income for 2013.
(2)compute comprehensive income for 2013.
26)
finley company sells office equipment. on january 1, 2013, finley entered into an
installment sale contract with miller company for a six-year period expiring january 1,
2019. equal annual payments under the installment sale are $894,000 and are due on
january 1. the first payment was made on january 1, 2013.
additional information is as follows:
the cash selling price of the equipment, i.e., the amount that would be realized on an
outright sale, is $4,584,000.
the cost of sales relating to the equipment is $3,438,000.
the finance charges relating to the installment period are $780,000 based on a stated
interest rate of 7% which is appropriate. for tax purposes, finley appropriately uses the
accrual basis for recording finance charges.
circumstances are such that the collection of the installment sale is reasonably assured.
the installment sale qualified for the installment method of reporting for tax purposes.
assume that the income tax rate is 30%.
instructions
what income (loss) before income taxes should finley appropriately record as a result of
this transaction for the year ended december 31, 2013? show supporting computations
in good form.
