Which of the following accounts has a normal credit balance?
a. Salary expense.
b. Accrued income taxes payable.
c. Land.
d. Prepaid rent.
On January 1, 2016, Solo Inc. issued 1,000 of its 8%, $1,000 bonds at 98. Interest is
payable semiannually on January 1 and July 1. The bonds mature on January 1, 2026.
Solo paid $50,000 in bond issue costs. Solo uses straight-line amortization. The amount
of interest expense for the year is:
a. $80,000.
b. $82,000.
c. $87,000.
d. $89,000.
On April 1, 2016, Austere Corporation issued $300,000 of 10% bonds at 105. Each
$1,000 bond was sold with 25 detachable stock warrants, each permitting the investor to
purchase one share of common stock for $17. On that date, the market value of the
common stock was $15 per share and the market value of each warrant was $2. Austere
should record what amount of the proceeds from the bond issue as an increase in
liabilities?
a. $285,000.
b. $300,000.
c. $315,000.
d. $0.
When a company purchases a security it considers a cash equivalent, the cash outflow
is:
a. Reported as an operating activity.
b. Reported as an investing activity.
c. Reported as a financing activity.
d. Not reported on a statement of cash flows.
When computing earnings per share, noncumulative preferred dividends not declared
should be:
a. Ignored.
b. Deducted from earnings for the year.
c. Added to earnings for the year.
d. Deducted, net of tax effect, from earnings for the year.
Cash flows from investing do not include cash flows from:
a. Lending money to another corporation.
b. The sale of equipment.
c. Borrowing.
d. The purchase of other corporation’s securities.
An exclusive 20-year right to manufacture a product or use a process is a:
a. Patent.
b. Copyright.
c. Trademark.
d. Franchise.
Cinnamon Buns Co. (CBC) started 2016 with $52,000 of merchandise on hand. During
2016, $280,000 in merchandise was purchased on account with credit terms of 2/10,
n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid
freight charges of $9,000. Merchandise with an invoice amount of $4,000 was returned
for credit. Cost of goods sold for the year was $316,000. CBC uses a perpetual
inventory system. Assuming CBC uses the gross method to record purchases, ending
inventory would be:
a. $6,480.
b. $15,400.
c. $15,480.
d. $21,000.
The employer has an obligation to provide future benefits for:
a. Defined benefit pension plans.
b. Defined contribution pension plans.
c. Defined benefit and defined contribution plans.
d. None of these answer choices are correct.
Excerpts from Dowling Company’s December 31, 2016 and 2015, financial statements
and key ratios are presented below (all numbers are in millions):
Dowling’s average total assets for 2016 is (rounded):
a. 32.
b. 210.
c. 115.
d. 194.
On January 1, 2016, D Corp. granted an employee an option to purchase 6,000 shares
of D’s $5 par common stock at $20 per share. The options became exercisable on
December 31, 2017, after the employee completed two years of service. The option was
exercised on January 10, 2018. The market prices of D’s stock were as follows: January
1, 2016, $30; December 31, 2017, $50; and January 10, 2018, $45. An option pricing
model estimated the value of the options at $8 each on the grant date. For 2016, D
should recognize compensation expense of:
a. $ 0.
b. $24,000.
c. $30,000.
d. $60,000.
Which of the following will require a recalculation of weighted-average shares
outstanding for all years presented?
a. Stock dividends and stock splits.
b. Stock dividends but not stock splits.
c. Stock splits but not stock dividends.
d. Stock rights.
Zwick Company bought 28,000 shares of the voting common stock of Handy
Corporation in January 2016. In December, Handy announced $200,000 net income for
2016 and declared and paid a cash dividend of $2 per share on the 200,000 shares of
outstanding common stock. Zwick Company’s dividend revenue from Handy
Corporation in December 2016 would be:
a. $ 0.
b. $28,000.
c. $56,000.
d. None of these answer choices is correct.
Briefly explain the differences between U.S. GAAP and International Financial
Reporting Standards in accounting for research and development expenditures other
than software development costs.
The Rink offers annual $200 memberships that entitle members to unlimited use of
ice-skating facilities and locker rooms. Each new membership also entitles the member
to receive ten “20% off a $5 meal” coupons that are redeemable at the Rink’s snack bar.
The Rink estimates that approximately 80% of the coupons will be redeemed, and that,
if the coupons weren’t redeemed, $5 meals still would be discounted by 5% because of
ongoing promotions.
Prepare the journal entry to recognize the sale of a new membership. Clearly identify
revenue or deferred revenue associated with each performance obligation.
The following note disclosure appeared in a recent annual report of Halliburton: Our
receivables are generally not collateralized. Included in notes and accounts receivable
are notes with varying interest rates totaling $12 million at December 31. At December
31, 39% of our consolidated receivables related to our United States government
contracts, primarily for projects in the Middle East.
Explain the reason that Halliburton indicates that its receivables include notes with
varying interest rates totaling $12 million at December 31. What significance does this
have to the reader?
The accounting records of Harrison Company provided the data below.
Required:
Prepare a reconciliation of net income to net cash flows from operating activities.
Do the statement of cash flows and its related disclosure note report only transactions
that cause an increase or decrease in cash? Explain.
Poseidon Corporation, based in Greece, specializes in painting cargo ships. On
December 1, 2016 Poseidon received $300,000 in advance from Worldwide Shipping,
Inc. to paint a 40,000-ton cargo vessel. The painting process is scheduled to begin on
December 1, 2016, and the ship is to be returned to Worldwide in four months.
Worldwide retains legal title to the ship during the contract period, and can sell the ship
to another shipper during the contract period if it so chooses.
Required: Assuming Poseidon uses “proportion of time” as its measure of progress
toward completion, prepare any journal entry that Poseidon would record:
(1) at inception of the contract
(2) at the end of 2016 to recognize all revenue associated with this contract that should
be recognized in 2016. Ignore any costs associated with providing the painting service.
Arctic Cat Inc., the snowmobile manufacturer, reported the following in its 20X5
annual report to shareholders: NOTE B – SHORT-TERM INVESTMENTS
Short-term investments consist primarily of a diversified portfolio of municipal bonds
and money market funds and are classified as follows at March 31:
Trading securities consist of $54,608,000 and $41,707,000 invested in various money
market funds at March 31, 20X5 and 20X4, respectively, while the remainder of trading
securities and available-for-sale securities consist primarily of A-rated or higher
municipal bond investments. The amortized cost and fair value of debt securities
classified as available-for-sale was $3,105,000 and $3,196,000, at March 31, 20X5. The
unrealized gain on available-for-sale debt securities is reported, net of tax, as a separate
component of shareholders’ equity. Arctic Cat Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended March 31, Accumulated Other Comprehensive Income changed by the
following amounts:
In its 20X4 annual report, Arctic Cat disclosed, “The contractual maturities of
available-for-sale debt securities at March 31, 20X4, are $3,573,000 within one year
and $3,340,000 from one year through five years.”
How much did Arctic Cat actually receive from the sale of available-for-sale securities
during 20X5?
Listed below are 5 terms followed by a list of phrases that describe or characterize each
of the terms. Match each phrase with the number for the correct term.
In its 2016 annual report to shareholders, Plank Breweries included the following note:
Fixed Assets Fixed assets consist of the following (in $ thousands):
Total depreciation expense was approximately $2.121 million and $2.179 million for
the years ended December 31, 2016 and 2015, respectively. Also, Plank Breweries
reported the following information in its annual report (in $ thousands):
Required: Use a T- account to show the balances and changes during 2016 in Plank
Breweries:
Fixed assets account and Accumulated depreciation’”fixed assets account (in $
thousands).