1) Buerhle Company needs to determine if its indefinite-life intangibles other than
goodwill have been impaired and should be reduced or written off on its balance sheet.
The impairment test(s) to be used is (are)
Recoverability TestFair Value Test
a.YesYes
b.YesNo
cNoYes
d.NoNo
2) Lerner Co. had 200,000 shares of common stock, 20,000 shares of convertible
preferred stock, and $500,000 of 10% convertible bonds outstanding during 2015 . The
preferred stock is convertible into 40,000 shares of common stock. During 2015, Lerner
paid dividends of $.45 per share on the common stock and $1.50 per share on the
preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The
net income for 2015 was $300,000 and the income tax rate was 30%.
Basic earnings per share for 2015 is (rounded to the nearest penny)
a.$1.11
b.$1.21
c.$1.25
d.$1.35
3) Wilcox Corporation reported the following results for its first three years of
operation:
2014 income (before income taxes)$ 200,000
2015 loss (before income taxes)(1,800,000)
2016 income (before income taxes)2,000,000
There were no permanent or temporary differences during these three years. Assume a
corporate tax rate of 30% for 2014 and 2015, and 40% for 2016 .
Assuming that Wilcox elects to use the carryback provision, what income (loss) is
reported in 2015? (Assume that any deferred tax asset recognized is more likely than
not to be realized.)
a.$(1,800,000)
b.$ -0-
c.$(1,740,000)
d.$(1,100,000)
4) Which table has a factor of 1.00000 for 1 period at every interest rate?
a.Future value of 1
b.Present value of 1
c.Future value of an ordinary annuity of 1
d.Present value of an ordinary annuity of 1
5) The declaration and issuance of a stock dividend larger than 25% of the shares
previously outstanding
a.increases common stock outstanding and increases total stockholders’ equity
b.decreases retained earnings but does not change total stockholders’ equity
c.may increase or decrease paid-in capital in excess of par but does not change total
stockholders’ equity
d.increases retained earnings and increases total stockholders’ equity
6) The general ledger of Vance Corporation as of December 31, 2015, includes the
following accounts:
Copyrights$ 30,000
Deposits with advertising agency (will be used to promote goodwill)27,000
Discount on bonds payable70,000
Excess of cost over fair value of identifiable net assets of
Acquired subsidiary480,000
Trademarks90,000
In the preparation of Vance’s balance sheet as of December 31, 2015, what should be
reported as total intangible assets?
a.$570,000
b.$597,000
c.$600,000
d.$627,000
7) If Benjamin Company and Iris, Inc. are similar companies in every regard, except
Benjamin Company uses IFRS while Iris, Inc. uses U.S. GAAP, which of the following
is
true?
a.Iris, Inc. is required to issue interim statements every 6 months
b.Benjamin Company need not recognize post-balance sheet events
c.Benjamin Company is not required by IFRS to issue interim statements
d.All of the above are true
8) Lantos Company had a 40 percent tax rate. Given the following pre-tax amounts,
what would be the income tax expense reported on the face of the income statement?
Sales revenue$ 500,000
Cost of goods sold300,000
Salaries and wages expense40,000
Depreciation expense55,000
Dividend revenue45,000
Utilities expense5,000
Extraordinary loss50,000
Interest expense10,000
a.$54,000
b.$34,000
c.$36,000
d.$16,000
9) A trial balance before adjustments included the following:
Debit Credit
Sales$850,000
Sales returns and allowance$28,000
Accounts receivable86,000
Allowance for doubtful accounts1,520
If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the
adjustment is
a.$13,400
b.$16,440
c.$17,000
d.$19,480
10) Packard Corporation reports the following information:
Net cash provided by operating activities$285,000
Average current liabilities150,000
Average long-term liabilities100,000
Dividends declared60,000
Capital expenditures110,000
Payments of debt35,000
Packards cash debt coverage is
a.1.14
b.1.90
c.2.85
d.4.75
11) Foyle, Inc., had 680,000 shares of common stock issued and outstanding at
December 31, 2014 . On July 1, 2015, an additional 40,000 shares of common stock
were issued for cash. Foyle also had unexercised stock options to purchase 32,000
shares of common stock at $15 per share outstanding at the beginning and end of 2015 .
The average market price of Foyle’s common stock was $20 during 2015 . What is the
number of shares that should be used in computing diluted earnings per share for the
year ended
December 31, 2015?
a.700,000
b.708,000
c.728,000
d.732,000
12) Costs which are inventoriable include all of the following except
a.costs that are directly connected with the bringing of goods to the place of business of
the buyer
b.costs that are directly connected with the converting of goods to a salable condition
c.buying costs of a purchasing department
d.selling costs of a sales department
13) During the lifetime of an entity accountants produce financial statements at
artificial points in time in accordance with the concept of
RelevancePeriodicity
a.NoNo
b.YesNo
c.NoYes
d.YesYes
14) Presented below are data for Caracas Corp.
20142015
Assets, January 1$4,560?
Liabilities, January 1?$2,736
Stockholders’ Equity, Jan. 1?2,750
Dividends570646
Common Stock608650
Stockholders’ Equity, Dec. 31?2,266
Net Income684?
Net income for 2015 is
a.$484 income
b.$484 loss
c.$162 loss
d.$162 income
15) Which of the following is related to an effective capital allocation?
a.Promoting productivity
b.Encouraging innovation
c.Providing an efficient market for buying and selling securities
d.All of these answer choices are correct
16) Colt Football Co. had a player contract with Watts that is recorded in its books at
$5,600,000 on July 1, 2014 . Day Football Co. had a player contract with Kurtz that is
recorded in its books at $7,000,000 on July 1, 2014 . On this date, Colt traded Watts to
Day for Kurtz and paid a cash difference of $700,000. The fair value of the Kurtz
contract was $8,400,000 on the exchange date. The exchange had no commercial
substance. After the exchange, the Kurtz contract should be recorded in Colt’s books at
a.$6,300,000
b.$7,000,000
c.$7,700,000
d.$8,400,000
17) The following information relates to Windom Company for 2015:
Realized gain on sale of available-for-sale securities$30,000
Unrealized holding gains arising during the period on
available-for-sale securities60,000
Reclassification adjustment for gains included in net income20,000
Windoms 2015 other comprehensive income is
a.$50,000
b.$70,000
c.$90,000
d.$110,000
18) On October 1, 2014, Noller Company issued $6,000,000 par value, 10%, 10-year
bonds dated July 1, 2014, with interest payable semiannually on January 1 and July 1 .
The bonds are issued at $6,813,000 (to yield 8%) plus accrued interest. The effective
interest method is used.
(a)Prepare the journal entry at the date the bonds are issued.
(b)Prepare the adjusting entry at December 31, 2014, the end of the fiscal year.
(c)Prepare the entry for the interest payment on January 1, 2015 .
19) In 2006, Jarrett Company purchased a tract of land as a possible future plant site. In
January, 2014, valuable sulphur deposits were discovered on adjoining property and
Jarrett Company immediately began explorations on its property. In December, 2014,
after incurring $800,000 in exploration costs, which were accumulated in an expense
account, Jarrett discovered sulphur deposits appraised at $4,500,000 more than the
value of the land. To record the discovery of the deposits, Jarrett should
a.make no entry
b.debit $800,000 to an asset account
c.debit $4,500,000 to an asset account
d.debit $5,300,000 to an asset account
20) Not adjusting the amounts reported in the financial statements for inflation is an
example of which basic principle of accounting?
a.Economic entity
b.Going concern
c.Historical cost
d.Full disclosure