1) The following information is available for Naab Company for 2014:
Freight-in$ 30,000
Purchase returns75,000
Selling expenses230,000
Ending inventory260,000
The cost of goods sold is equal to 400% of selling expenses. What is the cost of goods
available for sale?
a.$ 920,000
b.$1,150,000
c.$1,135,000
d.$1,180,000
2) Major reasons for disclosure of deferred income tax information is (are)
a.better assessment of quality of earnings
b.better predictions of future cash flows
c.predicting future cash flows for operating loss carryforwards
d.All of these answer choices are correct
3) Vasguez Corporation had a 1/1/14 balance in the Allowance for Doubtful Accounts
of $30,000. During 2014, it wrote off $21,600 of accounts and collected $6,300 on
accounts previously written off. The balance in Accounts Receivable was $600,000 at
1/1 and $720,000 at 12/31. At 12/31/14, Vasguez estimates that 5% of accounts
receivable will prove to be uncollectible. What is Bad Debt Expense for 2014?
a.$6,000
b.$21,300
c.$27,600
d.$36,000
4) Companies should disclose all of the following in interim reports except
a.basic and diluted earnings per share
b.changes in accounting principles
c.post-balance-sheet events
d.seasonal revenue, cost, or expenses
5) Debit always means
a.the right side of an account
b.an increase
c.a decrease
d.None of these answer choices are correct
6) Which of the following is false about an income statement?
a.Items that cannot be measured reliably are not reported in the income statement
b.It is used to measure the solvency of a company
c.Income measurement involves judgment
d.Income numbers are affected by the accounting methods employed
7) Jeff Corporation purchased a limited-life intangible asset for $225,000 on May 1,
2013 . It has a useful life of 10 years. What total amount of amortization expense should
have been recorded on the intangible asset by December 31, 2015?
a.$ -0-
b.$45,000
c.$60,000
d.$67,500
8) Davis Company purchased a new piece of equipment on July 1, 2014 at a cost of
$1,800,000. The equipment has an estimated useful life of 5 years and an estimated
salvage value of $150,000. The current year end is 12/31/15. Davis records depreciation
to the nearest month.
What is sum-of-the-years’-digits depreciation for 2015?
a.$439,998
b.$495,000
c.$540,000
d.$550,000
9) Companies that attempt to exploit inefficiencies in various derivative markets by
attempting to lock in profits by simultaneously entering into transactions in two or more
markets are called
a.arbitrageurs
b.gamblers
c.hedgers
d.speculators
10) Lower-of-cost-or-market as it applies to inventory is best described as the
a.drop of future utility below its original cost
b.method of determining cost of goods sold
c.assumption to determine inventory flow
d.change in inventory value to market value
11) At the beginning of 2013, Gannon Company received a three-year
zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at
that time. Gannon reported this note as a $1,000 trade note receivable on its 2013
year-end statement of financial position and $1,000 as sales revenue for 2013 . What
effect did this accounting for the note have on Gannon’s net earnings for 2013, 2014,
2015, and its retained earnings at the end of 2015, respectively?
a.Overstate, overstate, understate, zero
b.Overstate, understate, understate, understate
c.Overstate, overstate, overstate, overstate
d.None of these answer choices are correct
12) A corporation has a defined-benefit plan. A pension liability will result at the end of
the year if the
a.projected benefit obligation exceeds the fair value of the plan assets
b.fair value of the plan assets exceeds the projected benefit obligation
c.amount of employer contributions exceeds the pension expense
d.amount of pension expense exceeds the amount of employer contributions
13) The following data are for the pension plan for the employees of Lockett Company.
1/1/1412/31/1412/31/15
Accumulated benefit obligation$2,500,000$2,600,000$3,400,000
Projected benefit obligation2,700,0002,800,0003,700,000
Plan assets (at fair value)2,300,0003,000,0003,300,000
AOCL – net loss-0-480,000500,000
Settlement rate (for year)10%9%
Expected rate of return (for year)8%7%
Locketts contribution was $420,000 in 2015 and benefits paid were $375,000. Lockett
estimates that the average remaining service life is 15 years.
The actual return on plan assets in 2015 was
a.$300,000
b.$255,000
c.$200,000
d.$155,000
14) Which of the following transactions would be considered a financing activity in
preparing a statement of cash flows?
a.Amortizing a discount on bonds payable
b.Recording net income from operations
c.Selling common stock
d.Purchasing inventory
15) What impact does a bargain purchase option have on the present value of the
minimum lease payments computed by the lessee?
a.There is no impact as the option does not enter into the transaction until the end of the
lease term
b.The lessee must increase the present value of the minimum lease payments by the
present value of the option price
c.The lessee must decrease the present value of the minimum lease payments by the
present value of the option price
d.The minimum lease payments would be increased by the present value of the option
price if, at the time of the lease agreement, it appeared certain that the lessee would
exercise the option at the end of the lease and purchase the asset at the option price
16) Olsen Company paid or collected during 2014 the following items:
Insurance premiums paid$ 25,800
Interest collected62,800
Salaries and wages paid260,400
The following balances have been excerpted from Olsen’s balance sheets:
December 31, 2014December 31, 2013
Prepaid insurance$ 2,400$ 3,000
Interest receivable7,4005,800
Salaries and wages payable24,60021,200
Salaries and wages expense on the income statement for 2014 was
a.$214,600
b.$257,000
c.$263,800
d.$306,200
17) A change in estimate should
a.result in restatement of prior period statements
b.be handled in current and future periods
c.be handled in future periods only
d.be handled retroactively
18) Larsen Corporation reported $100,000 in revenues in its 2014 financial statements,
of which $33,000 will not be included in the tax return until 2015 . The enacted tax rate
is 40% for 2014 and 35% for 2015 . What amount should Larsen report for deferred
income tax liability in its balance sheet at December 31, 2014?
a.$11,550
b.$13,200
c.$14,700
d.$16,800