1) The following information relates to the pension plan for the employees of Turner
Co.:
1/1/14 12/31/14 12/31/15
Accum. benefit obligation$6,160,000$6,440,000$8,400,000
Projected benefit obligation6,510,0006,972,0009,338,000
Fair value of plan assets5,950,0007,280,0008,036,000
AOCI – net (gain) or loss-0-(1,008,000)(1,120,000)
Settlement rate (for year)11%11%
Expected rate of return (for year)8%7%
Turner estimates that the average remaining service life is 16 years. Turner’s
contribution was $882,000 in 2015 and benefits paid were $658,000.
The corridor for 2015 is
a.$722,400
b.$728,000
c.$791,000
d.$933,800
2) Tracy Company owns 4,000 of the 10,000 outstanding shares of Penn Corporation
common stock. During 2015, Penn earns $300,000 and pays cash dividends of
$100,000.
Tracy should report investment revenue for 2015 of
a.$40,000
b.$80,000
c.$100,000
d.$120,000
3) Sauder Corporation reports the following information:
Net income$320,000
Depreciation expense70,000
Increase in accounts receivable30,000
Sauder should report cash provided by operating activities of
a.$220,000
b.$280,000
c.$360,000
d.$420,000
4) Assume that Darcy Industries had the following inventory values:
Inventory cost (on December 31, 2014) = $500
Inventory market (on December 31, 2014) = $450
Inventory net realizable value (on December 31, 2014) = $440
Inventory market (on June 30, 2015) = $520
Inventory net realizable value (on June 30, 2015) = $525
Under IFRS, what is the inventory carrying value on June 30, 2015?
a.$500
b.$520
c.$525
d.$440
5) In 2014, Pollard Corporation began selling a new line of products that carry a
two-year warranty against defects. Based upon past experience with other products, the
estimated warranty costs related to dollar sales are as follows:
First year of warranty3%
Second year of warranty5%
Sales and actual warranty expenditures for 2014 and 2015 are presented below:
2014 2015
Sales$500,000$700,000
Actual warranty expenditures30,00050,000
What is the estimated warranty liability at the end of 2015?(assume the accrual method)
a.$16,000
b.$64,000
c.$96,000
d.$20,000
6) On January 3, 2014, Benton 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, 2014, this machine was irreparably damaged by
Pogo Corp. and became worthless. In October 2014, a court awarded damages of
$480,000 against Pogo in favor of Benton. At December 31, 2014, the final outcome of
this case was awaiting appeal and was, therefore, uncertain. However, in the opinion of
Bentons attorney, Pogos appeal will be denied. At December 31, 2014, what amount
should Benton accrue for this gain contingency?
a.$480,000
b.$390,000
c.$300,000
d.$0
7) All of the following costs should be charged against revenue in the period in which
costs are incurred except for
a.manufacturing overhead costs for a product manufactured and sold in the same
accounting period
b.costs which will not benefit any future period
c.costs from idle manufacturing capacity resulting from an unexpected plant shutdown
d.costs of normal shrinkage and scrap incurred for the manufacture of a product in
ending inventory
8) The balance sheet data of Kohler Company at the end of 2015 and 2014 follow:
2015 2014
Cash$ 100,000$ 140,000
Accounts receivable (net)240,000180,000
Inventory280,000180,000
Prepaid expenses40,000100,000
Buildings and equipment360,000300,000
Accumulated depreciationbuildings and equipment(72,000)(32,000)
Land 360,000 160,000
Totals$1,308,000$1,028,000
Accounts payable$272,000$220,000
Accrued expenses48,00072,000
Notes payablebank, long-term160,000
Mortgage payable120,000
Common stock, $10 par836,000636,000
Retained earnings (deficit) 32,000 (60,000)
$1,308,000$1,028,000
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 $40,000 were charged to retained
earnings and paid during the year; the transfer of net income to retained earnings was
the only other entry in the Retained Earnings account. In the statement of cash flows for
the year ended December 31, 2015, for Naley Company:
The net cash provided (used) by financing activities was
a.$ -0-
b.$(40,000)
c.$(80,000)
d.$120,000
9) In a troubled debt restructuring in which the debt is restructured by a transfer of
assets with a fair value less than the carrying amount of the debt, the debtor would
recognize
a.no gain or loss on the restructuring
b.a gain on the restructuring
c.a loss on the restructuring
d.None of these answers are correct
10) 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 AICPA in establishing accounting standards
c.The SEC has a mandate to establish accounting standards for enterprises under its
jurisdiction
d.The SEC reviews financial statements for compliance
11) Kerr Co.’s accounts payable balance at December 31, 2014 was $1,400,000 before
considering the following transactions:
Goods were in transit from a vendor to Kerr on December 31, 2014 . The invoice price
was $70,000, and the goods were shipped f.o.b. shipping point on December 29, 2014 .
The goods were received on January 4, 2015 .
Goods shipped to Kerr, f.o.b. shipping point on December 20, 2014, from a vendor
were lost in transit. The invoice price was $50,000. On January 5, 2015, Kerr filed a
$50,000 claim against the common carrier.
In its December 31, 2014 balance sheet, Kerr should report accounts payable of
a.$1,520,000
b.$1,470,000
c.$1,450,000
d.$1,400,000
12) Trademarks, newspaper mastheads, and internet domain names are all examples of
a.contract-related intangible assets
b.artistic-related intangible assets
c.marketing-related intangible assets
d.customer-related intangible assets
13) Barton Corporation acquires a coal mine at a cost of $1,800,000. Intangible
development costs total $360,000. After extraction has occurred, Barton must restore
the property (estimated fair value of the obligation is $180,000), after which it can be
sold for $210,000. Barton estimates that 5,000 tons of coal can be extracted. What is the
amount of depletion per ton?
a.$426
b.$384
c.$468
d.$360
14) Rushia Company has an available-for-sale investment in the 10%, 10-year bonds of
Pear Company The investments carrying value is $3,200,000 at December 31, 2014 .
On January 9, 2015, Rushia learns that Pear Company has lost its primary
manufacturing facility in an uninsured fire. As a result, Rushia determines that the
investment is impaired and now has a fair value of $2,300,000. In June, 2016, Pear
Company has succeeded in rebuilding its manufacturing facility, and its prospects have
improved as a result.
If Rushia Company determines that the fair value of the investment is now $3,900,000
and is using U.S. GAAP for its external financial reporting, which of the following is
true?
a.Rushia is prohibited from recording the recovery in value of the impaired investment
b.Rushia may record a recovery of $900,000
c.Rushia may record a recovery of $700,000
d.Rushia may record a recovery of $1,600,000
15) On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 103, which are due on
April 30, 2024 . Twenty detachable stock warrants entitling the holder to purchase for
$40 one share of Paynes common stock, $15 par value, were attached to each $1,000
bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value
of Paynes common stock was $35 per share and of the warrants was $2.
On May 1, 2014, Payne should record the bonds with a
a.discount of $36,000
b.discount of $10,080
c.discount of $ 9,000
d.premium of $27,000