1) on march 15, a fire destroyed interlock company’s entire retail inventory. the
inventory on hand as of january 1 totaled $3,300,000. from january 1 through the time
of the fire, the company made purchases of $1,366,000, incurred freight-in of $156,000,
and had sales of $2,420,000. assuming the rate of gross profit to selling price is 30%,
what is the approximate value of the inventory that was destroyed?
a.$4,096,000
b.$2,972,000
c.$3,128,000
d.$4,822,000
2) on january 15, 2012, dolan corp. adopted a plan to accumulate funds for
environmental improvements beginning july 1, 2016, at an estimated cost of
$5,000,000. dolan plans to make four equal annual deposits in a fund that will earn
interest at 10% compounded annually. the first deposit was made on july 1, 2012. future
value factors are as follows:
dolan should make four annual deposits of
a.$889,522
b.$978,474
c.$1,077,586
d.$1,250,000
3) which of the following is false regarding accounting for deferred taxes under ifrs?
a.a deferred tax liability is classified as current or noncurrent based on the classification
of the asset or liability to which it relates
b.a deferred tax asset is recognized up to the amount that is probable to be realized.
c.tax effects of certain items are recognized in equity
d.the rate used to compute deferred taxes is either the enacted tax rate, or a substantially
enacted tax rate (virtually certain)
4) lerner co. had 200,000 shares of common stock, 20,000 shares of convertible
preferred stock, and $1,500,000 of 10% convertible bonds outstanding during 2013. the
preferred stock is convertible into 40,000 shares of common stock. during 2013, lerner
paid dividends of $1.35 per share on the common stock and $4.50 per share on the
preferred stock. each $1,000 bond is convertible into 45 shares of common stock. the
net income for 2013 was $900,000 and the income tax rate was 30%.
basic earnings per share for 2013 is (rounded to the nearest penny)
a.$3.32
b.$3.63
c.$3.76
d.$4.05
5) monroe construction company uses the percentage-of-completion method of
accounting. in 2013, monroe began work on a contract it had received which provided
for a contract price of $20,000,000. other details follow:
what should be the gross profit recognized in 2013?
a.$800,000
b.$10,400,000
c.$2,400,000
d.$4,000,000
6) chess top uses the periodic inventory system. for the current month, the beginning
inventory consisted of 300 units that cost $65 each. during the month, the company
made two purchases: 450 units at $68 each and 225 units at $70 each. chess top also
sold 750 units during the month. using the average cost method, what is the amount of
ending inventory?
a.$15,750
b.$50,655
c.$50,100
d.$15,197
7) at the beginning of 2012; elephant, inc. had a deferred tax asset of $8,000 and a
deferred tax liability of $12,000. pre-tax accounting income for 2012 was $600,000 and
the enacted tax rate is 40%. the following items are included in elephants pre-tax
income:
the ending balance in elephant, incs deferred tax liability at december 31, 2012 is
a.$18,400
b.$30,400
c.$20,800
d.$62,400
8) valuing assets at their liquidation values rather than their cost is inconsistent with the
a.periodicity assumption
b.expense recognition principle
c.materiality constraint
d.historical cost principle
9) franco company uses ifrs and owns property, plant and equipment with a historical
cost of 5,000,000 euros. at december 31, 2011, the company reported a valuation
reserve of
8,365,000 euros. at december 31, 2012, the property, plant and equipment was
appraised at
5,325,000 euros.
the property, plant and equipment will be reported on the december 31, 2012 balance
sheet at
a.5,000,000 euros
b.5,325,000 euros
c.8,365,000 euros
d.8,690,000 euros
10) the balance in moon co.’s accounts payable account at december 31, 2012 was
$900,000 before any necessary year-end adjustments relating to the following:
goods were in transit to moon from a vendor on december 31, 2012. the invoice cost
was $40,000. the goods were shipped f.o.b. shipping point on december 29, 2012 and
were received on january 4, 2013.
goods shipped f.o.b. destination on december 21, 2012 from a vendor to moon were
received on january 6, 2013. the invoice cost was $25,000.
on december 27, 2012, moon wrote and recorded checks to creditors totaling $30,000
that were mailed on january 10, 2013.
in moon’s december 31, 2012 balance sheet, the accounts payable should be
a.$930,000
b.$940,000
c.$965,000
d.$970,000
11) judd, inc., owns 35% of cosby corporation. during the calendar year 2012, cosby
had net earnings of $300,000 and paid dividends of $30,000. judd mistakenly recorded
these transactions using the fair value method rather than the equity method of
accounting. what effect would this have on the investment account, net income, and
retained earnings, respectively?
a.understate, overstate, overstate
b.overstate, understate, understate
c.overstate, overstate, overstate
d.understate, understate, understate
12) chang corporation issued $6,000,000 of 9%, ten-year convertible bonds on july 1,
2012 at 96.1 plus accrued interest. the bonds were dated april 1, 2010 with interest
payable april 1 and october 1. bond discount is amortized semiannually on a
straight-line basis. on april 1, 2013, $1,200,000 of these bonds were converted into 500
shares of $20 par value common stock. accrued interest was paid in cash at the time of
conversion.
what should be the amount of the unamortized bond discount on april 1, 2013 relating
to the bonds converted?
a.$46,800
b.$43,200
c.$23,400
d.$44,400
13) the amount of the liability for compensated absences should be based on
1>the current rates of pay in effect when employees earn the right to compensated
absences.
2>the future rates of pay expected to be paid when employees use compensated time.
3>the present value of the amount expected to be paid in future periods.
a.1
b.2
c.3
d.either 1 or 2 is acceptable
14) liabilities are
a.any accounts having credit balances after closing entries are made
b.deferred credits that are recognized and measured in conformity with generally
accepted accounting principles
c.obligations to transfer ownership shares to other entities in the future
d.obligations arising from past transactions and payable in assets or services in the
future
15) on december 31, 2013, grantham, inc. appropriately changed its inventory valuation
method to fifo cost from weighted-average cost for financial statement and income tax
purposes. the change will result in a $2,000,000 increase in the beginning inventory at
january 1, 2013. assume a 30% income tax rate. the cumulative effect of this accounting
change on beginning retained earnings is
a.$0
b.$600,000
c.$1,400,000
d.$2,000,000
16) ag inc. made a $15,000 sale on account with the following terms: 2/10, n/30. if the
company uses the net method to record sales made on credit, what is/are the debit(s) in
the journal entry to record the sale?
a.debit accounts receivable for $14,700
b.debit accounts receivable for $14,700 and sales discounts for $300
c.debit accounts receivable for $15,000
d.debit accounts receivable for $15,000 and sales discounts for $300