1) A company gives each of its 50 employees ( assume they were all employed
continuously through 2014 and 2015 ) 12 days of vacation a year if they are employed
at the end of the year. The vacation accumulates and may be taken starting January 1 of
the next year. The employees work 8 hours per day. In 2014, they made $24.50 per hour
and in 2015 they made $28 per hour. During 2015, they took an average of 9 days of
vacation each. The companys policy is to record the liability existing at the end of each
year at the wage rate for that year. What amount of vacation liability would be reflected
on the 2014 and 2015 balance sheets, respectively?
a.$117,600; $163,800
b.$134,400; $168,000
c.$117,600; $168,000
d.$134,400; $163,800
2) Haag Corp.’s 2015 income statement showed pretax accounting income of
$1,500,000. To compute the federal income tax liability, the following 2015 data are
provided:
Income from exempt municipal bonds$ 60,000
Depreciation deducted for tax purposes in excess of depreciation
deducted for financial statement purposes120,000
Estimated federal income tax payments made300,000
Enacted corporate income tax rate30%
What amount of current federal income tax liability should be included in Hagg’s
December 31, 2015 balance sheet?
a.$ 96,000
b.$132,000
c.$150,000
d.$396,000
3) Which of the following organizations selects members for the IASB?
a.The Accounting Standards Committee Foundation
b.The Standards Advisory Council
c.The International Financial Reporting Interpretations Committee
d.The International Accounting Standards Committee Foundation
4) In a defined-benefit plan, the process of funding refers to
a.determining the projected benefit obligation
b.determining the accumulated benefit obligation
c.making the periodic contributions to a funding agency to ensure that funds are
available to meet retirees’ claims
d.determining the amount that might be reported for pension expense
5) Transactions for the month of June were:
PurchasesSales
June 1(balance) 1,600 @ $3.20June 21,200 @ $5.50
34,400 @ 3.1063,200 @ 5.50
72,400 @ 3.3092,000 @ 5.50
153,600 @ 3.4010800 @ 6.00
221,000 @ 3.50182,800 @ 6.00
25400 @ 6.00
Assuming that perpetual inventory records are kept in dollars, the ending inventory on a
LIFO basis is
a.$8,220
b.$8,320
c.$8,580
d.$8,940
6) The following information was extracted from the accounts of Essex Corporation at
December 31, 2014:
CR(DR)
Total reported income since incorporation$3,200,000
Total cash dividends paid(1,600,000)
Unrealized holding loss on available-for-sale securities(240,000)
Total stock dividends distributed(400,000)
Prior period adjustment, recorded January 1, 2014150,000
What should be the balance of retained earnings at December 31, 2014?
a.$1,110,000
b.$1,200,000
c.$1,960,000
d.$1,350,000
7) Which of the following nonmonetary exchange transactions represents a culmination
of the earning process?
a.Exchange of assets with no difference in future cash flows
b.Exchange of products by companies in the same line of business with no difference in
future cash flows
c.Exchange of assets with a difference in future cash flows
d.Exchange of an equivalent interest in similar productive assets that causes the
companies involved to remain in essentially the same economic position
8) Mendenhall Corporation constructed a building at a cost of $10,000,000.
Weighted-average accumulated expenditures were $4,000,000, actual interest was
$400,000, and avoidable interest was $200,000. If the salvage value is $800,000, and
the useful life is 40 years, depreciation expense for the first full year using the
straight-line method is
a.$235,000
b.$240,000
c.$255,000
d.$335,000
9) On April 1, Mooney Corporation purchased for $1,624,500 a tract of land on which a
warehouse and office building was located. The following data were collected
concerning the property:
Current Assessed ValuationVendors Original Cost
Land$600,000$560,000
Warehouse400,000360,000
Office building 800,000 680,000
$1,800,000$1,600,000
What are the appropriate amounts that Mooney should record for the land, warehouse,
and office building, respectively?
a.Land, $560,000; warehouse, $360,000; office building, $680,000.
b.Land, $600,000; warehouse, $400,000; office building, $800,000.
c.Land, $568,575; warehouse, $365,513; office building, $345,206.
d.Land, $541,500; warehouse, $361,000; office building, $722,000.
10) On October 1, 2014 Bartley Corporation issued 5%, 10-year bonds with a face
value of $5,000,000 at 104 . Interest is paid on October 1 and April 1, with any
premiums or discounts amortized on a straight-line basis.
Bond interest expense reported on the December 31, 2014 income statement of Bartley
Corporation would be
a.$67,500
b.$115,000
c.$57,500
d.$62,500
11) Lanier Company began operations on January 1, 2014, and uses the FIFO method in
costing its raw material inventory. Management is contemplating a change to the LIFO
method and is interested in determining what effect such a change will have on net
income. Accordingly, the following information has been developed:
Final Inventory 2014 2015
FIFO$320,000$360,000
LIFO240,000300,000
Net Income (computed under the FIFO method)500,000650,000
Based upon the above information, a change to the LIFO method in 2015 would result
in net income for 2015 of
a.$590,000
b.$650,000
c.$670,000
d.$710,000
12) When an investment in a held-to-maturity security is transferred to an
available-for-sale security, the carrying value assigned to the available-for-sale security
should be
a.its original cost
b.its fair value at the date of the transfer
c.the lower of its original cost or its fair value at the date of the transfer
d.the higher of its original cost or its fair value at the date of the transfer
13) What condition(s) is/are necessary to recognize an asset retirement obligation?
a.Company has an existing legal obligation and can reasonably estimate the amount of
the liability
b.Company can reasonably estimate the amount of the liability
c.Company has an existing legal obligation
d.Obligation event has occurred
14) Which of the following principles best describes the conceptual rationale for the
methods of matching depreciation expense with revenues?
a.Associating cause and effect
b.Systematic and rational allocation
c.Immediate recognition
d.Partial recognition
15) Which of the following is not a long-term investment?
a.Cash surrender value of life insurance
b.Franchise
c.Land held for speculation
d.A sinking fund
16) The single-step income statement emphasizes
a.the gross profit figure
b.total revenues and total expenses
c.operating and non-operating expenses
d.the various components of income from continuing operations