1) the pervasive criterion by which accounting information can be judged is that of
a.decision usefulness
b.freedom from bias
c.timeliness
d.comparability
2) the average days to sell inventory is computed by dividing
a.365 days by the inventory turnover ratio
b.the inventory turnover ratio by 365 days
c.net sales by the inventory turnover ratio
d.365 days by cost of goods sold
3) the balance sheet is useful for analyzing all of the following except
a.liquidity
b.solvency
c.profitability
d.financial flexibility
4) which of the following items should be included in accounts receivable reported on
the balance sheet?
a.notes receivable
b.interest receivable
c.allowance for doubtful accounts
d.advances to related parties and officers
5) “in-substance defeasance” is a term used to refer to an arrangement whereby
a.a company gets another company to cover its payments due on long-term debt
b.a governmental unit issues debt instruments to corporations
c.a company provides for the future repayment of a long-term debt by placing
purchased securities in an irrevocable trust
d.a company legally extinguishes debt before its due date
6) a company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on january 1, 2012.
interest is paid on june 30 and december 31. the proceeds from the bonds are
$14,703,109. what is interest expense for 2013, using straight-line amortization?
a.$1,540,207
b.$1,170,000
c.$1,176,894
d.$1,184,845
7) if a unit of inventory has declined in value below original cost, but the market value
exceeds net realizable value, the amount to be used for purposes of inventory valuation
is
a.net realizable value
b.original cost
c.market value
d.net realizable value less a normal profit margin
8) mott co. includes one coupon in each bag of dog food it sells. in return for eight
coupons, customers receive a leash. the leashes cost mott $3 each. mott estimates that
40 percent of the coupons will be redeemed. data for 2012 and 2013 are as follows:
the premium expense for 2012 is
a.$37,500
b.$45,000
c.$52,500
d.$75,000
9) the occurrence which most likely would have no effect on 2012 net income
(assuming that all amounts involved are material) is the
a.sale in 2012 of an office building contributed by a stockholder in 1983
b.collection in 2012 of a receivable from a customer whose account was written off in
2011 by a charge to the allowance account
c.settlement based on litigation in 2012 of previously unrecognized damages from a
serious accident which occurred in 2010
d.worthlessness determined in 2012 of stock purchased on a speculative basis in 2008
10) manning company has the following items: write-down of inventories, $360,000;
loss on disposal of sports division, $555,000; and loss due to strike, $339,000. ignoring
income taxes, what total amount should manning company report as extraordinary
losses?
a.$ -0-
b.$555,000
c.$699,000
d.$894,000
11) when the conventional retail inventory method is used, markdowns are commonly
ignored in the computation of the cost to retail ratio because
a.there may be no markdowns in a given year
b.this tends to give a better approximation of the lower of cost or market
c.markups are also ignored
d.this tends to result in the showing of a normal profit margin in a period when no
markdown goods have been sold
12) construction of a qualifying asset is started on april 1 and finished on december 1.
the fraction used to multiply an expenditure made on april 1 to find weighted-average
accumulated expenditures is
a.8/8
b.8/12
c.9/12
d.11/12
13) if the parent company owns 90% of the subsidiary company’s outstanding common
stock, the company should generally account for the income of the subsidiary under the
a.cost method
b.fair value method
c.divesture method
d.equity method
14) reserve recognition accounting
a.is presently the generally accepted accounting method for financial reporting of oil
and gas reserves
b.is a historical cost method similar to the full cost approach and the successful efforts
approach
c.is used for reporting of oil and gas reserves for federal income tax purposes
d.requires estimates of future production costs, the appropriate discount rate, and the
expected selling price of oil and gas reserves
15) nickerson corporation began operations in 2011. there have been no permanent or
temporary differences to account for since the inception of the business. the following
data are available:
in 2013, nickerson had an operating loss of $1,550,000. what amount of income tax
benefits should be reported on the 2013 income statement due to this loss?
a.$682,500
b.$622,500
c.$620,000
d.$465,000