1) A corporation was organized in January 2014 with authorized capital of $10 par
value common stock. On February 1, 2014, shares were issued at par for cash. On
March 1, 2014, the corporation’s attorney accepted 7,000 shares of common stock in
settlement for legal services with a fair value of $90,000. Additional paid-in capital
would increase on
February 1, 2014March 1, 2014
a.YesNo
b.YesYes
c.NoNo
d.NoYes
2) Pole Co. at the end of 2015, its first year of operations, prepared a reconciliation
between pretax financial income and taxable income as follows:
Pretax financial income$ 420,000
Extra depreciation taken for tax purposes(1,050,000)
Estimated expenses deductible for taxes when paid 890,000
Taxable income$ 260,000
Use of the depreciable assets will result in taxable amounts of $350,000 in each of the
next three years. The estimated litigation expenses of $890,000 will be deductible in
2018 when settlement is expected.
Instructions
(a)Prepare a schedule of future taxable and deductible amounts.
(b)Prepare the journal entry to record income tax expense, deferred taxes, and income
taxes payable for 2015, assuming a tax rate of 40% for all years.
3) In which account are post-dated checks received classified?
a.Receivables
b.Prepaid expenses
c.Cash
d.Payables
4) Seasons Construction is constructing an office building under contract for Cannon
Company. The contract calls for progress billings and payments of $1,240,000 each
quarter. The total contract price is $14,880,000 and Seasons estimates total costs of
$14,200,000. Seasons estimates that the building will take 3 years to complete, and
commences construction on January 2, 2014 .
At December 31, 2015, Seasons Construction estimates that it is 75% complete with the
building; however, the estimate of total costs to be incurred has risen to $14,400,000
due to unanticipated price increases. What is the total amount of Construction Expenses
that Seasons will recognize for the year ended December 31, 2015?
a.$10,800,000
b.$6,300,000
c.$6,390,000
d.$6,540,000
5) The IFRS income statement classification of expenses by nature results in
descriptions
which include all of the following except
a.salaries
b.depreciation
c.distribution
d.utilities
6) Antidilutive securities
a.should be included in the computation of diluted earnings per share but not basic
earnings per share
b.are those whose inclusion in earnings per share computations would cause basic
earnings per share to exceed diluted earnings per share
c.include stock options and warrants whose exercise price is less than the average
market price of common stock
d.should be ignored in all earnings per share calculations
7) On January 2, 2014, Indian River Groves began construction of a new citrus
processing plant. The automated plant was finished and ready for use on September 30,
2015 . Expenditures for the construction were as follows:
Indian River Groves borrowed $2,200,000 on a construction loan at 12% interest on
January 2, 2014 . This loan was outstanding during the construction period. The
company also had $8,000,000 in 9% bonds outstanding in 2014 and 2015 .
What were the weighted-average accumulated expenditures for 2015 by the end of the
construction period?
a.$780,000
b.$3,270,000
c.$3,972,000
d.$2,772,000
8) Which of the following is an argument against using historical cost in accounting?
a.Fair values are more relevant
b.Historical costs are based on an exchange transaction
c.Historical costs are reliable
d.Fair values are subjective
9) Primary users for general-purpose financial statements include
a.creditors
b.employees
c.investors
d.both creditors and investors
10) Companies use intraperiod tax allocation for all of the following items except
a.discontinued operations
b.extraordinary items
c.changes in accounting estimates
d.income from continuing operations
11) The balance in retained earnings at December 31, 2014 was $1,080,000 and at
December 31, 2015 was $873,000. Net income for 2015 was $750,000. A stock
dividend was declared and distributed which increased common stock $375,000 and
paid-in capital $165,000. A cash dividend was declared and paid.
The stock dividend should be reported on the statement of cash flows (indirect method)
as
a.an outflow from financing activities of $375,000
b.an outflow from financing activities of $540,000
c.an outflow from investing activities of $540,000
d.Stock dividends are not shown on a statement of cash flows
12) In the process of conversion from the equity method to the fair value method, the
earnings or losses that the investor previously recognized under the equity method
should:
a.be ignored
b.be subtracted from the carrying value of the securities
c.remain as a part of the carrying amount of the investment
d.be shown in the income statement
13) Wilcox Corporation reported the following results for its first three years of
operation:
2014 income (before income taxes)$ 200,000
2015 loss (before income taxes)(1,800,000)
2016 income (before income taxes)2,000,000
There were no permanent or temporary differences during these three years. Assume a
corporate tax rate of 30% for 2014 and 2015, and 40% for 2016 .
Assuming that Wilcox elects to use the carryforward provision and not the carryback
provision, what income (loss) is reported in 2015?
a.$(1,800,000)
b.$(1,080,000)
c.$ -0-
d.$(1,740,000)