1) financial information exhibits the characteristic of consistency when
a.expenses are reported as charges against revenue in the period in which they are paid
b.companies apply the same accounting treatment to similar events, from period to
period
c.extraordinary gains and losses are not included on the income statement
d.accounting procedures are adopted which give a consistent rate of net income
2) the realization of income on installment sales transactions involves
a.recognition of the difference between the cash collected on installment sales and the
cash expenses incurred
b.deferring the net income related to installment sales and recognizing the income as
cash is collected
c.deferring gross profit while recognizing operating or financial expenses in the period
incurred
d.deferring gross profit and all additional expenses related to installment sales until cash
is ultimately collected
3) which of the following statements is true regarding capitalization of interest?
a.interest cost capitalized in connection with the purchase of land to be used as a
building site should be debited to the land account and not to the building account
b.the amount of interest cost capitalized during the period should not exceed the actual
interest cost incurred
c.when excess borrowed funds not immediately needed for construction are temporarily
invested, any interest earned should be offset against interest cost incurred when
determining the amount of interest cost to be capitalized
d.the minimum amount of interest to be capitalized is determined by multiplying a
weighted average interest rate by the amount of average accumulated expenditures on
qualifying assets during the period
4) rollins company purchased a depreciable asset for $500,000 on april 1, 2010. the
estimated salvage value is $50,000, and the estimated total useful life is 5 years. the
straight-line method is used for depreciation. what is the balance in accumulated
depreciation on may 1, 2013 when the asset is sold?
a.$196,667
b.$210,000
c.$247,500
d.$277,500
5) feine co. accepted delivery of merchandise which it purchased on account. as of
december 31, feine had recorded the transaction, but did not include the merchandise in
its inventory. the effect of this on its financial statements for december 31 would be
a.net income, current assets, and retained earnings were understated
b.net income was correct and current assets were understated
c.net income was understated and current liabilities were overstated
d.net income was overstated and current assets were understated
6) shipley corporation had net income for the year of $600,000 and a weighted average
number of common shares outstanding during the period of 200,000 shares. the
company has a convertible bond issue outstanding. the bonds were issued four years
ago at par ($2,500,000), carry a 7% interest rate, and are convertible into 40,000 shares
of common stock. the company has a 40% tax rate. diluted earnings per share are
a.$2.06
b.$2.79
c.$2.94
d.$3.22
7) a dividend which is a return to stockholders of a portion of their original investments
is a
a.liquidating dividend
b.property dividend
c.liability dividend
d.participating dividend
8) harrel company acquired a patent on an oil extraction technique on january 1, 2012
for $7,500,000. it was expected to have a 10 year life and no residual value. harrel uses
straight-line amortization for patents. on december 31, 2013, the expected future cash
flows expected from the patent were expected to be $900,000 per year for the next eight
years. the present value of these cash flows, discounted at harrels market interest rate, is
$4,200,000. at what amount should the patent be carried on the december 31, 2013
balance sheet?
a.$7,500,000
b.$7,200,000
c.$6,000,000
d.$4,200,000
9) a soundly developed conceptual framework of concepts and objectives should
a.increase financial statement users’ understanding of and confidence in financial
reporting
b.enhance comparability among companies’ financial statements
c.allow new and emerging practical problems to be more quickly solved
d.all of these
10) flint co. records purchase discounts lost and uses perpetual inventories. prepare
journal entries in general journal form for the following:
(a)purchased merchandise costing $1,500 with terms 2/10, n/30.
(b)payment was made thirty days after the purchase.
11) which of the following represents the total number of shares that a corporation may
issue under the terms of its charter?
a.authorized shares
b.issued shares
c.unissued shares
d.outstanding shares
12) in a period of falling prices, which inventory method generally provides the greatest
amount of net income?
a.average cost
b.fifo
c.lifo
d.specific identification
13) eilert construction company had a contract starting april 2013, to construct a
$18,000,000 building that is expected to be completed in september 2014, at an
estimated cost of $16,500,000. at the end of 2013, the costs to date were $7,590,000 and
the estimated total costs to complete had not changed. the progress billings during 2013
were $3,600,000 and the cash collected during 2013 was $2,400,000. eilert uses the
percentage-of-completion method.
at december 31, 2013, eilert would report construction in process in the amount of
a.$8,280,000
b.$7,590,000
c.$7,080,000
d.$690,000
14) maxwell corporation factored, with recourse, $100,000 of accounts receivable with
huskie financing. the finance charge is 3%, and 5% was retained to cover sales
discounts, sales returns, and sales allowances. maxwell estimates the recourse
obligation at $2,400. what amount should maxwell report as a loss on sale of
receivables?
a.$ -0-
b.$3,000
c.$5,400
d.$10,400
15) the economic entity assumption
a.is inapplicable to unincorporated businesses
b.recognizes the legal aspects of business organizations
c.requires periodic income measurement
d.is applicable to all forms of business organizations