1) both u.s. gaap and ifrs permit the use of the lifo method to account for inventories.
2) when numerous adjustments are necessary, companies often use a cash flow
worksheet instead of preparing a statement of cash flows.
3) if a long-term note payable has a stated interest rate, that rate should be considered to
be the effective rate.
4) contra accounts must be reported for intangible assets in a manner similar to
accumu-lated depreciation and property, plant, and equipment.
5) insurance on equipment purchased, while the equipment is in transit, is part of the
cost of the equipment.
6) the laws of some states require that corporations restrict their legal capital from
distribution to stockholders.
7) financial statements are the principal means through which a company communicates
its financial information to those outside it.
8) all revenues, expenses, and the dividends account are closed through the income
summary account.
9) all liability and stockholders equity accounts are increased on the credit side and
decreased on the debit side.
10) the unrealized holding gain/lossequity account is reported as a part of other
compre-hensive income.
11) during the lifetime of an entity, accountants produce financial statements at arbitrary
points in time in accordance with which basic accounting concept?
a.cost constraint
b.periodicity assumption
c.conservatism constraint
d.expense recognition principle
12) 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
13) a requirement for a security to be classified as held-to-maturity is
a.ability to hold the security to maturity
b.positive intent
c.the security must be a debt security
d.all of these are required
14) which of the following costs should be excluded from research and development
expense?
a.modification of the design of a product
b.acquisition of r & d equipment for use on a current project only
c.cost of marketing research for a new product
d.engineering activity required to advance the design of a product to the manufacturing
stage
15) when the interest payment dates of a bond are may 1 and november 1, and a bond
issue is sold on june 1, the amount of cash received by the issuer will be
a.decreased by accrued interest from june 1 to november 1
b.decreased by accrued interest from may 1 to june 1
c.increased by accrued interest from june 1 to november 1
d.increased by accrued interest from may 1 to june 1
16) the correct order to present current assets is
a.cash, accounts receivable, prepaid items, inventories
b.cash, accounts receivable, inventories, prepaid items
c.cash, inventories, accounts receivable, prepaid items
d.cash, inventories, prepaid items, accounts receivable
17) houser appliances accounts for all sales of its merchandise on the installment basis.
following is the unadjusted trial balance at 12/31/14.
additional information:
2012 gross profit rate: 30%
total cash receipts during 2014: $110,000
merchandise sold in 2013 was repossessed in 2014 and the following entry was
prepared:
instructions
(a)what is the gross profit rate for 2013? show supporting computations.
(b)what is the gross profit rate for 2014? show supporting computations.
(c)of the total cash receipts in 2014, how much represents collections from installment
sales of: (show supporting computations.)
(1)2012?
(2)2013?
(3)2014?
(d)what is the total realized gross profit in 2014? show supporting computations.
18) the covenants and other terms of the agreement between the issuer of bonds and the
lender are set forth in the
a.bond indenture
b.bond debenture
c.registered bond
d.bond coupon
19) on march 1, imhoff co. began construction of a small building. payments of
$240,000 were made monthly for four months beginning march 1. the building was
completed and ready for occupancy on june 1. in determining the amount of interest
cost to be capitalized, the weighted-average accumulated expenditures are
a.$120,000
b.$240,000
c.$480,000
d.$960,000
20) in accounting for long-term construction contracts (those taking longer than one
year to complete), the two methods commonly followed are percentage-of-completion
and completed-contract.
instructions
(a)discuss how earnings on long-term construction contracts are recognized and
computed under these two methods.
(b)under what circumstances should one method be used over the other?
(c)how are job costs and interim billings reflected on the balance sheet under the
percentage-of-completion method and the completed-contract method?
21) for the year ended december 31, 2012, transformers inc. reported the following:
net income$120,000
preferred dividends declared20,000
common dividend declared4,000
unrealized holding loss, net of tax2,000
retained earnings, beginning balance160,000
common stock80,000
accumulated other comprehensive income,
beginning balance10,000
what would transformers report as the ending balance of retained earnings?
a.$278,000
b.$266,000
c.$256,000
d.$254,000
22) the following information is available for kessler company after its first year of
operations:
kessler estimates its annual warranty expense as a percentage of sales. the amount
charged to warranty expense on its books was $105,000. assuming a 40% income tax
rate, what amount was actually paid this year for warranty claims?
a.$115,000
b.$100,000
c.$105,000
d.$95,000
23) the date on which total compensation expense is computed in a stock option plan is
the date
a.of grant
b.of exercise
c.that the market price coincides with the option price
c.that the market price exceeds the option price
24) santana corporation has 400,000 shares of common stock outstanding throughout
2013. in addition, the corporation has 5,000, 20-year, 9% bonds issued at par in 2011.
each $1,000 bond is convertible into 20 shares of common stock after 9/23/14. during
the year 2013, the corporation earned $900,000 after deducting all expenses. the tax rate
was 30%.
instructions
compute the proper earnings per share for 2010.
25) when preparing a statement of cash flows, an increase in accounts payable during a
period would require which of the following adjustments in determining cash flows
from operating activities?
26) briefly describe some of the similarities and differences between u.s. gaap and ifrs
with respect to the accounting for inventories.
27) how much must be invested now to receive $25,000 for ten years if the first
$25,000 is received today and the rate is 8%?
28) on december 29, 2013, james co. sold an equity security that had been purchased on
january 4, 2012. james owned no other equity securities. an unrealized holding loss was
reported in the 2012 income statement. a realized gain was reported in the 2013 income
statement. was the equity security classified as available-for-sale and did its 2012
market price decline exceed its 2013 market price recovery?