1) Geary Co. assigned $800,000 of accounts receivable to Kwik Finance Co. as security
for a loan of $670,000. Kwik charged a 2% commission on the amount of the loan; the
interest rate on the note was 10%. During the first month, Geary collected $220,000 on
assigned accounts after deducting $760 of discounts. Geary accepted returns worth
$2,700 and wrote off assigned accounts totaling $5,960.
The amount of cash Geary received from Kwik at the time of the assignment was
a.$603,000
b.$654,000
c.$656,600
d.$670,000
2) In accounting for long-term construction contracts (those taking longer than one year
to complete), the two methods commonly followed are the percentage-of-completion
and completed-contract methods.
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?
3) Which of the following is an ethical concern of accountants?
a.Earnings manipulation
b.Conservative accounting
c.Industry practices
d.None of these answers are correct
4) Which of the following would be classified as a financing activity on a statement of
cash flows?
a.Declaration and distribution of a stock dividend
b.Deposit to a bond sinking fund
c.Sale of a loan receivable
d.Payment of interest to a creditor
5) Discuss the accounting procedures for and illustrate the following:
(a)Change in estimate
(b)Change in reporting entity
(c)Correction of an error
6) If a corporation purchases land and building and subsequently tears down the
building and uses the property as a parking lot, the proper accounting treatment of the
cost of the building would depend on
a.the significance of the cost allocated to the building in relation to the combined cost
of the land and building
b.the length of time for which the building was held prior to its demolition
c.the contemplated future use of the parking lot
d.the intention of management for the property when the building was acquired
7) Stockholders equity is not affected by all
a.cash receipts
b.dividends
c.revenues
d.expenses
8) The following information applied to Howe, Inc. for 2014:
Merchandise purchased for resale$380,000
Freight-in8,000
Freight-out5,000
Purchase returns2,000
Howe’s 2014 inventoriable cost was
a.$380,000
b.$383,000
c.$386,000
d.$391,000
9) Mordica Company will receive $300,000 in 7 years. If the appropriate interest rate is
10%, the present value of the $300,000 receipt is
a.$153,000
b.$153,948
c.$453,000
d.$584,616
10) Henry Company purchased a depreciable asset for $240,000. The estimated salvage
value is $22,000, and the estimated useful life is 10 years. The straight-line method will
be used for depreciation. What is the depreciation base of this asset?
a.$22,000
b.$24,000
c.$218,000
d.$240,000
11) An item that should be classified as an extraordinary item is
a.write-off of goodwill
b.gains from transactions involving foreign currencies
c.losses from moving a plant to another city
d.gains from a company selling the only investment it has ever owned
12) Members of the Financial Accounting Standards Board are
a.employed by the American Institute of Certified Public Accountants (AICPA)
b.part-time employees
c.required to hold a CPA certificate
d.independent of any other organization