1) which of the following is a temporary difference classified as a revenue or gain that
is taxable after it is recognized in financial income?
a.subscriptions received in advance
b.prepaid royalty received in advance
c.an installment sale accounted for on the accrual basis for financial reporting purposes
and on the installment (cash) basis for tax purposes
d.interest received on a municipal obligation
2) on january 1, 2012, kline company decided to begin accumulating a fund for asset
replacement five years later. the company plans to make five annual deposits of $40,000
at 9% each january 1 beginning in 2012. what will be the balance in the fund, within
$10, on january 1, 2017 (one year after the last deposit)? the following 9% interest
factors may be used.
a.$260,932
b.$239,388
c.$218,000
d.$200,000
3) at the beginning of 2013, flaherty company had retained earnings of $250,000.
during the year flaherty reported net income of $100,000, sold treasury stock at a gain
of $36,000, declared a cash dividend of $60,000, and declared and issued a small stock
dividend of 3,000 shares ($10 par value) when the fair value of the stock was $20 per
share. the amount of retained earnings available for dividends at the end of 2013 was
a.$230,000
b.$260,000
c.$266,000
d.$296,000
4) on january 1, 2012, ellison co. issued eight-year bonds with a face value of
$2,000,000 and a stated interest rate of 6%, payable semiannually on june 30 and
december 31. the bonds were sold to yield 8%. table values are:
the issue price of the bonds is
a.$1,767,120
b.$1,769,640
c.$1,779,120
d.$1,999,200
5) storm corporation purchased a new machine on october 31, 2012. a $3,600 down
payment was made and three monthly installments of $10,800 each are to be made
beginning on november 30, 2012. the cash price would have been $34,800. storm paid
no installation charges under the monthly payment plan but a $600 installation charge
would have been incurred with a cash purchase. the amount to be capitalized as the cost
of the machine on october 31, 2012 would be
a.$36,600
b.$36,000
c.$35,400
d.$34,800
6) klein book store uses the conventional retail method and is now considering converting
to the lifo retail method for the period beginning 1/1/13. available information consists of
the following:
following is a schedule showing the computation of the cost of inventory on hand at
12/31/12 based on the conventional retail method.
instructions
(a)prepare the journal entry to convert the inventory from the conventional retail to the lifo
retail method. show detailed calculations to support your entry.
(b)prepare a schedule showing the computation of the 12/31/13 inventory based on the lifo
retail method as adjusted for fluctuating prices. without prejudice to your answer to (a)
above, assume that you computed the 1/1/13 inventory (retail value $49,000) under the lifo
retail method at a cost of $35,000.
7) which of the following is accounted for as a change in accounting principle?
a.a change in the estimated useful life of plant assets
b.a change from the cash basis of accounting to the accrual basis of accounting
c.a change from expensing immaterial expenditures to deferring and amortizing them as
they become material
d.a change in inventory valuation from average cost to fifo
8) chess top uses the periodic inventory system. for the current month, the beginning
inventory consisted of 300 units that cost $65 each. during the month, the company
made two purchases: 450 units at $68 each and 225 units at $70 each. chess top also
sold 750 units during the month. using the lifo method, what is the amount of cost of
goods sold for the month?
a.$50,655
b.$48,750
c.$51,225
d.$50,100
9) balcom corporation acquires a coal mine at a cost of $1,500,000. intangible
development costs total $360,000. after extraction has occurred, balcom must restore
the property (estimated fair value of the obligation is $180,000), after which it can be
sold for $510,000. balcom estimates that 5,000 tons of coal can be extracted. what is the
amount of depletion per ton?
a.$306
b.$510
c.$300
d.$372
10) jerry recently was offered a position with a major accounting firm. the firm offered
jerry either a signing bonus of $23,000 payable on the first day of work or a signing
bonus of $26,000 payable after one year of employment. assuming that the relevant
interest rate is 10%, which option should jerry choose?
a.the options are equivalent
b.insufficient information to determine
c.the signing bonus of $23,000 payable on the first day of work
d.the signing bonus of $26,000 payable after one year of employment
11) when an investor’s accounting period ends on a date that does not coincide with an
interest receipt date for bonds held as an investment, the investor must
a.make an adjusting entry to debit interest receivable and to credit interest revenue for
the amount of interest accrued since the last interest receipt date
b.notify the issuer and request that a special payment be made for the appropriate
portion of the interest period
c.make an adjusting entry to debit interest receivable and to credit interest revenue for
the total amount of interest to be received at the next interest receipt date
d.do nothing special and ignore the fact that the accounting period does not coincide
with the bond’s interest period
12) long-term liabilities include
a. obligations not expected to be liquidated within the operating cycle
b.obligations payable at some date beyond the operating cycle
c.deferred income taxes and most lease obligations
d.all of these
13) a trial balance
a.proves that debits and credits are equal in the ledger
b.supplies a listing of open accounts and their balances that are used in preparing
financial statements
c.is normally prepared three times in the accounting cycle
d.all of these
14) under current accounting practice, intangible assets are classified as
a.amortizable or unamortizable
b.limited-life or indefinite-life
c.specifically identifiable or goodwill-type
d.legally restricted or goodwill-type