1) ifrs, like u.s. gaap, capitalizes all direct costs in self-constructed assets.
2) in the retail inventory method, the term markup means a markup on the original cost
of an inventory item.
3) changes in the fair value of a company’s debt instruments are included as part of
earnings in any given period.
4) under ifrs recording for the issuance of bonds payable, the discount on bonds payable
and the paid-in capital-convertible bonds could be utilized.
5) who owns the goods, as well as the costs to include in inventory, are essentially
accounted for the same under ifrs and u.s. gaap.
6) bank overdrafts are always offset against the cash account in the balance sheet.
7) retrospective application refers to the application of a different accounting principle
to recast previously issued financial statementsas if the new principle had always been
used.
8) limited-life intangibles are amortized by systematic charges to expense over their
useful life.
9) the future value of an annuity due factor is found by multiplying the future value of
an ordinary annuity factor by 1 minus the interest rate.
10) adjusting entries for prepayments record the portion of the prepayment that
represents the expense incurred or the revenue earned in the current accounting period.
11) the rents that comprise an annuity due earn no interest during the period in which
they are originally deposited.
12) liquidity refers to the ability of an enterprise to pay its debts as they mature.
13) a company can convert net income to net cash flow from operating activities
through either the direct method or the indirect method.
14) the increased acceptance of ifrs has caused costs associated with internally
generated intangible assets to be capitalized under u.s. gaap.
15) note that x in the following statement of cash flows identifies a dollar amount and
the letters (a) through (f) identify specific items which appear in the major sections of
the statement prepared using the indirect method.
statement of cash flows
instructions
for each of the following items, indicate by letter in the blank spaces below, the section
or sections where the effect would be reported. use the code (a through f) from above. if
the item is not required to be reported on the statement of cash flows, write the word
“none” in the blank. assume that generally accepted accounting principles have been
followed in determining net income and that there are no short-term securities which
are considered cash equivalents.
1>after the retirement of an officer, the insurance policy was canceled, and a cash
settlement was received by the firm. these proceeds were in excess of the book value of
the policy.
2>sales discounts lapsed and not taken by customers. (sales recorded at net originally.)
3>accrued estimated income taxes for the period. these taxes will be paid next year.
4>amortization of premium on bonds payable.
5>premium amortized on investment in bonds.
6>the book value of trading securities was reduced to fair value.
7>purchase of available-for-sale securities.
8>declaration of stock dividends (not yet issued).
9>issued preferred stock in exchange for equipment.
10>bad debts (under allowance method) estimated and recorded for the period
(receivables classified as current).
11>gain on disposal of old machinery.
12>payment of cash dividends (previously declared in a prior period).
13>trading securities are sold at a loss.
14>two-year notes issued at discount for a patent.
15>amortization of discount on notes receivable (long-term).
16>decrease in retained earnings appropriated for self-insurance.
16) winser, inc. is engaged in extensive exploration for water in utah. if, upon discovery
of water, winser does not recognize any revenue from water sales until the sales exceed
the costs of exploration, the basis of revenue recognition being employed is the
a.production basis
b.cash (or collection) basis
c.sales (or accrual) basis
d.cost recovery basis
17)
if $6,000 is deposited annually starting on january 1, 2012 and it earns 8%, what will
the balance be on december 31, 2019?
a.$53,537
b.$57,820
c.$63,820
d. $68,925
18) fanestil corporation purchased a depreciable asset for $630,000 on january 1, 2010.
the estimated salvage value is $63,000, and the estimated total useful life is 9 years. the
straight-line method is used for depreciation. in 2013, fanestill changed its estimates to
a useful life of 5 years with a salvage value of $105,000. what is 2013 depreciation
expense?
a.$63,000
b.$105,000
c.$168,000
d.$189,000
19) vance company reported net incomes for a three-year period as follows:
2011, $191,000;2012, $199,000;2013, $180,000.
in reviewing the accounts in 2014 after the books for the prior year have been closed,
you find that the following errors have been made in summarizing activities:
instructions
(a)determine corrected net incomes for 2011, 2012, and 2013.
(b)give the entry to bring the books of the company up to date in 2014, assuming that
the books have been closed for 2013.
20) on may 1, 2012, marly co. issued $1,000,000 of 7% bonds at 103, which are due on
april 30, 2022. twenty detachable stock warrants entitling the holder to purchase for $40
one share of marlys common stock, $15 par value, were attached to each $1,000 bond.
the bonds without the warrants would sell at 96. on may 1, 2012, the fair value of
marlys common stock was $35 per share and of the warrants was $2.
on may 1, 2012, marly should record the bonds with a
a.discount of $40,000
b.discount of $10,000
c.discount of $11,200
d.premium of $30,000
21) black corporation had a 1/1/12 balance in the allowance for doubtful accounts of
$18,000. during 2012, it wrote off $12,960 of accounts and collected $3,780 on
accounts previously written off. the balance in accounts receivable was $360,000 at 1/1
and $432,000 at 12/31. at 12/31/12, black estimates that 5% of accounts receivable will
prove to be uncollectible. what should black report as its allowance for doubtful
accounts at 12/31/12?
a.$8,640
b.$8,820
c.$12,420
d.$21,600
22) which of the following is a limitation of the balance sheet?
a.many items that are of financial value are omitted
b.judgments and estimates are used
c.current fair value is not reported
d.all of these
23) the following information is available for barone corporation:
the number of shares to be used in computing earnings per common share for 2013 is
a.3,390,600
b.3,285,000
c.3,270,000
d.2,047,500
24) what is the effect of a $50,000 overstatement of last year’s inventory on current
years ending retained earning balance?
a.understated by $50,000
b.no effect
c.overstated by $50,000
d.need more information to determine
25) as there is no comparable institution to the sec in international securities markets,
many international companies (those not registered with the sec)
a.voluntarily adhere to sec criteria in providing information related to contractual
obligations
b.are not required to provide disclosures such as those related to contractual obligations
c.follow the requirements established for contractual obligations put forth by the iasb
d.follow the requirements established for contractual obligations put forth by the fasb
26) a review of the december 31, 2012, financial statements of somer corporation
revealed that under the caption “extraordinary losses,” somer reported a total of
$1,030,000. further analysis revealed that the $1,030,000 in losses was comprised of the
following items:
(1)somer recorded a loss of $300,000 incurred in the abandonment of equipment
formerly used in the business.
(2)in an unusual and infrequent occurrence, a loss of $500,000 was sustained as a result
of hurricane damage to a warehouse.
(3)during 2012, several factories were shut down during a major strike by employees,
resulting in a loss of $170,000.
(4)uncollectible accounts receivable of $60,000 were written off as uncollectible.
ignoring income taxes, what amount of loss should somer report as extraordinary on its
2012 income statement?
a.$300,000
b.$500,000
c.$800,000
d.$1,030,000
27) houser corporation owns 4,000,000 shares of stock in baha corporation. on
december 31, 2012, houser distributed these shares of stock as a dividend to its
stockholders. this is an example of a
a.property dividend
b.stock dividend
c.liquidating dividend
d.cash dividend
28) seasons construction completes the remaining 25% of the building construction on
december 31, 2014, as scheduled. at that time the total costs of construction are
$11,250,000. what is the total amount of revenue from long-term contracts and
construction expenses that seasons will recognize for the year ended december 31,
2014?
29) in the space provided, write the word or phrase that is defined or indicated.
1>net income minus preferred dividends
divided by the weighted average of shares
outstanding.1>________________________________
2>all changes in equity during a period except
those resulting from investments by owners
and distributions to owners.2>________________________________
3>a correction of an error is reported as a3>________________________________
4>an event or transaction which is unusual
in nature and infrequent in occurrence.4>________________________________
5>the income statement category for a
disposal of a component of a business.5>________________________________
6>relating tax expense to specific items
on the income statement.6>________________________________
30) dunbar company had 400,000 shares of common stock outstanding during the year
2013. in addition, at december 31, 2013, 60,000 shares were issuable upon exercise of
executive stock options which require a $40 cash payment upon exercise (options
granted in 2011). the average market price during 2013 was $50.
instructions
compute the number of shares to be used in determining diluted earnings per share for
2013.
31) presented below are changes in the account balances of wenn company during the
year, except for retained earnings.
the only entries in retained earnings were for net income and a dividend declaration of
$12,000.
compute the net income for the current year.
32) an inventory taken the morning after a large theft discloses $60,000 of goods on
hand as of march 12. the following additional data is available from the books:
past records indicate that sales are made at 50% above cost.
instructions
estimate the inventory of goods on hand at the close of business on march 11 by the
gross profit method and determine the amount of the theft loss. show appropriate titles
for all amounts in your presentation.
33) when preparing a statement of cash flows, the following are used for which method
in determining cash flows from operating activities?
34) what are the ifrs requirements with respect to expense classification?
35) buerhle company needs to determine if its indefinite-life intangibles other than
goodwill have been impaired and should be reduced or written off on its balance sheet.
the impairment test(s) to be used is (are)
36) the records of lohse stores included the following data:
inventory, may 1, at retail, $14,500; at cost, $10,440
purchases during may, at retail, $42,900; at cost, $31,550
freight-in, $2,000; purchase discounts, $250
additional markups, $3,800; markup cancellations, $400; net markdowns, $1,300
sales during may, $44,500
instructions
calculate the estimated inventory at may 31 on a lifo basis. show your calculations in
good form and label all amounts.