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1) Didde Corp. reports operating expenses in two categories: (1) selling and (2) general
and administrative. The adjusted trial balance at December 31, 2014 included the
following expense and loss accounts:
Accounting and legal fees$210,000
Advertising290,000
Freight-out120,000
Interest105,000
Loss on sale of long-term investment45,000
Officers' salaries335,000
Rent for office space330,000
Sales salaries and commissions255,000
One-half of the rented premises is occupied by the sales department. Didde's total
selling expenses for 2014 are
a.$830,000
b.$710,000
c.$665,000
d.$575,000
2) Which of the following is generally associated with payables classified as accounts
payable?
Periodic PaymentSecured
of Interestby Collateral
a.NoNo
b.NoYes
c.YesNo
d.YesYes
3) How do these prepaid expenses expire?
Rent Supplies
a.With the passage of timeThrough use and consumption
b.With the passage of timeWith the passage of time
c.Through use and consumptionThrough use and consumption
d.Through use and consumptionWith the passage of time
4) Putnam, Inc.
Comparative Balance Sheets
December 31,
20152014
Assets:
Current Assets:
Cash$ 1,380,000$1,080,000
Accounts Receivable (net)3,120,0002,160,000
Inventory3,900,0002,520,000
Prepaid Expenses 702,000 630,000
Total Current Assets9,102,0006,390,000
Long-Term Investments450,000
Plant Assets:
Property, Plant & Equipment4,380,0002,880,000
Accumulated Depreciation (900,000) (540,000)
Total Plant Assets 3,480,000 2,340,000
Total Assets$13,032,000$8,730,000
Equities:
Current Liabilities:
Accounts Payable$ 2,550,000$2,190,000
Accrued Expenses618,000564,000
Dividends Payable 402,000
Total Current Liabilities3,570,0002,754,000
Long-Term Notes Payable1,650,000
Stockholders' Equity:
Common Stock6,000,0004,800,000
Retained Earnings 1,812,000 1,176,000
Total Equities$13,032,000$8,730,000
Putnam, Inc.
Comparative Income Statements
December 31,
20152014
Net Credit Sales$14,040,000$7,506,000
Cost of Goods Sold 7,830,000 3,762,000
Gross Profit6,210,0003,744,000
Operating Expenses (including Income Tax) 5,172,000 2,748,000
Net Income$1,038,000$ 996,000
Additional Information:
a.Accounts receivable and accounts payable relate to merchandise held for sale in the
normal course of business. The allowance for bad debts was the same at the end of 2015
and 2014, and no receivables were charged against the allowance. Accounts payable are
recorded net of any discount and are always paid within the discount period.
b.The proceeds from the note payable were used to finance the acquisition of property,
plant, and equipment. Capital stock was sold to provide additional working capital.
What amount of cash was collected from 2015 accounts receivable?
a.$15,000,000
b.$14,040,000
c.$13,080,000
d.$6,540,000
5) Porter Corp. purchased its own par value stock on January 1, 2014 for $20,000 and
debited the treasury stock account for the purchase price. The stock was subsequently
sold for $12,000. The $8,000 difference between the cost and sales price should be
recorded as a deduction from
a.additional paid-in capital to the extent that previous net "gains" from sales of the same
class of stock are included therein; otherwise, from retained earnings
b.additional paid-in capital without regard as to whether or not there have been previous
net "gains" from sales of the same class of stock included therein
c.retained earnings
d.net income
6) On January 2, 2015, Worth Co. issued at par $1,000,000 of 7% convertible bonds.
Each $1,000 bond is convertible into 20 shares of common stock. No bonds were
converted during 2015 . Worth had 200,000 shares of common stock outstanding during
2015 . Worths 2015 net income was $450,000 and the income tax rate was 30%. Worths
diluted earnings per share for 2015 would be (rounded to the nearest penny):
a.$2.50
b.$2.27
c.$2.25
d.$2.36
7) Accrual accounting is used because
a.cash flows are considered less important
b.it provides a better indication of a companys ability to generate cash flows than the
cash basis
c.it recognizes revenues when cash is received and expenses when cash is paid
d.None of the answer choices are correct
8) During the course of your examination of the financial statements of Doppler
Corporation for the year ended December 31, 2015, you found a new account,
"Investments." Your examination revealed that during 2015, Doppler began a program
of investments, and all investment-related transactions were entered in this account.
Your analysis of this account for 2015 follows:
Doppler Corporation
Analysis of Investments
For the Year Ended December 31, 2015
Date2015 Debit Credit
(a)
Harmon Company Common Stock
Feb.14Purchased 4,000 shares @ $55 per share.$220,000
July26Received 400 shares of Harmon Company common stock
as a stock dividend. (Memorandum entry in general ledger.)
Sept.28Sold the 400 shares of Harmon Company common stock
received July 26 @ $60 per share.$24,000
(b)
Debit Credit
Taber Inc., Common Stock
Apr.30Purchased 20,000 shares @ $40 per share.$800,000
Oct.28Received dividend of $1 per share.$20,000
Additional information:
1>The fair value for each security as of the 2015 date of each transaction follow:
SecurityFeb. 14Apr. 30July 26Sept. 28Dec. 31
Harmon Company$55$62$60$64
Taber Inc.$4033
Doppler Corp.2528303335
2>All of the investments of Doppler are nominal in respect to percentage of ownership
(5% or less).
3>Each investment is considered by Dopplers management to be available-for-sale.
Instructions
(1)Prepare any necessary correcting journal entries related to investments (a) and (b).
(2)Prepare the entry, if necessary, to record the proper valuation of the available-for-sale
equity security portfolio as of December 31, 2015 .
9) When a plant asset is acquired by issuance of common stock, the cost of the plant
asset is properly measured by the
a.par value of the stock
b.stated value of the stock
c.book value of the stock
d.fair value of the stock
10) Which of the following is a current liability?
a.A long-term debt maturing currently, which is to be paid with cash in a sinking fund
b.A long-term debt maturing currently, which is to be retired with proceeds from a new
debt issue
c.A long-term debt maturing currently, which is to be converted into common stock
d.None of these answers are correct
11) Winsor Co. records purchases at net amounts. On May 5 Winsor purchased
merchandise on account, $40,000, terms 2/10, n/30. Winsor returned $3,000 of the May
5 purchase and received credit on account. At May 31 the balance had not been paid.
By how much should the account payable be adjusted on May 31?
a.$ 0
b.$860
c.$800
d.$740
12) Under U.S. GAAP, impairment losses
a.can be reversed but only if the reversal is greater than the amount of the original
impairment
b.can be reversed but only if the reversal falls in a subsequent fiscal year of the
company's operations
c.cannot be reversed for assets to be held and used
d.none of these answer choices are correct
13) Tipson Corporation will invest $20,000 every January 1st for the next six years
(2014 2019). If Tipson will earn 12% on the investment, what amount will be in the
investment fund on December 31, 2019?
a.$82,228
b.$92,096
c.$162,304
d.$181,780
14) Foley Corporation has the following capital structure at the beginning of the year:
4% Preferred stock, $50 par value, 20,000 shares authorized,
6,000 shares issued and outstanding$ 300,000
Common stock, $10 par value, 60,000 shares authorized,
40,000 shares issued and outstanding400,000
Paid-in capital in excess of par 110,000
Total paid-in capital810,000
Retained earnings 440,000
Total stockholders' equity$1,250,000
Instructions
(a)Record the following transactions which occurred consecutively (show all
calculations).
1>A total cash dividend of $90,000 was declared and payable to stockholders of record.
Record dividends payable on common and preferred stock in separate accounts.
2>A 15% common stock dividend was declared. The average fair value of the common
stock is $22 a share.
3>Assume that net income for the year was $140,000 (record the closing entry) and the
board of directors appropriated $70,000 of retained earnings for plant expansion.
(b)Construct the stockholders' equity section incorporating all the above information.
15) General Products Company bought Special Products Division in 2014 and
appropriately recorded $750,000 of goodwill related to the purchase. On December 31,
2015, the fair value of Special Products Division is $6,000,000 and it is carried on
General Products books for a total of $5,100,000, including the goodwill. An analysis of
Special Products Divisions assets indicates that goodwill of $600,000 exists on
December 31, 2015 . What goodwill impairment should be recognized by General
Products in 2015?
a.$0
b.$300,000
c.$75,000
d.$450,000
16) When preparing a statement of cash flows (indirect method), which of the following
is not an adjustment to reconcile net income to net cash provided by operating
activities?
a.A change in interest payable
b.A change in dividends payable
c.A change in income taxes payable
d.All of these are adjustments
