1) Ringler Corporation exchanges one plant asset for a similar plant asset and gives
cash in the exchange. The exchange is not expected to cause a material change in the
future cash flows for either entity. If a gain on the disposal of the old asset is indicated,
the gain will
a.be reported in the Other Revenues and Gains section of the income statement
b.effectively reduce the amount to be recorded as the cost of the new asset
c.effectively increase the amount to be recorded as the cost of the new asset
d.be credited directly to the owner’s capital account
2) Ben, Inc. follows IFRS for its external financial reporting. Ben, Inc. owns 25% of the
outstanding stock of Black, Inc. and accordingly uses the equity method to account for
its investment. Which of the following is true regarding Ben, Inc.s policies related to
Black, Inc.?
a.Ben, Inc. will increase the investment account for its pro-rata share of Black, Inc.s net
loss for the year
b.Ben, Inc. will increase the investment account for its pro-rata share of the dividends
paid out by Black, Inc. for the year
c.Ben, Inc. will conform the accounting policies of Black, Inc. to its own accounting
policies
d.None of these is true regarding how Ben, Inc. accounts for its investment in Black,
Inc
3) Benedict Corporation reports the following information:
Net income$750,000
Dividends on common stock$210,000
Dividends on preferred stock$ 90,000
Weighted average common shares outstanding150,000
Benedict should report earnings per share of
a.$3.00
b.$3.60
c.$4.40
d.$5.00
4) Which table would show the largest factor for an interest rate of 8% for five periods?
a.Future value of an ordinary annuity of 1
b.Present value of an ordinary annuity of 1
c.Future value of an annuity due of 1
d.Present value of an annuity due of 1
5) On January 1, 2012, Nobel Corporation acquired machinery at a cost of $1,200,000.
Nobel adopted the straight-line method of depreciation for this machine and had been
recording depreciation over an estimated life of ten years, with no residual value. At the
beginning of 2015, a decision was made to change to the double-declining balance
method of depreciation for this machine.
Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning
retained earnings, is
a.$134,400
b.$0
c.$157,920
d.$225,600
6) Jeremy Leasing purchases and then leases small aircraft to interested parties. The
company is currently determining the required rental for a small aircraft that cost
$800,000. If the lease is for twenty years and annual lease payments are required to be
made at the end of each year, what will be the annual rental if Jeremy wants to earn a
return of 10%?
a.$85,427
b.$93,968
c.$13,968
d.$40,419
7) Factors considered in determining an intangible assets useful life include all of the
following except
a.the expected use of the asset
b.any legal or contractual provisions that may limit the useful life
c.any provisions for renewal or extension of the assets legal life
d.the amortization method used
8) A segment of a business enterprise is to be reported separately when the revenues of
the segment exceed 10 percent of the
a.total combined revenues of all segments reporting profits
b.total revenues of all the enterprise’s industry segments
c.total export and foreign sales
d.combined net income of all segments reporting profits
9) Shelton Company has the following account balances at year-end:
Accounts receivable$120,000
Allowance for doubtful accounts7,200
Sales discounts 4,800
Shelton should report accounts receivable at a net amount of
a.$108,000
b.$112,800
c.$115,200
d.$120,000
10) A company changes from the straight-line method to an accelerated method of
calculating depreciation, which will be similar to the method used for tax purposes. The
entry to record this change will include a
a.credit to Accumulated Depreciation
b.debit to Retained Earnings in the amount of the difference on prior years
c.debit to Deferred Tax Asset
d.credit to Deferred Tax Liability
11) What is the preferable presentation of accounts receivable from officers, employees,
or affiliated companies on a balance sheet?
a.As offsets to capital
b.By means of footnotes only
c.As assets but separately from other receivables
d.As trade notes and accounts receivable if they otherwise qualify as current assets
12) If the lease in a sale-leaseback transaction meets one of the four leasing criteria and
is therefore accounted for as a capital lease, who records the asset on its books and
which party records interest expense during the lease period?
Party recording the Party recording
asset on its booksinterest expense
a.Seller-lesseePurchaser-lessor
b.Purchaser-lessorSeller-lessee
c.Purchaser-lessorPurchaser-lessor
d.Seller-lesseeSeller-lessee