1) if management wishes to “capitalize” part of the earnings, it may issue a
a.cash dividend
b.stock dividend
c.property dividend
d.liquidating dividend
2) equipment that cost $240,000 and has accumulated depreciation of $189,000 is
exchanged for equipment with a fair value of $96,000 and $24,000 cash is received. the
exchange lacked commercial substance.
instructions
(a)show the calculation of the gain to be recognized from the exchange.
(b)prepare the entry for the exchange. show a check of the amount recorded for the new
equipment.
3) what method yields results that are essentially the same as those of the conventional
retail method?
a.fifo
b.lower-of-average-cost-or-market
c.average cost
d.lifo
4) chase corp. had the following infrequent transactions during 2012:
a $225,000 gain from selling the only investment chase has ever owned.
a $315,000 gain on the sale of equipment.
a $105,000 loss on the write-down of inventories.
in its 2012 income statement, what amount should chase report as total infrequent net
gains that are not considered extraordinary?
a.$120,000
b.$210,000
c.$435,000
d.$540,000
5) given below are the present value factors for $1.00 discounted at 10% for one to five
periods. each of the items 69 to 72 is based on 10% interest compounded annually.
what is the present value today of $6,000 to be received six years from today?
a.$6,000 0.909 6
b.$6,000 0.751 2
c.$6,000 0.621 0.909
d.$6,000 0.683 3
6) the ability to consummate the refinancing of a short-term obligation may be demon-
strated by
a.actually refinancing the obligation by issuing a long-term obligation after the date of
the balance sheet but before it is issued
b.entering into a financing agreement that permits the enterprise to refinance the debt
on a long-term basis
c.actually refinancing the obligation by issuing equity securities after the date of the
balance sheet but before it is issued
d.all of these
7) which of the following contingencies need not be disclosed in the financial
statements or the notes thereto?
a.probable losses not reasonably estimable
b.environmental liabilities that cannot be reasonably estimated
c.guarantees of indebtedness of others
d.all of these must be disclosed
8) the net assets of a business are equal to
a.current assets minus current liabilities
b.total assets plus total liabilities
c.total assets minus total stockholders’ equity
d.none of these
9) on january 2, 2012, york corp. replaced its boiler with a more efficient one. the
following information was available on that date:
the old boiler was sold for $4,000. what amount should york capitalize as the cost of the
new boiler?
a.$190,000
b.$186,000
c.$180,000
d.$170,000
10) at ruth company, events and transactions during 2012 included the following. the
tax rate for all items is 30%.
(1)depreciation for 2010 was found to be understated by $60,000.
(2)a strike by the employees of a supplier resulted in a loss of $50,000.
(3)the inventory at december 31, 2010 was overstated by $80,000.
(4)a flood destroyed a building that had a book value of $1,000,000. floods are very
uncommon in that area.
the effect of these events and transactions on 2012 net income net of tax would be
a.($35,000)
b.($735,000)
c.($777,000)
d.($833,000)
11) which method(s) may be used to record a loss due to a price decline in the value of
inventory?
a.cost-of-goods-sold
b.sales method
c.loss method
d.both a and c
12) richman co. purchased $600,000 of 8%, 5-year bonds from carlin, inc. on january 1,
2012, with interest payable on july 1 and january 1. the bonds sold for $624,948 at an
effective interest rate of 7%. using the effective interest method, richman co. decreased
the available-for-sale debt securities account for the carlin, inc. bonds on july 1, 2012
and december 31, 2012 by the amortized premiums of $2,124 and $2,196, respectively.
at december 31, 2012, the fair value of the carlin, inc. bonds was $636,000. what should
richman co. report as other comprehensive income and as a separate component of
stockholders equity?
a.$0
b.$4,320
c.$11,052
d.$15,372
13) the purpose of the emerging issues task force is to
a.develop a conceptual framework as a frame of reference for the solution of future
problems
b.lobby the fasb on issues that affect a particular industry
c.do research on issues that relate to long-term accounting problems
d.issue statements which reflect a consensus on how to account for new and unusual
financial transactions that need to be resolved quickly
14) a major advantage of the retail inventory method is that it
a.provides reliable results in cases where the distribution of items in the inventory is
different from that of items sold during the period
b.hides costs from competitors and customers
c.gives a more accurate statement of inventory costs than other methods
d.provides a method for inventory control and facilitates determination of the periodic
inventory for certain types of companies
15) what is the objective of financial reporting?
a.provide information that is useful to management in making decisions
b.provide information that clearly portray nonfinancial transactions
c.provide information about the reporting entity that is useful to present and potential
equity investors, lenders, and other creditors
d.provide information that excludes claims to the resources
16) if you invest $50,000 to earn 8% interest, which of the following compounding
approaches would return the lowest amount after one year?
a.daily
b.monthly
c.quarterly
d.annually