1) a decrease in net assets arising from peripheral or incidental transactions is called
a(n)
a.capital expenditure
b.cost
c.loss
d.expense
2) the conversion of bonds is most commonly recorded by the
a.incremental method
b.proportional method
c.market value method
d.book value method
3) when investments in debt securities are purchased between interest payment dates,
preferably the
a.securities account should include accrued interest
b.accrued interest is debited to interest expense
c.accrued interest is debited to interest revenue
d.accrued interest is debited to interest receivable
4) which of the following would represent the least likely use of an income statement
prepared for a business enterprise?
a.use by customers to determine a company’s ability to provide needed goods and
services
b.use by labor unions to examine earnings closely as a basis for salary discussions
c.use by government agencies to formulate tax and economic policy
d.use by investors interested in the financial position of the entity
5) on january 1, 2010, neal corporation acquired equipment at a cost of $900,000. neal
adopted the sum-of-the-years-digits method of depreciation for this equipment and had
been recording depreciation over an estimated life of eight years, with no residual
value. at the beginning of 2013, a decision was made to change to the straight-line
method of depreciation for this equipment. the depreciation expense for 2013 would be
a.$46,875
b.$75,000
c.$112,500
d.$180,000
6) which of the following is not a difference between the accounting treatment for
depreciation and cost depletion?
a.depletion applies to natural resources while depreciation applies to plant and
equipment
b.depletion refers to the physical exhaustion or consumption of the asset while
depreciation refers to the wear, tear, and obsolescence of the asset
c.many formulas are used in computing depreciation but only one is used to any extent
in computing depletion
d.the cost of the asset is the starting point from which computation of the amount of the
periodic charge is made to operations for depreciation, but the fair value reassessed
each year as the starting point for the periodic charge for depletion
7) kesler, inc. estimates the cost of its physical inventory at march 31 for use in an
interim financial statement. the rate of markup on cost is 25%. the following account
balances are available:
the estimate of the cost of inventory at march 31 would be
a.$147,000
b.$252,000
c.$278,250
d.$196,000
8) the revenue recognition principle provides that revenue is recognized when
a.it is realized
b.it is realizable
c.it is realized or realizable and it is earned
d.none of these
9) which of the following is a constraint in presenting financial information?
a.industry practice
b.full disclosure
c.relevance
d.consistency
10) on its december 31, 2012 balance sheet, calhoun company appropriately reported a
$10,000 debit balance in its fair value adjustment (available-for-sale) account. there was
no change during 2013 in the composition of calhouns portfolio of equity investments
held as available-for-sale securities. the following information pertains to that portfolio:
what amount of unrealized loss on these securities should be included in calhoun’s
stockholders’ equity section of the balance sheet at december 31, 2013?
a.$40,000
b.$30,000
c.$10,000
d.$0
11) what is “recourse” as it relates to selling receivables?
a.the obligation of the seller of the receivables to pay the purchaser in case the debtor
fails to pay
b.the obligation of the purchaser of the receivables to pay the seller in case the debtor
fails to pay
c.the obligation of the seller of the receivables to pay the purchaser in case the debtor
returns the product related to the sale
d.the obligation of the purchaser of the receivables to pay the seller if all of the
receivables are collected
12) which of the following earnings per share figures must be disclosed on the face of
the income statement?
a.eps on income from continuing operations
b.the effect on eps from operations of a discontinued division, net of taxes
c.the effect on eps from an extraordinary item, net of taxes
d.all of the above
13) in the time diagram below, which concept is being depicted?
a.present value of an ordinary annuity
b.present value of an annuity due
c.future value of an ordinary annuity
d.future value of an annuity due
14) the accountant for the lintz sales company is preparing the income statement for
2012 and the balance sheet at december 31, 2012. the january 1, 2012 merchandise
inventory balance will appear
a.only as an asset on the balance sheet
b.only in the cost of goods sold section of the income statement
c.as a deduction in the cost of goods sold section of the income statement and as a
current asset on the balance sheet
d.as an addition in the cost of goods sold section of the income statement and as a
current asset on the balance sheet
15) which of the following is a capital expenditure?
a.payment of an account payable
b.retirement of bonds payable
c.payment of federal income taxes
d.none of these
16) rf company had january 1 inventory of $150,000 when it adopted dollar-value lifo.
during the year, purchases were $900,000 and sales were $1,500,000. december 31
inventory at year-end prices was $215,040, and the price index was 112.
what is rf companys gross profit?
a.$642,000
b.$647,040
c.$665,190
d.$1,302,960
17) information in the income statement helps users to
a.evaluate the past performance of the enterprise
b.provide a basis for predicting future performance
c.help assess the risk or uncertainty of achieving future cash flows
d.all of these
18) what is the quality of information that enables users to better forecast future
operations?
a.faithful representation
b.materiality
c.timeliness
d.relevance