1) discontinued operations, extraordinary items, and unusual gains and losses are all
reported net of tax in the income statement.
2) companies can recognize revenue prior to completion and delivery of the product
under certain circumstances.
3) simple interest is computed on principal and on any interest earned that has not been
withdrawn.
4) interest is the excess cash received or repaid over and above the amount lent or
borrowed.
5) in a basket purchase, the cost of the individual assets acquired is determined on the
basis of their relative sales value.
6) if the contract price on a noncancelable purchase commitment exceeds the market
price, the buyer should record any expected losses on the commitment in the period in
which the market decline takes place.
7) a short-term obligation can be excluded from current liabilities if the company
intends to refinance it on a long-term basis.
8) as in u.s. gaap, under ifrs the costs associated with research and development are
segregated into two components.
9) a statement of cash flows prepared according to ifrs requirements must be prepared
using the direct method for operating activities.
10) fogelberg company purchased equipment for $15,000. sales tax on the purchase was
$900. other costs incurred were freight charges of $240, repairs of $420 for damage
during installation, and installation costs of $270. what is the cost of the equipment?
a.$15,000
b.$15,900
c.$16,410
d.$16,830
11) during 2011, stabler co. introduced a new line of machines that carry a three-year
warranty against manufacturers defects. based on industry experience, warranty costs
are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 4% in the
second year after sale. sales and actual warranty expenditures for the first three-year
period were as follows:
what amount should stabler report as a liability at december 31, 2013?
a.$0
b.$28,000
c.$36,000
d.$116,000
12) when using the periodic inventory system, which of the following generally would
not be separately accounted for in the computation of cost of goods sold?
a.trade discounts applicable to purchases during the period
b.cash (purchase) discounts taken during the period
c.purchase returns and allowances of merchandise during the period
d.cost of transportation-in for merchandise purchased during the period
13) when a change in the tax rate is enacted into law, its effect on existing deferred
income tax accounts should be
a.handled retroactively in accordance with the guidance related to changes in
accounting principles
b.considered, but it should only be recorded in the accounts if it reduces a deferred tax
liability or increases a deferred tax asset
c.reported as an adjustment to tax expense in the period of change
d.applied to all temporary or permanent differences that arise prior to the date of the
enactment of the tax rate change, but not subsequent to the date of the change
14) under the installment-sales method,
a.revenue, costs, and gross profit are recognized proportionate to the cash that is
received from the sale of the product
b.gross profit is deferred proportionate to cash uncollected from sale of the product, but
total revenues and costs are recognized at the point of sale
c.gross profit is not recognized until the amount of cash received exceeds the cost of the
item sold
d.revenues and costs are recognized proportionate to the cash received from the sale of
the product, but gross profit is deferred until all cash is received
15) for randolph company, the following information is available:
in randolphs balance sheet, intangible assets should be reported at
a.$180,000
b.$210,000
c.$740,000
d.$770,000
16) which of the following describes a change in reporting entity?
a.a company acquires a subsidiary that is to be accounted for as a purchase
b.a manufacturing company expands its market from regional to nationwide
c.a company divests itself of a european branch sales office
d.changing the companies included in combined financial statements
17) in the diluted earnings per share computation, the treasury stock method is used for
options and warrants to reflect assumed reacquisition of common stock at the average
market price during the period. if the exercise price of the options or warrants exceeds
the average market price, the computation would
a.fairly present diluted earnings per share on a prospective basis
b.fairly present the maximum potential dilution of diluted earnings per share on a
prospective basis
c.reflect the excess of the number of shares assumed issued over the number of shares
assumed reacquired as the potential dilution of earnings per share
d.be antidilutive
18) myers co. acquired a 60% interest in gannon corp. on december 31, 2012 for
$1,260,000. during 2013, gannon had net income of $800,000 and paid cash dividends
of $200,000. at december 31, 2013, the balance in the investment account should be
a.$1,260,000
b.$1,740,000
c.$1,620,000
d.$1,860,000
19) a variable-interest entity has
a.insufficient equity investment at risk
b.stockholders who have decision-making rights
c.stockholders who absorb the losses or receive the benefits of a normal stockholder
d.all of the above are characteristics of a variable-interest entity
20) hamilton company purchased a depreciable asset for $240,000. the estimated
salvage value is $20,000, and the estimated useful life is 10 years. the straight-line
method will be used for depreciation. what is the depreciation base of this asset?
a.$22,000
b.$24,000
c.$220,000
d.$240,000
21) what is the relationship between the present value factor of an ordinary annuity and
the present value factor of an annuity due for the same interest rate?
a.the ordinary annuity factor is not related to the annuity due factor
b.the annuity due factor equals one plus the ordinary annuity factor for n1 periods
c.the ordinary annuity factor equals one plus the annuity due factor for n+1 periods
d.the annuity due factor equals the ordinary annuity factor for n+1 periods minus one
22) the following information is available for the first three years of operations for
cooper company:
2>on january 2, 2012, heavy equipment costing $600,000 was purchased. the
equipment had a life of 5 years and no salvage value. the straight-line method of
depreciation is used for book purposes and the tax depreciation taken each year is listed
below:
3>on january 2, 2013, $270,000 was collected in advance for rental of a building for a
three-year period. the entire $270,000 was reported as taxable income in 2013, but
$180,000 of the $270,000 was reported as unearned revenue at december 31, 2013 for
book purposes.
4>the enacted tax rates are 40% for all years.
instructions
(a)prepare a schedule comparing depreciation for financial reporting and tax purposes.
(b)determine the deferred tax (asset) or liability at the end of 2012.
(c)prepare a schedule of future taxable and (deductible) amounts at the end of 2013.
(d)prepare a schedule of the deferred tax (asset) and liability at the end of 2013.
(e)compute the net deferred tax expense (benefit) for 2013.
(f)prepare the journal entry to record income tax expense, deferred income taxes, and
income tax payable for 2013.
23) harlan mining co. has recently decided to go public and has hired you as an
independent cpa. one statement that the enterprise is anxious to have prepared is a
statement of cash flows. financial statements of harlan mining co. for 2013 and 2012
are provided below.
balance sheets
the following additional data were provided:
1>dividends for the year 2013 were $144,000.
2>during the year, equipment was sold for $180,000. this equipment cost $264,000
originally and had a book value of $216,000 at the time of sale. the loss on sale was
incorrectly charged to cost of sales.
3>all depreciation expense is in the selling expense category.
questions 58 through 62 relate to a statement of cash flows (direct method) for the year
ended december 31, 2013, for harlan mining company.
the net cash provided (used) by financing activities is
a.$(180,000)
b.$36,000
c.$(324,000)
d.$144,000
24) an example of an item which is not an element of working capital is
a.accrued interest on notes receivable
b.goodwill
c.goods in process
d.temporary investments
25) how much total interest will martin pay on this payment plan?
a.$69,870
b.$36,987
c.$120,000
d.$30,000
26) the primary ifrs reporting standards related to financial instruments, including
dilutive securities, is
a.ias 33
b.ias 39
c.ifrs 2
d.ias 2
27) rule 203 of the code of professional conduct addresses:
a.ethical requirements
b.financial statements should be based on generally accepted accounting principles
c.advertising to obtained clients
d.auditing financial statements