1) warranty4u provides extended service contracts on electronic equipment sold
through major retailers. the standard contract is for three years. during the current year,
warranty4u provided 42,000 such warranty contracts at an average price of $81 each.
related to these contracts, the company spent $400,000 servicing the contracts during
the current year and expects to spend $2,100,000 more in the future. what is the net
profit that the company will recognize in the current year related to these contracts?
a.$902,000
b.$3,002,000
c.$300,667
d.$734,000
2) assume that darcy industries had the following inventory values:
inventory cost (on december 31, 2011) = $1,500
inventory market (on december 31, 2011) = $1,350
inventory net realizable value (on december 31, 2011) = $1,320
inventory market (on june 30, 2012) = $1,560
inventory net realizable value (on june 30, 2012) = $1,570
under ifrs, what is the inventory carrying value on december 31, 2011?
a.$1,500
b.$1,350
c.$1,320
d.$1,390
3) how much must be invested now to receive $20,000 for 15 years if the first $20,000
is received today and the rate is 9%?
a.$161,214
b.$175,723
c.$300,000
d.$146,250
4) nominal accounts are also called
a.temporary accounts
b.permanent accounts
c.real accounts
d.none of these
5) which of the following concepts relates to using the allowance method in accounting
for accounts receivable?
a.bad debt expense is an estimate that is based on historical and prospective information
b.bad debt expense is based on the actual amounts determined to be uncollectible
c.bad debt expense is an estimate that is based only on an analysis of the receivables
aging
d.bad debt expense is management’s determination of which accounts will be sent to the
attorney for collection
6) in november and december 2012, lane co., a newly organized magazine publisher,
received $75,000 for 1,000 three-year subscriptions at $25 per year, starting with the
january 2013 issue. lane included the entire $75,000 in its 2012 income tax return. what
amount should lane report in its 2012 income statement for subscriptions revenue?
a.$0
b.$4,167
c.$25,000
d.$75,000
7) the underlying theme of the conceptual framework is
a.decision usefulness
b.understandability
c.faithful representation
d.comparability
8) dole company, with an applicable income tax rate of 30%, reported net income of
$350,000. included in income for the period was an extraordinary loss from flood
damage of $50,000 before deducting the related tax effect. the company’s income
before income taxes and extraordinary items was
a.$400,000
b.$500,000
c.$550,000
d.$385,000
9) on january 1, 2012, huff co. sold $3,000,000 of its 10% bonds for $2,655,888 to yield
12%. interest is payable semiannually on january 1 and july 1. what amount should huff
report as interest expense for the six months ended june 30, 2012?
a.$132,798
b.$150,000
c.$159,353
d.$180,000
10) kramer company’s trading securities portfolio which is appropriately included in
current assets is as follows:
ignoring income taxes, what amount should be reported as a charge against income in
kramer’s 2012 income statement if 2012 is kramer’s first year of operation?
a.$0
b.$20,000
c.$25,000
d.$45,000
11) a company acquired a building, paying a portion of the purchase price in cash and
issuing a mortgage note payable to the seller for the balance.
in a statement of cash flows, what amount is included in financing activities for the
above transaction?
a.cash payment
b.acquisition price
c.zero
d.mortgage amount
12) general products company bought special products division in 2012 and
appropriately recorded $500,000 of goodwill related to the purchase. on december 31,
2013, the fair value of special products division is $4,000,000 and it is carried on
general products books for a total of $3,400,000, including the goodwill. an analysis of
special products divisions assets indicates that goodwill of $400,000 exists on december
31, 2013. what goodwill impairment should be recognized by general products in 2013?
a.$0.
b.$200,000
c.$50,000
d.$300,000
13) in the on the horizon feature in the text, which of the following is discussed
regarding convergence of u.s. gaap with ifrs?
a.noncash investing and financing activities will be disclosed only in the notes
b.bank overdrafts will be classified as part of financing activities
c.the statement of cash flows will present only changes in cash and will exclude
changes in cash equivalents
d.all of the above are in on the horizon regarding converging u.s. gaap and ifrs
14) based on the following information, compute 2013 taxable income for south co.
assuming that its pre-tax accounting income for the year ended december 31, 2013 is
$460,000.
future taxable
temporary difference(deductible) amount
a.$564,000
b.$356,000
c.$964,000
d.$444,000
15) pedigo corporation reports the following information:
pedigo free cash flow is
a.$50,000
b.$105,000
c.$165,000
d.$215,000
16) companies that attempt to exploit inefficiencies in various derivative markets by
attempting to lock in profits by simultaneously entering into transactions in two or more
markets are called
a.arbitrageurs
b.gamblers
c.hedgers
d.speculators
17) which of the following are not factors that are considered when evaluating whether
or not to record a liability for pending litigation?
a.time period in which the underlying cause of action occurred
b.the type of litigation involved
c.the probability of an unfavorable outcome
d.the ability to make a reasonable estimate of the amount of the loss
18) which of the following types of interest cost incurred in connection with the
purchase or manufacture of inventory should be capitalized as a product cost?
a.purchase discounts lost
b.interest incurred during the production of discrete projects such as ships or real estate
projects
c.interest incurred on notes payable to vendors for routine purchases made on a
repetitive basis
d.all of these should be capitalized
19) turner corporation acquired two inventory items at a lump-sum cost of $80,000. the
acquisition included 3,000 units of product lf, and 7,000 units of product 1b. lf normally
sells for $24 per unit, and 1b for $8 per unit. if turner sells 1,000 units of lf, what
amount of gross profit should it recognize?
a.$3,000
b.$9,000
c.$16,000
d.$19,000