1) many u.s. companies that have international operations use lifo for u.s. purposes but
use fifo for their foreign subsidiaries.
2) the cost of an asset less its salvage value is its depreciation base.
3) internally created intangibles are recorded at cost.
4) the profit margin on sales ratio is a measure for analyzing the use of property, plant,
and equipment.
5) both revenues and gains increase both net income and owners equity.
6) a loss in the current period on a profitable contract must be recognized under both
the percentage-of-completion and completed-contract method.
7) intangible development costs and restoration costs are part of the depletion base.
8) companies recognize the gain or loss on retiring convertible debt as an extraordinary
item.
9) gaap requires reporting inventory at net realizable value, even if above cost,
whenever there is a controlled market with a quoted price applicable to all quantities.
10) a company should allocate the proceeds from the sale of debt with detachable stock
warrants between the two securities based on their market values.
11) if two annuities have the same number of rents with the same dollar amount, but
one is an annuity due and one is an ordinary annuity, the future value of the annuity due
will be greater than the future value of the ordinary annuity.
12) ifrs includes both international financial reporting standards and international
accounting standards.
13) fences and parking lots are reported on the balance sheet as
a.current assets
b.land improvements
c.land
d.property and equipment
14) what condition is necessary to recognize an asset retirement obligation?
a.company has an existing legal obligation and can reasonably estimate the amount of
the liability
b.company can reasonably estimate the amount of the liability
c.company has an existing legal obligation
d.obligation event has occurred
15) which of the following features of preferred stock makes the security more like debt
than an equity instrument?
a.participating
b.voting
c.redeemable
d.noncumulative
16) on january 2, 2013 pod company purchased 25% of the outstanding common stock
of jobs, inc. and subsequently used the equity method to account for the investment.
during 2013 jobs, inc. reported net income of $630,000 and distributed dividends of
$270,000. the ending balance in the investment in pod company account at december
31, 2013 was $480,000 after applying the equity method during 2013. what was the
purchase price pod company paid for its investment in jobs, inc?
a.$255,000
b.$390,000
c.$570,000
d.$705,000
17) hopkins co. at the end of 2012, its first year of operations, prepared a reconciliation
between pretax financial income and taxable income as follows:
the estimated litigation expense of $1,200,000 will be deductible in 2013 when it is
expected to be paid. use of the depreciable assets will result in taxable amounts of
$600,000 in each of the next three years. the income tax rate is 30% for all years.
the deferred tax asset to be recognized is
a.$90,000 current
b.$180,000 current
c.$270,000 current
d.$360,000 current
18) for the year ended december 31, 2012, transformers inc. reported the following:
net income$120,000
preferred dividends declared20,000
common dividend declared4,000
unrealized holding loss, net of tax2,000
retained earnings, beginning balance160,000
common stock80,000
accumulated other comprehensive income,
beginning balance10,000
what would transformers report as total stockholders’ equity?
a.$344,000
b.$336,000
c.$256,000
d.$240,000
19) depreciation accounting
a.provides funds
b.funds replacements
c.retains funds
d.all of these
20) nichols company had 500 units of dink in its inventory at a cost of $5 each. it
purchased, for $2,400, 300 more units of dink. nichols then sold 600 units at a selling
price of $10 each, resulting in a gross profit of $2,100. the cost flow assumption used
by nichols.
a.is fifo
b.is lifo
c.is weighted average
d.cannot be determined from the information given
21) norling corporation reports the following information:
net income$750,000
dividends on common stock210,000
dividends on preferred stock90,000
weighted average common shares outstanding200,000
norling should report earnings per share of
a.$2.25
b.$2.70
c.$3.30
d.$3.75
22) which of the following should not be considered as a current asset in the balance
sheet?
a.installment notes receivable due over 18 months in accordance with normal trade
practice
b.prepaid taxes which cover assessments of the following operating cycle of the
business
c.equity or debt securities purchased with cash available for current operations
d.the cash surrender value of a life insurance policy carried by a corporation, the
beneficiary, on its president
23) under which section of the balance sheet is “cash restricted for plant expansion”
reported?
a.current assets
b.non-current assets
c.current liabilities
d.stockholders’ equity
24) economic factors that shorten the service life of an asset include
a.obsolescence
b.supersession
c.inadequacy
d.all of these
25) two independent companies, hager co. and shaw co., are in the home building
business. each owns a tract of land held for development, but each would prefer to build
on the other’s land. they agree to exchange their land. an appraiser was hired, and from
her report and the companies’ records, the following information was obtained:
the exchange was made, and based on the difference in appraised fair values, shaw paid
$90,000 to hager. the exchange lacked commercial substance.
the new land should be recorded on hager’s books at
a.$504,000
b.$576,000
c.$630,000
d.$720,000