1) which basic element of financial statements arises from peripheral or incidental
transactions?
a.assets
b.liabilities
c.gains
d.expenses
2) which of these is not included in an employer’s payroll tax expense?
a.f.i.c.a. (social security) taxes
b.federal unemployment taxes
c.state unemployment taxes
d.federal income taxes
3) the body that has the power to prescribe the accounting practices and standards to be
employed by companies that fall under its jurisdiction is the
a.fasb
b.aicpa
c.sec
d.apb
4) with regard to uncertain tax positions, the fasb requires that companies recognize a
tax benefit when
a.it is probable and can be reasonably estimated
b.there is at least a 51% probability that the uncertain tax position will be approved by
the taxing authorities
c.it is more likely than not that the tax position will be sustained upon audit
d.any of the above exist
5) a company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on january 1, 2012.
interest is paid on june 30 and december 31. the proceeds from the bonds are
$14,703,109. using effective-interest amortization, what will the carrying value of the
bonds be on the december 31, 2012 balance sheet?
a.$14,709,482
b.$15,000,000
c.$14,718,844
d.$14,706,232
6) an accrued revenue can best be described as an amount
a.collected and currently matched with expenses
b.collected and not currently matched with expenses
c.not collected and currently matched with expenses
d.not collected and not currently matched with expenses
7) orton corporation, which has a calendar year accounting period, purchased a new
machine for $60,000 on april 1, 2008. at that time orton expected to use the machine for
nine years and then sell it for $6,000. the machine was sold for $33,000 on sept. 30,
2013. assuming straight-line depreciation, no depreciation in the year of acquisition,
and a full year of depreciation in the year of retirement, the gain to be recognized at the
time of sale would be
a.$6,000
b.$4,500
c.$3,000
d.$0
8) on january 1, 2013, gore, inc. purchased a machine for $900,000 which will be
depreciated $90,000 per year for financial statement reporting purposes. for income tax
reporting, gore elected to expense $100,000 and to use straight-line depreciation which
will allow a cost recovery deduction of $80,000 for 2013. assume a present and future
enacted income tax rate of 30%. what amount should be added to gore’s deferred
income tax liability for this temporary difference at december 31, 2013?
a.$54,000
b.$30,000
c.$27,000
d.$24,000
9) assume that the following data relative to kane company for 2013 is available:
instructions
(a)compute the basic earnings per share for 2013. (round to the nearest penny.)
(b)compute the diluted earnings per share for 2013. (round to the nearest penny.)
10) which of the following is not a capital expenditure?
a.repairs that maintain an asset in operating condition
b.an addition
c.a betterment
d.a replacement
11) fill in the appropriate blanks for each of the independent situations below.
company a company b company c
sales revenue(a) $_______$343,400$540,000
beginning inventory52,600(d) _______90,000
net purchases175,300255,600(g) _______
ending inventory52,200108,00063,000
cost of goods sold(b) _______(e) _______417,000
gross profit75,300108,000(h) _______
operating expenses(c) _______50,00048,000
income before taxes6,000(f) _______(i) _______
12) mortenson corporation sells its product, a rare metal, in a controlled market with a
quoted price applicable to all quantities. the total cost of 5,000 pounds of the metal now
held in inventory is $150,000. the total selling price is $360,000, and estimated costs of
disposal are $10,000. at what amount should the inventory of 5,000 pounds be reported
in the balance sheet?
a.$140,000
b.$150,000
c.$350,000
d.$360,000
13) recognition of expense related to amortization of an intangible asset illustrates
which principle of accounting?
a.expense recognition
b.full disclosure
c.revenue recognition
d.historical cost
14) langley company’s december 31 year-end financial statements contained the
following errors:
an insurance premium of $36,000 was prepaid in 2012 covering the years 2012, 2013,
and 2014. the prepayment was recorded with a debit to insurance expense. in addition,
on december 31, 2013, fully depreciated machinery was sold for $19,000 cash, but the
sale was not recorded until 2014. there were no other errors during 2013 or 2014 and no
corrections have been made for any of the errors. ignore income tax considerations.
what is the total net effect of the errors on the amount of langley’s working capital at
december 31, 2013?
a.working capital overstated by $10,000
b.working capital overstated by $3,000
c.working capital understated by $9,000
d.working capital understated by $24,000
15) anders, inc., has 10,000 shares of 5%, $100 par value, cumulative preferred stock
and 40,000 shares of $1 par value common stock outstanding at december 31, 2013.
there were no dividends declared in 2011. the board of directors declares and pays a
$90,000 dividend in 2012 and in 2013. what is the amount of dividends received by the
common stockholders in 2013?
a.$30,000
b.$50,000
c.$90,000
d.$0
16) accounting for income taxes can result in the reporting of deferred taxes as any of
the following except
a.a current or long-term asset
b.a current or long-term liability
c.a contra-asset account
d.all of these are acceptable methods of reporting deferred taxes
17) where should raw materials be classified on the balance sheet?
a.prepaid expenses
b.inventory
c.equipment
d.not on the balance sheet
18) jarvis, inc. reported net income of $39,000 for the year ended december 31, 2013
included in net income were depreciation expense of $8,400 and a gain on sale of
equipment of $1,700. the equipment had an historical cost of $40,000 and accumulated
depreciation of $24,000. each of the following accounts increased during 2013:
what is the amount of cash provided by or used by investing activities for jarvis, inc. for
the year ended december 31, 2013?
a. ( $ 6,800)
b.$16,700
c.$ 9,200
d.$14,200