1) Even though IFRS does not employ the first-stage recoverability test used under U.S.
GAAP – comparing the undiscounted cash flows to the carrying amount, the fact that
IFRS uses a fair value test to measure impairment loss makes IFRS stricter than U.S.
GAAP
2) Accumulated rights exist when an employer has an obligation to make payment to an
employee even after terminating his employment.
3) Free cash flow is net income less capital expenditures and dividends.
4) A soundly developed conceptual framework enables the FASB to issue more useful
and consistent pronouncements over time.
5) Dividends payable in assets of the corporation other than cash are called property
dividends or dividends in kind.
6) U.S. GAAP, like IFRS, permits write-up for subsequent recoveries of impairment,
back up to the original amount before the impairment in all circumstances.
7) If a nonmonetary exchange lacks commercial substance, and cash is received, a
partial gain or loss is recognized.
8) The IASB and the FASB are working on a joint project to develop a common
conceptual framework.
9) Internally generated goodwill associated with a business may be recorded as an asset
when a firm offer to purchase that business unit has been received.
10) The future value of an annuity due factor is found by multiplying the future value of
an ordinary annuity factor by 1 minus the interest rate.
11) The expense recognition principle states that debits must equal credits in each
transaction.
12) Contra accounts must be reported for intangible assets in a manner similar to
accumulated depreciation and property, plant, and equipment.
13) Companies frequently report income tax expense as the last item before net income
on a single-step income statement.
14) Held-to-maturity securities are reported at
a.acquisition cost
b.acquisition cost plus amortization of a discount
c.acquisition cost plus interest
d.fair value
15) Which of the following should not be included in the current liabilities section of
the balance sheet?
a.Trade notes payable
b.Short-term zero-interest-bearing notes payable
c.The discount on short-term notes payable
d.All of these answers are correct
16) Gamma Ray Corp. has annual sales totaling $780,000 and an average gross profit of
20% of cost. What is the dollar amount of the gross profit?
a.$156,000
b.$117,000
c.$130,000
d.$195,000
17) Composite or group depreciation is a depreciation system whereby
a.the years of useful life of the various assets in the group are added together and the
total divided by the number of items
b.the cost of individual units within an asset group is charged to expense in the year a
unit is retired from service
c.a straight-line rate is computed by dividing the total of the annual depreciation
expense for all assets in the group by the total cost of the assets
d.the original cost of all items in a given group or class of assets is retained in the asset
account and the cost of replacements is charged to expense when they are acquired
18) Blue Sky Companys 12/31/15 balance sheet reports assets of $6,000,000 and
liabilities of $2,400,000. All of Blue Skys assets book values approximate their fair
value, except for land, which has a fair value that is $360,000 greater than its book
value. On 12/31/15, Horace Wimp Corporation paid $6,120,000 to acquire Blue Sky.
What amount of goodwill should Horace Wimp record as a result of this purchase?
a.$ -0-
b.$120,000
c.$2,160,000
d.$2,520,000
19) A company borrows $10,000 and signs a 90-day nontrade note payable. In
preparing a statement of cash flows (indirect method), this event would be reflected as
a(n)
a.addition adjustment to net income in the cash flows from operating activities section
b.cash outflow from investing activities
c.cash inflow from investing activities
d.cash inflow from financing activities
20) During 2012, Hauke Company purchased 4,000, $1,000, 9% bonds. The carrying
value of the bonds at December 31, 2014 was $3,920,000. The bonds mature on March
1, 2019, and pay interest on March 1 and September 1 . Hauke sells 2,000 bonds on
September 1, 2015, for $1,976,000, after the interest has been received. Hauke uses
straight-line amortization. The gain on the sale is
a.$0
b.$9,600
c.$16,000
d.$22,400
21) Fleming Company provided the following information on selected transactions
during 2015:
Dividends paid to preferred stockholders$ 250,000
Loans made to affiliated corporations700,000
Proceeds from issuing bonds800,000
Proceeds from issuing preferred stock1,050,000
Proceeds from sale of equipment400,000
Purchases of inventories1,200,000
Purchase of land by issuing bonds300,000
Purchases of treasury stock600,000
The net cash provided (used) by financing activities during 2015 is
a.$(1,650,000)
b.$550,000
c.$1,300,000
d.$1,000,000
22) The following information relates to the pension plan for the employees of Turner
Co.:
1/1/14 12/31/14 12/31/15
Accum. benefit obligation$6,160,000$6,440,000$8,400,000
Projected benefit obligation6,510,0006,972,0009,338,000
Fair value of plan assets5,950,0007,280,0008,036,000
AOCI – net (gain) or loss-0-(1,008,000)(1,120,000)
Settlement rate (for year)11%11%
Expected rate of return (for year)8%7%
Turner estimates that the average remaining service life is 16 years. Turner’s
contribution was $882,000 in 2015 and benefits paid were $658,000.
The interest cost for 2015 is
a.$627,480
b.$708,400
c.$766,920
d.$1,027,180
23) Bank overdrafts, if material, should be
a.reported as a deduction from the current asset section
b.reported as a deduction from cash
c.netted against cash and a net cash amount reported
d.reported as a current liability
24) If the FIFO inventory method was used last period, it should be used for the current
and following periods because of
a.relevance
b.neutrality
c.understandability
d.consistency
25) The process of formally recording or incorporating an item in the financial
statements of an entity is
a.allocation
b.articulation
c.realization
d.recognition
26) During 2014, Larue Co., a manufacturer of chocolate candies, contracted to
purchase 200,000 pounds of cocoa beans at $4.00 per pound, delivery to be made in the
spring of 2015 . Because a record harvest is predicted for 2015, the price per pound for
cocoa beans had fallen to $3.30 by December 31, 2014 .
Of the following journal entries, the one which would properly reflect in 2014 the effect
of the commitment of Larue Co. to purchase the 200,000 pounds of cocoa is
a.Cocoa Inventory800,000
Accounts Payable800,000
b.Cocoa Inventory660,000
Loss on Purchase Commitments140,000
Accounts Payable800,000
c.Unrealized Holding Gain or Loss-Income140,000
Estimated Liability on Purchase Commitments140,000
d.No entry would be necessary in 2014