1) which of the following statements is incorrect regarding the classification of
accounts and notes receivable?
a.segregation of the different types of receivables is required if they are material
b.disclose any loss contingencies that exist on the receivables
c.any discount or premium resulting from the determination of present value in notes
receivable transactions is an asset or liability respectively
d.valuation accounts should be appropriately offset against the proper receivable
accounts
2) the generally accepted method of accounting for gains or losses from the early
extinguishment of debt treats any gain or loss as
a.an adjustment to the cost basis of the asset obtained by the debt issue
b.an amount that should be considered a cash adjustment to the cost of any other debt
issued over the remaining life of the old debt instrument
c.an amount received or paid to obtain a new debt instrument and, as such, should be
amortized over the life of the new debt
d.a difference between the reacquisition price and the net carrying amount of the debt
which should be recognized in the period of redemption
3) operating losses incurred during the start-up years of a new business should be
a.accounted for and reported like the operating losses of any other business
b.written off directly against retained earnings
c.capitalized as a deferred charge and amortized over five years
d.capitalized as an intangible asset and amortized over a period not to exceed 20 years
4) which of the following is true regarding the use of lifo for inventory valuation?
a.if lifo is used for external financial reporting, then it must also be used for internal
reports
b.for purposes of external financial reporting, lifo may not be used with the lower of
cost or market approach
c.if lifo is used for external financial reporting, then it cannot be used for tax purposes.
d.none of these
if lifo is used for tax purposes, then it must also be used for external financial reporting.
5) on january 1, 2011, orr co. established a stock appreciation rights plan for its
executives. they could receive cash at any time during the next four years equal to the
difference between the market price of the common stock and a preestablished price of
$16 on 600,000 sars. the market price is as follows: 12/31/11$21; 12/31/12$18;
12/31/13$19; 12/31/14$20. on december 31, 2013, 100,000 sars are exercised, and the
remaining sars are exercised on december 31, 2014.
instructions
(a)prepare a schedule that shows the amount of compensation expense for each of the
four years starting with 2011.
(b)prepare the journal entry at 12/31/12 to record compensation expense.
(c)prepare the journal entry at 12/31/14 to record the exercise of the remaining sars.
6) on january 1, 2006, hernandez corporation issued $3,600,000 of 10% ten-year bonds
at 103. the bonds are callable at the option of hernandez at 105. hernandez has recorded
amortization of the bond premium on the straight-line method (which was not
materially different from the effective-interest method).
on december 31, 2012, when the fair value of the bonds was 96, hernandez repurchased
$800,000 of the bonds in the open market at 96. hernandez has recorded interest and
amortization for 2012. ignoring income taxes and assuming that the gain is material,
hernandez should report this reacquisition as
a.a loss of $39,200
b.a gain of $39,200
c.a loss of $48,800
d.a gain of $48,800
7) classification as an extraordinary item on the income statement would be appropriate
for the
a.gain or loss on disposal of a component of the business
b.substantial write-off of obsolete inventories
c.loss from a strike
d.none of these
8) which of the following is (are) the proper time period(s) to record the effects of a
change in accounting estimate?
a.current period and prospectively
b.current period and retrospectively
c.retrospectively only
d.current period only
9) boxer inc. reported inventory at the beginning of the current year of $360,000 and at
the end of the current year of $411,000. if net sales for the current year are $3,321,900
and the corresponding cost of sales totaled $2,819,100, what is the inventory turnover
ratio for the current year?
a.8.61
b.6.86
c.7.83
d.7.31
10) mabelle corporation incurred the following costs in 2012:
what amount should mabelle record as research & development expense in 2012?
a.$ 650,000
b.$ 740,000
c.$1,100,000
d.$1,240,000
11) packard corporation reports the following information:
packards cash debt coverage ratio is
a.0.94
b.1.59
c.2.35
d.3.92
12)
korman company wishes to accumulate $400,000 by may 1, 2020 by making 8 equal
annual deposits beginning may 1, 2012 to a fund paying 8% interest compounded
annually. what is the required amount of each deposit?
a.$69,606
b.$37,606
c.$34,820
d.$40,312
13) which of the following should be reported for capital stock?
a.the shares authorized
b.the shares issued
c.the shares outstanding
d.all of these
14) on january 2, 2012, rapid delivery company traded in an old delivery truck for a
newer model. the exchange lacked commercial substance. data relative to the old and
new trucks follow:
what should be the cost of the new truck for financial accounting purposes?
a.$45,000
b.$54,000
c.$57,000
d.$60,000
15) moon inc. factors $2,000,000 of its accounts receivables with recourse for a finance
charge of 4%. the finance company retains an amount equal to 8% of the accounts
receivable for possible adjustments. moon estimates the fair value of the recourse
liability at $200,000. what would be the debit to cash in the journal entry to record this
transaction?
a.$2,000,000
b.$1,920,000
c.$1,760,000
d.$1,560,000
16) for stock appreciation rights, the measurement date for computing compensation is
the date
a.the rights mature
b.the stocks price reaches a predetermined amount
c.of grant
d.of exercise
17) in consignment sales, the consignee
a.records the merchandise as an asset on its books
b.records a liability for the merchandise held on consignment
c.recognizes revenue when it ships merchandise to the consignor
d.prepares an account report for the consignor which shows sales, expenses, and cash
receipts
18) paula purchased a house for $300,000. after providing a 20% down payment, she
borrowed the balance from the local savings and loan under a 30-year 6% mortgage
loan requiring equal monthly installments at the end of each month. which time value
concept would be used to determine the monthly payment?
a.present value of one
b.future value of one
c.present value of an ordinary annuity
d.future value of an ordinary annuity