The following is selected information from L Corporation for the fiscal year ending
October 31, 2014
Based on the accrual basis of accounting, what is L Corporation’s net income for the
year ending October 31, 2014?
a.$204,000
b.$174,000
c.$158,000
d.$220,000
Foyle Company purchased a new van for floral deliveries on January 1, 2014. The van
cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of
its useful life. The double-declining-balance method of depreciation will be used. What
is the depreciation expense for 2014?
a.$9,600.
b.$7,200.
c.$14,400.
d.$19,200.
The revenue recognition principle dictates that revenue should be recognized in the
accounting records:
a.when cash is received.
b.when the performance obligation is satisfied.
c.at the end of the month.
d.in the period that income taxes are paid.
Indian River Groves in central Florida lost about 10% of its strawberries (or $750,000)
due to frost. Based on this information, how will Indian River Groves most likely report
this loss?
a.As an extraordinary item net of taxes.
b.Below discontinued operations.
c.As a pretax ordinary loss prior to income before income taxes.
d.As a discontinued operation net of taxes.
Interline Trucking purchased a tractor trailer for $84,000. Interline uses the
units-of-activity method for depreciating its trucks and expects to drive the truck
1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $12,000. If
the truck is driven 80,000 miles in its first year, how much depreciation expense should
Interline record?
a.$5,333.
b.$6,720.
c.$5,760.
d.$6,222.
Where can an investor find operating activities in a company€s financial statements?
a.On the statement of cash flows
b.On the income statement
c.On the statement of cash flows and the income statement
d.On all four financial statements
Bates Company purchased equipment on January 1, 2013, at a total invoice cost of
$900,000. The equipment has an estimated salvage value of $22,500 and an estimated
useful life of 5 years. What is the amount of accumulated depreciation at December 31,
2014, if the straight-line method of depreciation is used?
a.$180,000.
b.$360,000.
c.$175,500.
d.$351,000.
The concern about international companies adopting SOX-type standards centers on
a.cost-benefit analysis.
b.ethics issues.
c.the governing authorities.
d.comparability.
The following information is available for Patterson Company:
The inventory turnover for 2014 is
a.5.4 times.
b.5.0 times.
c.2.5 times.
d.3.0 times.
The interest on a $5,000, 10%, 1-year note receivable is
a.$5,000.
b.$500.
c.$5,500.
d.$5,450.
La More Company had the following transactions during 2013.
Sales of $4,500 on account
Collected $2,000 for services to be performed in 2014
Paid $1,325 cash in salaries
Purchased airline tickets for $250 in December for a trip to take place in 2014
What is La More’s 2013 net income using cash basis accounting?
a.$5,175
b.$675
c.$4,925
d.$425
Which of the following statements is not true?
a.Comparability means using the same accounting principles from year to year within a
company.
b.Faithful representation is the quality of information that gives assurance that it is free
of error.
c.Relevant accounting information must be capable of making a difference in the
decision.
d.The primary objective of financial reporting is to provide financial information that is
useful to investors and creditors for making decisions.
Lupton Inc. disposes of an unprofitable segment of its business. The operation of the
segment suffered a $160,000 loss in the year of disposal. The loss on disposal of the
segment was $80,000. If the tax rate is 30%, and income before income taxes was
$1,300,000,
a.the income tax expense on the income before discontinued operations is $318,000.
b.the income from continuing operations is $910,000.
c.net income is $1,060,000.
d.the losses from discontinued operations are reported net of income taxes at $240,000.
If total liabilities decreased by $75,000 and stockholders’ equity increased by $25,000
during a period of time, then total assets must change by what amount and direction
during that same period?
a.$100,000 increase
b.$50,000 decrease
c.$50,000 increase
d.$75,000 decrease
Winrow Company received proceeds of $565,500 on 10-year, 8% bonds issued on
January 1, 2013. The bonds had a face value of $600,000, pay interest annually on
December 31st, and have a call price of 101. Winrow uses the straight-line method of
amortization. What is the amount of interest expense Winrow will show with relation to
these bonds for the year ended December 31, 2014?
a.$48,000
b.$45,240
c.$51,450
d.$44,550
Snug-As-A-Bug Blankets has the following inventory data:
Assuming that a perpetual inventory system is used, what is the ending inventory on a
LIFO basis for July?
a.$2,748
b.$2,754
c.$2,772.
d.$5,796
Prepare the required end-of-period adjusting entries for each independent case listed
below.
Case 1
The Thoma Company began the year with a $3,000 balance in the Supplies account.
During the year, $8,500 of additional supplies were purchased. A physical count of
supplies on hand at the end of the year revealed that $8,300 worth of supplies had been
used during the year. No adjusting entry has been made until year end.
Case 2
The Leno Company has a calendar year-end accounting period. On July 1, the company
purchased office equipment for $30,000. It is estimated that the office equipment will
depreciate $200 each month. No adjusting entry has been made until year end.
Case 3
Yeats Realty is in the business of renting several apartment buildings and prepares
monthly financial statements. It has been determined that 2 tenants in $900 per month
apartments and one tenant in the $1,000 per month apartment had not paid their
December rent as of December 31st.
Hess Company’s inventory records show the following data for the month of
September:
A physical inventory on September 30 shows 150 units on hand.
Calculate the value of ending inventory and cost of goods sold if the company uses
FIFO inventory costing and a periodic inventory system.
Presented below are selected transactions for the Tinker Company for 2015.
Instructions
Journalize all entries required as a result of the above transactions. Tinker Company
uses the straight-line method of depreciation and has recorded depreciation through
December 31, 2014.
Vineyard Company sold the following two pieces of equipment in 2014:
Instructions
Journalize all entries required to update depreciation and record the sales of the two
assets in 2014. The company has recorded depreciation on the equipment through
December 31, 2013.
The board of directors of Lauber Corporation are considering two plans for financing
the purchase of new plant equipment. Plan #1 would require the issuance of $5,000,000,
6%, 20-year bonds at face value. Plan #2 would require the issuance of 200,000 shares
of $5 par value common stock that is selling for $25 per share on the open market.
Lauber Corporation currently has 100,000 shares of common stock outstanding and the
income tax rate is expected to be 30%. Assume that income before interest and income
taxes is expected to be $500,000 if the new factory equipment is purchased.
Instructions
Prepare a schedule that shows the expected net income after taxes and the earnings per
share on common stock under each of the plans that the board of directors is
considering.
Assume the indirect method is used to compute cash flows from operations. For each
item listed below, indicate the effect on net income in arriving at cash flows from
operations by choosing one of the following code letters.
Nichols Company purchased a new machine for $250,000. It is estimated that the
machine will have a $25,000 salvage value at the end of its 5-year useful service life.
The double-declining-balance method of depreciation will be used.
Instructions
Prepare a depreciation schedule that shows the annual depreciation expense on the
machine for its 5-year life.
Determine the missing items.