1) A ten-year bond was issued in 2013 at a discount with a call provision to retire the
bonds. When the bond issuer exercised the call provision on an interest date in 2015,
the carrying amount of the bond was less than the call price. The amount of bond
liability removed from the accounts in 2015 should have equaled the
a.call price
b.call price less unamortized discount
c.face amount less unamortized discount
d.face amount plus unamortized discount
2) On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 103, which are due on
April 30, 2024 . Twenty detachable stock warrants entitling the holder to purchase for
$40 one share of Paynes common stock, $15 par value, were attached to each $1,000
bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value
of Paynes common stock was $35 per share and of the warrants was $2.
On May 1, 2014, Payne should credit Paid-in Capital from Stock Warrants for
a.$34,560
b.$36,000
c.$37,080
d.$63,000
3) An adjusted trial balance
a.is prepared after the financial statements are completed
b.proves the equality of the debit balances and credit balances of ledger accounts after
all adjustments have been made
c.is a required financial statement under generally accepted accounting principles
d.cannot be used to prepare financial statements
4) Equestrain Roads sold $80,000, of goods and accepted the customer’s $80,000 10%,
1-year note receivable in exchange. Assuming 10% approximates the market rate of
return, what would be the debit in this journal entry to record the sale?
a.No journal entry until cash is collected
b.Debit Notes Receivable for $80,000
c.Debit Accounts Receivable for $80,000
d.Debit Notes Receivable for $72,000
5) On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value
of $4,000,000 at 104 . Interest is paid on October 1 and April 1, with any premiums or
discounts amortized on a straight-line basis.
The entry to record the issuance of the bonds would include a credit of
a.$100,000 to Interest Payable
b.$160,000 to Discount on Bonds Payable
c.$3,840,000 to Bonds Payable
d.$160,000 to Premium on Bonds Payable
6) Making and collecting loans and disposing of property, plant, and equipment are
a.operating activities
b.investing activities
c.financing activities
d.liquidity activities
7) Hardin Company received $80,000 in cash and a used computer with a fair value of
$240,000 from Page Corporation for Hardin Company’s existing computer having a fair
value of $320,000 and an undepreciated cost of $300,000 recorded on its books. The
transaction has no commercial substance. How much gain should Hardin recognize on
this exchange, and at what amount should the acquired computer be recorded,
respectively?
a.$0 and $220,000
b.$1,537 and $221,537
c.$20,000 and $240,000
d.$80,000 and $300,000
8) Charlie Corp. is purchasing new equipment with a cash cost of $250,000 for an
assembly line. The manufacturer has offered to accept $57,400 payment at the end of
each of the next six years. How much interest will Charlie Corp. pay over the term of
the loan?
a.$57,400
b.$250,000
c.$307,400
d.$94,400
9) Geary Co. leased a machine to Dains Co. Assume the lease payments were made on
the basis that the residual value was guaranteed and Geary gets to recognize all the
profits. At the end of the lease term, before the lessee transfers the asset to the lessor,
the leased asset and obligation accounts have the following balances:
Leased equipment$400,000
Less accumulated depreciation–capital lease 384,000
$ 16,000
Interest payable$ 1,520
Lease liability 14,480
$16,000
If, at the end of the lease, the fair value of the residual value is $9,800, what gain or loss
should Geary record?
a.$4,680 gain
b.$8,280 loss
c.$6,200 loss
d.$9,800 gain
10) What is the “expectations gap”?
a.The difference between what the public thinks the accountant should not do and what
the accountant knows they should do
b.The difference between what the public thinks the accountant is doing and what
Congress says the accountant is doing
c.The difference between what the public thinks the accountant should do and what the
accountant thinks they can do
d.The difference between what the accountant is doing and what the Courts say the
accountant should be doing
11) Where is debt callable by the creditor reported on the debtor’s financial statements?
a.Long-term liability
b.Current liability if the creditor intends to call the debt within the year, otherwise a
long-term liability
c.Current liability if it is probable that creditor will call the debt within the year,
otherwise a long-term liability
d.Current liability
12) Given the acquisition cost of product Z is $80, the net realizable value for product Z
is $72, the normal profit for product Z is $6, and the market value (replacement cost)
for product Z is $75, what is the proper per unit inventory price for product Z?
a.$80
b.$75
c.$66
d.$72
13) When converting from cash-basis to accrual-basis accounting, which of the
following adjustments should be made to cash receipts from customers to determine
accrual-basis service revenue?
a.Subtract ending accounts receivable
b.Subtract beginning unearned service revenue
c.Add ending accounts receivable
d.Add cash sales
14) What is the purpose of Emerging Issues Task Force?
a.Provide interpretation of existing standards
b.Provide a consensus on how to account for new and unusual financial transactions
c.Provide interpretive guidance
d.Provide timely guidance on select issues
15) Which of the following organizations has not published accounting standards?
a.American Institute of Certified Public Accountants
b.Securities and Exchange Commission
c.Financial Accounting Standards Board
d.All of these have published accounting standards
16) On June 1, 2014, Pitts Company sold some equipment to Gannon Company. The
two companies entered into an installment sales contract at a rate of 8%. The contract
required 8 equal annual payments with the first payment due on June 1, 2014 . What
type of compound interest table is appropriate for this situation?
a.Present value of an annuity due of 1 table
b.Present value of an ordinary annuity of 1 table
c.Future amount of an ordinary annuity of 1 table
d.Future amount of 1 table
17) Metro Company, a dealer in machinery and equipment, leased equipment to Sands,
Inc., on
July 1, 2015 . The lease is appropriately accounted for as a sales-type lease by Metro
and as a capital lease by Sands. The lease is for a 10-year period (the useful life of the
asset) expiring June 30, 2025 . The first of 10 equal annual payments of $552,000 was
made on July 1, 2015 . Metro had purchased the equipment for $3,500,000 on January
1, 2015, and established a list selling price of $4,800,000 on the equipment. Assume
that the present value at July 1, 2015, of the rent payments over the lease term
discounted at 8% (the appropriate interest rate) was $4,000,000.
Assuming that Sands, Inc. uses straight-line depreciation, what is the amount of
deprecia-tion and interest expense that Sands should record for the year ended
December 31, 2015?
a.$200,000 and $137,920
b.$200,000 and $160,000
c.$2,400,000 and $137,920
d.$2,400,000 and $160,000
18) Stuart Corporation’s taxable income differed from its accounting income computed
for this past year. An item that would create a permanent difference in accounting and
taxable incomes for Stuart would be
a.a balance in the Unearned Rent account at year end
b.using accelerated depreciation for tax purposes and straight-line depreciation for book
purposes
c.a fine resulting from violations of OSHA regulations
d.making installment sales during the year
19) On January 2, 2014, Gold Star Leasing Company leases equipment to Brick Co.
with 5 equal annual payments of $80,000 each, payable beginning January 2, 2014 .
Brick Co. agrees to guarantee the $50,000 residual value of the asset at the end of the
lease term. Bricks incremental borrowing rate is 10%, however it knows that Gold Stars
implicit interest rate is 8%. What journal entry would Brick Co. make at January 1,
2015 to record the second lease payment?
PV Annuity DuePV Ordinary AnnuityPV Single Sum
8%, 5 periods 4.31213 3.99271 .68508
10%, 5 periods 4.16986 3.79079 .62092
a.Lease Liability80,000
Cash80,000
b.Lease Liability58,802
Interest Payable21,198
Cash80,000
c.Lease Liability56,062
Interest Payable23,938
Cash80,000
d.Lease Liability58,106
Interest Payable21,894
Cash80,000
20) The purpose of the International Accounting Standards Board is to:
a.regulate stock prices at the international level
b.develop a uniform currency in which the financial transactions occur
c.develop a single set of high-quality financial reporting standards
d.arbitrate accounting disputes between auditors and international companies