1) 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 purchases195,300255,600(g) _______
Ending inventory52,200108,00063,000
Cost of goods sold(b) _______(e) _______427,000
Gross profit75,300118,000(h) _______
Operating expenses(c) _______50,00048,000
Income before taxes6,000(f) _______(i) _______
2) The accounts receivable turnover ratio is computed by dividing
a.gross sales by ending net receivables
b.gross sales by average net receivables
c.net sales by ending net receivables
d.net sales by average net receivables
3) Ethical issues in financial accounting are governed by the AICPA.
4) A corporation issues bonds with detachable warrants. The amount to be recorded as
paid-in capital is preferably
a.zero
b.calculated by the excess of the proceeds over the face amount of the bonds
c.equal to the market value of the warrants
d.based on the relative market values of the two securities involved
5) Which of the following disclosures of pension plan information would not normally
be required?
a.The major components of pension expense
b.The amount of prior service cost changed or credited in previous years
c.The funded status of the plan and the amounts recognized in the financial statements
d.The rates used in measuring the benefit amounts
6) The accountant for the Lintz Sales Company is preparing the income statement for
2014 and the balance sheet at December 31, 2014 . The January 1, 2014 merchandise
inventory balance will appear
a.only as an asset on the balance sheet
b.only in the cost of goods sold section of the income statement
c.as a deduction in the cost of goods sold section of the income statement and as a
current asset on the balance sheet
d.as an addition in the cost of goods sold section of the income statement and as a
current asset on the balance sheet
7) Expensing the cost of copy paper when the paper is acquired is an example
a.materiality
b.expense recognition
c.conservatism
d.industry practices
8) Dolphin Company uses special strapping equipment in its packaging business. The
equipment was purchased in January 2013 for $8,000,000 and had an estimated useful
life of 8 years with no salvage value. At December 31, 2014, new technology was
introduced that would accelerate the obsolescence of Dolphins equipment. Dolphins
controller estimates that expected future net cash flows on the equipment will be
$5,000,000 and that the fair value of the equipment is $4,400,000. Dolphin intends to
continue using the equipment, but it is estimated that the remaining useful life is 4
years. Dolphin uses straight-line depreciation.
Instructions
(a)What is the carrying value of the asset?
(b)Prepare the journal entry (if any) to record the impairment at December 31, 2014 .
(c)Prepare any journal entries for the equipment at December 31, 2015 . The fair value
of the equipment at December 31, 2015, is estimated to be $4,600,000.
(d)Repeat the requirements for (a) and (b), assuming that Dolphin intends to dispose of
the equipment and that it has not been disposed of as of December 31, 2015 .
9) What would you pay for an investment that pays you $20,000 at the end of each year
for the next twenty years? Assume that the relevant interest rate for this type of
investment is 12%.
a.$167,316
b.$1,441,048
c.$20,733
d.$149,389
10) In the recent year Hill Corporation had net income of $210,000, interest expense of
$60,000, and tax expense of $90,000. What was Hill Corporation’s times interest earned
ratio for the year?
a.6.0
b.5.0
c.4.5
d.3.5
11) Harrison Company owns 20,000 of the 50,000 outstanding shares of Taylor, Inc.
common stock. During 2015, Taylor earns $1,000,000 and pays cash dividends of
$800,000.
Harrison should report investment revenue for 2015 of
a.$400,000
b.$320,000
c.$80,000
d.$0
12) Korman Company has the following securities in its portfolio of trading securities
on December 31, 2014:
CostFair Value
5,000 shares of Thomas Corp., Common$151,000$139,000
10,000 shares of Gant, Common 182,000 190,000
$333,000$329,000
All of the securities had been purchased in 2014 . In 2015, Korman completed the
following securities transactions:
March 1Sold 5,000 shares of Thomas Corp., Common @ $31 less fees of $1,500.
April 1Bought 600 shares of Werth Stores, Common @ $45 plus fees of $550.
The Korman Company portfolio of trading securities appeared as follows on December
31, 2015:
CostFair Value
10,000 shares of Gant, Common$185,000$195,500
600 shares of Werth Stores, Common 27,550 25,500
$212,550$221,000
Instructions
Prepare the general journal entries for Korman Company for:
(a)the 2014 adjusting entry.
(b)the sale of the Thomas Corp. stock.
(c)the purchase of the Werth Stores’ stock.
(d)the 2015 adjusting entry.
13) Which factor would be greater the present value of $1 for 10 periods at 8% per
period or the future value of $1 for 10 periods at 8% per period?
a.Present value of $1 for 10 periods at 8% per period
b.Future value of $1 for 10 periods at 8% per period
c.The factors are the same
d.Need more information
14) Give:
(a)Three distinct examples of investing activities.
(b)Three distinct examples of financing activities.
(c)Three distinct examples of significant noncash transactions.
(d)Two examples of transactions not shown on a statement of cash flows.
15) Qualpoint provides its employees two weeks of paid vacation per year. As of
December 31, 65 employees have earned two weeks of vacation time to be taken the
following year. If the average weekly salary for these employees is $1,140, what is the
required journal entry?
a.Debit Salaries and Wages Expense for $148,200 and credit Salaries and Wages
Payable for $148,200
b.No journal entry required
c.Debit Salaries and Wages Payable for $147,600 and credit Salaries and Wages
Expense for $147,600
d.Debit Salaries and Wages Expense for $74,100 and credit Salaries and Wages Payable
for $74,100
16) Posner Co. is a retail store operating in a state with a 7% retail sales tax. The retailer
may keep 2% of the sales tax collected. Posner Co. records the sales tax in the Sales
Revenue account. The amount recorded in the Sales Revenue account during May was
$251,450.
The amount of sales taxes (to the nearest dollar) for May is
a.$20,762
b.$16,450
c.$22,631
d.$17,602
17) Given the acquisition cost of product Dominoe is $29, the net realizable value for
product Dominoe is $26, the normal profit for product Dominoe is $3, and the market
value (replacement cost) for product Dominoe is $27, what is the proper per unit
inventory price for product Dominoe?
a.$27
b.$23
c.$26
d.$29