1) u.s. gaap does not specifically address how companies should account for the indirect
effects of changes in accounting principle.
2) accounting standards are now less likely to require the recording or disclosure of fair
value information.
3) under the cost-recovery method, a company recognizes no revenue or profit until
cash payments by the buyer exceed the cost of the merchandise sold.
4) companies only restrict retained earnings to comply with contractual requirements or
current necessity.
5) a reason for valuing inventory at net realizable value is that sometimes it is too
difficult to obtain the cost figures.
6) for receivables sold with recourse, the seller guarantees payment to the purchaser if
the debtor fails to pay.
7) similar to u.s. practice, ifrs requires that companies present current and noncurrent
liabilities on the face of the balance sheet, with current liabilities generally presented in
order of magnitude.
8) retrospective application is considered impracticable if a company cannot determine
the prior period effects using every reasonable effort to do so.
9) the replacement of an existing bond issue with a new one is called refunding.
10) companies must recognize a loss on an unprofitable contract under the
percentage-of-completion method but not the completed-contract method.
11) dicer uses the conventional retail method to determine its ending inventory at cost.
assume the beginning inventory at cost (retail) were $260,000 ($396,000), purchases
during the current year at cost (retail) were $1,370,000 ($2,200,000), freight-in on these
purchases totaled $86,000, sales during the current year totaled $2,100,000, and net
markups (markdowns) were $48,000 ($72,000). what is the ending inventory value at
cost?
a.$306,328
b.$312,330
c.$314,824
d.$472,000
12) hernandez company has 490,000 shares of $10 par value common stock
outstanding. during the year, hernandez declared a 10% stock dividend when the market
price of the stock was $30 per share. four months later hernandez declared a $.50 per
share cash dividend. as a result of the dividends declared during the year, retained
earnings decreased by
a.$1,739,500
b.$735,000
c.$269,500
d.$245,000
13) at december 31, 2012 raymond corporation reported a deferred tax liability of
$150,000 which was attributable to a taxable type temporary difference of $500,000.
the temporary difference is scheduled to reverse in 2016. during 2013, a new tax law
increased the corporate tax rate from 30% to 40%. raymond should record this change
by debiting
a.retained earnings for $50,000.
b.retained earnings for $15,000.
c.income tax expense for $15,000.
d.income tax expense for $50,000.
14) olsen company paid or collected during 2012 the following items:
the following balances have been excerpted from olsen’s balance sheets:
the interest revenue on the income statement for 2012 was
a.$54,600
b.$66,200
c.$69,400
d.$81,000
15) long-term debt that matures within one year and is to be converted into stock should
be reported
a.as a current liability
b.in a special section between liabilities and stockholders equity
c.as noncurrent
d.as noncurrent and accompanied with a note explaining the method to be used in its
liquidation
16) under ifrs, an entity should initially recognize inventory when
a.it has control of the inventory
b.it expects it to provide future economic benefits
c.the cost of the inventory can be reliably measured
d.all of these choices are correct
17) the balance sheet data of kohler company at the end of 2013 and 2012 follow:
cash$100,000$140,000accounts receivable (net)240,000180,000merchandise
inventory280,000180,000prepaid expenses40,000100,000buildings and
equipment360,000300,000accumulated depreciation—buildings and
equipment-72,000-32,000land360,000160,000
land was acquired for $200,000 in exchange for common stock, par $200,000, during
the year; all equipment purchased was for cash. equipment costing $20,000 was sold for
$8,000; book value of the equipment was $16,000 and the loss was reported as an
ordinary item in net income. cash dividends of $40,000 were charged to retained
earnings and paid during the year; the transfer of net income to retained earnings was
the only other entry in the retained earnings account. in the statement of cash flows for
the year ended december 31, 2013, for naley company:
the net cash provided (used) by investing activities was
a.$52,000
b.$(80,000)
c.$(272,000)
d.$(72,000)
18) madsen company reported the following information for 2012:
sales revenue$1,530,000
cost of goods sold1,050,000
operating expenses165,000
unrealized holding gain on available-for-sale securities120,000
cash dividends received on the securities6,000
for 2012, madsen would report other comprehensive income of
a.$411,000
b.$405,000
c.$126,000
d.$120,000
19) a company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on january 1,
2012. interest is paid on june 30 and december 31. the proceeds from the bonds are
$9,802,072. using effective-interest amortization, how much interest expense will be
recognized in 2012?
a.$390,000
b.$780,000
c.$784,248
d.$784,166
20) given the historical cost of product dominoe is $43, the selling price of product
dominoe is $60, costs to sell product dominoe are $11, the replacement cost for product
dominoe is $40, and the normal profit margin is 20% of sales price, what is the cost
amount that should be used in the lower-of-cost-or-market comparison?
a.$49
b.$40
c.$37
d.$43
21) under macrs, which one of the following is not considered in determining
depreciation for tax purposes?
a.cost of asset
b.property recovery class
c.half-year convention
d.salvage value
22) during 2012, kimmel co. incurred average accumulated expenditures of $600,000
during construction of assets that qualified for capitalization of interest. the only debt
outstanding during 2012 was a $750,000, 10%, 5-year note payable dated january 1,
2010. what is the amount of interest that should be capitalized by kimmel during 2012?
a.$0
b.$15,000
c.$60,000
d.$75,000
23) gross billings for merchandise sold by lang company to its customers last year
amounted to $12,720,000; sales returns and allowances were $370,000, sales discounts
were $175,000, and freight-out was $140,000. net sales last year for lang company were
a.$12,720,000
b.$12,350,000
c.$12,175,000
d.$12,035,000
24) dixon construction company was awarded a contract to construct an interchange at
the junction of u.s. 94 and highway 30 at a total contract price of $10,000,000. the
estimated total costs to complete the project were $7,500,000.
instructions
(a)make the entry to record construction costs of $4,500,000, on construction in process
to date.
(b)make the entry to record progress billings of $2,500,000.
(c)make the entry to recognize the profit that can be recognized to date, on a
percentage-of-completion basis.
25) debit always means
a.right side of an account
b.increase
c.decrease
d.none of these
26) rowen, inc. had pre-tax accounting income of $1,350,000 and a tax rate of 40% in
2013, its first year of operations. during 2013 the company had the following
transactions:
at the end of 2013, which of the following deferred tax accounts and balances is
reported on rowen, inc.s balance sheet?
27) taxable income of a corporation differs from pretax financial income because of
28) joseph co. began operations on january 1, 2012. financial statements for 2012 and
2013 contained the following errors:
in addition, on december 26, 2013 fully depreciated equipment was sold for $53,000,
but the sale was not recorded until 2014. no corrections have been made for any of the
errors.
instructions
ignoring income taxes, show your calculation of the total effect of the errors on 2013
net income.
29) colt corporation purchased massey inc. and agreed to give stockholders of massey
inc. 50,000 additional shares in 2014 if massey inc.s net income in 2013 is $600,000 or
more; in 2012 massey inc.s net income is $615,000. colt has net income for 2010 of
$1,200,000 and has an average number of common shares outstanding for 2012 of
500,000 shares. what should colt report as earnings per share for 2012?
30) contrast the cash basis of accounting with the accrual basis of accounting.