1) In the time diagram below, which concept is being depicted?
a.Present value of an ordinary annuity
b.Present value of an annuity due
c.Future value of an ordinary annuity
d.Future value of an annuity due
2) To compute interest expense on a note for an adjusting entry, the formula is
(principal annual rate a fraction). The numerator and denominator of the fraction are:
NumeratorDenominator
a.Length of time note has been outstanding12 months
b.Total length of note12 months
c.Length of time until note maturesTotal length of note
d.Length of time note has been outstandingTotal length of note
3) Debt securities acquired by a corporation which are accounted for by recognizing
unrealized holding gains or losses and are included as other comprehensive income and
as a separate component of stockholders’ equity are
a.held-to-maturity debt securities
b.trading debt securities
c.available-for-sale debt securities
d.never-sell debt securities
4) On January 3, 2014, Moss Company acquires $300,000 of Adam Companys 10-year,
10% bonds at a price of $319,254 to yield 9%. Interest is payable each December 31 .
The bonds are classified as held-to-maturity.
Assuming that Moss Company uses the effective-interest method, what is the amount of
interest revenue that would be recognized in 2015 related to these bonds?
a.$30,000
b.$31,925
c.$28,734
d.$28,619
5) Treasury bonds should be shown on the balance sheet as
a.an asset
b.a deduction from bonds payable issued to arrive at net bonds payable and outstanding
c.a reduction of stockholders’ equity
d.both an asset and a liability
6) 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 payable (to the nearest dollar) to the state for the month of
May is
a.$12,573
b.$16,121
c.$20,762
d.$17,250
7) On January 1, 2015, Parks Co. has the following balances:
Projected benefit obligation$4,200,000
Fair value of plan assets3,750,000
The settlement rate is 10%. Other data related to the pension plan for 2015 are:
Service cost$240,000
Amortization of prior service costs54,000
Contributions270,000
Benefits paid250,000
Actual return on plan assets264,000
Amortization of net gain18,000
The balance of the projected benefit obligation at December 31, 2015 is
a.$4,494,000
b.$4,596,000
c.$4,860,000
d.$4,610,000
8) On December 1, 2014, Hogan Co. purchased a tract of land as a factory site for
$750,000. The old building on the property was razed, and salvaged materials resulting
from demolition were sold. Additional costs incurred and salvage proceeds realized
during December 2014 were as follows:
Cost to raze old building$70,000
Legal fees for purchase contract and to record ownership10,000
Title guarantee insurance16,000
Proceeds from sale of salvaged materials8,000
In Hogan ‘s December 31, 2014 balance sheet, what amount should be reported as land?
a.$776,000
b.$812,000
c.$838,000
d.$846,000
9) If a company uses the periodic inventory system, what is the impact on net income of
including goods in transit f.o.b. shipping point in purchases, but not ending inventory?
a.Overstate net income
b.Understate net income
c.No effect on net income
d.Not sufficient information to determine effect on net income
10) Use of the accrual method in accounting for product warranty costs
a.is required for federal income tax purposes
b.is frequently justified on the basis of expediency when warranty costs are immaterial
c.finds the expense account being charged when the seller performs in compliance with
the warranty
d.represents accepted practice and should be used whenever the warranty is an integral
and inseparable part of the sale