1) lewis company traded machinery with a book value of $570,000 and a fair value of
$540,000. it received in exchange from timmons company a machine with a fair value
of $600,000. lewis also paid cash of $60,000 in the exchange. timmonss machine has a
book value of $570,000. what amount of gain or loss should lewis recognize on the
exchange?
a.$60,000 gain
b.$ -0-.
c.$3,000 loss
d.$30,000 loss
2) the cumulative feature of preferred stock
a.limits the amount of cumulative dividends to the par value of the preferred stock
b.requires that dividends not paid in any year must be made up in a later year before
dividends are distributed to common shareholders
c.means that the shareholder can accumulate preferred stock until it is equal to the par
value of common stock at which time it can be converted into common stock
d.enables a preferred stockholder to accumulate dividends until they equal the par value
of the stock and receive the stock in place of the cash dividends
3) an employee’s net (or take-home) pay is determined by gross earnings minus
amounts for income tax withholdings and the employee’s
a.portion of fica taxes and unemployment taxes
b.and employer’s portion of fica taxes, and unemployment taxes
c.portion of fica taxes, unemployment taxes, and any voluntary deductions
d.portion of fica taxes and any voluntary deductions
4) the printing costs and legal fees associated with the issuance of bonds should
a.be expensed when incurred
b.be reported as a deduction from the face amount of bonds payable
c.be accumulated in a deferred charge account and amortized over the life of the bonds
d.not be reported as an expense until the period the bonds mature or are retired
5) hoyle company traded machinery with a book value of $570,000 and a fair value of
$540,000. it received in exchange from durler company a machine with a fair value of
$600,000. hoyle also paid cash of $60,000 in the exchange. durlers machine has a book
value of $570,000. what amount of gain or loss should hoyle recognize on the
exchange?
a.$60,000 gain
b.$ -0-
c.$3,000 loss
d.$30,000 loss
6) putnam companys 2012 financial statements contain the following selected data:
putnams times interest earned for 2012 is
a.3.0 times
b.3.4 times
c.4.0 times
d.5.0 times
7)
newton co. had installment sales of $1,000,000 and cost of installment sales of
$650,000 in 2012. a 2012 sale resulted in a default in 2014, at which time the balance of
the installment receivable was $40,000. the repossessed merchandise had a fair value of
$21,000.
instructions
(a)calculate the rate of gross profit on 2012 installment sales.
(b)make the entry to record the repossession.
8) which disclosure method do most companies use to display the components of other
comprehensive income?
a.combined statement of retained earnings
b.second income statement
c.combined statement of comprehensive income
d.as part of the statement of stockholders’ equity
9) dotel companys 12/31/12 balance sheet reports assets of $12,000,000 and liabilities
of $5,000,000. all of dotels assets book values approximate their fair value, except for
land, which has a fair value that is $800,000 greater than its book value. on 12/31/12,
egbert corporation paid $12,200,000 to acquire dotel. what amount of goodwill should
egbert record as a result of this purchase?
a.$ -0-
b.$ 200,000
c.$4,400,000
d.$5,200,000
10) according to the fasb’s conceptual framework, the calculation of comprehensive
income includes which of the following?
11) what would you pay for an investment that pays you $20,000 at the beginning of
each year for the next ten years? assume that the relevant interest rate for this type of
investment is 10%.
a.$122,890
b.$135,180
c.$129,902
d.$142,892
12) issuance of common stock for cash affects which basic element of financial
statements?
a.revenues
b.losses
c.liabilities
d.equity
13) in order to retain certain key executives, jensen corporation granted them incentive
stock options on december 31, 2011. 70,000 options were granted at an option price of
$35 per share. market prices of the stock were as follows:
the options were granted as compensation for executives’ services to be rendered over a
two-year period beginning january 1, 2012. the black-scholes option pricing model
determines total compensation expense to be $700,000. what amount of compensation
expense should jensen recognize as a result of this plan for the year ended
december 31, 2012 under the fair value method?
a.$350,000
b.$700,000
c.$550,000
d.$1,750,000
14) which of the following statements is false?
a.a company may exclude a short-term obligation from current liabilities if the firm
intends to refinance the obligation on a long-term basis and demonstrates an ability to
complete the refinancing
b.cash dividends should be recorded as a liability when they are declared by the board
of directors
c.under the cash basis method, warranty costs are charged to expense as they are paid
d.fica taxes withheld from employees’ payroll checks should never be recorded as a
liability since the employer will eventually remit the amounts withheld to the
appropriate taxing authority
15) investments in debt securities should be recorded on the date of acquisition at
a.lower of cost or market
b.market value
c.market value plus brokerage fees and other costs incident to the purchase
d.face value plus brokerage fees and other costs incident to the purchase
16) which item below is not a current liability?
a.unearned revenue
b.stock dividends distributable
c.the currently maturing portion of long-term debt
d.trade accounts payable
17) on march 1, felt co. began construction of a small building. payments of $160,000
were made monthly for three months beginning march 1. the building was completed
and ready for occupancy on june 1. in determining the amount of interest cost to be
capitalized, the weighted-average accumulated expenditures are
a.$40,000
b.$80,000
c.$160,000
d.$320,000
18) an electronics store is running a promotion where for every video game purchased,
the customer receives a coupon upon checkout to purchase a second game at a 50%
discount. the coupons expire in one year. the store normally recognized a gross profit
margin of 40% of the selling price on video games. how would the store account for a
purchase using the discount coupon?
a.the reduction in sales price attributed to the coupon is recognized as premium expense
b.the difference between the cost of the video game and the cash received is recognized
as premium expense
c.premium expense is not recognized
d.the difference between the cost of the video game and the selling price prior to the
coupon is recognized as premium expense
19) which of the following is not an internal event?
a.depreciation
b.using raw materials in the production process
c.dividend declaration and subsequent payment
d.all of these are internal transactions.
20) arreaga corp. has a tax rate of 40 percent and income before non-operating items of
$464,000. it also has the following items (gross amounts).
unusual loss$ 74,000
extraordinary loss202,000
gain on disposal of equipment16,000
change in accounting principle
increasing prior year’s income106,000
what is the amount of income tax expense arreaga would report on its income
statement?
a.$185,600
b.$162,400
c.$198,400
d.$124,000