1) Jane wants to set aside funds to take an around the world cruise in four years. Jane
expects that she will need $12,000 for her dream vacation. If she is able to earn 8% per
annum on an investment, how much will she have to set aside today so that she will
have sufficient funds available?
a.$2,663
b.$16,325
c.$8,820
d.$8,167
2) Rodriguez Corporation sells its product, a rare metal, in a controlled market with a
quoted price applicable to all quantities. The total cost of 5,000 pounds of the metal
now held in inventory is $210,000. The total selling price is $560,000, and estimated
costs of disposal are $10,000. At what amount should the inventory of 5,000 pounds be
reported in the balance sheet?
a.$200,000
b.$210,000
c.$550,000
d.$560,000
3) Green Co. received merchandise on consignment. As of January 31, Green included
the goods in inventory, but did not record the transaction. The effect of this on its
financial statements for January 31 would be
a.net income, current assets, and retained earnings were overstated
b.net income was correct and current assets were understated
c.net income and current assets were overstated and current liabilities were understated
d.net income, current assets, and retained earnings were understated
4) Which of these is not included in an employer’s payroll tax expense?
a.F.I.C.A. (social security) taxes
b.Federal unemployment taxes
c.State unemployment taxes
d.Federal income taxes
5) At the beginning of 2015, Pitman Co. purchased an asset for $1,200,000 with an
estimated useful life of 5 years and an estimated salvage value of $100,000. For
financial reporting purposes the asset is being depreciated using the straight-line
method; for tax purposes the double-declining-balance method is being used. Pitman
Co.s tax rate is 40% for 2015 and all future years.
At the end of 2015, which of the following deferred tax accounts and balances is
reported on Pitmans balance sheet?
Account _Balance
a.Deferred tax asset$104,000
b.Deferred tax liability$104,000
c.Deferred tax asset$156,000
d.Deferred tax liability$156,000
6) At Ruth Company, events and transactions during 2014 included the following. The
tax rate for all items is 30%.
(1)Depreciation for 2012 was found to be understated by $90,000.
(2)A strike by the employees of a supplier resulted in a loss of $75,000.
(3)The inventory at December 31, 2012 was overstated by $120,000.
(4)A flood destroyed a building that had a book value of $1,500,000. Floods are very
uncommon in that area.
The effect of these events and transactions on 2014 net income net of tax would be
a.($52,500)
b.($1,102,500)
c.($1,165,500)
d.($1,249,500)
7) When goods or services are exchanged for cash or claims to cash (receivables),
revenues are considered
a.earned
b.realized
c.recognized
d.All of these answers are correct
8) Which of the following is not a reason why revenue is recognized at the time of sale?
a.Realization has occurred
b.The sale is the critical event
c.Title legally passes from seller to buyer
d.All of these are reasons to recognize revenue at the time of sale
9) Equipment was purchased at the beginning of 2012 for $680,000. At the time of its
purchase, the equipment was estimated to have a useful life of six years and a salvage
value of $80,000. The equipment was depreciated using the straight-line method of
depreciation through 2014 . At the beginning of 2015, the estimate of useful life was
revised to a total life of eight years and the expected salvage value was changed to
$50,000. The amount to be recorded for depreciation for 2015, reflecting these changes
in estimates, is
a.$41,250
b.$66,000
c.$76,000
d.$78,750
10) Which of the following is a required disclosure in the income statement when
reporting the disposal of a component of the business?
a.The gain or loss on disposal should be reported as an extraordinary item
b.Results of operations of a discontinued component should be disclosed immediately
below extraordinary items
c. Earnings per share from continuing operations, discontinued operations, and net
income should be disclosed on the face of the income statement
d. The gain or loss on disposal should not be segregated, but should be reported
together with the results of continuing operations