1) On September 1, Horton purchased $13,300 of inventory items on credit with the
terms 1/15, net 30, FOB destination. Freight charges were $280. Payment for the
purchase was made on September 18 . Assuming Horton uses the perpetual inventory
system and the net method of accounting for purchase discounts, what amount is
recorded as inventory from this purchase?
a.$13,167
b.$13,447
c.$13,580
d.$13,300
2) The summarized balance sheets of Goebel Company and Dobbs Company as of
December 31, 2014 are as follows:
Goebel Company
Balance Sheet
December 31, 2014
Assets$1,200,000
Liabilities$ 150,000
Capital stock600,000
Retained earnings 450,000
Total equities$1,200,000
Dobbs Company
Balance Sheet
December 31, 2014
Assets$900,000
Liabilities$205,000
Capital stock575,000
Retained earnings 120,000
Total equities$900,000
If Goebel Company acquired a 30% interest in Dobbs Company on December 31, 2014
for $215,000 and the equity method of accounting for the investment were used, the
amount of the debit to Equity Investments (Dobbs) would have been
a.$270,000
b.$215,000
c.$172,500
d.$208,500
3) Interest cost that is capitalized should
a.be written off over the remaining term of the debt
b.be accumulated in a separate deferred charge account and written off equally over a
40-year period
c.not be written off until the related asset is fully depreciated or disposed of
d.None of these answers are correct
4) During 2014, Corporation acquired a mineral mine for $4,000,000 of which
$400,000 was ascribed to land value after the mineral has been removed. Geological
surveys have indicated that 10 million units of the mineral could be extracted. During
2014, 1,800,000 units were extracted and 1,500,000 units were sold. What is the
amount of depletion expensed for 2014?
a.$400,000
b.$540,000
c.$360,000
d.$648,000
5) Consider the following: Cash in Bank checking account of $18,500, Cash on hand of
$500, Post-dated checks received totaling $3,500, and Certificates of deposit totaling
$124,000. How much should be reported as cash in the balance sheet?
a.$ 18,500
b.$ 19,000
c.$ 22,500
d.$136,500
6) When a plant asset is disposed of, a gain or loss may result. The gain or loss would
be classified as an extraordinary item on the income statement if it resulted from
a.an involuntary conversion and the conditions of the disposition are unusual and
infrequent in nature
b.a sale prior to the completion of the estimated useful life of the asset
c.the sale of a fully depreciated asset
d.an abandonment of the asset
7) In 2015, Fargo Corporation began construction work under a three-year contract. The
contract price is $4,800,000. Fargo uses the percentage-of-completion method for
financial accounting purposes. The income to be recognized each year is based on the
proportion of costs incurred to total estimated costs for completing the contract. The
financial statement presentations relating to this contract at December 31, 2015, follow:
Balance Sheet
Accounts receivableconstruction contract billings$200,000
Construction in progress$600,000
Less contract billings 480,000
Costs and recognized profit in excess of billings120,000
Income Statement
Income (before tax) on the contract recognized in 2015$120,000
How much cash was collected in 2015 on this contract?
a.$200,000
b.$280,000
c.$40,000
d.$480,000
8) Jeremy is in the process of purchasing a car. The list price of the car is $42,000. If
Jeremy pays cash for the car, the dealer will reduce the price by 10%. Otherwise, the
dealer will provide financing where Jeremy must pay $8,990 at the end of each of the
next five years. Compute the effective interest rate to the nearest percent that Jeremy
would pay if he chooses to make the five annual payments?
a.5%
b.6%
c.7%
d.8%
9) Why might inventory be reported at sales prices (net realizable value or market price)
rather than cost?
a.When there is a controlled market with a quoted price applicable to all quantities and
when there are no significant costs of disposal
b.When there are no significant costs of disposal
c.When a non-cancellable contract exists to sell the inventory
d.When there is a controlled market with a quoted price applicable to all quantities
10) What is the relationship between current liabilities and a company’s operating
cycle?
a.Liquidation of current liabilities is reasonably expected within the company’s
operating cycle (or one year if less)
b.Current liabilities are the result of operating transactions
c.Current liabilities can’t exceed the amount incurred in one operating cycle
d.There is no relationship between the two
11) Niles Co. has the following data related to an item of inventory:
Inventory, March 1200 units @ $2.10
Purchase, March 7700 units @ $2.20
Purchase, March 16140 units @ $2.25
Inventory, March 31260 units
The value assigned to cost of goods sold if Niles uses FIFO is
a.$ 580
b.$ 552
c.$1,724
d.$1,696