1) which of the following is an example of managing earnings up?
a.decreasing estimated salvage value of equipment
b.writing off obsolete inventory
c.underestimating warranty claims
d.accruing a contingent liability for an ongoing lawsuit
2) on october 1, 2012 bartley corporation issued 5%, 10-year bonds with a face value of
$3,000,000 at 104. interest is paid on october 1 and april 1, with any premiums or
discounts amortized on a straight-line basis.
bond interest expense reported on the december 31, 2012 income statement of bartley
corporation would be
a.$40,500
b.$69,000
c.$34,500
d.$37,500
3) included in vernon corp.’s liability account balances at december 31, 2012, were the
following:
vernon’s december 31, 2012 financial statements were issued on march 31, 2013. on
january 15, 2013, the entire $600,000 balance of the 8% note was refinanced by
issuance of a long-term obligation payable in a lump sum. in addition, on march 10,
2013, vernon consummated a noncancelable agreement with the lender to refinance the
7%, $250,000 note on a long-term basis, on readily determinable terms that have not yet
been implemented. on the december 31, 2012 balance sheet, the amount of the notes
payable that vernon should classify as short-term obligations is
a.$175,000
b.$125,000
c.$50,000
d.$0
4) if a company chooses the fair value option, a decrease in the fair value of the liability
is recorded by crediting
a.bonds payable
b.gain on restructuring of debt
c.unrealized holding gain/loss-income
d.none of these
5) dolan company reports its income from investments under the equity method and
recognized income of $25,000 from its investment in moss co. during the current year,
even though no dividends were declared or paid by moss during the year. on dolan’s
statement of cash flows (indirect method), the $25,000 should
a.not be shown
b.be shown as cash inflow from investing activities
c.be shown as cash outflow from financing activities
d.be shown as a deduction from net income in the cash flows from operating activities
section
6) during 2012, vaughn corporation sold merchandise costing $3,000,000 on an
installment basis for $4,000,000. the cash receipts related to these sales were collected
as follows: 2012, $1,600,000; 2013, $1,400,000; 2014, $1,000,000.
what is the rate of gross profit on the installment sales made by vaughn corporation
during 2012?
a.75%
b.60%
c.40%
d.25%
7) characteristics of generally accepted accounting principles include all of the
following except
a.authoritative accounting the rule-making body established a principle of reporting
b.standards are considered useful by the profession
c.each principle is approved by the sec
d.practice has become universally accepted over time
8) fleming company has the following cumulative taxable temporary differences:
the tax rate enacted for 2013 is 40%, while the tax rate enacted for future years is 30%.
taxable income for 2013 is $2,400,000 and there are no permanent differences. flemings
pretax financial income for 2013 is:
a.$1,440,000
b.$2,010,000
c.$2,595,000
d.$3,360,000
9) a mining company declared a liquidating dividend. the journal entry to record the
declaration must include a debit to
a.retained earnings
b.a paid-in capital account
c.accumulated depletion
d.accumulated depreciation
10) when boot is involved in an exchange having commercial substance.
a.gains or losses are recognized in their entirely
b.a gain or loss is computed by comparing the fair value of the asset received with the
fair value of the asset given up
c.only gains should be recognized
d.only losses should be recognized
11) an ifrs sorie statement might include all of the following except
a.net income or loss
b.unrealized gains or losses on the revaluation of long-term assets
c.cumulative effect of a change in accounting principle
d.extraordinary gain or loss
12) lopez company received $9,600 on april 1, 2012 for one year’s rent in advance and
recorded the transaction with a credit to a nominal account. the december 31, 2012
adjusting entry is
a.debit rent revenue and credit unearned rent revenue, $2,400
b.debit rent revenue and credit unearned rent revenue, $7,200
c.debit unearned rent revenue and credit rent revenue, $2,400
d.debit unearned rent revenue and credit rent revenue, $7,200
13) tripiani inc. incurred $900,000 of capitalizable costs to develop computer software
during 2012. the software will be used internally over its 5-year life. what amount of the
computer software costs should be expensed in 2012?
a.$900,000
b.$180,000
c.$202,500
d.$300,000
14) lucy and fred want to begin saving for their baby’s college education. they estimate
that they will need $300,000 in eighteen years. if they are able to earn 5% per annum,
how much must be deposited at the end of each of the next eighteen years to fund the
education?
a.$11,618
b.$25,664
c.$24,823
d.$10,664
15) if, during an accounting period, an expense item has been incurred and consumed
but not yet paid for or recorded, then the end-of-period adjusting entry would involve
a.a liability account and an asset account
b.an asset or contra asset account and an expense account
c.a liability account and an expense account
d.a receivable account and a revenue account
16) the ratio of current assets to current liabilities is called the
a.current ratio
b.acid-test ratio
c.current asset turnover ratio
d.current liability turnover ratio
17) what is the relationship between the future value of one and the present value of
one?
a.the present value of one equals the future value of one plus one
b.the present value of one equals one plus future value factor for n-1 periods
c.the present value of one equals one divided by the future value of one
d.the present value of one equals one plus the future value factor for n+1 value