Purchases and sales of securities are always reported as investing activities in a
statement of cash flows.
The equity method is in many ways a partial consolidation.
Bonds will sell for a premium when the market rate of interest exceeds their stated rate.
The balance sheet can be considered a change or flow statement.
A company that prepares its financial statements according to International Financial
Reporting Standards accounts for a government grant by recognizing revenue for the
amount of the grant.
The calculation of present value eliminates interest from future cash flows.
After an unadjusted trial balance is prepared, the next step in the accounting processing
cycle is the preparation of financial statements.
The asset/liability approach emphasizes matching to determine what assets and
liabilities should be reflected on the balance sheet.
A change in the estimated recoverable units used to compute depletion requires
retroactive adjustments to the financial statements.
Prior service cost is recognized as pension expense over a period of several years.
A company could improve its return on assets by increasing its income or by increasing
its total assets.
Under IAS No. 39, investments for which the investor lacks significant influence use
basically the same reporting classifications as those used under U.S. GAAP.
Gains, but not losses, from discontinued operations must be separately reported in an
income statement.
Which of the following is not true regarding accounting for transfers of receivables
under IFRS?
a. Transfers of receivables sometimes are treated as a sale of receivables.
b. Transfers of receivables sometimes are treated as a secured borrowing.
c. Transfers of receivables can be treated as a sale if the transferee is a QSPE.
d. Transfer of substantially all the risk and rewards of ownership is an important
consideration.
Ramen Inc. adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had a cost
inventory of $600,000. Its inventory as of December 31, 2016, was $667,800 at
year-end costs and the cost index was 1.06. What was DVL inventory on December 31,
2016?
a. $630,000.
b. $631,800.
c. $636,000.
d. None of the above is correct.
For trading securities, unrealized holding gains and losses are included in earnings:
a. Only at the end of the fiscal year.
b. On each reporting date.
c. Only when they exceed 10% of the underlying investment.
d. Based on a vote of the board of directors.
Which of the following differences between financial accounting and tax accounting
ordinarily creates a deferred tax liability?
a. Depreciation early in the life of an asset.
b. Unrealized losses from recording investments at fair value.
c. Rent collected in advance.
d. None of these answer choices are correct.
On July 1, 2016, Larkin Co. purchased a $400,000 tract of land that is intended to be
the site of a new office complex. Larkin incurred additional costs and realized salvage
proceeds during 2016 as follows:
What would be the balance in the land account as of December 31, 2016?
a. $400,000.
b. $475,000.
c. $477,000.
d. $487,000.
Oregon Co.’s employees are eligible for retirement with benefits at the end of the year
in which both age 60 is attained and they have completed 35 years of service. The
benefits provide 15 years reimbursement for health care services of $20,000 annually,
beginning one year from the date of retirement.
Ralph Young was hired at the beginning of 1977 by Oregon after turning age 22 and is
expected to retire at the end of 2018 (age 60). The discount rate is 4%. The plan is
unfunded.
The PV of an ordinary annuity of $1 where n = 15 and i = 4% is 11.11839.
The PV of $1 where n = 2 and i = 4% is 0.92456
What is the present value of Ralph’s net benefits as of his expected retirement date,
rounded to the nearest dollar?
a. $166,580.
b. $222,368.
c. $300,000.
d. None of these answer choices is correct.
The following information relates to Halloran Co.’s accounts receivable for 2016:
What amount should Halloran report for accounts receivable, before allowances, at
December 31, 2016?
a. $1,040,000.
b. $ 970,000.
c. $ 760,000.
d. None of these answer choices are correct.
Assume a company’s liquidity ratios all are less than 1.0 before it purchases inventory
on credit. When it makes the purchase:
a. Its current ratio decreases.
b. Its quick ratio decreases.
c. Its current ratio remains unchanged.
d. Its quick ratio remains unchanged.
Which of the following increases the investment account under the equity method of
accounting?
a. Decreases in the market price of the investee’s stock.
b. Dividends paid by the investee that were declared in the previous year.
c. Net loss of the investee company.
d. None of these answer choices is correct.
An underfunded pension plan means that the:
a. PBO is less than plan assets.
b. PBO exceeds plan assets.
c. ABO is less than plan assets.
d. ABO exceeds plan assets.
The most important accounting objective for executive stock options is:
a. Measuring and reporting the amount of compensation expense during the service
period.
b. Measuring their fair value for balance sheet purposes.
c. To disclose increases or decreases in the stock options held at the end of each
accounting
period.
d. None of these answer choices is correct.
Portman Inc. uses the conventional retail inventory method. Expressed in millions of
dollars, information about Portman’s 2016 inventory account is expressed in the table
below:
What is the value of Portman’s inventory at 12/31/16?
a. $150 million.
b. $252 million.
c. $300 million.
d. None of these answer choices are correct.
Data related to the inventories of Alpine Ski Equipment and Supplies is presented
below:
In applying the lower of cost and net realizable value rule, the inventory of apparel
would be valued at:
a. $108,000.
b. $ 90,000.
c. $110,000.
d. $99,000.
Below is information relative to an exchange of equipment by Pensacola Inc. Assume
the exchange has commercial substance.
In Case B, Pensacola would record a gain/(loss) of:
a. $ 4,000.
b. $ (4,000).
c. $ (10,000).
d. None of these answer choices are correct.
To help assess the uncertainties that surround a defined benefit pension plan,
corporations frequently hire a(n):
a. CPA.
b. Attorney.
c. Investment analyst.
d. Actuary.
Below is a list of accounts in no particular order. Assume that all accounts have normal
balances. Required: In column A, indicate whether a debit will:
1> Increase the account balance, or
2> Decrease the account balance. In column B, classify each account according to the
following scheme. For contra accounts, indicate the classification of the account to
which it relates.
1>A current asset in the balance sheet.
2>A noncurrent asset in the balance sheet.
3>A current liability in the balance sheet.
4>A long-term liability in the balance sheet.
5>A permanent equity account in the balance sheet.
6>A revenue account in the income statement.
7>An expense account shown in the income statement.
8> Account does not appear in either the balance sheet or the income statement.
Accounts receivable
What was the fair value of the treasury stock exchanged for asset acquisitions for 2015?
Describe some key elements of an internal control system for cash.
FlexMotors, Inc. manufactures a variety of electronic drills and grass cutters. Recently,
it introduced a new line of handheld drills that generates much less noise and consumes
much less energy, but carries a much higher price tag. The company is currently
considering whether it should record $1.2 million of revenue upon shipment. Under the
contract, FlexMotors is obligated to accept any products from the distributors if they are
not sold within 6 months. The company is confident that the new model will sell, but is
unable to accurately estimate returns, because it has never sold anything quite like it.
Required: How much revenue should FlexMotors recognize upon shipment to
distributors?
On January 1, 2016, American Corporation purchased 25% of the outstanding voting
shares of Short Supplies common stock for $210,000 cash. On that date, Short’s book
value and fair value were both $840,000. The equity method is deemed appropriate for
this investment. Short’s net income reported on December 31, 2016, was $80,000.
During 2016, Short also paid cash dividends in the amount of $24,000.
Required:
Compute the amount that would be reported for the investment on American
Corporation’s financial statements at December 31, 2016.
Partial balance sheets and additional information are listed below for Monaco
Company.
Additional information for 2016:
Net income was $270,000.
Depreciation expense was $30,000.
Sales totaled $800,000.
Cost of goods sold totaled $305,000.
Required:
Prepare the summary entry for the amount of cash paid to merchandise suppliers during
2016.
Travis Transportation reported a net loss-AOCI in last year’s balance sheet. This year,
the company revised its estimate of future salary levels causing its PBO estimate to
decline by $12. Also, the $24 million actual return on plan assets was less than the $27
million expected return.
Required:
1) Prepare the appropriate journal entries to record the gain and loss.
2) How do this gain and loss affect Travis’ income statement, statement of
comprehensive income, and balance sheet?
On October 18, 2016, Flying Chicken sold 2,000 pounds of chicken to Healthier
Grocery for $3,400, subject to terms 2/10, n/30. Flying Chicken uses the gross method
of accounting for sales discounts.
Required:
1> Prepare the journal entry to record the sale.
2> Prepare the journal entry to record receipt of the payment, assuming the correct
amount was received on October 26, 2016.
3> Prepare the journal entry to record receipt of the payment, assuming the correct
amount was received on November 15, 2016.
