1) Which of the following statements is true about postretirement health care benefits?
a.They are generally funded
b.The benefits are well-defined and level in dollar amount
c.The beneficiary is the retiree, spouse, and other dependents
d.The benefit is payable monthly
2) Boxer Inc. reported inventory at the beginning of the current year of $360,000 and at
the end of the current year of $411,000. If net sales for the current year are $4,429,200
and the corresponding cost of sales totaled $3,758,800, what is the inventory turnover
ratio for the current year?
a.11.48
b.9.15
c.10.44
d.9.75
3) The 2014 financial statements of Sito Company reported a beginning inventory of
$80,000, an ending inventory of $120,000, and cost of goods sold of $900,000 for the
year. Sitos inventory turnover ratio for 2014 is
a.11.3 times
b.9.0 times
c.7.5 times
d.6.5 times
4) Is the following exception applicable to IFRS or U.S. GAAP?
If determining the effect of a correction of an error is considered impracticable, then a
company should report the effect of the error correction in the period in which it
believes it practicable to do so.
IFRSU.S. GAAP
a. YesYes
b. Yes No
c. No Yes
d. NoNo
5) Ethan has $160,000 to invest today at an annual interest rate of 4%. Approximately
how many years will it take before the investment grows to $324,000?
a.18 years
b.20 years
c.16 years
d.11 years
6) A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1,
2014 . Interest is paid on June 30 and December 31 . The proceeds from the bonds are
$9,802,072. Using effective-interest amortization, how much interest expense will be
recognized in 2014?
a.$390,000
b.$780,000
c.$784,249
d.$784,166
7) Under IFRS, Sampson Company, who has a non-current asset which has been
classified as held-for-sale, should
a.test the asset’s value monthly for impairment
b.value the asset at its depreciated historical cost
c.depreciate the asset over its remaining life
d.not depreciate the asset
8) Moon Inc. factors $2,000,000 of its accounts receivables with recourse for a finance
charge of 4%. The finance company retains an amount equal to 8% of the accounts
receivable for possible adjustments. Moon estimates the fair value of the recourse
liability at $200,000. What would be the debit to Cash in the journal entry to record this
transaction?
a.$2,000,000
b.$1,920,000
c.$1,760,000
d.$1,560,000
9) Ace Co. prepared an aging of its accounts receivable at December 31, 2014 and
determined that the net realizable value of the receivables was $600,000. Additional
information is available as follows:
Allowance for uncollectible accounts at 1/1/14credit balance$ 68,000
Accounts written off as uncollectible during 201446,000
Accounts receivable at 12/31/14650,000
Uncollectible accounts recovered during 201410,000
For the year ended December 31, 2014, Ace’s uncollectible accounts expense would be
a.$50,000
b.$46,000
c.$32,000
d.$18,000
10) IFRS generally assumes that all restructurings be accounted for as:
a.extinguishments of debt
b.loss on debt
c.amortization expense
d.bad-debt expense
11) What is not a variable that is considered in interest computations?
a.Principal
b.Interest rate
c.Assets
d.Time
12) Pine Leasing Company purchased specialized equipment from Wayne Company on
December 31, 2013 for $800,000. On the same date, it leased this equipment to Sears
Company for 5 years, the useful life of the equipment. The lease payments begin
January 1, 2014 and are made every 6 months until July 1, 2018 . Pine Leasing wants to
earn 10% annually on its investment.
Various Factors at 10%
PeriodsFuturePresentFuture Value of anPresent Value of an
or RentsValue of $1Value of $1Ordinary AnnuityOrdinary Annuity
92.35795.4241013.579485.75902
102.59374.3855415.937426.14457
112.85312.3504918.531176.49506
Various Factors at 5%
PeriodsFuturePresentFuture Value of anPresent Value of an
or RentsValue of $1Value of $1Ordinary AnnuityOrdinary Annuity
91.55133.6446111.026567.10782
101.62889.6139112.577897.72173
111.71034.5846814.206798.30641
Instructions
(a)Calculate the amount of each rent.
(b)How much interest revenue will Pine earn in 2014?
13) Information concerning the capital structure of Piper Corporation is as follows:
December 31,
20152014
Common stock150,000 shares150,000 shares
Convertible preferred stock15,000 shares15,000 shares
6% convertible bonds$2,400,000$2,400,000
During 2015, Piper paid dividends of $0.60 per share on its common stock and $1.50
per share on its preferred stock. The preferred stock is convertible into 30,000 shares of
common stock. The 6% convertible bonds are convertible into 75,000 shares of
common stock. The net income for the year ended December 31, 2015, was $300,000.
Assume that the income tax rate was 30%.
What should be the diluted earnings per share for the year ended December 31, 2015,
rounded to the nearest penny?
a.$1.74
b.$1.57
c.$1.33
d.$1.78
14) Ernst Company purchased equipment that cost $2,250,000 on January 1, 2014 . The
entire cost was recorded as an expense. The equipment had a nine-year life and a
$90,000 residual value. Ernst uses the straight-line method to account for depreciation
expense. The error was discovered on December 10, 2016 . Ernst is subject to a 40%
tax rate.
Before the correction was made and before the books were closed on December 31,
2016, retained earnings was understated by
a.$996,000
b.$1,008,000
c.$1,062,000
d.$1,350,000
15) At the date of the financial statements, common stock shares issued would exceed
common stock shares outstanding as a result of the
a.declaration of a stock split
b.declaration of a stock dividend
c.purchase of treasury stock
d.payment in full of subscribed stock
16) Cortez Company issues $4,000,000 face value of bonds at 96 on January 1, 2013 .
The bonds are dated January 1, 2013, pay interest semiannually at 8% on June 30 and
December 31, and mature in 10 years. Straight-line amortization is used for discounts
and premiums. On September 1, 2016, $2,400,000 of the bonds are called at 102 plus
accrued interest. What gain or loss would be recognized on the called bonds on
September 1, 2016?
a.$240,000 loss
b.$108,800 loss
c.$144,000 loss
d.$181,000 loss