1) In determining diluted earnings per share, dividends on nonconvertible cumulative
preferred stock should be
a.disregarded
b.added back to net income whether declared or not
c.deducted from net income only if declared
d.deducted from net income whether declared or not
2) Economic factors that shorten the service life of an asset include
a.obsolescence
b.supersession
c.inadequacy
d.all of these answers are correct
3) Surf Company follows IFRS for its external financial reporting. The following
amounts were available at December 31, 2015:
Interest received$25,000
Dividends received16,000
Under IFRS, what is the maximum amount that could be reported for cash provided by
operating activities for Surf Company for the year ended December 31, 2015?
a.$-0-
b.$25,000
c.$16,000
d.$41,000
4) Stech Co. is issuing $7.5 million 12% bonds in a private placement on July 1, 2014 .
Each $1,000 bond pays interest semi-annually on December 31 and June 30 of each
year. The bonds mature in ten years. At the time of issuance, the market interest rate for
similar types of bonds was 8%. What is the expected selling price of the bonds?
a.$9,538,574
b.$11,250,000
c.$9,512,998
d.$9,589,572
5) Goods in transit which are shipped f.o.b. shipping point should be
a.included in the inventory of the seller
b.included in the inventory of the buyer
c.included in the inventory of the shipping company
d.None of these answer choices are correct
6) Ludwig, Inc., which owes Giffin Co. $1,600,000 in notes payable, is in financial
difficulty. To eliminate the debt, Giffin agrees to accept from Ludwig land having a fair
value of $1,220,000 and a recorded cost of $900,000.
Instructions
(a)Compute the amount of gain or loss to Ludwig, Inc. on the transfer (disposition) of
the land.
(b)Compute the amount of gain or loss to Ludwig, Inc. on the restructuring of the debt.
(c)Prepare the journal entry on Ludwig ‘s books to record the restructuring of this debt.
(d)Compute the gain or loss to Giffin Co. from restructuring of its receivable from
Ludwig.
(e)Prepare the journal entry on Giffin’s books to record the restructuring of this
receivable.
7) The following information relates to the pension plan for the employees of Turner
Co.:
1/1/14 12/31/14 12/31/15
Accum. benefit obligation$6,160,000$6,440,000$8,400,000
Projected benefit obligation6,510,0006,972,0009,338,000
Fair value of plan assets5,950,0007,280,0008,036,000
AOCI – net (gain) or loss-0-(1,008,000)(1,120,000)
Settlement rate (for year)11%11%
Expected rate of return (for year)8%7%
Turner estimates that the average remaining service life is 16 years. Turner’s
contribution was $882,000 in 2015 and benefits paid were $658,000.
The amount of AOCI (net gain) amortized in 2015 is
a.$17,850
b.$17,500
c.$13,563
d.$11,638
8) At the end of the fiscal year, Apha Airlines has an outstanding non-cancellable
purchase commitment for the purchase of 1 million gallons of jet fuel at a price of $4.10
per gallon for delivery during the coming summer. The company prices its inventory at
the lower of cost or market. If the market price for jet fuel at the end of the year is
$4.50, how would this situation be reflected in the annual financial statements?
a.Record unrealized gains of $400,000 and disclose the existence of the purchase
commitment
b.No impact
c.Record unrealized losses of $400,000 and disclose the existence of the purchase
commitment
d.Only disclose the existence of the purchase commitment
9) Which of the following is an appropriate reconciling item to the balance per bank in
a
bank reconciliation?
a.Bank service charge
b.Deposit in transit
c.Bank interest
d.Chargeback for NSF check
10) Which of the following is a contra account?
a.Premium on bonds payable
b.Unearned revenue
c.Patents
d.Accumulated depreciation
11) Pierson Corporation owned 10,000 shares of Hunter Corporation. These shares were
purchased in 2011 for $90,000. On November 15, 2015, Pierson declared a property
dividend of one share of Hunter for every ten shares of Pierson held by a stockholder.
On that date, when the market price of Hunter was $28 per share, there were 90,000
shares of Pierson outstanding. What gain and net reduction in retained earnings would
result from this property dividend?
Gain Net Reduction in
Retained Earnings
a.$0$252,000
b.$0$ 81,000
c.$171,000$ 81,000
d.$171,000$ 36,000
12) On December 1, 2014, Richards Company sold some machinery to Fleming
Company. The two companies entered into an installment sales contract at a
predetermined interest rate. The contract required four equal annual payments with the
first payment due on December 1, 2014, the date of the sale. What present value
concept is appropriate for this situation?
a.Future amount of an annuity of 1 for four periods
b.Future amount of 1 for four periods
c.Present value of an ordinary annuity of 1 for four periods
d.Present value of an annuity due of 1 for four periods
13) Neutrality means that information
a.provides benefits which are at least equal to the costs of its preparation
b.can be compared with similar information about an enterprise at other points in time
c.would have no impact on a decision maker
d.cannot favor one set of interested parties over another