1) Which of the following is a reason for recasting prior financial statements based on
IFRS?
a.To increase the market value of a companys shares
b.To report a high income for attracting investors
c.To report a low taxable income reducing the tax liability
d.To provide financial statement users with comparable information
2) Recognition of tax benefits in the loss year due to a loss carryforward requires
a.the establishment of a deferred tax liability
b.the establishment of a deferred tax asset
c.the establishment of an income tax refund receivable
d.only a note to the financial statements
3) Which of the following should be reported as a prior period adjustment?
Change inChange from
Estimated LivesUnaccepted Principle
of Depreciable Assetsto Accepted Principle
a.YesYes
b.NoYes
c.YesNo
d.NoNo
4) The income statement of Dolan Corporation for 2014 included the following items:
Interest revenue$121,000
Salaries and wages expense180,000
Insurance expense18,200
The following balances have been excerpted from Dolan Corporation’s balance sheets:
December 31, 2014December 31, 2013
Interest receivable$18,200$15,000
Salaries and wages payable17,8008,400
Prepaid insurance2,2003,000
The cash received for interest during 2014 was
a.$102,800
b.$117,800
c.$121,000
d.$124,200
5) Which of the following items is a current liability?
a.Bonds (for which there is an adequate sinking fund properly classified as a long-term
investment) due in three months
b.Bonds due in three years
c.Bonds (for which there is an adequate appropriation of retained earnings) due in
eleven months
d.Bonds to be refunded when due in eight months, there being no doubt about the
marketability of the refunding issue
6) Assume that the following data relative to Kane Company for 2015 is available:
Net Income$2,800,000
Transactions in Common Shares ChangeCumulative
Jan. 1, 2015, Beginning number700,000
Mar. 1, 2015, Purchase of treasury shares(60,000)640,000
June 1, 2015, Stock split 2-1640,0001,280,000
Nov. 1, 2015, Issuance of shares240,0001,520,000
8% Cumulative Convertible Preferred Stock
Sold at par, convertible into 200,000 shares of common
(adjusted for split).$1,000,000
Stock Options
Exercisable at the option price of $25 per share. Average
market price in 2015, $30 (market price and option price
adjusted for split).90,000 shares
Instructions
(a)Compute the basic earnings per share for 2015 . (Round to the nearest penny.)
(b)Compute the diluted earnings per share for 2015 . (Round to the nearest penny.)
7) Which of the following is not a factor that is considered when evaluating whether or
not to record a liability for pending litigation?
a.Time period in which the underlying cause of action occurred
b.The type of litigation involved
c.The probability of an unfavorable outcome
d.The ability to make a reasonable estimate of the amount of the loss
8) Identify ( in accordance with FASB Statement No. 2 ) each of the following activities
as:
a.Research and development
b.Not research and development
1> Testing in search for, or evaluation of, product or process alternatives.
2> Cost of marketing research to promote new product.
3> Adaptation of an existing capability to a particular requirement or customer’s need.
4> Design, construction, and testing of pre-production prototypes and models.
5> Routine, on-going efforts to refine, enrich, or improve the qualities of an existing
product.
6> Engineering activity required to advance the design of a product to the
manufacturing stage.
7> Searching for applications of new research findings.
8> Laboratory research aimed at discovery of new knowledge.
9> Conceptual formulation and design of possible product or process alternatives.
10> Trouble-shooting break-downs during production.
11> Periodic design changes to existing products.
12> Quality control during commercial production including routine testing.
13> Costs of testing prototype and design modifications.
14> Engineering follow-through in an early phase of production.
15> Design, construction, and operation of a pilot plant not useful for commercial
production.
9) Minear Company reported net income of $450,000 for the year ended 12/31/15.
Included in the computation of net income were: depreciation expense, $60,000;
amortization of a patent, $32,000; income from an investment in common stock of Brett
Inc., accounted for under the equity method, $48,000; and amortization of a bond
discount, $12,000. Minear also paid an $80,000 dividend during the year. The net cash
provided by operating activities would be reported at
a.$506,000
b.$426,000
c.$394,000
d.$314,000
10) Which of the following is not an acceptable treatment for the presentation of
current liabilities?
a.Listing current liabilities in order of maturity
b.Listing current liabilities according to amount
c.Offsetting current liabilities against assets that are to be applied to their liquidation
d.Showing current liabilities immediately below current assets to obtain a presentation
of working capital
11) Ocean Company follows IFRS for its external financial reporting. Which of the
following methods of reporting are acceptable under IFRS for the items shown?
Interest paid Dividends paid
a. Operating Investing
b. Investing Financing
c. Financing Investing
d. Operating Financing
12) Which characteristic is not possessed by intangible assets?
a.Physical existence
b.Long-lived
c.Result in future benefits
d.Expensed over current and/or future years
13) Lawrence Company has cash in bank of $22,000, restricted cash in a separate
account of $4,000, and a bank overdraft in an account at another bank of $2,000.
Lawrence should report cash of
a.$20,000
b.$22,000
c.$25,000
d.$26,000
14) During 2015, equipment was sold for $312,000. The equipment cost $524,000 and
had a book value of $288,000. Accumulated DepreciationEquipment was $1,374,000 at
12/31/14 and $1,470,000 at 12/31/15. Depreciation expense for 2015 was
a.$96,000
b.$192,000
c.$332,000
d.$384,000
15) General-purpose financial statements are the product of
a.financial accounting
b.managerial accounting
c.both financial and managerial accounting
d.neither financial nor managerial accounting
16) Compensation expense resulting from a compensatory stock option plan is
generally
a.recognized in the period of exercise
b.recognized in the period of the grant
c.allocated to the periods benefited by the employee’s required service
d.allocated over the periods of the employee’s service life to retirement