1) depreciation is based on the decline in the fair market value of the asset.
2) ifrs differs from u.s. gaap in the development phase in that costs are capitalized once
technological feasibility is achieved.
3) users of financial accounting statements have both coinciding and conflicting needs
for information of various types.
4) an asset which is expected to be converted into cash, sold, or consumed within one
year of the balance sheet date is always reported as a current asset.
5) for counterbalancing errors, restatement of comparative financial statements is
necessary even if a correcting entry is not required.
6) freight charges on goods purchased are considered a period cost and therefore are not
part of the cost of the inventory.
7) the historical cost principle would be of limited usefulness if not for the going
concern assumption.
8) the international accounting standards board issues international financial reporting
standards.
9) under ias 37 and the establishment of estimate provisions, discounting is required
where the time value of money is material.
10) financial accounting concepts set forth fundamental objectives and concepts that are
used in developing future standards of financial accounting and reporting.
11) companies report the amount of social security taxes withheld from employees as
well as the companies matching portion as current liabilities until they are remitted.
12) which of the following would not be a correct form for an adjusting entry?
a.a debit to a revenue and a credit to a liability
b.a debit to an expense and a credit to a liability
c.a debit to a liability and a credit to a revenue
d.a debit to an asset and a credit to a liability
13) dot point, inc. is a retailer of washers and dryers and offers a three-year service
contract on each appliance sold. although dot point sells the appliances on an
installment basis, all service contracts are cash sales at the time of purchase by the
buyer. collections received for service contracts should be recorded as
a.service revenue
b.deferred service revenue
c.a reduction in installment accounts receivable
d.a direct addition to retained earnings
14) when a note payable is exchanged for property, goods, or services, the stated
interest rate is presumed to be fair unless
a.no interest rate is stated
b.the stated interest rate is unreasonable
c.the stated face amount of the note is materially different from the current cash sales
price for similar items or from current fair value of the note
d.any of these
15) on the december 31, 2012 balance sheet of vanoy co., the current receivables
consisted of the following:
at december 31, 2012, the correct total of vanoy’s current net receivables was
a.$61,000
b.$87,000
c.$91,000
d.$117,000
16) fox co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. the
bonds are sold to yield 8%.
one step in calculating the issue price of the bonds is to multiply the principal by the
table value for
a.10 periods and 10% from the present value of 1 table
b.20 periods and 5% from the present value of 1 table
c.10 periods and 8% from the present value of 1 table
d.20 periods and 4% from the present value of 1 table
17) if kiner uses the percentage-of-completion method, the gross profit to be recognized
in 2012 is
a.$2,160,000
b.$2,400,000
c.$3,240,000
d.$3,600,000
18) dublin co. holds a 30% stake in club co. which was purchased in 2013 at a cost of
$3,000,000. after applying the equity method, the investment in club co. account has a
balance of $3,040,000. at december 31, 2013 the fair value of the investment is
$3,120,000. which of the following values is acceptable for dublin to use in its balance
sheet at december 31, 2013?
i.$3,000,000
ii.$3,040,000
iii.$3,120,000
a.i, ii, or iii
b.i or ii only
c.ii only
d.ii or iii only
19) minear company reported net income of $390,000 for the year ended 12/31/13.
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.$446,000
b.$366,000
c.$334,000
d.$254,000
20) when treasury stock is purchased for more than the par value of the stock and the
cost method is used to account for treasury stock, what account(s) should be debited?
a.treasury stock for the par value and paid-in capital in excess of par for the excess of
the purchase price over the par value
b.paid-in capital in excess of par for the purchase price
c.treasury stock for the purchase price
d.treasury stock for the par value and retained earnings for the excess of the purchase
price over the par value
21) on january 1, 2010, nobel corporation acquired machinery at a cost of $800,000.
nobel adopted the straight-line method of depreciation for this machine and had been
recording depreciation over an estimated life of ten years, with no residual value. at the
beginning of 2013, a decision was made to change to the double-declining balance
method of depreciation for this machine.
assuming a 30% tax rate, the cumulative effect of this accounting change on beginning
retained earnings, is
a.$89,600
b.$0
c.$105,280
d.$150,400
22) which of the following is an acceptable method of presenting the income statement?
a.a single-step income statement
b.a multiple-step income statement
c.a consolidated statement of income
d.all of these
23) john jones won a lottery that will pay him $2,000,000 after twenty years. assuming
an appropriate interest rate is 5% compounded annually, what is the present value of
this amount?
a.$2,000,000
b.$5,306,600
c.$24,924,420
d.$753,780
24) hay company had january 1 inventory of $120,000 when it adopted dollar-value
lifo. during the year, purchases were $720,000 and sales were $1,200,000. december 31
inventory at year-end prices was $151,800, and the price index was 110.
what is hay companys ending inventory?
a.$132,000
b.$138,000
c.$139,800
d.$151,800
25) on may 1, 2012, goodman company began construction of a building. expenditures
of $240,000 were incurred monthly for 5 months beginning on may 1. the building was
completed and ready for occupancy on september 1, 2012. for the purpose of
determining the amount of interest cost to be capitalized, the average accumulated
expenditures on the building during 2012 were
a.$200,000
b.$240,000
c.$960,000
d.$1,200,000
26) eaton company, which uses the retail lifo method to determine inventory cost, has
provided the following information for 2012:
assuming that the price index was 105 at december 31, 2012 and 100 at january 1, 2012,
what is the cost of eaton’s inventory at december 31, 2012 under the dollar-value-lifo
retail method?
a.$200,535
b.$208,372
c.$210,458
d.$197,700
27) on may 5, 2013, macdougal corp. exchanged 6,000 shares of its $25 par value
treasury common stock for a patent owned by masset co. the treasury shares were
acquired in 2012 for $135,000. at may 5, 2013, macdougal’s common stock was quoted
at $34 per share, and the patent had a carrying value of $165,000 on masset’s books.
macdougal should record the patent at
a.$135,000
b.$150,000
c.$165,000
d.$204,000
28) which of the following disclosures is required for a change from lifo to fifo?
a.the cumulative effect on prior years, net of tax, in the current retained earnings
statement
b.the justification for the change
c.restated prior year income statements
d.all of these are required.
29) under what conditions is an employer required to accrue a liability for sick pay?
a.sick pay benefits can be reasonably estimated
b.sick pay benefits vest
c.sick pay benefits equal 100% of the pay
d.sick pay benefits accumulate
30) jeff corporation purchased a limited-life intangible asset for $150,000 on may 1,
2010. it has a useful life of 10 years. what total amount of amortization expense should
have been recorded on the intangible asset by december 31, 2012?
a.$ -0-
b.$30,000
c.$40,000
d.$45,000
31) an expenditure made in connection with a machine being used by an enterprise
should be
a.expensed immediately if it merely extends the useful life but does not improve the
quality
b.expensed immediately if it merely improves the quality but does not extend the useful
life
c.capitalized if it maintains the machine in normal operating condition
d.capitalized if it increases the quantity of units produced by the machine
32) under statements of financial accounting concepts, comprehensive income includes
which of the following?
33) jerome co. has the following deferred tax liabilities at december 31, 2012:
what amount would jerome co. report as a noncurrent deferred tax liability under ifrs
and under u.s. gaap?
34) stinson corporation owned 30,000 shares of matile corporation. these shares were
purchased in 2009 for $270,000. on november 15, 2013, stinson declared a property
dividend of one share of matile for every ten shares of stinson held by a stockholder. on
that date, when the market price of matile was $21 per share, there were 270,000 shares
of stinson outstanding. what gain and net reduction in retained earnings would result
from this property dividend?
35) the december 31, 2012 inventory of gwynn company consisted of four products, for
which certain information is provided below.
instructions
using the lower-of-cost-or-market approach applied on an individual-item basis,
compute the inventory valuation that should be reported for each product on december
31, 2012.
36) cheng company has recently decided to accept a proposal from the city of bel aire
that publicly owned property with a large warehouse located on it will be donated to
cheng if cheng will build a branch plant in bel aire. the appraised value of the property
is $350,000 and of the warehouse is $700,000.
instructions
prepare the entry by cheng for the receipt of the properties.
37) dodson company traded in a manual pressing machine for an automated pressing
machine and gave $16,000 cash. the old machine cost $186,000 and had a net book
value of $142,000. the old machine had a fair value of $120,000.
which of the following is the correct journal entry to record the exchange?
