1) significant financing and investing activities that do not affect cash are not reported
in the statement of cash flows or any other place.
2) under ifrs compliance requirements the revaluation surplus is not considered
contributed capital.
3) the iasb has also issued a conceptual framework and the fasb and the iasb have
agreed to develop a common conceptual framework.
4) companies should consider both positive and negative evidence to determine whether
it needs to record a valuation allowance to reduce a deferred tax asset.
5) the first level of the conceptual framework identifies the recognition, measurement,
and disclosure concepts used in establishing accounting standards.
6) trade receivables include notes receivable and advances to officers and employees.
7) the future value of a single sum is determined by multiplying the future value factor
by its present value.
8) dividends declared on common and preferred stock are subtracted from net income in
the computation of earnings per share.
9) the principal advantage of the completed-contract method is that reported revenue
reflects final results rather than estimates.
10) the loss to be recognized by a creditor on an impaired loan is the difference between
the investment in the loan and the expected undiscounted future cash flows from the
loan.
11) companies account for a change in depreciation methods as a change in accounting
principle.
12) negative goodwill arises when the ______________ of the net assets acquired is
higher than the purchase price of the assets.
a.useful life
b.carrying value
c.fair value
d.excess earnings
13) which of the following best exemplifies a contingency that is reported in the notes
to the financial statements?
a.losses from potential future lawsuits
b.loss from a lawsuit settled out of court prior to the end of the fiscal year
c.warranty claims on future sales
d.estimated loss from an ongoing lawsuit
14) didde corp. prepared the following reconciliation of income per books with income
per tax return for the year ended december 31, 2013:
didde’s effective income tax rate is 34% for 2013. what amount should didde report in
its 2013 income statement as the current provision for income taxes?
a.$54,400
b.$346,800
c.$510,000
d.$564,400
15) jamison corp.’s balance sheet accounts as of december 31, 2013 and 2012 and
information relating to 2013 activities are presented below.
information relating to 2013 activities:
net income for 2013 was $1,500,000.
cash dividends of $600,000 were declared and paid in 2013.
equipment costing $1,000,000 and having a carrying amount of $320,000 was sold in
2013 for $360,000.
a long-term investment was sold in 2013 for $320,000. there were no other transactions
affecting long-term investments in 2013.
20,000 shares of common stock were issued in 2013 for $25 a share.
short-term investments consist of treasury bills maturing on 6/30/14.
net cash used in jamisons 2013 investing activities was
a.$2,320,000
b.$1,820,000
c.$1,680,000
d.$1,720,000
16) eilert construction company had a contract starting april 2013, to construct a
$18,000,000 building that is expected to be completed in september 2014, at an
estimated cost of $16,500,000. at the end of 2013, the costs to date were $7,590,000 and
the estimated total costs to complete had not changed. the progress billings during 2013
were $3,600,000 and the cash collected during 2013 was $2,400,000. eilert uses the
percentage-of-completion method.
for the year ended december 31, 2013, eilert would recognize gross profit on the
building of
a.$0
b.$632,500
c.$690,000
d.$810,000
17) financial statements in the early 2000s provide information related to
a.nonfinancial measurements
b.forward-looking data
c.hard assets (inventory and plant assets)
d.none of these
18) during 2012 logic company purchased 6,000 shares of midi, inc. for $30 per share.
the investment was classified as a trading security. during the year logic company sold
1,500 shares of midi, inc. for $35 per share. at december 31, 2012 the market price of
midi, inc.s stock was $28 per share. what is the total amount of gain/(loss) that logic
company will report in its income statement for the year ended december 31, 2012
related to its investment in midi, inc. stock?
a.($12,000)
b.$7,500
c.($4,500)
d.($1,500)
19) milford company had 400 units of tank in its inventory at a cost of $8 each. it
purchased 600 more units of tank at a cost of $12 each. milford then sold 700 units at a
selling price of $20 each. the lifo liquidation overstated normal gross profit by
a.$ -0-
b.$400
c.$800
d.$1,200
20) the use of a purchase discounts account implies that the recorded cost of a
purchased inventory item is its
a.invoice price
b.invoice price plus any purchase discount lost
c.invoice price less the purchase discount taken
d.invoice price less the purchase discount allowable whether taken or not
21) at 12/31/12, the end of jenner company’s first year of business, inventory was
$4,100 and $2,800 at cost and at market, respectively.
following is data relative to the 12/31/13 inventory of jenner:
selling price is $1.00/unit for all items. disposal costs amount to 10% of selling price and a
“normal” profit is 30% of selling price. there are 1,000 units of each item in the 12/31/13
inventory.
instructions
(a)prepare the entry at 12/31/12 necessary to implement the lower-of-cost-or-market
procedure assuming jenner uses a contra account for its balance sheet.
(b)complete the last three columns in the 12/31/13 schedule above based upon the
lower-of-cost-or-market rules.
(c)prepare the entry(ies) necessary at 12/31/13 based on the data above.
(d)how are inventory losses disclosed on the income statement?
22) which of the following is not true about the discount on short-term notes payable?
a.the discount on notes payable account has a debit balance
b.the discount on notes payable account should be reported as an asset on the balance
sheet
c.when there is a discount on a note payable, the effective interest rate is higher than the
stated discount rate
d.all of these are true
23) a general description of the depreciation methods applicable to major classes of
depreciable assets
a.is not a current practice in financial reporting
b.is not essential to a fair presentation of financial position
c.is needed in financial reporting when company policy differs from income tax policy
d.should be included in corporate financial statements or notes thereto
24) briefly discuss the implications of the financial statement presentation project for
the reporting of stockholders equity.
25) foltz corp.’s 2012 income statement had pretax financial income of $250,000 in its
first year of operations. foltz uses an accelerated cost recovery method on its tax return
and straight-line depreciation for financial reporting. the differences between the book
and tax deductions for depreciation over the five-year life of the assets acquired in
2012, and the enacted tax rates for 2012 to 2016 are as follows:
there are no other temporary differences. in foltz’s december 31, 2012 balance sheet, the
noncurrent deferred income tax liability and the income taxes currently payable should
be
26) what are the major characteristics of plant assets?
27) wilcox corporation had income from continuing operations of $750,000 (after
taxes) in 2012. in addition, the following information, which has not been considered, is
as follows.
1>in 2012, wilcox experienced an uninsured earthquake loss in the amount of $240,000.
2>a machine was sold for $140,000 cash during the year at a time when its book value
was $110,000. (depreciation has been properly recorded.) the company often sells
machinery of this type.
3>wilcox decided to discontinue its stereo division in 2012. during the current year, the
loss on the disposal of this component of the business was $150,000 less applicable
taxes.
instructions
present in good form the income statement of wilcox corporation for 2012 starting with
“income from continuing operations.” assume that wilcox’s tax rate is 30% and 200,000
shares of com-mon stock were outstanding during the year.
28) rojas company purchased for $3,800,000 a mine estimated to contain 2 million tons
of ore. when the ore is completely extracted, it was expected that the land would be
worth $200,000. a building and equipment costing $1,800,000 were constructed on the
mine site, and they will be completely used up and have no salvage value when the ore
is exhausted. during the first year, 750,000 tons of ore were mined, and $300,000 was
spent for labor and other operating costs.
instructions
compute the total cost per ton of ore mined in the first year. (show computations by
setting up a schedule giving cost per ton.)
29) prepare journal entries to record the following retirement. (show computations and
round to the nearest dollar.)
the december 31, 2012 balance sheet of wolfe co. included the following items:
the bonds were issued on december 31, 2010 at 95, with interest payable on june 30 and
december 31. (use straight-line amortization.)
on april 1, 2013, wolfe retired $320,000 of these bonds at 101 plus accrued interest.
30) operating income and tax rates for c.j. companys first three years of operations were
as
follows:
assuming that c.j. company opts only to carryforward its 2013 nol, what is the amount
of deferred tax asset or liability that c.j. company would report on its december 31,
2013 balance sheet?
31)
32) presented below is information related to farr company.
retained earnings, december 31, 2012$ 650,000
sales revenue1,400,000
selling and administrative expenses240,000
hurricane loss (pre-tax) on plant (extraordinary item)270,000
cash dividends declared on common stock33,600
cost of goods sold830,000
gain resulting from computation error on depreciation charge in 2011 (pre-tax)520,000
other revenue120,000
other expenses100,000
instructions
prepare in good form a multiple-step income statement for the year 2013. assume a 30%
tax rate and that 80,000 shares of common stock were outstanding during the year.
33)
during periods of rising prices, the use of fifo (as compared with lifo) will result in what
effect on the financial statements?