1) which of the following methods of determining bad debt expense does not properly
match expense and revenue?
a.charging bad debts with a percentage of sales under the allowance method
b.charging bad debts with an amount derived from a percentage of accounts receivable
under the allowance method
c.charging bad debts with an amount derived from aging accounts receivable under the
allowance method
d.charging bad debts as accounts are written off as uncollectible
2) lopez corp. incurred $1,260,000 of research and development costs to develop a
product for which a patent was granted on january 2, 2008. legal fees and other costs
associated with registration of the patent totaled $240,000. on march 31, 2013, lopez
paid $450,000 for legal fees in a successful defense of the patent. the total amount
capitalized for the patent through march 31, 2013 should be
a.$690,000
b. $1,500,000
c.$1,710,000
d.$1,950,000
3) milo co. had 800,000 shares of common stock outstanding on january 1, issued
126,000 shares on may 1, purchased 63,000 shares of treasury stock on september 1,
and issued 54,000 shares on november 1. the weighted average shares outstanding for
the year is
a.851,000
b.872,000
c.893,000
d.914,000
4) braun, inc. appropriately uses the installment-sales method of accounting to
recognize income in its financial statements. some pertinent data relating to this method
of accounting include:
what amount of installment accounts receivable should be presented in braun’s
december 31, 2013 balance sheet?
a.$720,000
b.$810,000
c.$780,000
d.$866,666
5) similarities between ifrs and u.s. gaap requirements for balance sheet presentation
include all of the following except:
a.both require that changes to the valuation reserve be disclosed in the notes to the
financial statements
b.both require disclosure of significant accounting policies
c.both require the preparation of financial statements annually
d.both generally require the use of the current/ non-current classification for both assets
and liabilities
6) apb opinion no. 21 specifies that, regarding the amortization of a premium or
discount on a debt security, the
a.effective-interest method of allocation must be used
b.straight-line method of allocation must be used
c.effective-interest method of allocation should be used but other methods can be
applied if there is no material difference in the results obtained
d.par value method must be used and therefore no allocation is necessary
7) on may 1, 2012, marly co. issued $1,000,000 of 7% bonds at 103, which are due on
april 30, 2022. twenty detachable stock warrants entitling the holder to purchase for $40
one share of marlys common stock, $15 par value, were attached to each $1,000 bond.
the bonds without the warrants would sell at 96. on may 1, 2012, the fair value of
marlys common stock was $35 per share and of the warrants was $2.
on may 1, 2012, marly should credit paid-in capital from stock warrants for
a.$70,000
b.$41,200
c.$40,000
d.$38,400
8) when an item of revenue or expense has been earned or incurred but not yet collected
or paid, it is normally called a(n) ____________ revenue or expense.
a.prepaid
b.adjusted
c.estimated
d.none of these
9) gannon company acquired 8,000 shares of its own common stock at $20 per share on
february 5, 2012, and sold 4,000 of these shares at $27 per share on august 9, 2013. the
fair value of gannon’s common stock was $24 per share at december 31, 2012, and $25
per share at december 31, 2013. the cost method is used to record treasury stock
transactions. what account(s) should gannon credit in 2013 to record the sale of 4,000
shares?
a.treasury stock for $108,000
b.treasury stock for $80,000 and paid-in capital from treasury stock for $28,000
c.treasury stock for $80,000 and retained earnings for $28,000
d.treasury stock for $96,000 and retained earnings for $12,000
10) lohmeyer corporation reports:
what is lohmeyers ending cash balance?
a.$250,000
b.$320,000
c.$470,000
d.$540,000
11) on january 1, 2012, guzman company purchased a machine costing $250,000. the
machine is in the macrs 5-year recovery class for tax purposes and has an estimated
$50,000 salvage value at the end of its economic life.
assuming the company uses the general macrs approach, the amount of macrs deduction
for tax purposes for the year 2012 is
a.$50,000
b.$100,000
c.$80,000
d.$40,000
12) bishop co. began operations on january 1, 2012. financial statements for 2012 and
2013 con- tained the following errors:
in addition, on december 31, 2013 fully depreciated equipment was sold for $28,800,
but the sale was not recorded until 2014. no corrections have been made for any of the
errors. ignore income tax considerations.
the total effect of the errors on bishop’s 2013 net income is
a.understated by $386,800
b.understated by $254,800
c.overstated by $137,200
d.overstated by $269,200
13) kaniper company has the following items at year-end:
kaniper should report cash and cash equivalents of
a.$30,000
b.$30,300
c.$35,800
d.$37,200
14) in 2012, benfer corporation reported net income of $280,000. it declared and paid
common stock dividends of $32,000 and had a weighted average of 70,000 common
shares outstanding. compute the earnings per share to the nearest cent.
a.$3.54
b.$2.80
c.$3.60
d.$4.00
15) on july 1, 2012, gonzalez corporation purchased factory equipment for $225,000.
salvage value was estimated to be $6,000. the equipment will be depreciated over ten
years using the double-declining balance method. counting the year of acquisition as
one-half year, gonzalez should record depreciation expense for 2013 on this equipment
of
a.$45,000
b.$40,500
c.$39,420
d.$36,000