1) Under IFRS, interest revenue earned on specific borrowings for qualifying assets
a.reduces the cost of the qualifying asset
b.reduces interest expense reported on the income statement
c.increases equity in the period earned
d.increases the cost of the qualifying asset
2) During the first year of Wilkinson Co.’s operations, all purchases were recorded as
assets. Supplies in the amount of $25,800 were purchased. Actual year-end supplies
amounted to $5,600. The adjusting entry for store supplies will
a.increase net income by $20,200
b.increase expenses by $20,200
c.decrease supplies by $5,600
d.debit Accounts Payable for $5,600
3) A primary source of stockholders’ equity is
a.income retained by the corporation
b.appropriated retained earnings
c.contributions by stockholders
d.both income retained by the corporation and contributions by stockholders
4) The following information relates to Jackson, Inc.:
For the Year Ended December 31,
2014 2015
Plan assets (at fair value)$1,360,000$1,824,000
Pension expense570,000450,000
Projected benefit obligation1,620,0001,934,000
Annual contribution to plan600,000450,000
Accumulated OCI (PSC)480,000420,000
The amount reported as the liability for pensions on the December 31, 2015 balance
sheet is
a.$ -0-
b.$110,000
c.$1,934,000
d.$420,000
5) Siegle Company exchanged 1,000 shares of Guinn Company common stock, which
Siegle was holding as an investment, for equipment from Mayo Company. The Guinn
Company common stock, which had been purchased by Siegle for $50 per share, had a
quoted market value of $58 per share at the date of exchange. The equipment had a
recorded amount on Mayo’s books of $52,500. What journal entry should Siegle make
to record this exchange?
a.Equipment 50,000
Investment in Guinn Co. Common Stock 50,000
b.Equipment 52,500
Investment in Guinn Co. Common Stock 50,000
Gain on Disposal of Investment 2,500
c.Equipment 52,500
Loss on Disposal of Investment 5,500
Investment in Guinn Co. Common Stock 58,000
d.Equipment 58,000
Investment in Guinn Co. Common Stock 50,000
Gain on Disposal of Investment 8,000
6) The basis for classifying assets as current or noncurrent is conversion to cash within
a.the accounting cycle or one year, whichever is shorter
b.the operating cycle or one year, whichever is longer
c.the accounting cycle or one year, whichever is longer
d.the operating cycle or one year, whichever is shorter
7) Belgium Co. is constructing a tunnel for $600 million. Construction began in 2013
and is estimated to be completed in 2018 . At December 31, 2015, Belgium has incurred
costs totaling $267 million with $64 million of that incurred in 2015, $107 million in
2014, and the remainder during 2013 . Belgium believes that it completed 30% of the
tunnel during 2015, although that may change based on future activity. Belgium Co.
uses IFRS for its accounting and regards its cost numbers as very uncertain. What
amount of revenue should Belgium Co. recognize for the year ended December 31,
2016?
a.No revenue should be recognized until the contract is completed in 2018
b.$267 million
c.$180 million
d.$64 million
8) Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the
operation of the plan for the year 2015.
Service cost$ 230,000
Contributions to the plan220,000
Actual return on plan assets180,000
Projected benefit obligation (beginning of year)2,400,000
Fair value of plan assets (beginning of year)1,600,000
The expected return on plan assets and the settlement rate were both 10%. The amount
of pension expense reported for 2015 is
a.$230,000
b.$290,000
c.$310,000
d.$470,000
9) The balance in Moon Co.’s accounts payable account at December 31, 2014 was
$950,000 before any necessary year-end adjustments relating to the following:
Goods were in transit to Moon from a vendor on December 31, 2014. The invoice cost
was $40,000. The goods were shipped f.o.b. shipping point on December 29, 2014 and
were received on January 4, 2015 .
Goods shipped f.o.b. destination on December 21, 2014 from a vendor to Moon were
received on January 6, 2015 . The invoice cost was $25,000.
On December 27, 2014, Moon wrote and recorded checks to creditors totaling $30,000
that were mailed on January 10, 2015 .
In Moon’s December 31, 2014 balance sheet, the accounts payable should be
a.$ 980,000
b.$ 990,000
c.$1,015,000
d.$1,020,000
10) Panda Corporation paid cash of $60,000 on June 1, 2014 for one years rent in
advance and recorded the transaction with a debit to Prepaid Rent. The December 31,
2014 adjusting entry is
a.debit Prepaid Rent and credit Rent Expense, $25,000
b.debit Prepaid Rent and credit Rent Expense, $35,000
c.debit Rent Expense and credit Prepaid Rent, $35,000
d.debit Prepaid Rent and credit Cash, $25,000
11) Roxy Co., which has a taxable payroll of $600,000, is subject to FUTA tax of 6.2%
and a state contribution rate of 5.4%. However, because of stable employment
experience, the companys state rate has been reduced to 2%. What is the total amount
of federal and state unemployment tax for Roxy Co.?
a.$70,200
b.$49,200
c.$24,000
d.$16,800
12) Richman Company purchased $900,000 of 8%, 5-year bonds from Carlin, Inc. on
January 1, 2014, with interest payable on July 1 and January 1 . The bonds sold for
$937,422 at an effective interest rate of 7%. Using the effective interest method,
Richman Company decreased the Available-for-Sale Debt Securities account for the
Carlin, Inc. bonds on July 1, 2014 and December 31, 2014 by the amortized premiums
of $3,186 and $3,294, respectively.
At December 31, 2014, the fair value of the Carlin, Inc. bonds was $954,000. What
should Richman Company report as other comprehensive income and as a separate
component of stockholders equity?
a.$0
b.$6,480
c.$16,578
d.$23,058