1) on january 3, 2011, munoz co. purchased machinery. the machinery has an estimated
useful life of eight years and an estimated salvage value of $60,000. the depreciation
applicable to this machinery was $130,000 for 2013, computed by the
sum-of-the-years’-digits method. the acquisition cost of the machinery was
a.$720,000
b.$780,000
c.$840,000
d.$936,000
2) the following information relates to moore company’s inventory:
cost of inventory = $860
selling price of inventory = $1,000
normal profit margin = 10% of selling price
current replacement cost = $740
cost of completion and disposal = $100
under ifrs, which of the following would be the correct measurement value for the
inventory?
a.$860
b.$740
c.$1,000
d.$900
3) harrison co. owns 20,000 of the 50,000 outstanding shares of taylor, inc. common
stock. during 2013, taylor earns $1,200,000 and pays cash dividends of $960,000.
if the beginning balance in the investment account was $750,000, the balance at
december 31, 2013 should be
a.$1,230,000
b.$990,000
c.$846,000
d.$750,000
4) arlington company is constructing a building. construction began on january 1 and
was completed on december 31. expenditures were $4,000,000 on march 1, $3,300,000
on june 1, and $5,000,000 on december 31. arlington company borrowed $2,000,000 on
january 1 on a 5-year, 12% note to help finance construction of the building. in
addition, the company had outstanding all year a 10%, 3-year, $4,000,000 note payable
and an 11%, 4-year, $7,500,000 note payable.
what is the avoidable interest for arlington company?
a.$240,000
b.$773,013
c.$273,802
d.$587,012
5) olsen company paid or collected during 2012 the following items:
the following balances have been excerpted from olsen’s balance sheets:
salaries expense on the income statement for 2012 was
a.$194,600
b.$237,000
c.$243,800
d.$286,200
6) indicate the major section or subsection of a multiple-step income statement in which
each of the following items would usually appear:
a.advertising
b.depletion
c.dividend revenue
d.freight-in
e.loss on disposal of a component of the business, net of tax
f.income taxes on income
g.major casualty loss, net of tax
h.purchase discounts
i.sales discounts
j.officers’ salaries
k.freight-out
l.interest income
7) which of the following is not a required component of financial statements prepared
in accordance with generally accepted accounting principles?
a.president’s letter to shareholders
b.balance sheet
c.income statement
d.notes to financial statements
8) in 2004, horton company purchased a tract of land as a possible future plant site. in
january, 2012, valuable sulphur deposits were discovered on adjoining property and
horton company immediately began explorations on its property. in december, 2012,
after incurring $800,000 in exploration costs, which were accumulated in an expense
account, horton discovered sulphur deposits appraised at $4,500,000 more than the
value of the land. to record the discovery of the deposits, horton should
a.make no entry
b.debit $800,000 to an asset account
c.debit $4,500,000 to an asset account
d.debit $5,300,000 to an asset account
9) 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
10) the adjusted trial balance for lifesaver corp. at the end of the current year, 2012,
contained the following accounts.
the total long-term liabilities reported on the balance sheet are
a.$2,365,000
b.$2,350,000
c.$2,465,000
d.$2,450,000
11) the supplies account had a balance at the beginning of year 3 of $8,000 (before the
reversing entry). payments for purchases of supplies during year 3 amounted to $50,000
and were recorded as expense. a physical count at the end of year 3 revealed supplies
costing $9,500 were on hand. reversing entries are used by this company. the required
adjusting entry at the end of year 3 will include a debit to:
a.supplies expense for $1,500
b.supplies for $1,500
c.supplies expense for $48,500
d.supplies for $9,500
12) opera corp. uses the dollar-value lifo method of computing its inventory cost. data
for the past four years is as follows:
what is the 2011 inventory balance using dollar-value lifo?
a.$130,000
b.$123,808
c.$245,454
d.$270,000
13) what are compensated absences?
a.unpaid time off
b.a form of healthcare
c.payroll deductions
d.paid time off
14) geller inc. incurred $700,000 of capitalizable costs to develop computer software
during 2012. the software will earn total revenues over its 4-year life as follows: 2012 –
$400,000; 2013 – $500,000; 2014 – $600,000; and 2015 – $500,000. what amount of the
computer software costs should be expensed in 2012?
a.$700,000
b.$140,000
c.$175,000
d.$245,000
15) what is a contingency?
a.an existing situation where certainty exists as to a gain or loss that will be resolved
when one or more future events occur or fail to occur
b.an existing situation where uncertainty exists as to possible loss that will be resolved
when one or more future events occur
c.an existing situation where uncertainty exists as to possible gain or loss that will not
be resolved in the foreseeable future
d.an existing situation where uncertainty exists as to possible gain or loss that will be
resolved when one or more future events occur or fail to occur
16) during the prior fiscal year, jeremiah corp. signed a long-term noncancellable
purchase commitment with its primary supplier to purchase $2.5 million of raw
materials. jeremiah paid the $2.5 million to acquire the raw materials when the raw
materials were only worth $2.3 million. assume that the purchase commitment was
properly recorded. what is the journal entry to record the purchase?
a.debit inventory for $2,300,000, and credit cash for $2,300,000
b.debit inventory for $2,300,000, debit unrealized holding gain or loss for $200,000,
and credit cash for $2,500,000
c.debit inventory for $2,300,000, debit estimated liability on purchase commitments for
$200,000 and credit cash for $2,500,000
d.debit inventory for $2,500,000, and credit cash for $2,500,000