1) Instrument Corporation has the following investments which were held throughout
2014-2015:
Fair Value
Cost 12/31/1412/31/15
Trading$600,000$800,000$760,000
Available-for-sale 600,000 640,000 720,000
What amount of gain or loss would Instrument Corporation report in its income
statement for the year ended December 31, 2015 related to its investments?
a.$40,000 gain
b.$40,000 loss
c.$280,000 gain
d.$160,000 gain
2) When a company holds between 20% and 50% of the outstanding stock of an
investee, which of the following statements applies?
a.The investor should always use the equity method to account for its investment
b.The investor should use the equity method to account for its investment unless
circum-stances indicate that it is unable to exercise ‘significant influence” over the
investee
c.The investor must use the fair value method unless it can clearly demonstrate the
ability to exercise ‘significant influence” over the investee
d.The investor should always use the fair value method to account for its investment
3) Parton owes $2 million that is due on February 28 . The company borrows
$1,600,000 on February 25 (5-year note) and uses the proceeds to pay down the $2
million note and uses other cash to pay the balance. How much of the $2 million note is
classified as long-term in the December 31 financial statements.
a.$2,000,000
b.$0
c.$1,600,000
d.$400,000
4) Feine Co. accepted delivery of merchandise which it purchased on account. As of
December 31, Feine had recorded the transaction, but did not include the merchandise
in its inventory. The effect of this on its financial statements for December 31 would be
a.net income, current assets, and retained earnings were understated
b.net income was correct and current assets were understated
c.net income was understated and current liabilities were overstated
d.net income was overstated and current assets were understated
5) Long-term debt that matures within one year and is to be converted into stock should
be reported
a.as a current liability
b.in a special section between liabilities and stockholders equity
c.as noncurrent
d.as noncurrent and accompanied with a note explaining the method to be used in its
liquidation
6) Tongas Company applies revaluation accounting to plant assets with a carrying value
of $1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated
on the straight-line basis. At the end of year 1, independent appraisers determine that
the asset has a fair value of $1,500,000.
The journal entry to record depreciation for year one will include a
a.debit to Accumulated Depreciation for $400,000
b.debit to Depreciation Expense for $100,000
c.credit to Accumulated Depreciation for $100,000
d.debit to Depreciation Expense for $400,000
7) The accounting for fair value hedges records the derivative at its
a.amortized cost
b.carrying value
c.fair value
d.historical cost
8) For which of the following areas a provision may be recognized in the financial
statement?
a.Possibility of war
b.Business recession
c.Warranties
d.Strike
9) Which of the following inventories carried by a manufacturer is similar to the
merchandise inventory of a retailer?
a.Raw materials
b.Work-in-process
c.Finished goods
d.Supplies
10) Marsh Corporation purchased a machine on July 1, 2012, for $1,250,000. The
machine was estimated to have a useful life of 10 years with an estimated salvage value
of $70,000. During 2015, it became apparent that the machine would become
uneconomical after December 31, 2019, and that the machine would have no scrap
value. Accumulated depreciation on this machine as of December 31, 2014, was
$295,000. What should be the charge for depreciation in 2015 under generally accepted
accounting principles?
a.$177,000
b.$191,000
c.$205,000
d.$238,750
11) The following information for Cooper Enterprises is given below:
December 31, 2015
Assets and obligations
Plan assets (at fair value)$400,000
Accumulated benefit obligation740,000
Projected benefit obligation800,000
Other Items
Pension asset / liability, January 1, 201520,000
Contributions 240,000
Accumulated other comprehensive loss335,800
There were no actuarial gains or losses at January 1, 2015 . The average remaining
service life of employees is 10 years.
What is the amount that Cooper Enterprises should report as its pension liability on its
balance sheet as of December 31, 2015?
a.$400,000
b.$60,000
c.$740,000
d.$800,000
12) Boston Company owns more than 50 percent of the ordinary shares of Dynamic
Company. Assume Boston net income of $225,000 is allocated as $180,000 to Boston
and $45,000 to noncontrolling interest. In Bostons consolidated income statement that
includes Dynamic, under IFRS, how will the amount of non-controlling interest be
reported?
a.$45,000 will be presented as an item of expense below the net income
b.$45,000 will be presented as an item of expense above the net income
c.$45,000 will be presented as an allocation to net income below the net income
d.$45,000 will not be presented on the face of the income statement
13) Authoritative standards for IFRS include:
a.International Financial Reporting Standards only
b.International Financial Reporting Standards and International Accounting Standards
only
c.International Financial Reporting Standards, International Accounting Standards and
U.S. GAAP only
d.International Financial Reporting Standards, International Accounting Standards and
any GAAP standard recognized by an organized stock exchange
14) Newton Co. had installment sales of $1,000,000 and cost of installment sales of
$750,000 in 2014 . A 2014 sale resulted in a default in 2016, at which time the balance
of the installment receivable was $36,000. The repossessed merchandise had a fair
value of $21,000.
Instructions
(a)Calculate the rate of gross profit on 2014 installment sales.
(b)Make the entry to record the repossession.
15) On June 1, 2014, Yang Corp. loaned Gant $400,000 on a 12% note, payable in five
annual installments of $80,000 beginning January 2, 2015 . In connection with this
loan, Gant was required to deposit $4,000 in a zero-interest-bearing escrow account.
The amount held in escrow is to be returned to Gant after all principal and interest
payments have been made. Interest on the note is payable on the first day of each month
beginning July 1, 2014 . Gant made timely payments through November 1, 2014 . On
January 2, 2015, Yang received payment of the first principal installment plus all
interest due. At
December 31, 2014, Yang’s interest receivable on the loan to Gant should be
a.$0
b.$4,000
c.$8,000
d.$12,000
16) In classifying the elements of financial statements, the primary distinction between
revenues and gains is
a.the materiality of the amounts involved
b.the likelihood that the transactions involved will recur in the future
c.the nature of the activities that gave rise to the transactions involved
d.the costs versus the benefits of the alternative methods of disclosing the transactions
involved
17) Robust Inc. has the following information related to an item in its ending inventory.
Product 66 has a cost of $812, a replacement cost of $775, a net realizable value of
$800, and a normal profit margin of $50. What is the final lower-of-cost-or-market
inventory value for product 66?
a.$800
b.$775
c.$812
d.$762
18) Presented below is information related to Orender, Inc.:
December 31,
2015 2014
Common stock$ 75,000$ 60,000
4% Preferred stock350,000350,000
Retained earnings (includes net income for current year)90,00075,000
Net income for year35,00032,000
What is Orenders rate of return on common stock equity for 2015?
a.23.3%
b.14.0%
c.31.1%
d.21.2%
19) According to Statement of Financial Accounting Concepts No. 2, predictive value is
an ingredient of the fundamental quality of
RelevanceFaithful Representation
a.YesNo
b.YesYes
c.NoNo
d.NoYes