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1) The interest rate of variable-rate mortgages is tied to changes in the fluctuating
market rate.
2) One significant difference between a balance sheet prepared using IFRS rather than
U.S. GAAP is that long-term tangible assets may be reported at fair value rather than
historical cost.
3) Off-balance-sheet financing is an attempt to borrow monies in such a way to
minimize the reporting of debt on the balance sheet.
4) In a contingent issue agreement, the contingent shares are considered outstanding for
computing diluted EPS when the earnings or market price level is met by the end of the
year.
5) IFRS does not permit the reversal of impairment losses, as does U.S. GAAP.
6) True no-par stock should be carried in the accounts at issue price without any
additional paid-in capital reported.
7) The rules-based standards of IFRS are more detailed than the simpler,
principles-based standards of U.S. GAAP.
8) Purchase Discounts Lost is a financial expense and is reported in the other expenses
and losses section of the income statement.
9) The cash paid for interest will always be greater than interest expense when using
effective-interest amortization for a bond.
10) Deferred tax expense is the increase in the deferred tax liability balance from the
beginning to the end of the accounting period.
11) Retrospective application is considered impracticable if a company cannot
determine the prior period effects using every reasonable effort to do so.
12) IFRS requires companies to prepare interim reports on a quarterly basis.
13) A company should abandon the historical cost principle when the future utility of
the inventory item falls below its original cost.
14) When companies make changes that result in different reporting entities, the change
is reported prospectively.
15) Internally generated goodwill should not be capitalized in the accounts.
16) Icon International, a software company, incorporated on January 1, 2013 is planning
to convert to IFRS. The company decided to present its first IFRS statements for the
year ended December 31, 2015 . What is the transition date of Icon International?
a.January 1, 2013
b.January 1, 2015
c.December 31, 2015
d.December 31, 2013
17) Hay Company had January 1 inventory of $180,000 when it adopted dollar-value
LIFO. During the year, purchases were $1,080,000 and sales were $1,800,000.
December 31 inventory at year-end prices was $227,700, and the price index was 110 .
What is Hay Companys ending inventory?
a.$198,000
b.$207,000
c.$209,700
d.$227,700
18) Gutierrez Company is constructing a building. Construction began in 2014 and the
building was completed 12/31/14. Gutierrez made payments to the construction
company of $2,500,000 on 7/1, $5,500,000 on 9/1, and $5,000,000 on 12/31.
Weighted-average accumulated expenditures were
a.$2,625,000
b.$3,083,333
c.$8,000,000
d.$13,000,000
19) The following information relates to Jackson, Inc.:
For the Year Ended December 31,
2014 2015
Plan assets (at fair value)$1,360,000$1,824,000
Pension expense570,000450,000
Projected benefit obligation1,620,0001,934,000
Annual contribution to plan600,000450,000
Accumulated OCI (PSC)480,000420,000
The amount reported as the liability for pensions on the December 31, 2014 balance
sheet is
a.$ -0-
b.$30,000
c.$260,000
d.$230,000
20) Muckenthaler Company sells product 2005WSC for $40 per unit. The cost of one
unit of 2005WSC is $36, and the replacement cost is $35. The estimated cost to dispose
of a unit is $8, and the normal profit is 40%. At what amount per unit should product
2005WSC be reported, applying lower-of-cost-or-market?
a.$16
b.$32
c.$35
d.$36
21) During 2014 the DLD Company had a net income of $75,000. In addition, selected
accounts showed the following changes:
Accounts Receivable$3,000 increase
Accounts Payable1,000 increase
Buildings4,000 decrease
Depreciation Expense1,500 increase
Bonds Payable8,000 increase
What was the amount of cash provided by operating activities?
a.$74,500
b.$75,000
c.$76,500
d.$84,500
22) Which of the following is a type of technology-related intangible asset?
a.Copyright
b.Franchise
c.License
d.Patent
23) The calculation of comprehensive income includes which of the following?
Operating IncomeDistributions to Owners
a.YesYes
b.NoNo
c.NoYes
d.YesNo
24) Which of the following is an example of managing earnings up?
a.Decreasing estimated salvage value of equipment
b.Writing off obsolete inventory
c.Underestimating warranty claims
d.Accruing a contingent liability for an ongoing lawsuit
25) Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000
shares of no-par 8% preferred stock with a stated value of $5. The preferred stock is
cumulative and nonparticipating. Dividends have been paid in every year except the
past two years and the current year.
Assuming that $300,000 will be distributed as a dividend in the current year, how much
will the common stockholders receive?
a.Zero
b.$156,000
c.$204,000
d.$252,000
26) On February 1, 2014, Nelson Corporation purchased a parcel of land as a factory
site for $280,000. An old building on the property was demolished, and construction
began on a new building which was completed on November 1, 2014 . Costs incurred
during this period are listed below:
Demolition of old building$ 20,000
Architect's fees35,000
Legal fees for title investigation and purchase contract5,000
Construction costs1,340,000
(Salvaged materials resulting from demolition were sold for $10,000.)
Nelson should record the cost of the land and new building, respectively, as
a.$305,000 and $1,365,000
b.$290,000 and $1,380,000
c.$290,000 and $1,375,000
d.$295,000 and $1,375,000
27) Presenting consolidated financial statements this year when statements of individual
companies were presented last year is
a.a correction of an error
b.an accounting change that should be reported prospectively
c.an accounting change that should be reported by restating the financial statements of
all prior periods presented
d.not an accounting change
28) Greeson Corp. signed a three-month, zero-interest-bearing note on November 1,
2014 for the purchase of $250,000 of inventory. The face value of the note was
$253,900. Assuming Greeson used a Discount on Note Payable account to initially
record the note and that the discount will be amortized equally over the 3-month period,
the adjusting entry made at December 31, 2014 will include a
a.debit to Discount on Note Payable for $1,300
b.debit to Interest Expense for $2,600
c.credit to Discount on Note Payable for $1,300
d.credit to Interest Expense for $2,600
29) Hunt Co. at the end of 2015, its first year of operations, prepared a reconciliation
between pretax financial income and taxable income as follows:
Pretax financial income$ 750,000
Estimated warranty expenses deductible for taxes when paid1,200,000
Extra depreciation (1,650,000)
Taxable income$ 300,000
Estimated warranty expense of $800,000 will be deductible in 2016, $300,000 in 2017,
and $100,000 in 2018 . The use of the depreciable assets will result in taxable amounts
of $550,000 in each of the next three years.
Instructions
(a)Prepare a table of future taxable and deductible amounts.
(b)Prepare the journal entry to record income tax expense, deferred income taxes, and
income taxes payable for 2015, assuming an income tax rate of 40% for all years.
30) Which of the following is an example of managing earnings down?
a.Changing estimated bad debts from 3 percent to 2.5 percent of sales
b.Revising the estimated life of equipment from 10 years to 8 years
c.Not writing off obsolete inventory
d.Reducing research and development expenditures
31) On January 1, 2015 Dairy Treats, Inc. entered into a franchise agreement with a
company allowing the company to do business under Dairy Treats's name. Dairy Treats
had performed substantially all required services by January 1, 2015, and the franchisee
paid the initial franchise fee of $840,000 in full on that date. The franchise agreement
specifies that the franchisee must pay a continuing franchise fee of $72,000 annually, of
which 20% must be spent on advertising by Dairy Treats. What entry should Dairy
Treats make on January 1, 2015 to record receipt of the initial franchise fee and the
continuing franchise fee for 2015?
a.Cash912,000
Franchise Fee Revenue840,000
Revenue from Franchise Fees72,000
b.Cash912,000
Unearned Franchise Fees912,000
c.Cash912,000
Franchise Fee Revenue840,000
Revenue from Franchise Fees57,600
Unearned Franchise Fees14,400
d.Prepaid Advertising14,400
Cash912,000
Franchise Fee Revenue840,000
Revenue from Franchise Fees72,000
Unearned Franchise Fees14,400
32) During periods of rising prices, a perpetual inventory system would result in the
same dollar amount of ending inventory as a periodic inventory system under which of
the following inventory cost flow methods?
FIFOLIFO
a.YesNo
b.YesYes
c.NoYes
d.NoNo
