1) IFRS and U.S. IFRS are very similar in accounting for cash and receivables.
2) The number of financial statement elements in the IFRS conceptual framework is
equal to those in GAAP.
3) Preferred dividends are subtracted from net income but not income before
extraordinary items in computing earnings per share.
4) Cash equivalents are investments with original maturities of six months or less.
5) Under the fair value method, the investor reports as revenue its share of the net
income reported by the investee.
6) For purposes of recognizing a provision probable is defined as more likely than not
7) Although the presentation formats for the balance sheet and statement of cash flows
are similar under IFRS and U.S. GAAP, IFRS requires far more extensive disclosure.
8) A deferred tax liability represents the increase in taxes payable in future years as a
result of taxable temporary differences existing at the end of the current year.
9) Yoder, Inc. has 150,000 shares of $10 par value common stock and 75,000 shares of
$10 par value, 6%, cumulative, participating preferred stock outstanding. Dividends on
the preferred stock are one year in arrears. Assuming that Yoder wishes to distribute
$405,000 as dividends, the common stockholders will receive
a.$ 90,000
b.$165,000
c.$240,000
d.$315,000
10) Why was it believed that accounting standards that were issued by the Financial
Accounting Standards Board would carry more weight?
a.Smaller membership
b.The FASB board members were well-paid
c.The FASB board members were CPAs
d.Due process
11) Eaton Company, which uses the retail LIFO method to determine inventory cost,
has provided the following information for 2014:
Cost Retail
Inventory, 1/1/14$ 188,000$280,000
Net purchases756,0001,124,000
Net markups136,000
Net markdowns60,000
Net sales1,060,000
Assuming that the price index was 105 at December 31, 2014 and 100 at January 1,
2014, what is the cost of Eaton’s inventory at December 31, 2014 under the
dollar-value-LIFO retail method?
a.$267,380
b.$277,830
c.$280,610
d.$263,600
12) Foltz Corp.’s 2014 income statement had pretax financial income of $250,000 in its
first year of operations. Foltz uses an accelerated cost recovery method on its tax return
and straight-line depreciation for financial reporting. The differences between the book
and tax deductions for depreciation over the five-year life of the assets acquired in
2014, and the enacted tax rates for 2014 to 2018 are as follows:
Book Over (Under) TaxTax Rates
2014$(50,000)35%
2015(65,000)30%
2016(15,000)30%
201760,00030%
201870,00030%
There are no other temporary differences. In Foltz’s December 31, 2014 balance sheet,
the noncurrent deferred income tax liability and the income taxes currently payable
should be
Noncurrent Deferred Income Taxes
Income Tax LiabilityCurrently Payable
a.$39,000$50,000
b.$39,000$70,000
c.$15,000$60,000
d.$15,000$70,000
13) Which item below is not a current liability?
a.Unearned revenue
b.Stock dividends distributable
c.The currently maturing portion of long-term debt
d.Trade accounts payable
14) Reversing entries are most commonly used in relation to year-end adjusting entries
that
a.allocate the expired portion of a depreciable asset to expense
b.amortize intangible assets
c.provide for bad debt expense
d.accrue interest revenue on notes receivable
15) When convertible debt is retired by the issuer, any material difference between the
cash acquisition price and the carrying amount of the debt should be
a.reflected currently in income, but not as an extraordinary item
b.reflected currently in income as an extraordinary item
c.treated as a prior period adjustment
d.treated as an adjustment of additional paid-in capital
16) Tate Company purchased equipment on November 1, 2014 and gave a 3-month, 9%
note with a face value of $60,000. The December 31, 2014 adjusting entry is
a.debit Interest Expense and credit Interest Payable, $5,400
b.debit Interest Expense and credit Interest Payable, $1,350
c.debit Interest Expense and credit Cash, $900
d.debit Interest Expense and credit Interest Payable, $900
17) At December 31, 2014, Kifer Company had 800,000 shares of common stock
outstanding. On October 1, 2015, an additional 160,000 shares of common stock were
issued. In addition, Kifer had $10,000,000 of 6% convertible bonds outstanding at
December 31, 2014, which are convertible into 360,000 shares of common stock. No
bonds were converted into common stock in 2015 . The net income for the year ended
December 31, 2015, was $3,000,000. Assuming the income tax rate was 30%, the
diluted earnings per share for the year ended December 31, 2015, should be (rounded to
the nearest penny)
a.$4.07
b.$3.00
c.$2.85
d.$2.50
18) Corporations issue convertible debt for two main reasons. One is the desire to raise
equity capital that, assuming conversion, will arise when the original debt is converted.
The other is
a.the ease with which convertible debt is sold even if the company has a poor credit
rating
b.the fact that equity capital has issue costs that convertible debt does not
c.that many corporations can obtain debt financing at lower rates
d.that convertible bonds will always sell at a premium
19) If income tax effects are ignored, accelerated depreciation methods
a.provide funds for the earlier replacement of fixed assets.
b.increase funds provided by operations
c.tend to offset the effect of steadily increasing repair and maintenance costs on the
income statement
d.tend to decrease the fixed asset turnover ratio
20) What is the purpose of a FASB Staff Position?
a.Provide interpretation of existing standards
b.Provide a consensus on how to account for new and unusual financial transactions
c.Provide interpretive guidance
d.Provide timely guidance on select issues
21) The method most commonly used to report defaults and repossessions is
a.provide no basis for the repossessed asset thereby recognizing a loss
b.record the repossessed merchandise at fair value, recording a gain or loss if
appropriate
c.record the repossessed merchandise at book value, recording no gain or loss
d.None of these answers are correct
22) On January 1, 2015, Yancey, Inc. signs a 10-year noncancelable lease agreement to
lease a storage building from Holt Warehouse Company. Collectibility of lease
payments is reasonably predictable and no important uncertainties surround the amount
of costs yet to be incurred by the lessor. The following information pertains to this lease
agreement.
(a)The agreement requires equal rental payments at the beginning each year.
(b)The fair value of the building on January 1, 2015 is $4,000,000; however, the book
value to Holt is $3,300,000.
(c)The building has an estimated economic life of 10 years, with no residual value.
Yancey depreciates similar buildings on the straight-line method.
(d)At the termination of the lease, the title to the building will be transferred to the
lessee.
(e)Yanceys incremental borrowing rate is 11% per year. Holt Warehouse Co. set the
annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by
Yancey, Inc.
(f)The yearly rental payment includes $10,000 of executory costs related to taxes on the
property.
Future Value of Ordinary Annuity of 1
Period 5% 6% 8% 10% 12%
11.000001.000001.000001.000001.00000
22.050002.060002.080002.100002.12000
33.152503.183603.246403.310003.37440
44.310134.374624.506114.641004.77933
55.525635.637095.866606.105106.35285
66.801916.975327.335927.715618.11519
78.142018.393848.922809.4871710.08901
89.549119.8974710.6366311.4358912.29969
911.0265611.4913212.4875613.5794814.77566
1012.5778913.1807914.4865615.9374317.54874
Present Value of an Ordinary Annuity of 1
Period 5% 6% 8% 10% 12%
1.95238.94340.92593.90909.89286
21.859411.833391.783261.735541.69005
32.723252.673012.577102.486852.40183
43.545953.465113.312133.169863.03735
54.329484.212363.992713.790793.60478
65.075694.917324.622884.355264.11141
75.786375.582385.206374.868424.56376
86.463216.209795.746645.334934.96764
97.107826.801696.246895.759025.32825
107.721737.360096.710086.144575.65022
What is the amount of the total annual lease payment?
a.$181,801
b.$581,801
c.$591,801
d.$601,801
23) Gibbs Corporation owned 20,000 shares of Oliver Corporations $5 par value
common stock. These shares were purchased in 2011 for $180,000. On September 15,
2015, Gibbs declared a property dividend of one share of Oliver for every ten shares of
Gibbs held by a stockholder. On that date, when the market price of Oliver was $28 per
share, there were 180,000 shares of Gibbs outstanding. What NET reduction in retained
earnings would result from this property dividend?
a.$162,000
b.$504,000
c.$171,000
d.$342,000
24) Which of the following should be disclosed in a Summary of Significant
Accounting Policies?
a.Types of executory contracts
b.Amount for cumulative effect of change in accounting principle
c.Claims of equity holders
d.Depreciation method followed
25) For the year ended December 31, 2014, Transformers Inc. reported the following:
Net income$180,000
Preferred dividends declared30,000
Common dividend declared6,000
Unrealized holding loss, net of tax3,000
Retained earnings, beginning balance240,000
Common stock120,000
Accumulated Other Comprehensive Income,
Beginning Balance15,000
What would Transformers report as the ending balance of Retained Earnings?
a.$417,000
b.$399,000
c.$384,000
d.$381,000