1) Wynne Inc. charges an initial franchise fee of $1,840,000, with $400,000 paid when
the agreement is signed and the balance in five annual payments. The present value of
the future payments, discounted at 10%, is $1,091,744. The franchisee has the option to
purchase $240,000 of equipment for $192,000. Wynne has substantially provided all
initial services required and collectibility of the payments is reasonably assured. The
amount of revenue from franchise fees is
a.$ 400,000
b.$1,443,744
c.$1,491,744
d.$1,840,000
2) In preparing its August 31, 2014 bank reconciliation, Bing Corp. has available the
following information:
Balance per bank statement, 8/31/14$18,650
Deposit in transit, 8/31/143,900
Return of customer’s check for insufficient funds, 8/30/14600
Outstanding checks, 8/31/142,750
Bank service charges for August100
At August 31, 2014, Bing’s correct cash balance is
a.$19,800
b.$19,200
c.$19,100
d.$17,500
3) A correction of an error in prior periods’ income will be reported
In the income statementNet of tax
a.YesYes
b.NoNo
c.YesNo
d.NoYes
4) The purpose of the Emerging Issues Task Force is to
a.develop a conceptual framework as a frame of reference for the solution of future
problems
b.lobby the FASB on issues that affect a particular industry
c.do research on issues that relate to long-term accounting problems
d.issue statements which reflect a consensus on how to account for new and unusual
financial transactions that need to be resolved quickly
5) An employee’s net (or take-home) pay is determined by gross earnings minus
amounts for income tax withholdings and the employee’s
a.portion of FICA taxes and unemployment taxes
b.and employer’s portion of FICA taxes, and unemployment taxes
c.portion of FICA taxes, unemployment taxes, and any union dues
d.portion of FICA taxes and any union dues
6) Downing Company issues $4,000,000, 6%, 5-year bonds dated January 1, 2014 on
January 1, 2014. The bonds pay interest semiannually on June 30 and December 31 .
The bonds are issued to yield 5%. What are the proceeds from the bond issue?
a.$4,000,000
b.$4,173,195
c.$4,175,047
d.$4,173,847
7) The printing costs and legal fees associated with the issuance of bonds should
a.be expensed when incurred
b.be reported as a deduction from the face amount of bonds payable
c.be accumulated in a deferred charge account and amortized over the life of the bonds
d.not be reported as an expense until the period the bonds mature or are retired
8) The cost of a nonmonetary asset acquired in exchange for another nonmonetary asset
when the exchange has commercial substance is usually recorded at
a.the fair value of the asset given up, and a gain or loss is recognized
b.the fair value of the asset given up, and a gain but not a loss may be recognized
c.the fair value of the asset received if it is equally reliable as the fair value of the asset
given up
d.either the fair value of the asset given up or the asset received, whichever one results
in the largest gain (smallest loss) to the company
9) The objective of general-purpose financial reporting is to provide financial
information about a reporting entity to each of the following except
a.potential equity investors
b.potential lenders
c.present investors
d.All of these answers are correct
10) Dennis Company purchases Miles Company for $5,000,000 cash on January 1,
2015 . The book value of Miles Company’s net assets reported on its December 31,
2014 financial statement was $3,800,000. An analysis indicated that the fair value of
Miles’s tangible assets exceeded the book value by $600,000, and the fair value of
identifiable intangible assets exceeded book value by $320,000. Determine the fair
value of identifiable net assets used to record goodwill.
a.$280,000
b.$4,720,000
c.$4,400,000
d.$3,800,000
11) Goren Corporation had the following amounts, all at retail:
Beginning inventory$ 3,600Purchases$110,000
Purchase returns6,000Net markups18,000
Abnormal shortage4,000Net markdowns2,800
Sales77,000Sales returns1,800
Employee discounts1,600Normal shortage2,600
What is Gorens ending inventory at retail?
a.$39,400
b.$41,000
c.$42,600
d.$43,400
12) Net cash provided by operating activities divided by average total liabilities equals
the
a.current cash debt coverage
b.cash debt coverage
c.free cash flow
d.current ratio
13) A postretirement asset is computed as the excess of the
a.expected postretirement benefit obligation over the fair value of plan assets
b.accumulated postretirement benefit obligation over the fair value of plan assets
c.fair value of plan assets over the accumulated postretirement benefit obligation
d.accumulated postretirement benefit obligation over the fair value of plan assets, but
not vice versa
14) At the close of its first year of operations, December 31, 2014, Ming Company had
accounts receivable of $1,080,000, after deducting the related allowance for doubtful
accounts. During 2014, the company had charges to bad debt expense of $180,000 and
wrote off, as uncollectible, accounts receivable of $80,000. What should the company
report on its balance sheet at December 31, 2014, as accounts receivable before the
allowance for doubtful accounts?
a.$1,340,000
b.$1,180,000
c.$980,000
d.$880,000
15) Palmer Frosted Flakes Company offers its customers a pottery cereal bowl if they
send in 3 boxtops from Palmer Frosted Flakes boxes and $1. The company estimates
that 60% of the boxtops will be redeemed. In 2014, the company sold 675,000 boxes of
Frosted Flakes and customers redeemed 330,000 boxtops receiving 110,000 bowls. If
the bowls cost Palmer Company $3 each, how much liability for outstanding premiums
should be recorded at the end of 2014?
a.$270,000
b.$50,000
c.$75,000
d.$138,000
16) Under current GAAP, inflation is ignored in accounting due to the
a.economic entity assumption
b.going concern assumption
c.monetary unit assumption
d.periodicity assumption
17) Which of the following statements concerning the cost-benefit relationship is not
True?
a.Business reporting should exclude information outside of management’s expertise
b.Management should not be required to report information that would significantly
harm the company’s competitive position
c.Management should not be required to provide forecasted financial information
d.If needed by financial statement users, management should gather information not
included in the financial statements that would not otherwise be gathered for internal
use
18) Note disclosures for long-term debt generally include all of the following except
a.assets pledged as security
b.call provisions and conversion privileges
c.restrictions imposed by the creditor
d.names of specific creditors