1) hummel co. purchased a put option on olney common shares on july 7, 2012, for
$100. the put option is for 200 shares, and the strike price is $30. the option expires on
january 31, 2013. the following data are available with respect to the put option:
instructions
prepare the journal entries for hummel co. for the following dates:
(a)july 7, 2012investment in put option on olney shares.
(b)september 30, 2012 hummel prepares financial statements.
(c)december 31, 2012 hummel prepares financial statements.
(d)january 31, 2013put option expires.
2) presented below is information available for morton company.
total current liabilities are $110,000. the acid-test ratio for morton is
a.2.55 to 1
b.2.27 to 1
c.1.27 to 1
d.0.72 to 1
3) fill in the dollar changes caused in the investment account and dividend revenue or
investment revenue account by each of the following transactions, assuming crane
company uses (a) the fair value method and (b) the equity method for accounting for its
investments in hudson company.
4) what is the primary difference between an ordinary annuity and an annuity due?
a.the timing of the periodic payment
b.the interest rate
c.annuity due only relates to present values
d.ordinary annuity only relates to present values
5) described below are certain transactions of larson company for 2012:
1>on may 10, the company purchased goods from fry company for $75,000, terms 2/10,
n/30. purchases and accounts payable are recorded at net amounts. the invoice was paid
on may 18.
2>on june 1, the company purchased equipment for $90,000 from raney company,
paying $30,000 in cash and giving a one-year, 9% note for the balance.
3>on september 30, the company discounted at 10% its $200,000, one-year
zero-interest-bearing note at first state bank.
instructions
(a)prepare the journal entries necessary to record the transactions above using
appropriate dates.
(b)prepare the adjusting entries necessary at december 31, 2012 in order to properly
report interest expense related to the above transactions. assume straight-line
amortization of discounts.
(c)indicate the manner in which the above transactions should be reflected in the current
liabilities section of larson company’s december 31, 2012 balance sheet.
6) a reclassification adjustment is reported in the
a.income statement as an other revenue or expense
b.stockholders equity section of the balance sheet
c.statement of comprehensive income as other comprehensive income
d.statement of stockholders equity
7) costs incurred internally to create intangibles are
a.capitalized
b.capitalized if they have an indefinite life
c.expensed as incurred
d.expensed only if they have a limited life
8) which of the following is a recordable event or item?
a.changes in managerial policy
b.the value of human resources
c.changes in personnel
d.none of these
9) korte company reported the following information for 2012:
sales revenue$1,500,000
cost of goods sold1,050,000
operating expenses165,000
unrealized holding gain on available-for-sale securities60,000
cash dividends received on the securities6,000
for 2012, korte would report comprehensive income of
a.$351,000
b.$345,000
c.$291,000
d.$60,000
10) the date on which to measure the compensation element in a stock option granted to
a corporate employee ordinarily is the date on which the employee
a.is granted the option
b.has performed all conditions precedent to exercising the option
c.may first exercise the option
d.exercises the option
11) the inventory turnover ratio is computed by dividing the cost of goods sold by
a.beginning inventory
b.ending inventory
c.average inventory
d.number of days in the year
12) in no case can “market” in the lower-of-cost-or-market rule be more than
a.estimated selling price in the ordinary course of business
b.estimated selling price in the ordinary course of business less reasonably predictable
costs of completion and disposal
c.estimated selling price in the ordinary course of business less reasonably predictable
costs of completion and disposal and an allowance for an approximately normal profit
margin
d.estimated selling price in the ordinary course of business less reasonably predictable
costs of completion and disposal, an allowance for an approximately normal profit
margin, and an adequate reserve for possible future losses
13) a journal entry to record a payment on account will include a
a.debit to accounts receivable
b.credit to accounts receivable
c.debit to accounts payable
d.credit to accounts payable
14) when a company discontinues an operation and disposes of the discontinued
operation (component), the transaction should be included in the income statement as a
gain or loss on disposal reported as
a.a prior period adjustment
b.an extraordinary item
c.an amount after continuing operations and before extraordinary items
d.a bulk sale of plant assets included in income from continuing operations
15) giger company acquired a tract of land containing an extractable natural resource.
giger is required by the purchase contract to restore the land to a condition suitable for
recreational use after it has extracted the natural resource. geological surveys estimate
that the recoverable reserves will be 5,000,000 tons, and that the land will have a value
of $800,000 after restoration. relevant cost information follows:
if giger maintains no inventories of extracted material, what should be the charge to
depletion expense per ton of extracted material?
a.$1.36
b.$1.20
c.$1.12
d.$0.96
16) pine leasing company purchased specialized equipment from wayne company on
december 31, 2011 for $600,000. on the same date, it leased this equipment to sears
company for 5 years, the useful life of the equipment. the lease payments begin january
1, 2012 and are made every 6 months until july 1, 2016. pine leasing wants to earn 10%
annually on its investment.
various factors at 10%
various factors at 5%
instructions
(a)calculate the amount of each rent.
(b)how much interest revenue will pine earn in 2012?