1) john won a lottery that will pay him $150,000 at the end of each of the next twenty
years. assuming an appropriate interest rate is 8% compounded annually, what is the
present value of this amount?
a.$1,590,540
b.$32,183
c.$1,472,723
d.$6,864,294
2) an unearned revenue can best be described as an amount
a.collected and currently matched with expenses
b.collected and not currently matched with expenses
c.not collected and currently matched with expenses
d.not collected and not currently matched with expenses
3) how is the gross profit method used as it relates to inventory valuation?
a.verify the accuracy of the perpetual inventory records
b.verity the accuracy of the physical inventory
c.to estimate cost of goods sold
d.to provide an inventory value of lifo inventories
4) in the conceptual framework for financial reporting, what provides “the why”–the
purpose of accounting?
a.recognition, measurement, and disclosure concepts such as assumptions, principles,
and constraints
b.qualitative characteristics of accounting information
c.elements of financial statements
d.objective of financial reporting
5) what is meant by comparability when discussing financial accounting information?
a.information has predictive or confirmatory value
b.information is reasonably free from error
c.information that is measured and reported in a similar fashion across companies
d.information is timely
6) the income statement information would help in which of the following tasks?
a.evaluate the liquidity of a company
b.evaluate the solvency of a company
c.estimate future cash flows
d.estimate future financial flexibility
7) otto corp. purchased merchandise during 2012 on credit for $400,000; terms 2/10,
n/30. all of the gross liability except $80,000 was paid within the discount period. the
remainder was paid within the 30-day term. at the end of the annual accounting period,
december 31, 2012, 90% of the merchandise had been sold and 10% remained in
inventory. the company uses a periodic system.
instructions
(a)assuming that the net method is used for recording purchases, prepare the entries for
the purchase and two subsequent payments.
(b)what dollar amounts should be reported for the final inventory and cost of goods sold
under the (1) net method; (2) gross method? assume that there was no beginning
inventory.
8) how should significant noncash transactions be reported in the statement of cash
flows according to fasb statement no. 95?
a.they should be incorporated in the statement of cash flows in a section labeled,
‘significant noncash transactions.”
b.such transactions should be incorporated in the section (operating, financing, or
investing) that is most representative of the major component of the transaction
c.these noncash transactions are not to be incorporated in the statement of cash flows.
they may be summarized in a separate schedule at the bottom of the statement or appear
in a separate supplementary schedule to the financials
d.they should be handled in a manner consistent with the transactions that affect cash
flows
9) adler construction co. uses the percentage-of-completion method. in 2012, adler
began work on a contract for $5,500,000 and it was completed in 2013. data on the
costs are:
for the years 2012 and 2013, adler should recognize gross profit of
2012 2013
a.$0$2,150,000
b.$1,290,000$860,000
c.$1,350,000$800,000
d.$1,350,000$2,150,000
10) the basic accounting concept that refers to the tendency of accountants to resolve
uncertainty in favor of understating assets and revenues and overstating liabilities and
expenses is known as
a.prudence or conservatism
b.the materiality constraint
c.the substance over form principle
d.the industry practices constraint
11) on august 1, 2012, mendez corporation purchased a new machine on a deferred
payment basis. a down payment of $2,000 was made and 4 annual installments of
$18,000 each are to be made beginning on september 1, 2012. the cash equivalent price
of the machine was $69,000. due to an employee strike, mendez could not install the
machine immediately, and thus incurred $900 of storage costs. costs of installation
(excluding the storage costs) amounted to $2,400. the amount to be capitalized as the
cost of the machine is
a.$69,000
b.$71,400
c.$72,300
d.$78,000