1) companies should assign no portion of fixed overhead to self-constructed assets.
2) the most popular input measure used to determine the progress toward completion is
the cost-to-cost basis.
3) companies should accrue an estimated loss from a loss contingency if information
available prior to the issuance of financial statements indicates that it is probable that a
liability has been incurred.
4) the primary purpose of the statement of cash flows is to provide cash-basis
information about the companys operating, investing, and financing activities.
5) the fair value of an asset retirement obligation is recorded as both an increase to the
related asset and a liability.
6) if the market rate is greater than the coupon rate, bonds will be sold at a premium.
7) a mortgage bond is referred to as a debenture bond.
8) the number of compounding periods will always be one less than the number of rents
when computing the future value of an ordinary annuity.
9) under the accrual basis of accounting, net income is usually the same as net cash
flow from operating activities.
10) companies determine cash provided by operating activities by converting net
income on an accrual basis to a cash basis.
11) all dividends received by an investor from the investee decrease the investments
carrying value under the equity method.
12) the fasb believes that the deferred tax method is the most consistent method for
accounting for income taxes.
13) the provision for a loss on an unprofitable contract may be combined with the
construction in process account balance under percentage-of-completion but not
completed-contract.
14) all claims held against customers and others for money, goods, or services are
reported as current assets.
15) a company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on january 1,
2012. interest is paid on june 30 and december 31. the proceeds from the bonds are
$9,802,0 using effective-interest amortization, what will the carrying value of the bonds
be on the december 31, 2012 balance sheet?
a.$9,806,320
b.$10,000,000
c.$9,812,562
d.$9,804,154
16) for each of the items listed below, indicate how it should be treated in the financial
statements. use the following letter code for your selections:
a.ordinary or unusual (but not extraordinary) item on the income statement
b.discontinued operations
c.extraordinary item on the income statement
d.prior period adjustment
1>the bad debt rate was increased from 1% to 2%, thus increasing bad debt expense.
2>obsolete inventory was written off. this was the first loss of this type in the
company’s history.
3>an uninsured casualty loss was incurred by the company. this was the first loss of this
type in the company’s 50-year history.
4>recognition of income earned last year which was inadvertently omitted from last
year’s income statement.
5>the company sold one of its warehouses at a loss.
6>settlement of litigation with federal government related to income taxes of three
years ago. the company is continually involved in various adjustments with the federal
government related to its taxes.
7>a loss incurred from expropriation (the company owned resources in south america
which were taken over by a dictator unsympathetic to american business).
8>the company neglected to record its depreciation in the previous year.
9>discontinuance of all production in the united states. the manufacturing operations
were relocated in mexico.
10>loss on sale of investments. the company last sold some of its investments two years
ago.
11>loss on the disposal of a component of the business.
17) cumulative preferred dividends in arrears should be shown in a corporation’s
balance sheet as
a.an increase in current liabilities
b.an increase in stockholders’ equity
c.a footnote
d.an increase in current liabilities for the current portion and long-term liabilities for the
long-term portion
18) information concerning the capital structure of piper corporation is as follows:
during 2013, piper paid dividends of $0.80 per share on its common stock and $2.00 per
share on its preferred stock. the preferred stock is convertible into 30,000 shares of
common stock. the 6% convertible bonds are convertible into 75,000 shares of common
stock. the net income for the year ended december 31, 2013, was $400,000. assume that
the income tax rate was 30%.
what should be the basic earnings per share for the year ended december 31, 2013,
rounded to the nearest penny?
a.$1.77
b.$1.95
c.$2.47
d.$2.67
19) grant, inc. had 50,000 shares of treasury stock ($10 par value) at december 31,
2012, which it acquired at $11 per share. on june 4, 2013, grant issued 25,000 treasury
shares to employees who exercised options under grant’s employee stock option plan.
the market value per share was $13 at december 31, 2012, $15 at june 4, 2013, and $18
at december 31, 2013. the stock options had been granted for $12 per share. the cost
method is used. what is the balance of the treasury stock on grant’s balance sheet at
december 31, 2013?
a.$175,000
b.$225,000
c.$275,000
d.$300,000
20) nenn co.’s allowance for uncollectible accounts was $190,000 at the end of 2012
and $180,000 at the end of 2011. for the year ended december 31, 2012, nenn reported
bad debt expense of $26,000 in its income statement. what amount did nenn debit to the
appropriate account in 2012 to write off actual bad debts?
a.$10,000
b.$16,000
c.$26,000
d.$36,000
21) external events do not include
a.interaction between an entity and its environment
b.a change in the price of a good or service that an entity buys or sells, a flood or
earthquake
c.improvement in technology by a competitor
d.using buildings and machinery in operations
22) the primary ifrs related to intangible assets and impairments is found in
a.ias 38 and ias 10
b.ias 16 and ias 36
c.ias 1 and ias 34
d.ias 38 and ias 36
23) which of the following is not required when using the retail inventory method?
a.all inventory items must be categorized according to the retail markup percentage
which reflects the item’s selling price
b.a record of the total cost and retail value of goods purchased
c.a record of the total cost and retail value of the goods available for sale
d.total sales for the period
24) the major problem of accounting for intangibles is determining
a.fair value
b.separability
c.salvage value
d.useful life
25) what condition is not necessary in order to use the retail method to provide
inventory results?
a.retailer keeps a record of the total costs of products sold for the period
b.retailer keeps a record of the total costs and retail value of goods purchased
c.retailer keeps a record of the total costs and retail value of goods available for sale
d.retailer keeps a record of sales for the period
26) gardner corporation purchased a truck at the beginning of 2012 for $90,000. the
truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles.
it was driven 18,000 miles in 2012 and 32,000 miles in 2013. what is the depreciation
expense for 2012?
a.$13,500
b.$12,960
c.$21,600
d.$36,000
27) east corporations computation of cost of goods sold is:
the average days to sell inventory for east are
a.68.3 days
b.75.7 days
c.55.3 days
d.90.9 days
28) presented below is certain information pertaining to edson company.
compute the net income for the year.