1) Moorman Corporation reports the following information:
Correction of understatement of depreciation expense
in prior years, net of tax$ 860,000
Dividends declared640,000
Net income2,000,000
Retained earnings, 1/1/14, as reported4,000,000
Moorman should report retained earnings, 12/31/14, as adjusted at
a.$3,140,000
b.$4,500,000
c.$5,360,000
d.$6,220,000
2) The cost-recovery method
a.is prohibited under current GAAP due to its conservative nature
b.requires a company to defer profit recognition until all cash payments are received
from the buyer
c.is used by sellers when there is a reasonable basis for estimating collectibility
d.recognizes total revenue and total cost of goods sold in the period of sale
3) Presented below is information related to Stage Department Stores, Inc. pension plan
for 2015 .
Service cost$550,000
Funding contribution for 2015530,000
Settlement rate used in actuarial computation10%
Expected return on plan assets9%
Amortization of PSC (due to benefit increase)90,000
Amortization of unrecognized net gains48,000
Projected benefit obligation (at beginning of period)540,000
Fair value of plan assts (at beginning of period)360,000
Instructions
(a)Compute the amount of pension expense to be reported for 2015 . (Show
computations.)
(b)Prepare the journal entry to record pension expense and the employers contribution
for 2015 .
4) Information from Collins Companys balance sheet is as follows:
Current assets:
Cash$ 12,000,000
Short-term investments20,000,000
Accounts receivable50,000,000
Inventories66,000,000
Prepaid expenses 2,000,000
Total current assets$150,000,000
Current liabilities:
Notes payable$ 21,000,000
Accounts payable18,000,000
Accrued expenses13,000,000
Income taxes payable3,000,000
Current portion of long-term debt 5,000,000
Total current liabilities$ 60,000,000
What is the acid-test (quick) ratio?
a.1.03 to 1
b.1.37 to 1
c.1.40 to 1
d.2.50 to 1
5) Operating income and tax rates for C.J. Companys first three years of operations
were as
follows:
Income _Enacted tax rate
2014 $300,00035%
2015($750,000)30%
2016 $1,260,00040%
Assuming that C.J. Company opts to carryback its 2015 NOL, what is the amount of
income taxes payable at December 31, 2016?
a.$204,000
b.$504,000
c.$369,000
d.$324,000
6) Dublin Company holds a 30% stake in Club Company which was purchased in 2015
at a cost of $3,000,000. After applying the equity method, the Investment in Club
Company account has a balance of $3,040,000. At December 31, 2015 the fair value of
the investment is $3,120,000. Which of the following values is acceptable for Dublin to
use in its balance sheet at December 31, 2015?
I.$3,000,000
II.$3,040,000
III.$3,120,000
a.I, II, or III
b.I or II only
c.II only
d.II or III only
7) Hull Co. leased equipment to Riggs Company on May 1, 2015 . At that time the
collectibility of the minimum lease payments was not reasonably predictable. The lease
expires on May 1, 2016 . Riggs could have bought the equipment from Hull for
$4,800,000 instead of leasing it. Hulls accounting records showed a book value for the
equipment on May 1, 2012, of $4,200,000. Hulls depreciation on the equipment in 2015
was $540,000. During 2015, Riggs paid $1,080,000 in rentals to Hull for the 8-month
period. Hull incurred maintenance and other related costs under the terms of the lease of
$96,000 in 2015 . After the lease with Riggs expires, Hull will lease the equipment to
another company for two years.
Ignoring income taxes, the amount of expense incurred by Riggs from this lease for the
year ended December 31, 2015, should be
a.$444,000
b.$540,000
c.$984,000
d.$1,080,000
8) An essential element of a lease is that the
a.lessor conveys less than his or her total interest in the property
b.lessee provides a sinking fund equal to one years lease payments
c.property that is the subject of the lease agreement must be held for sale by the lessor
prior to the drafting of the lease agreement
d.term of the lease is substantially equal to the economic life of the leased property
9) In accounting for plant assets, which of the following outlays made subsequent to
acquisition should be fully expensed in the period the expenditure is made?
a.Expenditure made to increase the efficiency or effectiveness of an existing asset
b.Expenditure made to extend the useful life of an existing asset beyond the time frame
originally anticipated
c.Expenditure made to maintain an existing asset so that it can function in the manner
intended
d.Expenditure made to add new asset services
10) Recording inventory at net realizable value is permitted, even if it is above cost,
when there are no significant costs of disposal involved and
a.the ending inventory is determined by a physical inventory count
b.a normal profit is not anticipated
c.there is a controlled market with a quoted price applicable to all quantities
d.the internal revenue service is assured that the practice is not used only to distort
reported net income
11) The role of the Securities and Exchange Commission in the formulation of
accounting principles can be best described as
a.consistently primary
b.consistently secondary
c.sometimes primary and sometimes secondary
d.non-existent