1) Cost estimates at the end of the second year indicate that a loss will result on
completion of the entire contract. Which of the following statements is correct?
a.Under the completed-contract method, the loss is not recognized until the year the
construction is completed
b.Under the percentage-of-completion method, the gross profit recognized in the first
year must not be changed
c.Under the completed-contract method, when the billings exceed the accumulated
costs, the amount of the estimated loss is reported as a current liability
d.Under the completed-contract method, when the Construction in Process balance
exceeds the billings, the estimated loss is added to the accumulated costs
2) Where is the authoritative IFRS guidance related to accounting and reporting for
inventories found?
a.IAS 2
b.IAS 18
c.IAS 41
d.All of these standards deal with inventory
3) Cashman Company reported net income of $265,000 for the year ended 12/31/15.
Included in the computation of net income were: depreciation expense, $45,000;
amortization of a patent, $24,000; income from an investment in common stock of
Linda Inc., accounted for under the equity method, $36,000; and amortization of a bond
premium, $9,000. Cashman also paid a $60,000 dividend during the year. The net cash
provided by operating activities would be reported at
a.$289,000
b.$241,000
c.$229,000
d.$181,000
4) Bella requires $160,000 in four years to purchase a new home. What amount must be
invested today in an investment that earns 6% interest, compounded annually?
a.$126,734
b.$131,632
c.$193,783
d.$201,996
5) The following information relates to the pension plan for the employees of Turner
Co.:
1/1/14 12/31/14 12/31/15
Accum. benefit obligation$6,160,000$6,440,000$8,400,000
Projected benefit obligation6,510,0006,972,0009,338,000
Fair value of plan assets5,950,0007,280,0008,036,000
AOCI – net (gain) or loss-0-(1,008,000)(1,120,000)
Settlement rate (for year)11%11%
Expected rate of return (for year)8%7%
Turner estimates that the average remaining service life is 16 years. Turner’s
contribution was $882,000 in 2015 and benefits paid were $658,000.
The unexpected gain or loss on plan assets in 2015 is
a.$45,920 loss
b.$26,320 gain
c.$22,400 gain
d.$250,320 gain
6) Which of the following methods of accounting for uncollectible accounts does not
properly match costs with revenues?
a.Percentage of sales
b.Percentage of receivables
c.Direct write-off
d.Aging schedule
7) Which of the following items would be reported at its gross amount on the face of
the income statement?
a.Extraordinary loss
b.Prior period adjustment
c.Cumulative effect of a change in an accounting principle
d.Unusual gain
8) Which of the following intangible assets cannot be sold by a business to raise needed
cash for a capital project?
a.Patent
b.Copyright
c.Goodwill
d.Brand Name
9) Which of the following is true of the Financial Accounting Standards Board
a.It has issued a series of pronouncements entitled Auditing Standards Updates
b.It was the forerunner of the current Accounting Principles Board
c.It is the arm of the Securities and Exchange Commission responsible for setting
financial accounting standards
d.The members of the FASB are appointed by the Financial Accounting Foundation
10) Assets that qualify for interest cost capitalization include
a.assets under construction for a company’s own use
b.assets that are ready for their intended use in the earnings of the company
c.assets that are not currently being used because of excess capacity
d.All of these assets qualify for interest cost capitalization
11) Patton Company purchased $900,000 of 10% bonds of Scott Company on January
1, 2015, paying $846,225. The bonds mature January 1, 2025; interest is payable each
July 1 and January 1 . The discount of $53,775 provides an effective yield of 11%.
Patton Company uses the effective-interest method and plans to hold these bonds to
maturity.
On July 1, 2015, Patton Company should increase its Debt Investments account for the
Scott Company bonds by
a.$5,382
b.$3,084
c.$2,691
d.$1,542
12) Which of the following is a reason why the specific identification method may be
considered ideal for assigning costs to inventory and cost of goods sold?
a.The potential for manipulation of net income is reduced
b.There is no arbitrary allocation of costs
c.The cost flow matches the physical flow
d.Able to use on all types of inventory
13) Geary Co. assigned $800,000 of accounts receivable to Kwik Finance Co. as
security for a loan of $670,000. Kwik charged a 2% commission on the amount of the
loan; the interest rate on the note was 10%. During the first month, Geary collected
$220,000 on assigned accounts after deducting $760 of discounts. Geary accepted
returns worth $2,700 and wrote off assigned accounts totaling $5,960.
Entries during the first month would include a
a.debit to Cash of $220,760
b.debit to Bad Debt Expense of $5,960
c.debit to Allowance for Doubtful Accounts of $5,960
d.debit to Accounts Receivable of $229,420
14) When a company uses LIFO for external reporting purposes and FIFO for internal
reporting purposes, an Allowance to Reduce Inventory to LIFO account is used. This
account should be reported
a.on the income statement in the Other Revenues and Gains section
b.on the income statement in the Cost of Goods Sold section
c.on the income statement in the Other Expenses and Losses section
d.on the balance sheet in the Current Assets section
15) Present Value ofFuture Value of
Ordinary AnnuityOrdinary Annuity
7 periods5.20648.92280
8 periods5.746610.63663
9 periods6.246912.48756
(8% interest)
If $9,000 is deposited annually starting on January 1, 2014 and it earns 8%, what will
the balance be on December 31, 2021?
a.$80,306
b.$86,730
c.$95,730
d. $103,388
16) ASSETSLIABILITIES AND CAPITAL
a.Current assetsf.Current liabilities
b.Investmentsg.Long-term liabilities
c.Plant and equipmenth.Preferred stock
d.Intangiblesi.Common stock
e.Other assetsj.Additional paid-in capital
k.Retained earnings
l.Items excluded from balance sheet
Using the letters above, classify the following accounts according to the preferred and
ordinary balance sheet presentation.
1>Bond sinking fund
2>Common stock dividend distributable
3>Appropriation for plant expansion
4>Bank overdraft
5>Bonds payable ( due 2017 )
6>Premium on common stock
7>Securities owned by another company which are collateral for that company’s note
8>Equity investments (trading)
9>Inventory
10>Discount on bonds payable
11>Patents
12>Unearned rent revenue
17) Under U.S. GAAP, which of the following models may be used to determine if an
investment is consolidated?
Risk-and-reward modelVoting-interest approach
a.YesNo
b.NoYes
c.NoNo
d.YesYes
18) Swing High Inc. offers its 100 employees to participate in an employee
share-purchase plan. Under the terms of plan, employees are entitled to purchase 10
shares at 10% discount. The par values of shares were $10. Overall, 60 employees
accepted the offer and each employee purchased six shares. The market price on
purchase date was $100.
Swing High Inc. will credit Share PremiumOrdinary for:
a.$32,400
b.$ 3,600
c.$36,000
d.$28,800
19) The original cost of an inventory item is above the replacement cost and the net
realizable value. The replacement cost is below the net realizable value less the normal
profit margin. As a result, under the lower-of-cost-or-market method, the inventory item
should be reported at the
a.net realizable value
b.net realizable value less the normal profit margin
c.replacement cost
d.original cost
20) Which of the following is true when accounts receivable are factored without
recourse?
a.The transaction may be accounted for either as a secured borrowing or as a sale,
depending upon the substance of the transaction
b.The receivables are used as collateral for a promissory note issued to the factor by the
owner of the receivables
c.The factor assumes the risk of collectibility and absorbs any credit losses in collecting
the receivables
d.The financing cost (interest expense) should be recognized ratably over the collection
period of the receivables