1) compound interest uses the accumulated balance at each year end to compute interest
in the succeeding year.
2) true no-par stock should be carried in the accounts at issue price without any
additional paid-in capital reported.
3) an effective process of capital allocation promotes productivity and provides an
efficient market for buying and selling securities and obtaining and granting credit.
4) ifrs encourages companies to disclose the aggregate amount of cash flows
attributable to the increase in operating capacity separately from cash flows required to
maintain operating capacity.
5) if ending inventory is understated, then net income is understated.
6) both ifrs and u.s. gaap prohibit the recognition of liabilities for future losses.
7) taxable income is a tax accounting term and is also referred to as income before
taxes.
8) an example of an internal event would be a flood that destroyed a portion of a
company’s inventory.
9) the reason goodwill is sometimes referred to as a master valuation account is because
a.it represents the purchase price of a business that is about to be sold
b.it is the difference between the fair value of the net tangible and identifiable
intangible assets as compared with the purchase price of the acquired business
c.the value of a business is computed without consideration of goodwill and then
goodwill is added to arrive at a master valuation
d.it is the only account in the financial statements that is based on value, all other
accounts are recorded at an amount other than their value
10) all of the following are procedures for the computation of deferred income taxes
except to
a.identify the types and amounts of existing temporary differences
b.measure the total deferred tax liability for taxable temporary differences
c.measure the total deferred tax asset for deductible temporary differences and
operating loss carrybacks
d.all of these are procedures in computing deferred income taxes
11) gomez, inc. began work in 2012 on contract #3814, which provided for a contract
price of $9,600,000. other details follow:
assume that gomez uses the percentage-of-completion method of accounting. the
portion of the total gross profit to be recognized as income in 2012 is
a.$600,000
b.$800,000
c.$2,400,000
d.$3,200,000
12) if inventory levels are stable or increasing, an argument which is not an advantage
of the lifo method as compared to fifo is
a.income taxes tend to be reduced in periods of rising prices
b.cost of goods sold tends to be stated at approximately current cost on the income
statement
c.cost assignments typically parallel the physical flow of goods
d.income tends to be smoothed as prices change over time
13) cost estimates on a long-term contract may indicate that a loss will result on
completion of the entire contract. in this case, the entire expected loss should be
a.recognized in the current period, regardless of whether the percentage-of-completion
or completed-contract method is employed
b.recognized in the current period under the percentage-of-completion method, but the
completed-contract method should defer recognition of the loss to the time when the
contract is completed
c.recognized in the current period under the completed-contract method, but the
percentage-of-completion method should defer the loss until the contract is completed
d.deferred and recognized when the contract is completed, regardless of whether the
percentage-of-completion or completed-contract method is employed
14) watkins truck rental uses the group depreciation method for its fleet of trucks. when
it retires one of its trucks and receives cash from a salvage company, the carrying value
of property, plant, and equipment will be decreased by the
a.original cost of the truck
b.original cost of the truck less the cash proceeds
c.cash proceeds received
d.cash proceeds received and original cost of the truck
15) during 2013, leon co. incurred the following costs:
in leon’s 2013 income statement, research and development expense should be
a.$560,000
b.$985,000
c.$1,335,000
d.$1,585,000
16) a schedule of machinery owned by mallon co. is presented below:
mallon computes depreciation by the composite method.
the composite rate of depreciation (in percent) for these assets is
a.10.18
b.10.77
c.11.03
d.11.67
17) the following information was taken from the 2013 financial statements of dunlop
corporation:
during 2013
a $450,000 payment was made to retire bonds payable with a face amount of $500,000.
bonds payable with a face amount of $200,000 were issued in exchange for equipment.
in its statement of cash flows for the year ended december 31, 2013, what amount
should dunlop report as proceeds from issuance of bonds payable?
a.$2,500,000
b.$2,750,000
c.$2,800,000
d.$3,200,000
18) on january 1, 2012, west co. exchanged equipment for a $600,000
zero-interest-bearing note due on january 1, 2015. the prevailing rate of interest for a
note of this type at january 1, 2012 was 10%. the present value of $1 at 10% for three
periods is 0.75. what amount of interest revenue should be included in west’s 2013
income statement?
a.$0
b.$45,000
c.$49,500
d.$60,000
19) which table has a factor of 1.00000 for 1 period at every interest rate?
a.future value of 1
b.present value of 1
c.future value of an ordinary annuity of 1
d.present value of an ordinary annuity of 1
20) what is “expectation gap”?
a.the difference between what the public thinks the accountant is not doing and what the
accountant knows they don’t do
b.the difference between what the public thinks the accountant is doing and what
congress says the accountant is doing
c.the difference between what the public thinks the accountant is doing and what the
accountant thinks they can do
d.the difference between what the accountant is doing and what the courts say the
accountant should be doing
21) an investor has a long-term investment in stocks. regular cash dividends received by
the investor are recorded as
22) provide clear, concise answers for the following.
1>define depreciation.
2>define depreciation accounting.
3>does depreciation accounting provide funds? if not, what does provide funds? what
does depreciation accounting do related to funds?
23) the following information was taken from the books and records of ludwick, inc.:
instructions
compute basic and diluted earnings per share.
24) listed below are items that are treated differently for accounting purposes than they
are for tax purposes. indicate whether the items are permanent differences or temporary
differences. for temporary differences, indicate whether they will create deferred tax
assets or deferred tax liabilities.
1>investments accounted for by the equity method.
2>advance rental receipts.
3>fine for polluting.
4>estimated future warranty costs.
5>excess of contributions over pension expense.
6>expenses incurred in obtaining tax-exempt revenue.
7>installment sales.
8>excess tax depreciation over accounting depreciation.
9>long-term construction contracts.
10>premiums paid on life insurance of officers (company is the beneficiary).
25) match the approach and location where gains and losses from available-for-sale
securities are reported:
26) although the presentation formats for the balance sheet and statement of cash flows
are similar under ifrs and u.s. gaap, ifrs requires far more extensive disclosure.
27) a convertible bond issue should be included in the diluted earnings per share
computation as if the bonds had been converted into common stock, if the effect of its
inclusion is
28) dill co. records purchases at net amounts and uses periodic inventories. prepare
entries for the following:
june11purchased merchandise on account, $8,000, terms 2/10, n/30.
15returned part of june 11 purchase, $500, and received credit on account.
30prepared the adjusting entry required for financial statements.
29) a truck was acquired on july 1, 2010, at a cost of $162,000. the truck had a six-year
useful life and an estimated salvage value of $18,000. the straight-line method of
depreciation was used. on january 1, 2013, the truck was overhauled at a cost of
$15,000, which extended the useful life of the truck for an additional two years beyond
that originally estimated (salvage value is still estimated at $18,000). in computing
depreciation for annual adjustment purposes, expense is calculated for each month the
asset is owned.
instructions
prepare the appropriate entries for january 1, 2013 and december 31, 2013.
30) at december 31, 2013, jeter corp. had the following equity securities that were
purchased during 2013, its first year of operation:
all market declines are considered temporary. fair value adjustments at december 31,
2013 should be established with a corresponding charge against