1) glaus corp. signed a three-month, zero-interest-bearing note on november 1, 2012 for
the purchase of $250,000 of inventory. the face value of the note was $253,675.
assuming glaus used a discount on note payable account to initially record the note and
that the discount will be amortized equally over the 3-month period, the adjusting entry
made at december 31, 2012 will include a
a.debit to discount on note payable for $1,225
b.debit to interest expense for $2,450
c.credit to discount on note payable for $1,255
d.credit to interest expense for $2,450
2) generally accepted accounting principles
a.are fundamental truths or axioms that can be derived from laws of nature
b.derive their authority from legal court proceedings
c.derive their credibility and authority from general recognition and acceptance by the
accounting profession
d.have been specified in detail in the fasb conceptual framework
3) one of the elements of financial statements is comprehensive income. as described in
statement of financial accounting concepts no. 6, “elements of financial statements,”
comprehensive income is equal to
a.revenues minus expenses plus gains minus losses
b.revenues minus expenses plus gains minus losses plus investments by owners minus
distributions to owners
c.revenues minus expenses plus gains minus losses plus investments by owners minus
distributions to owners plus assets minus liabilities
d.none of these
4) which of the following is an example of managing earnings down?
a.changing estimated bad debts from 3 percent to 2.5 percent of sales
b.revising the estimated life of equipment from 10 years to 8 years
c.not writing off obsolete inventory
d.reducing research and development expenditures
5) malone corporation uses the perpetual inventory method. on march 1, it purchased
$50,000 of inventory, terms 2/10, n/30. on march 3, malone returned goods that cost
$5,000. on march 9, malone paid the supplier. on march 9, malone should credit
a.purchase discounts for $1,000
b.inventory for $1,000
c.purchase discounts for $900
d.inventory for $900
6) 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.
the amount of cash geary received from kwik at the time of the transfer was
a.$603,000
b.$654,000
c.$656,600
d.$670,000
7) a flood damaged a building and contents. floods are unusual and infrequent in this
area. the receipts from insurance companies totaled $400,000, which was $120,000 less
than the book values. the tax rate is 30%.
on the statement of cash flows (indirect method), the receipts from insurance companies
should
a.be shown as an addition to net income of $280,000
b.be shown as an inflow from investing activities of $280,000
c.be shown as an inflow from investing activities of $400,000
d.not be shown
8) which of the following tables would show the smallest value for an interest rate of
5% for six periods?
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
9) ben, inc. follows ifrs for its external financial reporting. ben, inc. owns 25% of the
outstanding stock of black, inc. and accordingly uses the equity method to account for
its investment. which of the following is true regarding ben, inc.s policies related to
black, inc.?
a.ben, inc. will increase the investment account for its pro-rata share of black, inc.s net
loss for the year
b.ben, inc. will increase the investment account for its pro-rata share of the dividends
paid out by black, inc. for the year
c.ben, inc. will conform the accounting policies of black, inc. to its own accounting
policies
d.none of the above is true regarding how ben, inc. accounts for its investment in black,
inc
10) ortiz co. had the following account balances:
what would ortiz report as total expenses in a single-step income statement?
a.$190,500
b.$201,000
c.$184,500
d.$ 94,500
11) stech co. is issuing $6.5 million 12% bonds in a private placement on july 1, 2012.
each $1,000 bond pays interest semi-annually on december 31 and june 30 of each year.
the bonds mature in ten years. at the time of issuance, the market interest rate for
similar types of bonds was 8%. what is the expected selling price of the bonds?
a.$8,266,764
b.$13,566,992
c.$8,244,598
d.$8,310,962
12) wellington corp. has outstanding accounts receivable totaling $1.27 million as of
december 31 and sales on credit during the year of $6.4 million. there is also a debit
balance of $3,000 in the allowance for doubtful accounts. if the company estimates that
1% of its net credit sales will be uncollectible, what will be the balance in the allowance
for doubtful accounts after the year-end adjustment to record bad debt expense?
a.$12,700
b.$15,700
c.$61,000
d.$67,000
13) total payroll of watson co. was $1,840,000, of which $320,000 represented amounts
paid in excess of $106,800 to certain employees. the amount paid to employees in
excess of $7,000 was $1,440,000. income taxes withheld were $450,000. the state
unemployment tax is 1.2%, the federal unemployment tax is .8%, and the f.i.c.a. tax is
7.65% on an employees salaries and wages to $106,800 and 1.45% in excess of
$106,800.
instructions
(a)prepare the journal entry for the salaries and wages paid.
(b)prepare the entry to record the employer payroll taxes.
14) if the fifo inventory method was used last period, it should be used for the current
and following periods because of
a.relevance
b.neutrality
c.understandability
d.consistency
15) rowen, inc. had pre-tax accounting income of $1,350,000 and a tax rate of 40% in
2013, its first year of operations. during 2013 the company had the following
transactions:
for 2013, what is the amount of income taxes payable for rowen, inc?
a.$452,400
b.$490,800
c.$514,800
d.$579,600
16) hartman, inc. has prepared the following comparative balance sheets for 2012 and
2013:
1>the accumulated depreciation account has been credited only for the depreciation
expense for the period.
2>the retained earnings account has been charged for dividends of $158,000 and
credited for the net income for the year.
the income statement for 2013 is as follows:
instructions
(a)from the information above, prepare a statement of cash flows (indirect method) for
hartman, inc. for the year ended december 31, 2013.
(b)from the information above, prepare a schedule of cash provided by operating
activities using the direct method.
