1) Risers Inc. reported total assets of $1,800,000 and net income of $240,000 for the
current year. Risers determined that inventory was overstated by $18,000 at the
beginning of the year (this was not corrected). What is the corrected amount for total
assets and net income for the year?
a.$1,800,000 and $240,000
b.$1,800,000 and $258,000
c.$1,782,000 and $222,000
d.$1,818,000 and $258,000
2) Which of the following is true with regard to pension accounting under U.S. GAAP
and IFRS?
a.Accounting for defined-benefit pensions is typically a less important issue in the U. S.
than in other parts of the world
b.The accounting for defined-benefit pension plans is the same under U.S. GAAP and
IFRS
c.Prior service cost is recognized on the balance sheet under both U.S. GAAP and IFRS
d.Prior service cost is amortized into income over the expected service lives of
employees under both U.S. GAAP and IFRS
3) During 2014, Eaton Co. introduced a new product carrying a two-year warranty
against defects. The estimated warranty costs related to dollar sales are 2% within 12
months following sale and 3% in the second 12 months following sale. Sales and actual
warranty expenditures for the years ended December 31, 2014 and 2015 are as follows:
Actual Warranty
SalesExpenditures
2014$ 800,000$12,000
2015 1,000,000 35,000
$1,800,000$47,000
At December 31, 2015, (assuming the accrual method) Eaton should report an
estimated warranty liability of
a.$0
b.$15,000
c.$35,000
d.$43,000
4) The economic entity assumption
a.is inapplicable to unincorporated businesses
b.recognizes the legal aspects of business organizations
c.requires periodic income measurement
d.is applicable to all forms of business organizations
5) On March 1, 2014, Newton Company purchased land for an office site by paying
$1,800,000 cash. Newton began construction on the office building on March 1 . The
following expenditures were incurred for construction:
DateExpenditures
March 1, 2014$ 1,200,000
April 1, 20141,680,000
May 1, 20143,000,000
June 1, 20144,800,000
The office was completed and ready for occupancy on July 1 . To help pay for
construction, and purchase of land $2,400,000 was borrowed on March 1, 2014 on a
9%, 3-year note payable. Other than the construction note, the only debt outstanding
during 2014 was a $1,000,000, 12%, 6-year note payable dated January 1, 2014 .
The weighted-average accumulated expenditures on the construction project during
2014 were
a.$1,280,000
b.$9,780,000
c.$1,040,000
d.$2,320,000
6) Long-term liabilities include
a. obligations not expected to be liquidated within the operating cycle
b.obligations payable at some date beyond the operating cycle
c.deferred income taxes and most lease obligations
d.all of these answer choices are correct
7) Information concerning the capital structure of Piper Corporation is as follows:
December 31,
20152014
Common stock150,000 shares150,000 shares
Convertible preferred stock15,000 shares15,000 shares
6% convertible bonds$2,400,000$2,400,000
During 2015, Piper paid dividends of $0.60 per share on its common stock and $1.50
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, 2015, was $300,000.
Assume that the income tax rate was 30%.
What should be the basic earnings per share for the year ended December 31, 2015,
rounded to the nearest penny?
a.$1.25
b.$1.54
c.$1.85
d.$2.00
8) A company is not required to report a per share amount on the face of the income
statement for which one of the following items?
a.Net income
b.Prior period adjustment
c.Extraordinary item
d.Discontinued operations
9) On December 31, 2014, the stockholders’ equity section of Arndt, Inc., was as
follows:
Common stock, par value $10; authorized 30,000 shares;
issued and outstanding 9,000 shares$ 90,000
Additional paid-in capital116,000
Retained earnings 184,000
Total stockholders’ equity$390,000
On March 31, 2015, Arndt declared a 10% stock dividend, and accordingly 900
additional shares were issued, when the fair value of the stock was $18 per share. For
the three months ended March 31, 2015, Arndt sustained a net loss of $32,000. The
balance of Arndts retained earnings as of March 31, 2015, should be
a.$135,800
b.$143,000
c.$144,800
d.$152,000
10) What is the objective of financial reporting?
a.Provide information that is useful to management in making decisions
b.Provide information that clearly portrays nonfinancial transactions
c.Provide information about the reporting entity that is useful to present and potential
equity investors, lenders, and other creditors
d.Provide information that excludes claims to the resources