1) Characteristics of generally accepted accounting principles include all of the
following except
a.authoritative accounting that the rule-making body has established as a principle of
reporting
b.standards are considered useful by the profession
c.each principle is approved by the SEC
d.practice has become universally accepted over time
2) The residual interest in a corporation belongs to the
a.management
b.creditors
c.common stockholders
d.preferred stockholders
3) Current assets are presented in the balance sheet in
a.ascending order of their balances
b.descending order of their balances
c.order of their liquidity
d.reverse order of their liquidity
4) Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015 .
Included in net income was a gain on early extinguishment of debt of $60,000 related to
bonds payable with a book value of $1,200,000. Each of the following accounts
increased during 2015:
Notes receivable$45,000
Deferred tax liability$10,000
Treasury stock$120,000
What is the amount of cash used by financing activities for Jarvis, Inc. for the year
ended December 31, 2015?
a.$1,260,000
b.$1,270,000
c.$1,900,000
d.$ 225,000
5) Stine Corp.’s trial balance reflected the following account balances at December 31,
2014:
Accounts receivable (net)$19,000
Trading securities6,000
Accumulated depreciation on equipment and furniture15,000
Cash16,000
Inventory30,000
Equipment25,000
Patent4,000
Prepaid expenses2,000
Land held for future business site18,000
In Stine’s December 31, 2014 balance sheet, the current assets total is
a.$90,000
b.$82,000
c.$77,000
d.$73,000
6) Lyons Company deducts insurance expense of $126,000 for tax purposes in 2014,
but the expense is not yet recognized for accounting purposes. In 2015, 2016, and 2017,
no insurance expense will be deducted for tax purposes, but $42,000 of insurance
expense will be reported for accounting purposes in each of these years. Lyons
Company has a tax rate of 40% and income taxes payable of $108,000 at the end of
2014 . There were no deferred taxes at the beginning of 2014 .
Assuming that income taxes payable for 2015 is $144,000, the income tax expense for
2015 would be what amount?
a.$194,400
b.$160,800
c.$144,000
d.$127,200
7) In accounting for a long-term construction-type contract using the
percentage-of-completion method, the gross profit recognized during the first year
would be the estimated total gross profit from the contract, multiplied by the percentage
of the costs incurred during the year to the
a.total costs incurred to date
b.total estimated cost
c.unbilled portion of the contract price
d.total contract price
8) Morgan Manufacturing Company has the following account balances at year end:
Office supplies$ 4,000
Raw materials27,000
Work-in-process59,000
Finished goods92,000
Prepaid insurance6,000
What amount should Morgan report as inventories in its balance sheet?
a.$92,000.
b.$96,000
c.$178,000
d.$182,000
9) On January 2, 2014, Gold Star Leasing Company leases equipment to Brick Co. with
5 equal annual payments of $80,000 each, payable beginning January 2, 2014 . Brick
Co. agrees to guarantee the $50,000 residual value of the asset at the end of the lease
term. Bricks incremental borrowing rate is 10%, however it knows that Gold Stars
implicit interest rate is 8%. What journal entry would Brick Co. make at January 2,
2014 to record the lease?
PV Annuity DuePV Ordinary AnnuityPV Single Sum
8%, 5 periods 4.31213 3.99271 .68508
10%, 5 periods 4.16986 3.79079 .62092
a.Lease Equipment299,224
Lease Liability299,224
b.Leased Equipment379,224
Cash 80,000
Lease Liability299,224
c.Leased Equipment344,970
Cash 80,000
Lease Liability264,970
d.Leased Equipment353,671
Cash 80,000
Lease Liability273,671
10) Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of
December 31 and sales on credit during the year of $24 million. There is also a credit
balance of $12,000 in the allowance for doubtful accounts. If the company estimates
that 8% of its outstanding receivables will be uncollectible, what will be the amount of
bad debt expense recognized for the year?
a.$ 532,000
b.$ 520,000
c.$1,920,000
d.$ 508,000
11) Callon Co. uses the composite method to depreciate its equipment. The following
totals are for all of the equipment in the group:
Initial ResidualDepreciableDepreciation
Cost Value Cost Per Year
$900,000$100,000$800,000$80,000
Instructions
(a)What is the composite rate of depreciation? (To nearest tenth of a percent.)
(b)A machine with a cost of $23,000 was sold for $14,000 at the end of the third year.
What entry should be made?
12) Didde Corp. prepared the following reconciliation of income per books with income
per tax return for the year ended December 31, 2015:
Book income before income taxes$1,800,000
Add temporary difference
Construction contract revenue which will reverse in 2016160,000
Deduct temporary difference
Depreciation expense which will reverse in equal amounts in
each of the next four years (640,000)
Taxable income$1,320,000
Didde’s effective income tax rate is 34% for 2015 . What amount should Didde report in
its 2015 income statement as the current provision for income taxes?
a.$ 54,400
b.$448,800
c.$612,000
d.$666,400
13) What is a compensating balance?
a.Savings account balances
b.Margin accounts held with brokers
c.Temporary investments serving as collateral for outstanding loans
d.Minimum deposits required to be maintained in connection with a borrowing
arrangement
14) The cash debt coverage is computed by dividing net cash provided by operating
activities by
a.average long-term liabilities
b.average total liabilities
c.ending long-term liabilities
d.ending total liabilities