1) if a company acquires a 40% common stock interest in another company
a.the equity method is usually applicable
b.all influence is classified as controlling
c.the cost method is usually applicable
d.the ability to exert significant influence over the activities of the investee does not
exist
2) hagan company owns 10% interest in the stock of nelsen corporation. during the
year, nelsen pays $80,000 in dividends to hagan, and reports $400,000 in net income.
hagan companys investment in nelsen will increase hagan net income by
a.$80,000
b.$96,000
c.$40,000
d.$8,000
3) burnham company reported the following summarized annual data at the end of
2012:
*based on an ending fifo inventory of $250,000.
the income tax rate is 30%. the controller of the company is considering a switch from
fifo to lifo. he has determined that on a lifo basis, the ending inventory would have been
$190,000.
(a)restate the summary information on a lifo basis.
(b)what effect, if any, would the proposed change have on burnhams income tax
expense, net income, and cash flows?
(c)if you were an owner of this business, what would your reaction be to this proposed
change?
4) regular dividends are declared out of
a.paid-in capital in excess of par value
b.treasury stock
c.common stock
d.retained earnings
5) on january 1, 2012, hannigan company issued bonds with a face value of $800,000.
the bonds carry a stated interest of 7% payable each january
a.prepare the journal entry for the issuance assuming the bonds are issued at 97.
b.prepare the journal entry for the issuance assuming the bonds are issued at 102.
6) plato company reports the following for the month of june.
instructions
(a)calculate the cost of the ending inventory and the cost of goods sold for each cost
flow assumption, using a perpetual inventory system. assume a sale of 570 units
occurred on june 15 for a selling price of $8 and a sale of 630 units on june 27 for $9.
(note: for the average-cost method, round unit cost to three decimal places.)
(b)why is the average unit cost not $6 [($5 + $6 + $7) 3 = $6]?
7) the following information pertains to bell company. assume that all balance sheet
amounts represent both average and ending balance figures. assume that all sales were
on credit.
what is the receivables turnover for this company?
a.2.8 times
b.2 times
c.3.4 times
d.3 times
8) expected direct materials purchases in wade company are $350,000 in the first
quarter and $450,000 in the second quarter. forty percent of the purchases are paid in
cash as incurred, and the balance is paid in the following quarter. the budgeted cash
payments for purchases in the second quarter are:
a.480,000
b.450,000
c.390,000
d.360,000
9) an analysis and aging of the accounts receivable of watts company at december 31
reveal these data:
what is the cash realizable value of the accounts receivable at december 31 after
adjustment?
a.$2,740,000
b.$3,000,000
c.$3,200,000
d.$2,940,000
10) use the following data to determine the total dollar amount of assets to be classified
as investments.
a.$0
b.$310,000
c.$160,000
d.$370,000
11) having one person responsible for the related activities of ordering merchandise,
receiving goods, and paying for them
a.increases the potential for errors and fraud
b.decreases the potential for errors and fraud
c.is an example of good internal control
d.is a good example of safeguarding the company’s assets
12) relevant accounting information
a.is information that has been audited
b.must be reported within the operating cycle or one year, whichever is longer
c.has been objectively determined
d.is information that is capable of making a difference in a business decision
13) the operating cycle of a merchandising company is
a.always one year in length
b.ordinarily longer than that of a service company
c.about the same as that of a service company
d.ordinarily shorter than that of a service company