1) a company buys an oil rig for $2,000,000 on january 1, 2012. the life of the rig is 10
years and the expected cost to dismantle the rig at the end of 10 years is $400,000
(present value at 10% is $154,220). 10% is an appropriate interest rate for this
company. what expense should be recorded for 2012 as a result of these events?
a.depreciation expense of $240,000
b.depreciation expense of $200,000 and interest expense of $15,422
c.depreciation expense of $200,000 and interest expense of $40,000
d.depreciation expense of $215,420 and interest expense of $15,422
2) foyle, inc., had 610,000 shares of common stock issued and outstanding at december
31, 2012. on july 1, 2013, an additional 40,000 shares of common stock were issued for
cash. foyle also had unexercised stock options to purchase 32,000 shares of common
stock at $15 per share outstanding at the beginning and end of 2013. the average market
price of foyle’s common stock was $20 during 2013. what is the number of shares that
should be used in computing diluted earnings per share for the year ended
december 31, 2013?
a.630,000
b.638,000
c.658,000
d.662,000
3) on december 31, 2013 dean company changed its method of accounting for inventory
from weighted average cost method to the fifo method. this change caused the 2013
beginning inventory to increase by $630,000. the cumulative effect of this accounting
change to be reported for the year ended 12/31/13, assuming a 40% tax rate, is
a.$630,000
b.$378,000
c.$252,000
d.$0
4) how might a company obtain a price index in order to apply dollar-value lifo?
a.calculate an index based on recent inventory purchases
b.use a general price level index published by the government
c.use a price index prepared by an industry group
d.all of the above
5) platteville corporation has the following account balances at 12/31/12:
what amount should platteville report for intangible assets on the 12/31/12 balance
sheet?
a.$210,000
b.$300,000
c.$630,000
d.$660,000
6) piper co. began operations on january 1, 2013 and appropriately uses the installment
method of accounting. the following information pertains to piper’s operations for 2013:
the balance in the deferred gross profit account at december 31, 2013 should be
a.$440,000
b.$660,000
c.$520,000
d.$960,000
7) which of the following costs should be capitalized in the year incurred?
a.research and development costs
b.costs to internally generate goodwill
c.organizational costs
d.costs to successfully defend a patent
8) assuming the market interest rate is 10% per annum, how much would green co.
record as a note payable if the terms of the loan with a bank are that it would have to
make one $80,000 payment in two years?
a.$80,000
b.$72,563
c.$72,727
d.$66,116
9) the ifrs income statement classification of expenses by nature results in descriptions
which include all of the following except
a.salaries
b.depreciation
c.distribution
d.utilities
10) mays, inc. had net income for 2012 of $3,180,000 and earnings per share on
common stock of $5. included in the net income was $450,000 of bond interest expense
related to its long-term debt. the income tax rate for 2012 was 30%. dividends on
preferred stock were $600,000. the payout ratio on common stock was 25%. what were
the dividends on common stock in 2012?
a.$645,000
b.$795,000
c.$723,750
d.$967,500
11) the stockholders’ equity section is usually divided into what three parts?
a.preferred stock, common stock, treasury stock
b.preferred stock, common stock, retained earnings
c.capital stock, additional paid-in capital, retained earnings
d.capital stock, appropriated retained earnings, unappropriated retained earnings
12) garretson corporation will receive $8,000 today (january 1, 2012), and also on each
january 1st for the next five years (2013 2017). what is the present value of the six
$8,000 receipts, assuming a 12% interest rate?
a.$32,891
b.$36,838
c.$64,922
d.$72,712
13) a patent should be amortized over
a.twenty years
b.its useful life
c.its useful life or twenty years, whichever is longer
d.its useful life or twenty years, whichever is shorter
14) during 2012, which was the first year of operations, oswald company had
merchandise purchases of $985,000 before cash discounts. all purchases were made on
terms of 2/10, n/30. three-fourths of the items purchased were paid for within 10 days
of purchase. all of the goods available had been sold at year end.
which of the following recording procedures would result in the highest cost of goods
sold for 2012?
1>recording purchases at gross amounts
2> recording purchases at net amounts, with the amount of discounts not taken shown
under “other expenses” in the income statement
a. 1
b.2
c.either 1 or 2 will result in the same cost of goods sold.
d.cannot be determined from the information provided.
15) bishop co. began operations on january 1, 2012. financial statements for 2012 and
2013 con- tained the following errors:
in addition, on december 31, 2013 fully depreciated equipment was sold for $28,800,
but the sale was not recorded until 2014. no corrections have been made for any of the
errors. ignore income tax considerations.
the total effect of the errors on the amount of bishop’s working capital at december 31,
2013 is understated by
a.$410,800
b.$326,800
c.$194,800
d.$134,800
16) ludwig, inc., which owes giffin co. $2,400,000 in notes payable, is in financial
difficulty. to eliminate the debt, giffin agrees to accept from ludwig land having a fair
value of $1,830,000 and a recorded cost of $1,350,000.
instructions
(a)compute the amount of gain or loss to ludwig, inc. on the transfer (disposition) of the
land.
(b)compute the amount of gain or loss to ludwig, inc. on the restructuring of the debt.
(c)prepare the journal entry on ludwig ‘s books to record the restructuring of this debt.
(d)compute the gain or loss to giffin co. from restructuring of its receivable from
ludwig.
(e)prepare the journal entry on giffin’s books to record the restructuring of this
receivable.