Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) Which of the following methods of determining bad debt expense does not properly
match expense and revenue?
a.Charging bad debts with a percentage of sales under the allowance method
b.Charging bad debts with an amount derived from a percentage of accounts receivable
under the allowance method
c.Charging bad debts with an amount derived from aging accounts receivable under the
allowance method
d.Charging bad debts as accounts are written off as uncollectible
2) Olsen Company paid or collected during 2014 the following items:
Insurance premiums paid$ 25,800
Interest collected62,800
Salaries paid260,400
The following balances have been excerpted from Olsen's balance sheets:
December 31, 2014December 31, 2013
Prepaid insurance$ 2,400$ 3,000
Interest receivable7,4005,800
Salaries and wages payable24,60021,200
The interest revenue on the income statement for 2014 was
a.$49,600
b.$61,200
c.$64,400
d.$76,000
3) Benson Plastics Company deposits all receipts and makes all payments by check.
The following information is available from the cash records:
MARCH 31 BANK RECONCILIATION
Balance per bank$26,746
Add: Deposits in transit2,100
Deduct: Outstanding checks (3,800)
Balance per books$25,046
Month of April Results
Per BankPer Books
Balance April 30$27,995$27,355
April deposits11,78413,889
April checks11,10010,080
April note collected (not included in April deposits)3,000-0-
April bank service charge35-0-
April NSF check of a customer returned by the bank
(recorded by bank as a charge)900-0-
Instructions
(a)Calculate the amount of the April 30:
1>Deposits in transit
2>Outstanding checks
(b)What is the April 30 adjusted cash balance? Show all work.
4) Which of the following is the first step to be taken by a company deciding to convert
to IFRS?
a.Preparing an opening balance sheet at the date of transition
b.Identifying the timing of first IFRS statement
c.Selecting accounting principles that comply with IFRS
d.Implementing accounting principles retrospectively
5) Armstrong Inc. is a calendar-year corporation. Its financial statements for the years
ended 12/31/14 and 12/31/15 contained the following errors:
20142015
Ending inventory$25,000 overstatement$40,000 understatement
Depreciation expense 10,000 understatement 20,000 overstatement
Assume that the 2014 errors were not corrected and that no errors occurred in 2013 . By
what amount will 2014 income before income taxes be overstated or understated?
a.$35,000 overstatement
b.$15,000 overstatement
c.$35,000 understatement
d.$15,000 understatement
6) Assuming no beginning inventory, what can be said about the trend of inventory
prices if cost of goods sold computed when inventory is valued using the FIFO method
exceeds cost of goods sold when inventory is valued using the LIFO method?
a.Prices decreased
b.Prices remained unchanged
c.Prices increased
d.Price trend cannot be determined from information given
7) A corporation borrowed money from a bank to build a building. The long-term note
signed by the corporation is secured by a mortgage that pledges title to the building as
security for the loan. The corporation is to pay the bank $80,000 each year for 10 years
to repay the loan. Which of the following relationships can you expect to apply to the
situation?
a.The balance of mortgage payable at a given balance sheet date will be reported as a
long-term liability
b.The balance of mortgage payable will remain a constant amount over the 10-year
period
c.The amount of interest expense will decrease each period the loan is outstanding,
while the portion of the annual payment applied to the loan principal will increase each
period
d.The amount of interest expense will remain constant over the 10-year period
8) Foster Corporation received the following report from its actuary at the end of the
year:
December 31, 2014December 31, 2015
Projected benefit obligation$2,000,000$2,200,000
Accumulated benefit obligation1,300,0001,480,000
Fair value of pension plan assets1,380,0001,440,000
The amount reported as the pension liability at December 31, 2015 is
a.$2,200,000
b.$1,480,000
c.$720,000
d.$760,000
9) Everhart Company issues $20,000,000, 6%, 5-year bonds dated January 1, 2014 on
January 1, 2014 . The bonds pay interest semiannually on June 30 and December 31 .
The bonds are issued to yield 5%. What are the proceeds from the bond issue?
a.$20,000,000
b.$20,865,976
c.$20,875,236
d.$20,869,232
10) Starr Corporation loaned $450,000 to another corporation on December 1, 2014 and
received a 3-month, 8% interest-bearing note with a face value of $450,000. What
adjusting entry should Starr make on December 31, 2014?
a.Debit Interest Receivable and credit Interest Revenue, $9,000
b.Debit Cash and credit Interest Revenue, $3,000
c.Debit Interest Receivable and credit Interest Revenue, $3,000
d.Debit Cash and credit Interest Receivable, $9,000
11) Which of these is not a major characteristic of a plant asset?
a.Possesses physical substance
b.Acquired for use in operations
c.Yields services over a number of years
d.All of these are major characteristics of a plant asset
12) When the interest payment dates of a bond are May 1 and November 1, and a bond
issue is sold on June 1, the amount of cash received by the issuer will be
a.decreased by accrued interest from June 1 to November 1
b.decreased by accrued interest from May 1 to June 1
c.increased by accrued interest from June 1 to November 1
d.increased by accrued interest from May 1 to June 1
13) Convertible bonds
a.have priority over other indebtedness
b.are usually secured by a first or second mortgage
c.pay interest only in the event earnings are sufficient to cover the interest
d.may be exchanged for equity securities
