1) When a company wishes to purchase and retire its own stock, the company must
A.decrease the stock account balances by the original issue price
B.record a gain or loss depending on the difference between original selling price and
repurchase cost
C.get the approval of the state to do so
D.issue a different class of stock to the former stockholders
2) Use the information below for Oakland Inc.. for 2013 and 2014 to answer the
following question.
During 2014, Oakland Inc. sold equipment with a cost of $30,000 and accumulated
depreciation of $25,000. A gain of $3,000 was recognized on the sale of the equipment
This was the only equipment sale during the year.
What amount would be reported as the cash proceeds from the sale of equipment?
A.$2,000
B.$3,000
C.$5,000
D.$8,000
3) Royal Company purchased a dump truck at the beginning of 2012 at a cost of
$50,000. The truck had an estimated life of 5 years and an estimated residual value of
$20,000. On January 1, 2014, the company made major repairs of $30,000 to the truck
that extended the life 3 years. Thus, starting with 2014, the truck has a remaining life of
5 years and a new salvage value of $8,000. Royal uses the straight-line depreciation
method
When calculating depreciation for 2014, Royal should
A.add the $30,000 to the book value at December 31, 2013 and then allocate the revised
basis over the remaining adjusted useful life of 5 years
B.report the effect of the change in life as an expense on the income statement in 2012
C.ignore the change in life on the original cost of $50,000 and depreciate the additional
$30,000 cost separately over its useful life
D.expense the $30,000 and depreciate the original cost of $50,000 over its revised
estimated total live of 7 years
4) On January 1, 2012, the long-term liability section of Dennison Supply Co. balance
sheet showed a balance of $800,000 in the bonds payable account. On December 31,
2012, the balance in that same account was $765,000. This change would appear on the
statement of cash flows as
A.an outflow of cash of $35,000 in the financing activities category
B.an inflow of cash of $35,000 in the financing activities category
C.an outflow of cash of $35,000 in the investing activities category
D.an inflow of cash of $35,000 in the investing activities category
5) If Crab Shack Company has a current ratio of 2.5 and current assets of $195,000, the
amount of working capital is:
A.$117,000
B.$330,000
C.$380,000
D.$78,000
6) Verilux Company sold merchandise to Flight Corp. on November 1, 2014, for
$10,000. Verilux accepted a promissory note from Flight Corp. for $10,000. The note
has a term of 5 months and a stated interest rate of 7%. Veriluxs accounting period ends
on December 31, 2014.
What amount should Verilux recognize as interest revenue on the maturity date of the
note?
A.$ -0-
B.$ 175.00
C.$ 291.67
D.$ 420.00
7) Sunset Band, Inc. purchased merchandise from Rumble Music Company on June 5,
2014. The goods were shipped the same day. The merchandise’s selling price was
$15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping
point. Sunset received the merchandise on June 10, 2014. Sunset paid the amount due
on June 13, 2014.
When did title to the merchandise transfer from Rumble Music Company to Sunset?
A.June 5, 2014
B.June 10, 2014
C.June 13, 2014
D.Cannot be determined from the information provided
8) The International Accounting Standards Committee was established in 1973 to
develop
worldwide standards. Which group replaced it in 2001?
A.FASB
B.IFRS
C.IASB
D.IIA
9) Assume the current ratio is 3 to 1. Estimating the warranties expense on the periods
sales would cause the current ratio to
A.increase
B.decrease
C.be unchanged since the effects offset one another
D.be unchanged since it has no effect on any current accounts
10) Operating assets with no physical properties are called
A.current assets
B.intangible assets
C.plant assets
D.property, plant, and equipment
11) The benefits of a single set of accounting standards used around the world would
include all of the following except:
A.They would eventually save companies considerable money in accounting fees
B.They would prevent competitors from acquiring each other
C.They would allow easier comparisons by analysts and investors
D.They would facilitate access to foreign capital markets
12) The denomination or principal amount of the bond is usually referred to as the
_________________________.
13) Explain the meaning of the terms contingent liabilities and provisions as they
relate to U.S. GAAP and IFRS?
14) The three reasons why a company might choose an accelerated depreciation method
are __________________________________________________,
__________________________________________________, and
__________________________________________________.
15) Distinguish between tangible and intangible operating assets.
16) A(n) ___________________ is a form used by the receiving department to account
for the quantity and condition of merchandise received from a supplier.