1) nolte co. has 4,800,000 shares of common stock outstanding on december 31, 2012.
an additional 200,000 shares are issued on april 1, 2013, and 480,000 more on
september 1. on october 1, nolte issued $6,000,000 of 9% convertible bonds. each
$1,000 bond is convertible into 40 shares of common stock. no bonds have been
converted. the number of shares to be used in computing basic earnings per share and
diluted earnings per share on december 31, 2013 is
a.5,110,000 and 5,110,000
b.5,110,000 and 5,170,000
c.5,110,000 and 5,350,000
d.5,880,000 and 5,320,000
2) which of the following are considered pervasive constraints by statement of financial
accounting concepts no. 2?
a.cost-constraint relationship and conservatism
b.timeliness and feedback value
c.conservatism and verifiability
d.materiality and cost-constraint relationship
3) 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
4) 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
5) a reconciliation of gentry company’s pretax accounting income with its taxable
income for 2012, its first year of operations, is as follows:
the excess tax depreciation will result in equal net taxable amounts in each of the next
three years. enacted tax rates are 40% in 2012, 35% in 2013 and 2014, and 30% in
2015. the total deferred tax liability to be reported on gentry’s balance sheet at december
31, 2012, is
a.$72,000
b.$60,000
c.$63,000
d.$54,000
6) which of the following is an example of an accrued expense?
a.office supplies purchased at the beginning of the year and debited to an expense
account
b.property taxes incurred during the year, to be paid in the first quarter of the
subsequent year
c.depreciation expense
d.rent earned during the period, to be received at the end of the year
7) which of the following organizations has not been instrumental in the development
of financial accounting standards in the united states?
a.aicpa
b.fasb
c.iasb
d.sec
8) on january 2, 2012, indian river groves began construction of a new citrus processing
plant. the automated plant was finished and ready for use on september 30, 2013.
expenditures for the construction were as follows:
indian river groves borrowed $1,650,000 on a construction loan at 12% interest on
january 2, 2012. this loan was outstanding during the construction period. the company
also had $6,000,000 in 9% bonds outstanding in 2012 and 2013.
what were the weighted-average accumulated expenditures for 2012?
a.$800,000
b.$750,000
c.$600,000
d.$1,500,000
9) landis co. purchased $1,000,000 of 8%, 5-year bonds from ritter, inc. on january 1,
2012, with interest payable on july 1 and january 1. the bonds sold for $1,041,580 at an
effective interest rate of 7%. using the effective-interest method, landis co. decreased
the available-for-sale debt securities account for the ritter, inc. bonds on july 1, 2012
and december 31, 2012 by the amortized premiums of $3,540 and $3,660, respectively.
at december 31, 2012, the fair value of the ritter, inc. bonds was $1,060,000. what
should landis co. report as other comprehensive income and as a separate component of
stockholders’ equity?
a.$25,620
b.$18,420
c.$7,200
d.no entry should be made
10) accounting policies disclosed in the notes to the financial statements typically
include all of the following except
a.the cost flow assumption used
b.the depreciation methods used
c.significant estimates made
d.significant inventory purchasing policies
11) what is the normal journal entry when writing-off an account as uncollectible under
the allowance method?
a.debit allowance for doubtful accounts, credit accounts receivable
b.debit allowance for doubtful accounts, credit bad debt expense
c.debit bad debt expense, credit allowance for doubtful accounts
d.debit accounts receivable, credit allowance for doubtful accounts
12) if a corporation purchases a lot and building and subsequently tears down the
building and uses the property as a parking lot, the proper accounting treatment of the
cost of the building would depend on
a.the significance of the cost allocated to the building in relation to the combined cost
of the lot and building
b.the length of time for which the building was held prior to its demolition
c.the contemplated future use of the parking lot
d.the intention of management for the property when the building was acquired
13) ferguson company purchased a depreciable asset for $120,000. the estimated
salvage value is $10,000, and the estimated useful life is 10 years. the straight-line
method will be used for depreciation. what is the depreciation base of this asset?
a.$11,000
b.$12,000
c.$110,000
d.$120,000