1) armstrong inc. is a calendar-year corporation. its financial statements for the years
ended 12/31/12 and 12/31/13 contained the following errors:
assume that the 2012 errors were not corrected and that no errors occurred in 2011. by
what amount will 2012 income before income taxes be overstated or understated?
a.$28,000 overstatement
b.$12,000 overstatement
c.$28,000 understatement
d.$12,000 understatement
2) oliver co. uses the installment-sales method. when an account had a balance of
$11,200, no further collections could be made and the dining room set was repossessed.
at that time, it was estimated that the dining room set could be sold for $3,200 as
repossessed, or for $4,000 if the company spent $400 reconditioning it. the gross profit
rate on this sale was 70%. the gain or loss on repossession was a
a.$7,840 loss
b.$8,000 loss
c.$800 gain
d.$240 gain
3) palomo corp has a tax rate of 30 percent and income before non-operating items of
$714,000. it also has the following items (gross amounts).
what is the amount of income tax expense palomo would report on its income
statement?
a.$231,600
b.$121,800
c.$166,200
d.$217,800
4) green construction co. has consistently used the percentage-of-completion method of
recognizing revenue. during 2012, green entered into a fixed-price contract to construct
an office building for $16,000,000. information relating to the contract is as follows:
contract costs incurred during 2013 were
a.$3,840,000
b.$3,960,000
c.$4,200,000
d.$5,760,000
5) treasury shares are
a.shares held as an investment by the treasurer of the corporation
b.shares held as an investment of the corporation
c.issued and outstanding shares
d.issued but not outstanding shares
6) when there is a significant increase in the estimated total contract costs but the
increase does not eliminate all profit on the contract, which of the following is correct?
a.under both the percentage-of-completion and the completed-contract methods, the
estimated cost increase requires a current period adjustment of excess gross profit
recognized on the project in prior periods
b.under the percentage-of-completion method only, the estimated cost increase requires
a current period adjustment of excess gross profit recognized on the project in prior
periods
c.under the completed-contract method only, the estimated cost increase requires a
current period adjustment of excess gross profit recognized on the project in prior
periods
d.no current period adjustment is required
7) which one of the following disclosures should be made in the equity section of the
balance sheet, rather than in the notes to the financial statements?
a.dividend preferences
b.liquidation preferences
c.call prices
d.conversion or exercise prices
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.
the interest capitalized for 2013 was:
a.$187,110
b.$177,458
c.$ 38,610
d.$ 148,500
9) the intangible asset goodwill may be
a.capitalized only when purchased
b.capitalized either when purchased or created internally
c.capitalized only when created internally
d.written off directly to retained earnings
10) during the year, kiner company made an entry to write off a $16,000 uncollectible
account. before this entry was made, the balance in accounts receivable was $200,000
and the balance in the allowance account was $18,000. the net realizable value of
accounts receivable after the write-off entry was
a.$200,000
b.$198,000
c.$166,000
d.$182,000
11) sealy corporation had the following information in its financial statements for the
years ended 2012 and 2013:
what is the payout ratio for sealy corporation for the year ended 2013?
a.14.7%
b. 6.4%
c. 7.4%
d.19.2%
12) percy resources company acquired a tract of land containing an extractable natural
resource. percy is required by its purchase contract to restore the land to a condition
suitable for recreational use after it has extracted the natural resource. geological
surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land
will have a value of $1,000,000 after restoration. relevant cost information follows:
if percy maintains no inventories of extracted material, what should be the charge to
depletion expense per ton of extracted material?
a.$3.25
b.$3.75
c.$4.00
d.$4.50
13) equipment that cost $88,000 and has accumulated depreciation of $40,000 is
exchanged for equipment with a fair value of $64,000 and $16,000 cash is received. the
exchange lacked commercial substance.
the gain to be recognized from the exchange is
a.$6,400 gain
b.$8,000 gain
c.$24,000 gain
d.$32,000 gain