1) when a stock dividend is less than 20-25 percent of the common stock outstanding, a
company is required to transfer the fair value of the stock issued from retained earnings.
2) the net amount reported for short-term receivables is not affected when a specific
account receivable is determined to be uncollectible.
3) taxable temporary differences will result in taxable amounts in future years when the
related assets are recovered.
4) the statement of cash flows reports only the cash effects of operations during a period
and financing transactions.
5) if a nonmonetary exchange lacks commercial substance, and cash is received, a
partial gain or loss is recognized.
6) the objective of financial reporting is to provide financial information about the
reporting entity that is useful to present and potential equity investors, but not to users
who are not investors.
7) delayed recognition of revenue is appropriate if the sale does not represent
substantial completion of the earnings process.
8) the idea of consistency does not mean that companies cannot switch from one
accounting method to another.
9) if a company scraps an asset without any cash recovery, it recognizes a loss equal to
the assets book value.
10) international financial reporting standards preceded international accounting
standards
11) the preemptive right allows stockholders the right to vote for directors of the
company.
12) the construction in process account includes only construction costs under the
percentage-of-completion method.
13) the interest rate written in the terms of the bond indenture is called the effective
yield or market rate.
14) short-term, highly liquid investments may be included with cash on the balance
sheet.
15) under ifrs, a deferred tax liability is classified as current or noncurrent based on the
classification of the asset or liability to which it relates.
16) the accountant for the lintz sales company is preparing the income statement for
2012 and the balance sheet at december 31, 2012. the january 1, 2012 merchandise
inventory balance will appear
a.only as an asset on the balance sheet
b.only in the cost of goods sold section of the income statement
c.as a deduction in the cost of goods sold section of the income statement and as a
current asset on the balance sheet
d.as an addition in the cost of goods sold section of the income statement and as a
current asset on the balance sheet
17) bonds for which the owners’ names are not registered with the issuing corporation
are called
a.bearer bonds
b.term bonds
c.debenture bonds
d.secured bonds
18) accrual accounting is used because
a.cash flows are considered less important
b.it provides a better indication of ability to generate cash flows than the cash basis
c.it recognizes revenues when cash is received and expenses when cash is paid
d. none of the above
19) winger corporation owned 300,000 shares of fegan corporation stock. on december
31, 2012, when winger’s account “equity investment (fegan corporation”) had a carrying
value of $5 per share, winger distributed these shares to its stockholders as a dividend.
winger originally paid $8 for each share. fegan has 1,000,000 shares issued and
outstanding, which are traded on a national stock exchange. the quoted market price for
a fegan share was $7 on the declaration date and $9 on the distribution date.
what would be the reduction in winger’s stockholders’ equity as a result of the above
transactions?
a.$1,200,000
b.$1,500,000
c.$2,400,000
d.$2,700,000
20) significant accounting policies may not be
a.selected on the basis of judgment
b.selected from existing acceptable alternatives
c.unusual or innovative in application
d.omitted from financial-statement disclosure
21) collier borrowed $350,000 on october 1 and is required to pay $360,000 on march
1. what amount is the note payable recorded at on october 1 and how much interest is
recognized from october 1 to december 31?
a.$350,000 and $0
b.$350,000 and $6,000
c.$360,000 and $0
d.$350,000 and $10,000
22) when should a transfer of receivables be recorded as a sale?
a.the transferred assets are isolated from the transferor
b.the transferor does not maintain effective control over the transferred assets through
an agreement to repurchase or redeem them prior to their maturity
c.the transferee has the right to pledge or exchange the transferred assets
d.all of the above
23) which of the following is included in comprehensive income?
a.investments by owners
b.unrealized gains on available-for-sale securities
c.distributions to owners
d.changes in accounting principles
24) when using the indirect method to prepare the operating section of a statement of
cash flows, which of the following is added to net income to compute cash provided
by/used by operating activities?
a.increase in accounts receivable
b.gain on sale of land
c.amortization of patent
d.all of the above are added to net income to arrive at cash flow from operating
activities
25) to record an asset retirement obligation (aro), the cost associated with the aro is
a.expensed
b.included in the carrying amount of the related long-lived asset
c.included in a separate account
d.none of these
26) which of the following is not a reason the retail inventory method is used widely?
a.as a control measure in determining inventory shortages
b.for insurance information
c.to permit the computation of net income without a physical count of inventory
d.to defer income tax liability
27) loazia inc. incurred the following costs during the year ended december 31, 2013:
the total amount to be classified and expensed as research and development in 2013 is
a.$605,000
b.$905,000
c.$635,000
d.$335,000
28) on december 31, 2012, flint corporation sold for $100,000 an old machine having
an original cost of $180,000 and a book value of $80,000. the terms of the sale were as
follows:
$20,000 down payment
$40,000 payable on december 31 each of the next two years
the agreement of sale made no mention of interest; however, 9% would be a fair rate for
this type of transaction. what should be the amount of the notes receivable net of the
unamortized discount on december 31, 2012 rounded to the nearest dollar? (the present
value of an ordinary annuity of 1 at 9% for 2 years is 1.75911.)
a.$70,364
b.$90,364.
c.$80,000.
d.$140,728.
29) ziegler corporation purchased 25,000 shares of common stock of the sherman
corporation for $40 per share on january 2, 2010. sherman corporation had 100,000
shares of common stock outstanding during 2013, paid cash dividends of $120,000
during 2013, and reported net income of $400,000 for 2013. ziegler corporation should
report revenue from investment for 2013 in the amount of
a.$30,000
b.$70,000
c.$100,000
d.$110,000
30) in which account are postage stamps classified?
a.cash
b.office supplies
c.receivables
d.inventory
31) presented below is information related to orender, inc.:
what is orenders rate of return on common stock equity for 2013?
a.26.7%
b.17.3%
c.15.8%
d.24.2%
32) which of the following is an example of managing earnings up?
a.decreasing estimated salvage value of equipment
b.writing off obsolete inventory
c.underestimating warranty claims
d.accruing a contingent liability for an ongoing lawsuit
33) williamson corporation purchased a depreciable asset for $400,000 on january 1,
2010. the estimated salvage value is $40,000, and the estimated useful life is 9 years.
the straight-line method is used for depreciation. in 2013, williamson changed its
estimates to a total useful life of 5 years with a salvage value of $60,000. what is 2013
depreciation expense?
a.$40,000
b.$60,000
c.$110,000
d.$120,000
34) on january 1, 2010, lake co. purchased a machine for $1,056,000 and depreciated it
by the straight-line method using an estimated useful life of eight years with no salvage
value. on january 1, 2013, lake determined that the machine had a useful life of six
years from the date of acquisition and will have a salvage value of $96,000. an
accounting change was made in 2013 to reflect these additional data. the accumulated
depreciation for this machine should have a balance at december 31, 2013 of
a.$584,000
b.$616,000
c.$640,000
d.$704,000
35) presented below is information related to farr company.
retained earnings, december 31, 2012$ 650,000
sales revenue1,400,000
selling and administrative expenses240,000
hurricane loss (pre-tax) on plant (extraordinary item)270,000
cash dividends declared on common stock33,600
cost of goods sold830,000
gain resulting from computation error on depreciation charge in 2011 (pre-tax)520,000
other revenue120,000
other expenses100,000
instructions
prepare in good form a multiple-step income statement for the year 2013. assume a 30%
tax rate and that 80,000 shares of common stock were outstanding during the year.
36) compared to the accrual basis of accounting, the cash basis of accounting overstates
income by the net increase during the accounting period of the
37) shown below is an income statement for 2012 that was prepared by a poorly trained
bookkeeper of howell corporation.
howell corporation
income statement
december 31, 2012
sales revenue$ 915,000
investment revenue19,500
cost of merchandise sold(408,500)
selling expenses(145,000)
administrative expenses(215,000)
interest expense (13,000)
income before special items153,000
special items
loss on disposal of a component of the business(30,000)
major casualty loss (extraordinary item)(60,000)
net federal income tax liability (27,900)
net income$ 35,100
instructions
prepare a multiple-step income statement for 2012 for howell corporation that is
presented in accordance with generally accepted accounting principles (including
format and terminology). howell corporation has 50,000 shares of common stock
outstanding and has a 30% federal income tax rate on all tax related items. round all
earnings per share figures to the nearest cent.
38) is the following exception applicable to ifrs or u.s. gaap?
a.yesyes
if determining the effect of a change in accounting principle is considered
impracticable, then a company should report the effect of the change in the period in
which it believes it practicable to do so.
39) on may 1, 2013, tv inc. consigned 80 tvs to ed’s tv. the tvs cost $360. freight on the
shipment paid by eds tv was $800. on july 10, tv inc. received an account sales and
$17,200 from ed’s tv. thirty tvs had been sold and the following expenses were
deducted:
the inventory of tvs will be reported on whose balance sheet and at what amount?
40) according to the fasb’s conceptual framework, comprehensive income includes
which of the following?
41) accounts receivable in the amount of $500,000 were assigned to the fast finance
company by marsh, inc., as security for a loan of $400,000. the finance company
charged a 4% commission on the face amount of the loan, and the note bears interest at
9% per year.
during the first month, marsh collected $260,000 on assigned accounts. this amount was
remitted to the finance company along with one month’s interest on the note.
instructions
make all the entries for marsh inc. associated with the transfer of the accounts
receivable, the loan, and the remittance to the finance company.