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1) Jerome Co. has the following deferred tax liabilities at December 31, 2014:
What amount would Jerome Co. report as a noncurrent deferred tax liability under IFRS
and under U.S. GAAP?
IFRSU.S. GAAP
a.$0$450,000
b.$540,000$350,000
c.$350,000$350,000
d.$540,000$540,000
2) Rogers Co. had a sheet metal cutter that cost $120,000 on January 5, 2010 . This old
cutter had an estimated life of ten years and a salvage value of $20,000. On April 3,
2015, the old cutter is exchanged for a new cutter with a fair value of $60,000. The
exchange lacked commercial substance. Rogers also received $15,000 cash. Assume
that the last fiscal period ended on December 31, 2014, and that straight-line
depreciation is used.
Instructions
(a)Show the calculation of the amount of the gain or loss to be recognized by Rogers
Co.
(b)Prepare all entries that are necessary on April 3, 2015 . Show a check of the amount
recorded for the new cutter.
3) Malrom Manufacturing Company acquired a patent on a manufacturing process on
January 1, 2014 for $3,750,000. It was expected to have a 10 year life and no residual
value. Malrom uses straight-line amortization for patents. On December 31, 2015, the
expected future cash flows expected from the patent were expected to be $300,000 per
year for the next eight years. The present value of these cash flows, discounted at
Malroms market interest rate, is $1,800,000. At what amount should the patent be
carried on the December 31, 2015 balance sheet?
a.$3,750,000
b.$ 3,000
c.$2,400,000
d.$1,800,000
4) Travel advances should be reported as
a.supplies
b.cash because they represent the equivalent of money
c.investments
d.none of these answers are correct
5) Which of the following is not an acceptable major asset classification?
a.Current assets
b.Long-term investments
c.Property, plant, and equipment
d.Deferred charges
6) Wriglee, Inc. went to court this year and successfully defended its patent from
infringement by a competitor. The cost of this defense should be charged to
a.patents and amortized over the legal life of the patent
b.legal fees and amortized over 5 years or less
c.expenses of the period
d.patents and amortized over the remaining useful life of the patent
7) On January 1, 2012, Bacon Co. leased a building to Horner Corp. for a ten-year term
at an annual rental of $140,000. At inception of the lease, Bacon received $560,000
covering the first two years' rent of $280,000 and a security deposit of $280,000. This
deposit will not be returned to Horner upon expiration of the lease but will be applied to
payment of rent for the last two years of the lease. What portion of the $560,000 should
be shown as a current and long-term liability, respectively, in Bacon's December 31,
2012 balance sheet?
Current LiabilityLong-term Liability
a.$0$560,000
b.$140,000$280,000
c.$280,000$280,000
d.$280,000$140,000
8) On May 1, 2014, Goodman Company began construction of a building. Expenditures
of $360,000 were incurred monthly for 5 months beginning on May 1 . The building
was completed and ready for occupancy on September 1, 2014 . For the purpose of
determining the amount of interest cost to be capitalized, the weighted-average
accumulated expenditures on the building during 2014 were
a.$300,000
b.$360,000
c.$1,440,000
d.$1,800,000
9) Napier Co. provided the following information on selected transactions during 2015:
Purchase of land by issuing bonds$500,000
Proceeds from issuing bonds1,500,000
Purchases of inventory1,900,000
Purchases of treasury stock300,000
Loans made to affiliated corporations700,000
Dividends paid to preferred stockholders200,000
Proceeds from issuing preferred stock800,000
Proceeds from sale of equipment150,000
The net cash provided (used) by investing activities during 2015 is
a.$150,000
b.$(550,000)
c.$(1,050,000)
d.$(2,250,000)
10) At the time a company prepays a cost
a.it debits an asset account to show the service or benefit it will receive in the future
b.it debits an expense account to match the expense against revenues recognized
c.its credits a liability account to show the obligation to pay for the service in the future
d.it credits an asset account and debits an expense account
11) Ramos Co. purchased machinery that was installed and ready for use on January 3,
2014, at a total cost of $115,000. Salvage value was estimated at $15,000. The
machinery will be depreciated over five years using the double-declining balance
method. For the year 2015, Ramos should record depreciation expense on this
machinery of
a.$24,000
b.$27,600
c.$30,000
d.$46,000
12) Harlan Mining Co. has recently decided to go public and has hired you as an
independent CPA. One statement that the enterprise is anxious to have prepared is a
statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014
are provided below.
BALANCE SHEETS
12/31/1512/31/14
Cash$306,000$ 144,000
Accounts receivable270,000162,000
Inventory288,000360,000
Property, plant and equipment$456,000$720,000
Less accumulated depreciation (240,000) 216,000 (228,000) 492,000
$1,080,000$1,158,000
Accounts payable$ 132,000 $ 72,000
Income taxes payable264,000294,000
Bonds payable270,000450,000
Common stock162,000162,000
Retained earnings 252,000 180,000
$1,080,000$1,158,000
INCOME STATEMENT
For the Year Ended December 31, 2015
Sales revenue$6,300,000
Cost of sales 5,364,000
Gross profit936,000
Selling expenses$450,000
Administrative expenses 144,000 594,000
Income from operations342,000
Interest expense 54,000
Income before taxes288,000
Income taxes 72,000
Net income$ 216,000
The following additional data were provided:
1>Dividends for the year 2015 were $144,000.
2>During the year, equipment was sold for $180,000. This equipment cost $264,000
originally and had a book value of $216,000 at the time of sale. The loss on sale was
incorrectly charged to cost of sales.
3>All depreciation expense is in the selling expense category.
Questions 51 through 55 relate to a statement of cash flows (direct method) for the year
ended December 31, 2015, for Harlan Mining Company.
Under the direct method, the total taxes paid is
a.$72,000
b.$30,000
c.$42,000
d.$102,000
13) On January 1, 2015, Shaw Co. sold land that cost $840,000 for $1,120,000,
receiving a note bearing interest at 10%. The note will be paid in three annual
installments of $450,380 starting on December 31, 2015 . Because collection of the
note is very uncertain, Shaw will use the cost-recovery method. How much revenue
from this sale should Shaw recognize in 2015?
a.$0
b.$84,000
c.$112,000
d.$280,000
14) The omission of the adjusting entry to record depreciation expense will result in an
a.overstatement of assets and an overstatement of owners' equity
b.understatement of assets and an understatement of owner's equity
c.overstatement of assets and an overstatement of liabilities
d.overstatement of liabilities and an understatement of owners' equity
15) A loss contingency can be accrued when
a.it is certain that funds are available to settle the disputed amount
b.an asset may have been impaired
c.the amount of the loss can be reasonably estimated and it is probable that an asset has
been impaired or a liability has been incurred
d.it is probable that an asset has been impaired or a liability incurred even though the
amount of the loss cannot be reasonably estimated
