1) In 2014, Esther Corporation reported net income of $600,000. It declared and paid
preferred stock dividends of $150,000 and common stock dividends of $60,000. During
2014, Esther had a weighted average of 250,000 common shares outstanding. Compute
Esther’s 2014 earnings per share.
a.$1.56
b.$1.80
c.$2.40
d.$3.00
2) According to the FASB Conceptual Framework, the elementsassets, liabilities, and
equitydescribe amounts of resources and claims to resources at/during a
Moment in TimePeriod of Time
a.YesNo
b.YesYes
c.NoYes
d.NoNo
3) Which method(s) may be used to record a loss due to a price decline in the value of
inventory?
a.The cost-of-goods-sold method
b.The sales method
c.The loss method
d.Both the cost-of-goods-sold method and the loss method
4) Which of the following is a component of the revenue recognition principle?
a.Cash is received and the amount is material
b.Recognition occurs when the performance obligation is satisfied
c.Production is complete and there is an active market for the product
d.Cash is realized or realizable and production is complete
5) The advantage of relating a company’s bad debt expense to its outstanding accounts
receivable is that this approach
a.gives a reasonably correct statement of receivables in the balance sheet
b.best relates bad debt expense to the period of sale
c.is the only generally accepted method for valuing accounts receivable
d.makes estimates of uncollectible accounts unnecessary
6) On its December 31, 2014 balance sheet, Calhoun Company appropriately reported a
$10,000 debit balance in its Fair Value Adjustment (available-for-sale) account. There
was no change during 2015 in the composition of Calhouns portfolio of equity
investments held as available-for-sale securities. The following information pertains to
that portfolio:
Security CostFair value at 12/31/15
X$125,000$160,000
Y100,00090,000
Z 175,000 125,000
$400,000$375,000
What amount of unrealized loss on these securities should be included in Calhoun’s
stockholders’ equity section of the balance sheet at December 31, 2015?
a.$35,000
b.$25,000
c.$15,000
d.$0
7) The opening balance of Accounts Receivable for George Company was $25,000. Net
sales (all on account) for the year amounted to $150,000. The Company doesnt offer
any cash discount. During the year $130,000 was collected on accounts receivable.
Compute accounts receivable turnover ratio for the year.
a.4.29 times
b.3.71 times
c.2.89 times
d.7.50 times
8) Which of the following is a constraint in presenting financial information?
a.Cost-benefit relationship
b.Full disclosure
c.Relevance
d.Consistency
9) Beaty Inc. purchased Dunbar Co. and agreed to give stockholders of Dunbar Co.
10,000 additional shares in 2016 if Dunbar Co.s net income in 2015 is $500,000; in
2014 Dunbar Co.s net income is $520,000. Beaty Inc. has net income for 2014 of
$400,000 and has an average number of common shares outstanding for 2014 of
100,000 shares. What should Beaty report as diluted earnings per share for 2014?
a.$4.44
b.$4.00
c.$3.64
d.$3.35
10) Stone Company changed its method of pricing inventories from FIFO to LIFO.
What type of accounting change does this represent?
a.A change in accounting estimate for which the financial statements for prior periods
included for comparative purposes should be presented as previously reported
b.A change in accounting principle for which the financial statements for prior periods
included for comparative purposes should be presented as previously reported
c.A change in accounting estimate for which the financial statements for prior periods
included for comparative purposes should be restated
d.A change in accounting principle for which the financial statements for prior periods
included for comparative purposes should be restated
11) In order to retain certain key executives, Smiley Corporation granted them incentive
stock options on December 31, 2013 . 120,000 options were granted at an option price
of $35
per share. Market prices of the stock were as follows:
December 31, 2014$46 per share
December 31, 2015 51 per share
The options were granted as compensation for executives services to be rendered over a
two-year period beginning January 1, 2014 . The Black-Scholes option pricing model
determines total compensation expense to be $1,200,000. What amount of
compensation expense should Smiley recognize as a result of this plan for the year
ended December 31, 2014 under the fair value method?
a.$2,100,000
b.$1,320,000
c.$1,200,000
d.$ 600,000
12) A deferred tax liability is classified on the balance sheet as either a current or a
noncurrent liability. The current amount of a deferred tax liability should generally be
a.the net deferred tax consequences of temporary differences that will result in net
taxable amounts during the next year
b.totally eliminated from the financial statements if the amount is related to a
noncurrent asset
c.based on the classification of the related asset or liability for financial reporting
purposes
d.the total of all deferred tax consequences that are not expected to reverse in the
operating period or one year, whichever is greater