1) the accounting profession has recommended that companies use the word reserve
only to describe amounts deducted from assets.
2) normally, companies compute depletion on a straight-line basis.
3) most purchase commitments must be recorded as a liability.
4) errors in financial statements result from mathematical mistakes or oversight or
misuse of facts that existed when preparing the financial statements.
5) even though ifrs does not employ the first-stage recoverability test used under u.s.
gaap comparing the undiscounted cash flows to the carrying amount, the fact that ifrs
uses a fair value test to measure impairment loss makes ifrs stricter than u.s. gaap
6) companies only restrict retained earnings to comply with contractual requirements or
current necessity.
7) significant influence over an investee may be indicated by material intercompany
trans-actions and interchange of managerial personnel.
8) when a corporation issues its capital stock in payment for services, the least
appropriate basis for recording the transaction is the
a.market value of the services received
b.par value of the shares issued
c.market value of the shares issued
d.any of these provides an appropriate basis for recording the transaction
9) in 2012, benfer corporation reported net income of $280,000. it declared and paid
common stock dividends of $32,000 and had a weighted average of 70,000 common
shares outstanding. compute the earnings per share to the nearest cent.
a.$3.54
b.$2.80
c.$3.60
d.$4.00
10) in a period of rising prices, the inventory method which tends to give the highest
reported net income is
a.base stock
b.first-in, first-out
c.last-in, first-out
d.weighted-average
11) an income statement shows income before income taxes and extraordinary items in
the amount of $2,740,000. the income taxes payable for the year are $1,440,000,
including $480,000 that is applicable to an extraordinary gain. thus, the income before
extraordinary items is
a.$1,780,000
b.$820,000
c.$1,860,000
d.$900,000
12) an alternative available when the seller is exposed to continued risks of ownership
through return of the product is
a.recording the sale, and accounting for returns as they occur in future periods
b.not recording a sale until all return privileges have expired
c.recording the sale, but reducing sales by an estimate of future returns
d.all of these
13) when a company develops a trademark the costs directly related to securing it
should generally be capitalized. which of the following costs associated with a
trademark would not be allowed to be capitalized?
a.attorney fees
b.consulting fees
c.research and development fees
d.design costs
14) the 10% bonds payable of nixon company had a net carrying amount of $760,000
on december 31, 2012. the bonds, which had a face value of $800,000, were issued at a
discount to yield 12%. the amortization of the bond discount was recorded under the
effective-interest method. interest was paid on january 1 and july 1 of each year. on
july 2, 2013, several years before their maturity, nixon retired the bonds at 102. the
interest payment on july 1, 2013 was made as scheduled. what is the loss that nixon
should record on the early retirement of the bonds on july 2, 2013? ignore taxes.
a.$16,000
b.$50,400
c.$44,800
d.$56,000
15) when preparing a statement of cash flows (indirect method), which of the following
is not an adjustment to reconcile net income to net cash provided by operating
activities?
a.a change in interest payable
b.a change in dividends payable
c.a change in income taxes payable
d.all of these are adjustments.
16) on january 1, 2012, huber co. sold 12% bonds with a face value of $800,000. the
bonds mature in five years, and interest is paid semiannually on june 30 and december
31. the bonds were sold for $861,600 to yield 10%. using the effective-interest method
of amortization, interest expense for 2012 is
a.$80,000
b.$85,914
c.$86,160
d.$96,000
17) use of the double-declining balance method
a.results in a decreasing charge to depreciation expense
b.means salvage value is not deducted in computing the depreciation base
c.means the book value should not be reduced below salvage value
d.all of these
18) how is days to collect accounts receivable determined?
a.365 days divided by accounts receivable turnover
b.net sales divided by 365
c.net sales divided by average net trade receivables
d.accounts receivable turnover divided by 365 days
19) litke corporation issued at a premium of $5,000 a $100,000 bond issue convertible
into 2,000 shares of common stock (par value $25). at the time of the conversion, the
unamortized premium is $2,000, the market value of the bonds is $110,000, and the
stock is quoted on the market at $60 per share. if the bonds are converted into common,
what is the amount of paid-in capital in excess of par to be recorded on the conversion
of the bonds?
a.$55,000
b.$52,000
c.$62,000
d.$70,000