1) Franco Company uses IFRS and owns property, plant and equipment with a
historical cost of 5,000,000 euros. At December 31, 2013, the company reported a
valuation reserve of
8,565,000 euros. At December 31, 2014, the property, plant and equipment was
appraised at
5,525,000 euros.
The valuation reserve at December 31, 2014 will be reported at
a.8,040,000 euros on the Statement of Stockholders’ Equity
b.8,565,000 euros in the Assets section of the Statement of Financial Position
c.9,090,000 euros in the equity section of the Statement of Financial Position
d.525,000 euros on the Income Statement
2) Define the following:
(a)The computation of earnings per common share
(b)Complex capital structure
(c)Basic earnings per share
(d)Diluted earnings per share
3) On January 2, 2012, Wang Company acquired equipment to be used in its
manufacturing operations. The equipment has an estimated useful life of 10 years and
an estimated salvage value of $30,000. The depreciation applicable to this equipment
was $140,000 for 2015, computed under the sum-of-the-years’-digits method. What was
the acquisition cost of the equipment?
a.$1,070,000
b.$1,130,000
c.$1,100,000
d.$1,083,333
4) Which of the following is a source of pressure that may influence the accounting
standard setting process?
a.Congress
b.Lobbyist
c.CPA firms
d.All of these answers are correct
5) Which of the following best describes a possible result of treasury stock transactions
by a corporation?
a.May increase but not decrease retained earnings
b.May increase net income if the cost method is used
c.May decrease but not increase retained earnings
d.May decrease but not increase net income
6) On March 1, 2014, Newton Company purchased land for an office site by paying
$1,800,000 cash. Newton began construction on the office building on March 1 . The
following expenditures were incurred for construction:
DateExpenditures
March 1, 2014$ 1,200,000
April 1, 20141,680,000
May 1, 20143,000,000
June 1, 20144,800,000
The office was completed and ready for occupancy on July 1 . To help pay for
construction, and purchase of land $2,400,000 was borrowed on March 1, 2014 on a
9%, 3-year note payable. Other than the construction note, the only debt outstanding
during 2014 was a $1,000,000, 12%, 6-year note payable dated January 1, 2014 .
The actual interest cost incurred during 2014 was
a.$300,000
b.$336,000
c.$168,000
d.$280,000
7) Feller Company issues $15,000,000 of 10-year, 9% bonds on March 1, 2014 at 97
plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30
and December 31 . What is the total cash received on the issue date?
a.$14,550,000
b.$15,337,500
c.$14,775,000
d.$14,325,000
8) Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however,
is paid in the next biweekly period. Colaw accrues salaries expense only at its
December 31 year end. Data relating to salaries earned in December 2014 are as
follows:
Last payroll was paid on 12/26/14, for the 2-week period ended 12/26/14.
Overtime pay earned in the 2-week period ended 12/26/14 was $20,000.
Remaining work days in 2014 were December 29, 30, 31, on which days there was no
overtime.
The recurring biweekly salaries total $360,000.
Assuming a five-day workweek, Colaw should record a liability at December 31, 2014
for accrued salaries of
a.$108,000
b.$128,000
c.$216,000
d.$236,000
9) Which of the following statements is false?
a.A company may exclude a short-term obligation from current liabilities if the firm
intends to refinance the obligation on a long-term basis and demonstrates an ability to
complete the refinancing
b.Cash dividends should be recorded as a liability when they are declared by the board
of directors
c.Under the cash basis method, warranty costs are charged to expense as they are paid
d.FICA taxes withheld from employees’ payroll checks should never be recorded as a
liability since the employer will eventually remit the amounts withheld to the
appropriate taxing authority
10) A franchise agreement grants the franchisor an option to purchase the franchisee’s
business. It is probable that the option will be exercised. When recording the initial
franchise fee, the franchisor should
a.record the entire initial franchise fee as a deferred credit which will reduce the
franchisor’s investment in the purchased outlet when the option is exercised
b.record the entire initial franchise fee as unearned revenue which will reduce the
amount of cash paid when the option is exercised
c.record the portion of the initial franchise fee which is attributable to the bargain
purchase option as a reduction of the future amounts receivable from the franchisee
d.None of these
11) Recent proposals by investors and others have suggested that corporations include
financial forecasts in their annual reports. It further has been suggested that the CPA
attest to those forecasts.
Instructions
(a)What arguments are advanced to support the publication of such forecasts?
(b)What arguments are advanced that oppose the publication of such forecasts?