1) stemway requires a new manufacturing facility. management found three locations;
all of which would provide needed capacity, the only difference is the price. location a
may be purchased for $500,000. location b may be acquired with a down payment of
$100,000 and annual payments at the end of each of the next twenty years of $50,000.
location c requires $40,000 payments at the beginning of each of the next twenty-five
years. assuming stemway’s borrowing costs are 8% per annum, which option is the least
costly to the company?
a.location a
b.location b
c.location c
d.location a and location b
2) if the interest rate is 10%, the factor for the future value of annuity due of 1 for n = 5,
i = 10% is equal to the factor for the future value of an ordinary annuity of 1 for n = 5, i
= 10%
a.plus 1.10
b.minus 1.10
c.multiplied by 1.10
d.divided by 1.10
3) which of the following does not describe intangible assets?
a.they lack physical existence
b.they are financial instruments
c.they provide long-term benefits
d.they are classified as long-term assets
4) on january 1, 2013, gridley corporation had 187,500 shares of its $2 par value
common stock outstanding. on march 1, gridley sold an additional 375,000 shares on
the open market at $20 per share. gridley issued a 20% stock dividend on may 1. on
august 1, gridley purchased 210,000 shares and immediately retired the stock. on
november 1, 300,000 shares were sold for $25 per share. what is the weighted-average
number of shares outstanding for 2013?
a.765,000
b.562,500
c.358,333
d.258,333
5) packard corporation reports the following information:
packards free cash flow is
a.$50,000
b.$65,000
c.$125,000
d.$175,000
6) starr corporation loaned $150,000 to another corporation on december 1, 2012 and
received a 3-month, 8% interest-bearing note with a face value of $150,000. what
adjusting entry should starr make on december 31, 2012?
a.debit interest receivable and credit interest revenue, $3,000
b.debit cash and credit interest revenue, $1,000
c.debit interest receivable and credit interest revenue, $1,000
d.debit cash and credit interest receivable, $3,000
7) on december 31, 2012, houser company granted some of its executives options to
purchase 75,000 shares of the company’s $50 par common stock at an option price of
$60 per share. the black-scholes option pricing model determines total compensation
expense to be $1,500,000. the options become exercisable on january 1, 2013, and
represent compensation for executives’ past and future services over a three-year period
beginning january 1, 2013. what is the impact on houser’s total stockholders’ equity for
the year ended december 31, 2012, as a result of this transaction under the fair value
method?
a.$1,500,000 decrease
b.$500,000 decrease
c.$0
d.$500,000 increase
8) the failure to properly record an adjusting entry to accrue a revenue item will result
in an:
a.understatement of revenues and an understatement of liabilities
b.overstatement of revenues and an overstatement of liabilities
c.overstatement of revenues and an overstatement of assets
d.understatement of revenues and an understatement of assets
9) which of the following statements about property dividends is not true?
a.a property dividend is usually in the form of securities of other companies
b.a property dividend is also called a dividend in kind
c.the accounting for a property dividend should be based on the carrying value (book
value) of the nonmonetary assets transferred
d.all of these statements are true
10) what might a manager do during the last quarter of a fiscal year if she wanted to
decrease current annual net income?
a.delay shipments to customers until after the end of the fiscal year
b.relax credit policies for customers
c.pay suppliers all amounts owed
d.delay purchases from suppliers until after the end of the fiscal year
11) in a statement of cash flows, proceeds from issuing equity instruments should be
classified as cash inflows from
a.lending activities
b.operating activities
c.investing activities
d.financing activities
12) which of the following is not considered an advantage of lifo when prices are
rising?
a.the inventory will be overstated
b.the more recent costs are matched against current revenues
c.there will be a deferral of income tax
d.a company’s future reported earnings will not be affected substantially by future price
declines
13) on december 31, 2012, the stockholders’ equity section of arndt, inc., was as
follows:
on march 31, 2013, arndt declared a 10% stock dividend, and accordingly 900
additional shares were issued, when the fair value of the stock was $18 per share. for
the three months ended march 31, 2013, arndt sustained a net loss of $32,000. the
balance of arndts retained earnings as of march 31, 2013, should be
a.$105,800
b.$113,000
c.$114,800
d.$122,000
14) capitalized costs incurred to develop internal use computer software should be
amortized using the:
a.percent-of-revenue approach
b.percent-of-completion approach
c.straight-line approach
d.accelerated amortization approach
15) morgan corporation had two issues of securities outstanding: common stock and an
8% convertible bond issue in the face amount of $20,000,000. interest payment dates of
the bond issue are june 30th and december 31st. the conversion clause in the bond
indenture entitles the bondholders to receive forty shares of $20 par value common
stock in exchange for each $1,000 bond. on june 30, 2012, the holders of $3,000,000
face value bonds exercised the conversion privilege. the market price of the bonds on
that date was $1,100 per bond and the market price of the common stock was $35. the
total unamortized bond discount at the date of conversion was $1,250,000. in applying
the book value method, what amount should morgan credit to the account “paid-in
capital in excess of par,” as a result of this conversion?
a.$412,500
b.$200,000
c.$1,800,000
d.$900,000
16) on january 2, 2013, mize co. issued at par $300,000 of 9% convertible bonds. each
$1,000 bond is convertible into 60 shares. no bonds were converted during 2013. mize
had 100,000 shares of common stock outstanding during 2013. mize ‘s 2013 net income
was $160,000 and the income tax rate was 30%. mize’s diluted earnings per share for
2013 would be (rounded to the nearest penny)
a.$1.36
b.$1.52
c.$1.60
d.$1.79
17) which organization is responsible for issuing emerging issues task force statements?
a.fasb
b.cap
c.apb
d.sec
18) murphy company purchased equipment for $300,000 on january 2, 2012, its first
day of operations. for book purposes, the equipment will be depreciated using the
straight-line method over three years with no salvage value. pretax financial income and
taxable income are as follows:
the temporary difference between pretax financial income and taxable income is due to
the use of accelerated depreciation for tax purposes.
instructions
(a)prepare the journal entries to record income taxes for all three years (expense,
deferrals, and liabilities) assuming that the enacted tax rate applicable to all three years
is 30%.
(b)prepare the journal entries to record income taxes for all three years (expense,
deferrals, and liabilities) assuming that the enacted tax rate as of 2012 is 30% but that in
the middle of 2013, congress raises the income tax rate to 35% retroactive to the
beginning of 2013.
19) yoder, inc. has 100,000 shares of $10 par value common stock and 50,000 shares of
$10 par value, 6%, cumulative, participating preferred stock outstanding. dividends on
the preferred stock are one year in arrears. assuming that yoder wishes to distribute
$270,000 as dividends, the common stockholders will receive
a.$60,000
b.$110,000
c.$160,000
d.$210,000