1) the fasbs codification integrates existing gaap, and creates new gaap.
2) use of lifo provides a tax benefit in an industry where unit costs tend to decrease as
production increases.
3) income from an investment in common stock using the equity method is added to net
income in computing net cash provided from operating activities.
4) the three factors involved in the depreciation process are the depreciation base, the
useful life, and the risk of obsolescence.
5) supplementary information may include details or amounts that present a different
perspective from that adopted in the financial statements.
6) the
7) the standard-setting structure used by the international accounting standards board is
very similar to that used by the financial accounting standards board.
8) bond issue costs are capitalized as a deferred charge and amortized to expense over
the life of the bond issue.
9) u.s. gaap, like ifrs permits write-up for subsequent recoveries of impairment, back up
to the original amount before the impairment in all circumstances.
10) in general, ifrs adheres to very different principles than u.s. gaap.
11) when the stated rate of interest exceeds the effective rate, the present value of the
note receivable will be less than its face value.
12) a conceptual framework is a coherent system of concepts that flow from an
objective.
13) which of the following is a current liability?
a.a long-term debt maturing currently, which is to be paid with cash in a sinking fund
b.a long-term debt maturing currently, which is to be retired with proceeds from a new
debt issue
c.a long-term debt maturing currently, which is to be converted into common stock
d.none of these
14) on december 31, 2010, nolte co. is in financial difficulty and cannot pay a note due
that day. it is a $1,200,000 note with $120,000 accrued interest payable to piper, inc.
piper agrees to accept from nolte equipment that has a fair value of $580,000, an
original cost of $960,000, and accumulated depreciation of $460,000. piper also
forgives the accrued interest, extends the maturity date to december 31, 2013, reduces
the face amount of the note to $500,000, and reduces the interest rate to 6%, with
interest payable at the end of each year.
nolte should recognize a gain or loss on the transfer of the equipment of
nolte should recognize a gain on the partial settlement and restructure of the debt of
a.$0
b.$30,000
c.$110,000
d.$150,000
15) which of the following is an advantage of the single-step income statement over the
multiple-step income statement?
a.it reports gross profit for the year
b.expenses are classified by function
c.it matches costs and expenses with related revenues
d.it does not imply that one type of revenue or expense has priority over another
16) where is materiality not used in providing financial information?
a.applying the revenue recognition principle
b.determining what items to include in the financial statements
c.applying the going concern assumption
d.determining the level of disclosure
17) given the historical cost of product z is $80, the selling price of product z is $95,
costs to sell product z are $11, the replacement cost for product z is $83, and the normal
profit margin is 40% of sales price, what is the amount that should be used to value the
inventory under the lower-of-cost-or-market method?
a.$46
b.$80
c.$84
d.$83
18) welch co. purchased a put option on reese common shares on july 7, 2013, for $215.
the put option is for 300 shares, and the strike price is $51. the option expires on july
31, 2013. the following data are available with respect to the put option:
instructions
prepare the journal entries for welch co. for the following dates:
(a)january 7, 2013investment in put option on reese shares.
(c)march 31, 2013 welch prepares financial statements.
(d)june 30, 2013 welch prepares financial statements.
(e)july 6, 2013 welch settles the call option on the reese shares.
19) the summarized balance sheets of goebel company and dobbs company as of
december 31, 2012 are as follows:
if goebel company acquired a 30% interest in dobbs company on december 31, 2012 for
$225,000 and the equity method of accounting for the investment were used, the
amount of the debit to equity investments (dobbs) would have been
a.$285,000
b.$225,000
c.$180,000
d.$202,500
20) leonard corporation reports the following information:
leonard should report retained earnings, 1/1/12, as adjusted at
a.$1,785,000
b.$2,000,000
c.$2,215,000
d.$2,555,000
21) the rate of interest actually earned by bondholders is called the
a.stated rate
b.yield rate
c.effective rate
d.effective, yield, or market rate
22) a company offers a cash rebate of $2 on each $6 package of batteries sold during
2012. historically, 10% of customers mail in the rebate form. during 2012, 6,000,000
packages of batteries are sold, and 210,000 $2 rebates are mailed to customers. what is
the rebate expense and liability, respectively, shown on the 2012 financial statements
dated december 31?
a.$1,200,000; $1,200,000
b.$1,200,000; $780,000
c.$780,000; $780,000
d.$420,000; $780,000
23) the market price of a $500,000, ten-year, 12% (pays interest semiannually) bond
issue sold to yield an effective rate of 10% is
a.$561,445
b.$562,311
c.$566,635
d.$936,180
24) at the close of its first year of operations, december 31, 2012, ming company had
accounts receivable of $1,080,000, after deducting the related allowance for doubtful
accounts. during 2012, the company had charges to bad debt expense of $180,000 and
wrote off, as uncollectible, accounts receivable of $80,000. what should the company
report on its balance sheet at december 31, 2012, as accounts receivable before the
allowance for doubtful accounts?
a.$1,340,000
b.$1,180,000
c.$980,000
d.$880,000
25) a company receives interest on a $40,000, 8%, 5-year note receivable each april 1.
at december 31, 2012, the following adjusting entry was made to accrue interest
receivable:
assuming that the company does not use reversing entries, what entry should be made
on april 1, 2013 when the annual interest payment is received?
26)
27) with regard to recognition of deferred tax assets, ifrs requires
28) during periods of rising prices, a perpetual inventory system would result in the
same dollar amount of ending inventory as a periodic inventory system under which of
the following inventory cost flow methods?
29) the following costs are incurred during the research and development phases of a
laser bone scanner
identify which of these are research phase items and will be immediately expensed
under
u.s. gaap and ifrs.
u.s. gaap ifrs
1. $1,000,000 $1,000,000
2. 2,200,000 1,200,000
3. 4,200,000 4,200,000
4. 4,200,000 3,500,000
30) briefly discuss the convergence efforts that are underway in the area of intangible
assets.
31) a temporary difference arises when a revenue item is reported for tax purposes in a
period
32) presented below is certain information pertaining to edson company.
assets, january 1$250,000
assets, december 31230,000
liabilities, january 1150,000
common stock, december 3180,000
retained earnings, december 3131,000
common stock sold during the year10,000
dividends declared during the year13,000
compute the net income for the year.