1) Perez Company’s net accounts receivable were $800,000 at December 31, 2014 and
$880,000 at December 31, 2015 . Net cash sales for 2015 were $520,000. The accounts
receivable turnover for 2015 was 8.0. What were Perez’s total net sales for 2015?
a.$4,160,000
b.$6,720,000
c.$7,240,000
d.$6,200,000
2) Which inventory costing method most closely approximates current cost for each of
the following:
Ending InventoryCost of Goods Sold
a.FIFOFIFO
b.FIFOLIFO
c.LIFOFIFO
d.LIFOLIFO
3) Grove Corporation issued $4,000,000 of 8% bonds on October 1, 2014, due on
October 1, 2019 . The interest is to be paid twice a year on April 1 and October 1 . The
bonds were sold to yield 10% effective annual interest. Grove Corporation closes its
books annually on December 31 .
Instructions
(a)Complete the following amortization schedule for the dates indicated. (Round all
answers to the nearest dollar.) Use the effective-interest method.
DebitCreditCarrying Amount
Credit CashInterest ExpenseBond Discount of Bonds
October 1, 2014$3,691,117
April 1, 2015
October 1, 2015
(b)Prepare the adjusting entry for December 31, 2015 . Use the effective-interest
method.
(c)Compute the interest expense to be reported in the income statement for the year
ended December 31, 2015 .
4) In computing the service cost component of pension expense, the FASB concluded
that
a.the accumulated benefit obligation provides a more realistic measure of the pension
obligation on a going concern basis
b.a company should employ an actuarial funding method to report pension expense that
best reflects the cost of benefits to employees
c.the projected benefit obligation using future compensation levels provides a realistic
measure of present pension obligation and expense
d.All of these answers are correct
5) In March 2015, an explosion occurred at Kirk Co.’s plant, causing damage to area
properties. By May 2015, no claims had yet been asserted against Kirk. However,
Kirk’s management and legal counsel concluded that it was reasonably possible that
Kirk would be held responsible for negligence, and that $4,000,000 would be a
reasonable estimate of the damages. Kirk’s $5,000,000 comprehensive public liability
policy contains a $400,000 deductible clause. In Kirk’s December 31, 2014 financial
statements, for which the auditor’s fieldwork was completed in April 2015, how should
this casualty be reported?
a.As a note disclosing a possible liability of $4,000,000
b.As an accrued liability of $400,000
c.As a note disclosing a possible liability of $400,000
d.No note disclosure of accrual is required for 2014 because the event occurred in 2015
6) A journal entry to record a payment on account will include a
a.debit to Accounts Receivable
b.credit to Accounts Receivable
c.debit to Accounts Payable
d.credit to Accounts Payable
7) Which of the following will be of interest to investors in decision-making?
a.Assessing the companys ability to generate net cash inflows
b.Assessing managements ability to protect and enhance the capital providers
investments
c.Both assessing the companys ability to generate net cash inflows and assessing
managements ability to protect and enhance the capital providers investments
d.Assessing the companys ability to collect debts
8) Johnstone Company has a loan receivable with a carrying value of $125,000 at
December 31, 2013 . On January 1, 2014, the borrower, Ralph Young Industries,
declares bankruptcy, and Johnstone estimates that it will collect only 45% of the loan
balance.
Assume that on January 4, 2015, Johnstone learns that Ralph Young Industries has
emerged from bankruptcy. As a result, Johnstone now estimates that all but $11,500 will
be paid on the loan. Under IFRS, which of the following entries would be made on
January 4, 2015?
a.Loan Receivable57,250
Recovery of impairment Loss57,250
b.Loan Receivable11,500
Recovery of impairment Loss11,500
c.Bad Debt Expense11,500
Impairment Loss11,500
d.No journal entry is allowed under IFRS.
9) Berry Corporation has 50,000 shares of $10 par common stock authorized. The
following transactions took place during 2014, the first year of the corporations
existence:
Sold 10,000 shares of common stock for $13.50 per share.
Issued 10,000 shares of common stock in exchange for a patent valued at $150,000.
At the end of the Berrys first year, total paid-in capital amounted to
a.$60,000
b.$135,000
c.$150,000
d.$285,000
10) Certain information relative to the 2014 operations of Ball Co. follows:
Accounts receivable, January 1, 2014$96,000
Accounts receivable collected during 2014184,000
Cash sales during 201448,000
Inventory, January 1, 201472,000
Inventory, December 31, 201466,000
Purchases of inventory during 2014160,000
Gross profit on sales54,000
What is Ball’s accounts receivable balance at December 31, 2014?
a.$72,000
b.$84,000
c.$96,000
d.$132,000
11) Given below are the future value factors for 1 at 8% for one to five periods.
PeriodsFuture Value of 1 at 8%
11.080
21.166
31.260
41.360
51.469
If $6,000 is deposited in a savings account today, what amount will be available six
years from now?
a.$6,000 x 1.080 x 6
b.$6,000 x 1.080 x 1.469
c.$6,000 x 1.166 x 3
d.$6,000 x 1.260 x 2
12) Hite Co. was formed on January 2, 2014, to sell a single product. Over a two-year
period, Hite’s acquisition costs have increased steadily. Physical quantities held in
inventory were equal to three months’ sales at December 31, 2014, and zero at
December 31, 2015 . Assuming the periodic inventory system, the inventory cost
method which reports the highest amount of each of the following is
InventoryCost of Sales
December 31, 20142015
a.LIFOFIFO
b.LIFOLIFO
c.FIFOFIFO
d.FIFOLIFO