1) timmons company traded machinery with a book value of $240,000 and a fair value
of $400,000. it received in exchange from lewis company a machine with a fair value of
$360,000 and cash of $40,000. lewiss machine has a book value of $380,000. what
amount of gain should timmons recognize on the exchange?
a.$ -0-
b.$16,000
c.$40,000
d.$160,000
2) a trial balance before adjustments included the following:
if the estimate of uncollectibles is made by taking 10% of gross account receivables, the
amount of the adjustment is
a.$7,080
b.$8,600
c.$8,448
d.$10,120
3) presented below are data for caracas corp.
net income for 2014 is
a.$584 income
b.$584 loss
c.$62 loss
d.$62 income
4) for mortenson company, the following information is available:
cost of goods sold$120,000
dividend revenue5,000
income tax expense12,000
operating expenses46,000
sales revenue200,000
in mortensons multiple-step income statement, gross profit
a.should not be reported
b.should be reported at $27,000
c.should be reported at $80,000
d.should be reported at $85,000
5) which of the following is not a legal restriction related to profit distributions by a
corporation?
a.the amount distributed to owners must be in compliance with the state laws governing
corporations
b.the amount distributed in any one year can never exceed the net income reported for
that year
c.profit distributions must be formally approved by the board of directors
d.dividends must be in full agreement with the capital stock contracts as to preferences
and participation
6) a correction of an error in prior periods’ income will be reported
in the income statementnet of tax
a.yesyes
b.nono
c.yesno
d.noyes
7) during 2012, lopez corporation disposed of pine division, a major component of its
business. lopez realized a gain of $1,800,000, net of taxes, on the sale of pine’s assets.
pine’s operating losses, net of taxes, were $2,100,000 in 2012. how should these facts be
reported in lopez’s income statement for 2012?
total amount to be included in
income fromresults of
continuing operationsdiscontinued operations
a.$2,100,000 loss$1,800,000 gain
b.300,000 loss0
c.0300,000 loss
d.1,800,000 gain2,100,000 loss
8) rich, inc. acquired 30% of doane corp.’s voting stock on january 1, 2012 for
$600,000. during 2012, doane earned $240,000 and paid dividends of $150,000. rich’s
30% interest in doane gives rich the ability to exercise significant influence over
doane’s operating and financial policies. during 2013, doane earned $300,000 and paid
dividends of $90,000 on april 1 and $90,000 on october 1. on july 1, 2013, rich sold
half of its stock in doane for $396,000 cash.
before income taxes, what amount should rich include in its 2012 income statement as a
result of the investment?
a.$240,000
b.$150,000
c.$72,000
d.$45,000
9) purchase retailer made cash sales during the month of october of $221,000. the sales
are subject to a 6% sales tax that was also collected. which of the following would be
included in the summary journal entry to reflect the sale transactions?
a.debit cash for $221,000
b.credit sales taxes payable for $12,510
c.credit sales revenue for $208,490
d.credit sales taxes payable for $13,260
10) the first step in the preparation of the statement of cash flows requires the use of
information included in which comparative financial statements?
a.statements of cash flows
b.balance sheets
c.income statements
d.statements of retained earnings
11) which of the following characteristics do intangible assets possess?
a.physical existence
b.claim to a specific amount of cash in the future
c.long-lived
d.held for resale
12) at ruth company, events and transactions during 2012 included the following. the
tax rate for all items is 30%.
(1)depreciation for 2010 was found to be understated by $60,000.
(2)a strike by the employees of a supplier resulted in a loss of $50,000.
(3)the inventory at december 31, 2010 was overstated by $80,000.
(4)a flood destroyed a building that had a book value of $1,000,000. floods are very
uncommon in that area.
the effect of these events and transactions on 2012 income from continuing operations
net of tax would be
a.($35,000)
b.($77,000)
c.($133,000)
d.($833,000)
13) accounting changes are often made and the monetary impact is reflected in the
financial statements of a company even though, in theory, this may be a violation of the
accounting concept of
a.materiality
b.consistency
c.conservatism
d.objectivity
14) on january 1, patterson inc. issued $3,000,000, 9% bonds for $2,817,000. the
market rate of interest for these bonds is 10%. interest is payable annually on december
31. patterson uses the effective-interest method of amortizing bond discount. at the end
of the first year, patterson should report unamortized bond discount of
a.$164,700
b.$171,300
c.$154,830
d.$153,000
15) sodium inc. borrowed $280,000 on april 1. the note requires interest at 12% and
principal to be paid in one year. how much interest is recognized for the period from
april 1 to december 31?
a.$0
b.$33,600
c.$8,400
d.$25,200
16) if an annuity due and an ordinary annuity have the same number of equal payments
and the same interest rates, then
a.the present value of the annuity due is less than the present value of the ordinary
annuity
b.the present value of the annuity due is greater than the present value of the ordinary
annuity
c.the future value of the annuity due is equal to the future value of the ordinary annuity
d.the future value of the annuity due is less than the future value of the ordinary annuity
17) a corporation called an outstanding bond obligation four years before maturity. at
that time there was an unamortized discount of $600,000. to extinguish this debt, the
company had to pay a call premium of $200,000. ignoring income tax considerations,
how should these amounts be treated for accounting purposes?
a.amortize $800,000 over four years
b.charge $800,000 to a loss in the year of extinguishment
c.charge $200,000 to a loss in the year of extinguishment and amortize $600,000 over
four years
d.either amortize $800,000 over four years or charge $800,000 to a loss immediately,
whichever management selects
18) when work to be done and costs to be incurred on a long-term contract can be
estimated dependably, which of the following methods of revenue recognition is
preferable?
a.installment-sales method
b.percentage-of-completion method
c.completed-contract method
d.none of these