1) On May 1, 2015, TV Inc. consigned 80 TVs to Ed’s TV. The TVs cost $450. Freight
on the shipment paid by Eds TV was $1,000. On July 10, TV Inc. received an account
sales and $21,500 from Ed’s TV. Thirty TVs had been sold and the following expenses
were deducted:
Freight$1,000
Commission (20% of sales price)?
Advertising650
Delivery350
The total sales price of the TVs sold by Ed’s TV was
a.$25,625
b.$26,875
c.$27,313
d.$29,375
2) When treasury stock is purchased for more than the par value of the stock and the
cost method is used to account for treasury stock, what account(s) should be debited?
a.Treasury stock for the par value and paid-in capital in excess of par for the excess of
the purchase price over the par value
b.Paid-in capital in excess of par for the purchase price
c.Treasury stock for the purchase price
d.Treasury stock for the par value and retained earnings for the excess of the purchase
price over the par value
3) 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
4) Two independent companies, Hager Co. and Shaw Co., are in the home building
business. Each owns a tract of land held for development, but each would prefer to
build on the other’s land. They agree to exchange their land. An appraiser was hired,
and from her report and the companies’ records, the following information was
obtained:
Hager’s LandShaw’s Land
Cost and book value$384,000$240,000
Fair value based upon appraisal480,000420,000
The exchange was made, and based on the difference in appraised fair values, Shaw
paid $60,000 to Hager. The exchange lacked commercial substance.
For financial reporting purposes, Hager should recognize a pre-tax gain on this
exchange of
a.$0
b.$12,000
c.$60,000
d.$96,000
5) On January 1, 2012, Neal Corporation acquired equipment at a cost of $720,000.
Neal adopted the sum-of-the-years-digits method of depreciation for this equipment and
had been recording depreciation over an estimated life of eight years, with no residual
value. At the beginning of 2015, a decision was made to change to the straight-line
method of depreciation for this equipment. The depreciation expense for 2015 would be
a.$37,500
b.$60,000
c.$90,000
d.$144,000
6) Jenks Company financed the purchase of a machine by making payments of $20,000
at the end of each of five years. The appropriate rate of interest was 8%. The future
value of one for five periods at 8% is 1.46933. The future value of an ordinary annuity
for five periods at 8% is 5.8666. The present value of an ordinary annuity for five
periods at 8% is 3.99271. What was the cost of the machine to Jenks?
a.$29,588
b.$79,854
c.$100,000
d.$117,334
7) Black Corporation had a 1/1/14 balance in the Allowance for Doubtful Accounts of
$18,000. During 2014, it wrote off $12,960 of accounts and collected $3,780 on
accounts previously written off. The balance in Accounts Receivable was $360,000 at
1/1 and $432,000 at 12/31. At 12/31/14, Black estimates that 5% of accounts receivable
will prove to be uncollectible. What should Black report as its Allowance for Doubtful
Accounts at 12/31/14?
a.$8,640
b.$8,820
c.$12,420
d.$21,600
8) Which of the following is a recordable event or item?
a.Changes in managerial policy
b.The value of human resources
c.Changes in personnel
d.None of these answer choices are correct
9) Which of the following ratios should be used in evaluating the effectiveness with
which the company uses its assets?
Accounts receivable TurnoverPayout Ratio
a.YesYes
b.NoNo
c.YesNo
d.NoYes
10) During 2014, Martin Corporation sold merchandise costing $3,500,000 on an
installment basis for $5,000,000. The cash receipts related to these sales were collected
as follows: 2014, $2,000,000; 2015, $1,750,000; 2016, $1,250,000.
If expenses, other than the cost of the merchandise sold, related to the 2014 installment
sales amounted to $200,000, by what amount would Martins net income for 2014
increase as a result of installment sales?
a.$1,800,000
b.$ 600,000
c.$ 450,000
d.$ 400,000
11) Which of the following is reported as part of discontinued operations?
a.Amortization expense
b.Impairment losses for intangible assets
c.Research and development costs
d.None of these answer choices are correct
12) 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
13) Endeavor Company purchased a depreciable asset for $800,000. The estimated
salvage value is $40,000, and the estimated useful life is 10,000 hours. Endeavor used
the asset for 1,100 hours in the current year. The activity method will be used for
depreciation. What is the depreciation expense on this asset?
a.$76,000
b.$83,600
c.$88,000
d.$760,000
14) Jenny Manufactures sold toys listed at $240 per unit to Jack Inc. for $204, a trade
discount of 15 percent. Jack Inc. in turn sells the toys in the market at $225. Jenny
should record the receivable and related sales revenue (per unit) at:
a.$240
b.$225
c.$204
d.$191