Archives: Quiz

Brunetti Co. designed and installed customized signs for Di Antonio CPA, Inc. Brunetti’s contract specifies that it will receive a flat fee of $15,000 for providing the customized signs, and an additional $1,000 if 30% of Di Antonio’s new customers […]

On January 1, 2016, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short’s book value and fair value were both $840,000. The equity method is deemed appropriate for […]

In its 2016 annual report to shareholders, the Goodday Chemical Company included the following disclosure note excerpts on CONTINGENCIES in its annual report to shareholders: At December 31, 2016, Goodday had recorded liabilities aggregating $66.5 million for anticipated costs related […]

The Yankel Corporation’s controller prepares adjusting entries only at the end of the fiscal year. The following adjusting entries were prepared on December 31, 2016: Additional information: 1> The company borrowed $30,000 on June 30, 2016. Principal and interest are […]

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on December […]

Moretti Department Store sells gift cards that expire three years from the date of purchase. During 2014, Moretti sold $50,000 of gift cards, of which $1,500 were redeemed during 2016. At the end of 2016, it is estimated that approximately […]

Ford Inc. exchanged land and $7,500 cash for material handling equipment. The land had a book value of $75,000 and a fair value of $105,000. Assume the exchange has commercial substance. Required: Prepare the journal entry to record the exchange. […]

On January 1, 2015, Bactin Corporation acquired 10% of Oakton Company for $100,000. On that date, the total book value and fair value of Oakton’s net assets was $900,000. Any difference between cost and fair value is attributable to goodwill. […]

The inventories disclosure note in the 2014 financial statements for SUPERVALU Inc., one of the largest grocery chains in the United States, included the following: “During fiscal 2014, 2013 and 2012, inventory quantities in certain LIFO layers were reduced. These […]

Hammerstein Corporation offers a variety of share-based compensation plans to employees. Under its restricted stock award plan, the company, on January 1, 2016, granted 2 million of its $1 par common shares to various division managers. The shares are subject […]

Carpenter Gems began the year with a net pension liability of $84 million (underfunded pension plan). Pension expense for the year included the following ($ in millions): service cost, $30; interest cost, $18; expected return on assets, $12; amortization of […]

Waddle Company amended its defined benefit pension plan on January 1, 2016, to increase retirement benefits earned with each service year. The actuary estimated the prior service cost to be $216,000. Waddle’s 80 present employees are expected to retire at […]

As part of its stock-based compensation package, on January 1, 2016, Weldon Well Supplies granted restricted stock units (RSUs) representing 100,000 $1 par common shares. At exercise, holders of the RSUs are entitled to receive cash or stock equal in […]

Murdock Industries uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following data has been summarized for December 31, 2016: Required: Estimate the LIFO cost of ending inventory. Assume stable retail prices during […]

Ramsgate Company has used the FIFO method for inventory valuation since it began business in 2012, but has elected to change to the average cost method starting in 2015. Year-end inventory valuations under each method are shown below: Required: How, […]

Identify or define the following term: historical cost. New York Sales Inc. uses the conventional retail method to estimate its ending inventories. The following data has been summarized for December 31, 2016: Required: Compute the cost-to-retail percentage used by New […]

Paul Company had 100,000 shares of common stock outstanding on January 1, 2016. On September 30, 2016, Paul sold 48,000 shares of common stock for cash. Paul also had 10,000 shares of convertible preferred stock outstanding throughout 2016. The preferred […]

The D Company develops, manufactures, distributes, and markets branded health care products as well as private-label vitamin products in the United States and more than 50 other countries. A disclosure note from D’s 2014 annual report is shown below: Weighted […]

($ in millions) Reported in income statement: Service cost-2016 $ 150 Past service cost 24 Service cost $ 174 Net interest cost (10% x [$960 – 600]) $ 36 Reported as OCI: Remeasurement gain from assumption change-OCI $ (44) Remeasurement […]

Following are the income statement and some additional information for Parson Corporation for 2016. All sales were on credit and accounts receivable increased by $600 in 2016 compared to 2015. Merchandise purchases were on credit with an increase in accounts […]

Which one of the following is not one of the five steps for recognizing revenue? i. Identify the contract with a customer j. Recognize revenue when all the performance obligations have been satisfied k. Identify the separate performance obligation(s) in […]

DeAngelo Yards, Inc., calculated pension expense for its underfunded pension plan as follows: ($ in millions) Service cost $448 Interest cost 300 Expected return on the plan assets ($200 actual, less $20 gain) (180) Amortization of prior service cost 16 […]

Zvinakis Mining Company paid $200,000 for the rights to mine lead in southeast Missouri. The cost to drill and erect a mine shaft was $2,400,000, and equipment to process the lead ore before shipment to the smelter was $1,800,000. The […]

On November 1, 2016, a $216,000, 9-month, noninterest-bearing note is issued at a 10% discount rate. Required: Prepare the appropriate journal entry to record the issuance of the note. 1> Determine the effective interest rate. 2> Prepare the appropriate journal […]

On January 1, 2016, for $18 million, Cenotaph Company purchased 10% bonds, dated January 1, 2016, with a face amount of $20 million. For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on […]

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the number for the correct term. Indicate (by letter) the way each of the items listed below […]

On October 15, 2016, a 5% stock dividend was declared and distributed. The market value of the common stock on this date was $32 per share. Fractional share rights represented 100,000 shares. Cash was paid in lieu of issuing fractional […]

During periods when costs are rising and inventory quantities are stable, ending inventory will be: a. Higher under LIFO than FIFO. b. Lower under average cost than LIFO. c. Higher under average cost than FIFO. d. Higher under FIFO than […]

Harvey’s Junk Jewelry started business January 1, 2016, and uses the LIFO retail method to estimate ending inventory. Listed below is data accumulated for the year ended December 31, 2016: The estimated ending inventory at retail is: a. $27,300. b. […]

Baldwin Company had 40,000 shares of common stock outstanding on January 1, 2016. On April 1, 2016, the company issued 20,000 shares of common stock. The company had outstanding fully vested incentive stock options for 10,000 shares exercisable at $10 […]

Trading securities are most commonly found on the books of: a. Oil companies. b. Manufacturing companies. c. Banks. d. Foreign subsidiaries. The International Accounting Standards Board: a. Was the predecessor to the IASC. b. Can overrule the FASB when their […]

Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses […]

The purpose of assigning accounts receivable is to: a. Satisfy a court order. b. Complete the legal prerequisites to record their sale. c. Comply with form and content rules of bankruptcy proceedings. d. Provide collateral for a loan. Recording revenue […]

C Co. reported a retained earnings balance of $200,000 at December 31, 2015. In September 2016, C determined that insurance premiums of $30,000 for the three-year period beginning January 1, 2015, had been paid and fully expensed in 2015. C […]

The factors that need to be determined to compute depreciation are an asset’s: a. Cost, residual value, and physical life. b. Cost, replacement value, and service life. c. Fair value, residual value, and economic life. d. Cost, residual value, and […]

The exclusive right to benefit from a creative work, such as a film, is a: a. Patent. b. Copyright. c. Trademark. d. Franchise. Which of the following is never a current liability account? a. Accrued payroll. b. Dividends payable. c. […]

Panther Co. had a quality-assurance warranty liability of $350,000 at the beginning of 2016 and $310,000 at the end of 2016. Warranty expense is based on 4% of sales, which were $50 million for the year. What were the warranty […]

Zulu Corporation hires a new chief executive officer and promises to pay her a signing bonus of $2 million per year for 10 years, starting five years after she joins the company. The liability for this bonus when the CEO […]

Clarabell Inc. uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below: To the nearest thousand, estimated ending inventory using the conventional retail method is: a. $163,000. b. $124,000. c. $127,000. […]

When preferred stock carries a redemption privilege, the shareholders may: a. Purchase new shares as they become available. b. Exchange their preferred shares for common shares. c. Surrender the preferred shares for a specified amount of cash. d. Purchase treasury […]

What is the effect of the error on Berkshire’s 2016 income statement? Berkshire Inc. uses a periodic inventory system. At the end of 2015, it missed counting some inventory items, resulting in an inventory understatement by $600,000. Assume that Berkshire […]

At the end of the current year, a company failed to accrue interest of $500,000 on its investments in municipal bonds. Its tax rate is 30%. As a result of this error, net income is: a. Unaffected. b. Understated by […]

Recent financial statement data for Harmony Health Foods (HHF) Inc. is shown below. HHF’s long-term debt to equity ratio equity is: a. 133.3%. b. 75%. c. 180%. d. 0%. On February 12, 2016, Mohawk Home and Garden enters into contract […]

Which of the following creates a deferred tax liability? a. An unrealized loss from recording inventory at lower of cost or market. b. Accelerated depreciation in the tax return. c. Estimated warranty expense. d. Subscriptions collected in advance. On June […]

Discount-Mart issued ten thousand $1,000 bonds on January 1, 2016. The bonds have a 10-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. What would be the total interest cost of the bonds […]

Antonio’s Car Services provides maintenance services for motorized vehicles. In March 2016, Rick placed an order for a new set of tires for $350. When a customer purchases goods and services in excess of $300, Antonio’s gives the customer a […]

Which of the accounting changes listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards (IFRS)? a. Change in reporting entity. b. Change to the LIFO method from the FIFO […]

Coastal Shores Inc. (CSI) was destroyed by Hurricane Fred on August 5, 2016. At January 1, CSI reported an inventory of $170,000. Sales from January 1, 2016, to August 5, 2016, totaled $480,000 and purchases totaled $195,000 during that time. […]

Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common stock. Arrow would report cash outflows from activities, as follows: a. Operating, $2,000; financing, $16,000. b. Operating, $0; financing, […]

Sneed Corporation reported balances in the following accounts for the current year: Income tax expense was $230 for the year. What was the amount paid for taxes? a. $280. b. $220. c. $210. d. $190. Information for Kent Corp. for […]