1) At December 31, 2014 Rice Company had 300,000 shares of common stock and
10,000 shares of 8%, $100 par value cumulative preferred stock outstanding. No
dividends were declared on either the preferred or common stock in 2014 or 2015 . On
January 30, 2016, prior to the issuance of its financial statements for the year ended
December 31, 2015, Rice declared a 100% stock dividend on its common stock. Net
income for 2015 was $1,520,000. In its 2015 financial statements, Rice’s 2015 earnings
per common share should be
a.$2.40
b.$2.53
c.$4.80
d.$5.07
2) The times interest earned ratio is computed by dividing
a.net income by interest expense
b.income before taxes by interest expense
c.income before income taxes and interest expense by interest expense
d.net income and interest expense by interest expense
3) Worthington Company purchased a machine on January 1, 2012, for $6,400,000. At
the date of acquisition, the machine had an estimated useful life of six years with no
salvage. The machine is being depreciated on a straight-line basis. On January 1, 2015,
Worthington determined, as a result of additional information, that the machine had an
estimated useful life of eight years from the date of acquisition with no salvage. An
accounting change was made to reflect this additional information. What amount of
depreciation expense should be reported in Worthingtons income statement for the year
ended December 31, 2015?
a.$1,066,667
b.$800,000
c.$640,000
d.$400,000
4) Peavy Corp.’s transactions for the year ended December 31, 2015 included the
following:
Acquired 50% of Gant Corp.’s common stock for $200,000 cash which was borrowed
from a bank.
Issued 5,000 shares of its preferred stock for land having a fair value of $320,000.
Issued 500 of its 11% debenture bonds, due 2020, for $392,000 cash.
Purchased a patent for $220,000 cash.
Paid $120,000 toward a bank loan.
Sold available-for-sale securities for $796,000.
Had a net increase in returnable customer deposits (long-term) of $88,000.
Peavys net cash provided by financing activities for 2015 was
a.$472,000
b.$560,000
c.$592,000
d.$680,000
5) On July 22, Peter sold $15,500 of inventory items on credit with the terms 2/15, net
30 . Payment on $10,000 sales was received on August 1 and the remaining payment
was received on August 12 . Assuming Peter uses the gross method of accounting for
sales discounts, which one of the following entries was made on August 1 to record the
cash received?
a.Cash9,800
Sales Discount200
Accounts Receivable10,000
b.Cash10,000
Accounts Receivable10,000
c.Cash9,800
Accounts Receivable9,800
d.Accounts Receivable200
Sales Discount Forfeited200
6) The passage of a new FASB Accounting Standards Update requires the support of
a.seven Board members
b.three Board members
c.four Board members
d.five Board members
7) A machine cost $600,000, has annual depreciation of $100,000, and has accumulated
depreciation of $450,000 on December 31, 2014 . On April 1, 2015, when the machine
has a fair value of $137,500, it is exchanged for a machine with a fair value of $675,000
and the proper amount of cash is paid. The exchange had commercial substance.
The new machine should be recorded at
a.$537,500
b.$612,500
c.$662,500
d.$675,000
8) Nenn Co.’s allowance for uncollectible accounts was $190,000 at the end of 2014
and $180,000 at the end of 2013. For the year ended December 31, 2014, Nenn reported
bad debt expense of $26,000 in its income statement. What amount did Nenn debit to
the appropriate account in 2014 to write off actual bad debts?
a.$10,000
b.$16,000
c.$26,000
d.$36,000
9) Coaster manufactures and sells logging equipment. Due to the nature of its business,
Coaster is unable to reliably predict bad debts. During 2014, Coaster sold equipment
costing $4,800,000 for $7,200,000. The terms of the sale were 20% down, with equal
payments due quarterly over the next 3 years. All payments for 2014 were made on
schedule. Round answers to two places.
Assuming that Coaster uses the installment-sales method of accounting for its
installment sales, what amount of realized gross profit will Coaster report in its income
statement for the year ended December 31, 2014?
a.$3,360,000
b.$2,240,000
c.$1,120,000
d.$ 739,200
10) Dalton Construction Co. contracted to build a bridge for $8,000,000. Construction
began in 2014 and was completed in 2015 . Data relating to the construction are:
2014 2015
Costs incurred$2,640,000$2,200,000
Estimated costs to complete2,160,000
Dalton uses the percentage-of-completion method.
Instructions
(a)How much revenue should be reported for 2014? Show your computation.
(b)Make the entry to record progress billings of $3,300,000 during 2014 .
(c)Make the entry to record the revenue and gross profit for 2014 .
(d)How much gross profit should be reported for 2015? Show your computation.
11) In hedging, the purchaser in the purchase commitment simultaneously enters into a
contract in which it agrees to sell in the future:
a.the same quantity of the same goods at a fixed price
b.a higher quantity of the same goods at a higher price
c.a lower quantity of the same goods at a fixed price
d.same quantity of different goods at a lower price
12) When boot is involved in an exchange having commercial substance
a.gains or losses are recognized in their entirely
b.a gain or loss is computed by comparing the fair value of the asset received with the
fair value of the asset given up
c.only gains should be recognized
d.only losses should be recognized
13) The following information was taken from the 2015 financial statements of Dunlop
Corporation:
Bonds payable, January 1, 2015$ 600,000
Bonds payable, December 31, 20153,600,000
During 2015
A $540,000 payment was made to retire bonds payable with a face amount of $600,000.
Bonds payable with a face amount of $240,000 were issued in exchange for equipment.
In its statement of cash flows for the year ended December 31, 2015, what amount
should Dunlop report as proceeds from issuance of bonds payable?
a.$3,000,000
b.$3,300,000
c.$3,360,000
d.$3,840,000
14) Lucy and Fred want to begin saving for their baby’s college education. They
estimate that they will need $150,000 in eighteen years. If they are able to earn 6% per
annum, how much must be deposited at the beginning of each of the next eighteen years
to fund the education?
a.$4,853
b.$4,579
c.$8,333
d.$4,443
15) The financial statements most frequently provided include all of the following
except the
a.balance sheet
b.income statement
c.statement of cash flows
d.statement of retained earnings
16) The income statement of Dolan Corporation for 2014 included the following items:
Interest revenue$121,000
Salaries and wages expense180,000
Insurance expense18,200
The following balances have been excerpted from Dolan Corporation’s balance sheets:
December 31, 2014December 31, 2013
Interest receivable$18,200$15,000
Salaries and wages payable17,8008,400
Prepaid insurance2,2003,000
The cash paid for salaries and wages during 2014 was
a.$189,400
b.$170,600
c.$171,600
d.$197,800