1) the acquisition cost of a certain raw material changes frequently. the book value of
the inventory of this material at year end will be the same if perpetual records are kept
as it would be under a periodic inventory method only if the book value is computed
under the
a.weighted-average method
b.moving average method
c.lifo method
d.fifo method
2) garr co. issued $3,000,000 of 12%, 5-year convertible bonds on december 1, 2012 for
$3,013,000 plus accrued interest. the bonds were dated april 1, 2012 with interest
payable
april 1 and october 1. bond premium is amortized each interest period on a straight-line
basis. garr co. has a fiscal year end of september 30.
on october 1, 2013, $1,500,000 of these bonds were converted into 20,000 shares of $15
par common stock. accrued interest was paid in cash at the time of conversion.
instructions
(a)prepare the entry to record the interest expense at april 1, 2013. assume that interest
payable was credited when the bonds were issued (round to nearest dollar).
(b)prepare the entry to record the conversion on october 1, 2013. assume that the entry
to record amortization of the bond premium and interest payment has been made.
3) which of the following is an example of managing earnings down?
a.changing estimated bad debts from 3 percent to 2.5 percent of sales
b.revising the estimated life of equipment from 10 years to 8 years
c.not writing off obsolete inventory
d.reducing research and development expenditures
4) if ending accounts receivable exceeds the beginning accounts receivable:
a.cash collections during the period exceed the amount of revenue earned
b.net income for the period is less than the amount of cash basis income
c.no cash was collected during the period
d.cash collections during the year are less than the amount of revenue earned
5) during 2012 carne corporation transferred inventory to nolan corporation and agreed
to repurchase the merchandise early in 2013. nolan then used the inventory as collateral
to borrow from norwalk bank, remitting the proceeds to carne. in 2013 when carne
repurchased the inventory, nolan used the proceeds to repay its bank loan.
this transaction is known as a(n)
a.consignment
b.installment sale
c.assignment for the benefit of creditors
d.product financing arrangement
6) if the month-end bank statement shows a balance of $72,000, outstanding checks are
$24,000, a deposit of $8,000 was in transit at month end, and a check for $1,000 was
erroneously charged by the bank against the account, the correct balance in the bank
account at month end is
a.$55,000
b.$57,000
c.$41,000
d.$87,000
7) during 2011, vanpelt co. introduced a new line of machines that carry a three-year
warranty against manufacturers defects. based on industry experience, warranty costs
are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 4% in the
second year after sale. sales and actual warranty expenditures for the first three-year
period were as follows:
what amount should vanpelt report as a liability at december 31, 2013?
a.$0
b.$12,000
c.$54,000
d.$169,000
8) which of the following best describes a possible result of treasury stock transactions
by a corporation?
a.may increase but not decrease retained earnings
b.may increase net income if the cost method is used
c.may decrease but not increase retained earnings
d.may decrease but not increase net income
9) farmer corp. owned 20,000 shares of eaton corp. purchased in 2009 for $300,000. on
december 15, 2012, farmer declared a property dividend of all of its eaton corp. shares
on the basis of one share of eaton for every 10 shares of farmer common stock held by
its stockholders. the property dividend was distributed on january 15, 2013. on the
declaration date, the aggregate market price of the eaton shares held by farmer was
$500,000. the entry to record the declaration of the dividend would include a debit to
retained earnings of
a.$0
b.$200,000
c.$300,000
d.$500,000
10) the installment-sales method of recognizing profit for accounting purposes is
acceptable if
a.collections in the year of sale do not exceed 30% of the total sales price
b.an unrealized profit account is credited
c.collection of the sales price is not reasonably assured
d.the method is consistently used for all sales of similar merchandise
11) state company manufactured a forklift machine at a cost of $60,000. the product is
sold for $66,000 at a 5% discount. the delivery costs are estimated to be $6,000. under
ifrs, how much should be the carrying amount of this inventory?
a.$60,000
b.$66,000
c.$54,000
d.$56,700
12) kraft company made the following journal entry in late 2012 for rent on property it
leases to danford corporation.
the payment represents rent for the years 2013 and 2014, the period covered by the
lease. kraft company is a cash basis taxpayer. kraft has income tax payable of $138,000
at the end of 2012, and its tax rate is 35%.
what amount of income tax expense should kraft company report at the end of 2012?
a.$79,500
b.$106,500
c.$122,250
d.$169,500
13) which of the following is false with regard to the element “comprehensive income”?
a.it is more inclusive than the traditional notion of net income
b.it includes net income and all other changes in equity exclusive of owners’
invest-ments and distributions to owners
c.this concept is not yet being applied in practice
d.it excludes prior period adjustments (transactions that relate to previous periods, such
as corrections of errors)
14) an adjusted trial balance
a.is prepared after the financial statements are completed
b.proves the equality of the total debit balances and total credit balances of ledger
accounts after all adjustments have been made
c.is a required financial statement under generally accepted accounting principles
d.cannot be used to prepare financial statements
15) which of the following tables would show the smallest factor for an interest rate of
10% for six periods?
a.future value of an ordinary annuity of 1
b.present value of an ordinary annuity of 1
c.future value of an annuity due of 1
d.present value of an annuity due of 1
16) present value is
a.the value now of a future amount
b.the amount that must be invested now to produce a known future value
c.always smaller than the future value
d.all of these
17) on january 1, 2010, nobel corporation acquired machinery at a cost of $800,000.
nobel adopted the straight-line method of depreciation for this machine and had been
recording depreciation over an estimated life of ten years, with no residual value. at the
beginning of 2013, a decision was made to change to the double-declining balance
method of depreciation for this machine.
the amount that nobel should record as depreciation expense for 2013 is
a.$80,000
b.$112,000
c.$160,000
d.none of the above
18) when a portion of inventories has been pledged as security on a loan,
a.the value of the portion pledged should be subtracted from the debt
b.an equal amount of retained earnings should be appropriated
c.the fact should be disclosed but the amount of current assets should not be affected
d.the cost of the pledged inventories should be transferred from current assets to
noncurrent assets
19) which of the following is a period cost?
a.labor costs
b.freight in
c.production costs
d.selling costs