1) what is the preferable presentation of accounts receivable from officers, employees,
or affiliated companies on a balance sheet?
a.as offsets to capital
b.by means of footnotes only
c.as assets but separately from other receivables
d.as trade notes and accounts receivable if they otherwise qualify as current assets
2) which of the following would be considered research and development?
a.routine efforts to refine an existing product
b.periodic alterations to existing production lines
c.marketing research to promote a new product
d.construction of prototypes
3) on january 2, 2012, a calendar-year corporation sold 8% bonds with a face value of
$900,000. these bonds mature in five years, and interest is paid semiannually on june 30
and december 31. the bonds were sold for $830,400 to yield 10%. using the
effective-interest method of computing interest, how much should be charged to interest
expense in 2012?
a.$72,000
b.$83,040
c.$83,316
d.$90,000
4) when an investment in a held-to-maturity security is transferred to an
available-for-sale security, the carrying value assigned to the available-for-sale security
should be
a.its original cost
b.its fair value at the date of the transfer
c.the lower of its original cost or its fair value at the date of the transfer
d.the higher of its original cost or its fair value at the date of the transfer
5) a corporation issues bonds with detachable warrants. the amount to be recorded as
paid-in capital is preferably
a.zero
b.calculated by the excess of the proceeds over the face amount of the bonds
c.equal to the market value of the warrants
d.based on the relative market values of the two securities involved
6) swift company purchased a machine on january 1, 2010, for $500,000. at the date of
acquisition, the machine had an estimated useful life of six years with no salvage. the
machine is being depreciated on a straight-line basis. on january 1, 2013, swift
determined, as a result of additional information, that the machine had an estimated
useful life of eight years from the date of acquisition with no salvage. an accounting
change was made in 2013 to reflect this additional information.
what is the amount of depreciation expense on this machine that should be charged in
swift’s income statement for the year ended december 31, 2013?
a.$ 50,000
b.$ 62,500
c.$100,000
d.$125,000
7) plank co. uses the retail inventory method. the following information is available for
the current year.
the ending inventory at retail should be
a.$320,000
b.$300,000
c.$288,000
d.$280,000
8) which of the following is a product cost as it relates to inventory?
a.selling costs
b.interest costs
c.raw materials
d.abnormal spoilage
9) farmer inc. began business on january 1, 2012. its pretax financial income for the
first 2 years was as follows:
the following items caused the only differences between pretax financial income and
taxable income.
1>in 2012, the company collected $240,000 of rent; of this amount, $80,000 was earned
in 2012; the other $160,000 will be earned equally over the 20132014 period. the full
$240,000 was included in taxable income in 2012.
2>the company pays $10,000 a year for life insurance on officers.
3>in 2013, the company terminated a top executive and agreed to $90,000 of severance
pay. the amount will be paid $30,000 per year for 20132015. the 2013 payment was
made. the $90,000 was expensed in 2013. for tax purposes, the severance pay is
deductible as it is paid.
the enacted tax rates existing at december 31, 2012 are:
instructions
(a)determine taxable income for 2012 and 2013.
(b)determine the deferred income taxes at the end of 2012, and prepare the journal entry
to record income taxes for 2012.
(c)prepare a schedule of future taxable and (deductible) amounts at the end of 2013.
(d)prepare a schedule of the deferred tax (asset) and liability at the end of 2013.
(e)compute the net deferred tax expense (benefit) for 2013.
(f)prepare the journal entry to record income taxes for 2013.
(g)show how the deferred income taxes should be reported on the balance sheet at
december 31, 2013.
10) barton company uses a periodic inventory system. on january 1, 2012, barton
company had 600 units of inventory on hand at a cost of $8 per unit. during 2012,
barton made the following inventory purchases.
assume barton company sold 1,150 units of inventory during 2012.
based on your answers to questions 6 and 7, which of the following is a disadvantage of
using the ifrs fifo method, as compared to average-cost under u.s. gaap?
a.under fifo, during periods of inflation, inventory costs matched against sales are
greater than the inventory replacement cost
b.when price levels increase and inventory quantities do not decrease, taxes are greater
under fifo
c.fifo may cause poorer buying habits as management attempts to manipulate net
income
d.fifo typically causes lower reported earnings
11) logan corp.’s trial balance of income statement accounts for the year ended
december 31, 2012 included the following:
other information:
logan’s income tax rate is 30%. finished goods inventory:
on logan’s multiple-step income statement for 2012,
extraordinary loss is
a.$16,800
b.$24,000
c.$29,400
d.$42,000
12) which of the following is not a retrospective-type accounting change?
a.completed-contract method to the percentage-of-completion method for long-term
contracts
b.lifo method to the fifo method for inventory valuation
c.sum-of-the-years’-digits method to the straight-line method
d.”full cost” method to another method in the extractive industry