1) Milford Company had 400 units of Tank in its inventory at a cost of $6 each. It
purchased 600 more units of Tank at a cost of $9 each. Milford then sold 700 units at a
selling price of $15 each. The LIFO liquidation overstated normal gross profit by
a.$ -0-
b.$300
c.$600
d.$900
2) Gage Co. purchases land and constructs a service station and car wash for a total of
$360,000. At January 2, 2014, when construction is completed, the facility and land on
which it was constructed are sold to a major oil company for $400,000 and immediately
leased from the oil company by Gage. Fair value of the land at time of the sale was
$40,000. The lease is a 10-year, noncancelable lease. Gage uses straight-line
depreciation for its other various business holdings. The economic life of the facility is
15 years with zero salvage value. Title to the facility and land will pass to Gage at
termination of the lease. A partial amortization schedule for this lease is as follows:
Payments InterestAmortization Balance
Jan. 2, 2014$400,000.00
Dec. 31, 2014$65,098.13$40,000.00$25,098.13374,901.87
Dec. 31, 201565,098.1337,490.1927,607.94347,293.93
Dec. 31, 201665,098.1334,729.3930,368.74316,925.19
The total lease-related income recognized by the lessee during 2015 is which of the
following?
a.$ -0-
b.$2,667
c.$4,000
d.$40,000
3) A company issues $10,000,000, 7.8%, 20-year bonds to yield 8% on January 1,
2013 . Interest is paid on June 30 and December 31 . The proceeds from the bonds are
$9,802,072. Using straight-line amortization, what is the carrying value of the bonds on
December 31, 2015?
a.$9,835,115
b.$9,970,311
c.$9,816,916
d.$9,831,761
4) Which of the following organizations have committed to develop high-quality,
compatible accounting standards that could be used for domestic and cross-border
financial reporting
a.The Financial Accounting Standards Board (FASB) and the International Organization
of Securities Commission (IOSCO)
b.The Financial Accounting Standards Board (FASB) and the International Accounting
Standards Board (IASB)
c.The International Accounting Standards Board (IASB) and International Organization
of Securities Commission (IOSCO)
d.The International Accounting Standards Board (IASB) and the Standards Advisory
Council (SAC)
5) If a company employs the gross method of recording accounts receivable from
customers, then sales discounts taken should be reported as
a.a deduction from sales in the income statement
b.an item of “other expense” in the income statement
c.a deduction from accounts receivable in determining the net realizable value of
accounts receivable
d.sales discounts forfeited in the cost of goods sold section of the income statement
6) A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1,
2014 . Interest is paid on June 30 and December 31 . The proceeds from the bonds are
$19,604,144. Using effective-interest amortization, what will the carrying value of the
bonds be on the December 31, 2014 balance sheet?
a.$19,612,642
b.$20,000,000
c.$19,625,124
d.$19,608,308
7) Equipment that cost $525,000 and had a book value of $234,000 was sold for
$270,000. Data from the comparative balance sheets are:
12/31/15 12/31/14
Equipment$3,240,000$2,925,000
Accumulated Depreciation990,000855,000
Depreciation expense for 2015 was
a.$462,000
b.$426,000
c.$81,000
d.$54,000
8) Factors that shape an accounting information system include the
a.nature of the business
b.size of the firm
c.volume of data to be handled
d.All of these answer choices are correct
9) Under MACRS, which one of the following is not considered in determining
depreciation for tax purposes?
a.Cost of asset
b.Property recovery class
c.Half-year convention
d.Salvage value
10) Under IFRS compliance requirements the Revaluation Surplus is
a. only utilized to record the changes in depreciable items – plant and equipment
b. considered as revenue when utilizing the U.S. GAAP formatted income statement
c. utilized to record the changes in property, plant, and equipment and intangible assets
d. reported as contributed capital
11) Checkers uses the periodic inventory system. For the current month, the beginning
inventory consisted of 4,800 units that cost $12 each. During the month, the company
made two purchases: 2,000 units at $13 each and 8,000 units at $13.50 each. Checkers
also sold 8,600 units during the month. Using the LIFO method, what is the ending
inventory?
a.$80,292
b.$74,400
c.$83,700
d.$75,800
12) What effect does the issuance of a 2-for-1 stock split have on each of the following?
Par Value per ShareRetained Earnings
a.No effectNo effect
b.IncreaseNo effect
c.DecreaseNo effect
d.DecreaseDecrease