1) miles company, a wholesaler, budgeted the following sales for the indicated months:
all merchandise is marked up to sell at its invoice cost plus 20%. merchandise
inventories at the beginning of each month are at 30% of that month’s projected cost of
goods sold.
the cost of goods sold for the month of june is anticipated to be
a.$2,160,000
b.$2,250,000
c.$2,280,000
d.$2,475,000
2) eckert corporation’s partial income statement after its first year of operations is as
follows:
eckert uses the straight-line method of depreciation for financial reporting purposes and
accelerated depreciation for tax purposes. the amount charged to depreciation expense
on its books this year was $1,800,000. no other differences existed between book
income and taxable income except for the amount of depreciation. assuming a 30% tax
rate, what amount was deducted for depreciation on the corporation’s tax return for the
current year?
a.$1,500,000
b.$1,125,000
c.$1,800,000
d.$2,100,000
3) where is the authoritative ifrs guidance related to accounting and reporting for
inventories found?
a.ias 2
b.ias 18
c.ias 41
d.all of these standards deal with inventory
4) net cash flow from operating activities for 2013 for graham corporation was
$350,000. the following items are reported on the financial statements for 2013:
based only on the information above, grahams net income for 2013 was:
a.$306,000
b.$314,000
c.$346,000
d.$354,000
5) which of the following is not a selling expense?
a.advertising expense
b.office salaries expense
c.freight-out
d.store supplies consumed
6) on january 1, 2012, janik corp. acquired a machine at a cost of $800,000. it is to be
depreciated on the straight-line method over a five-year period with no residual value.
because of a bookkeeping error, no depreciation was recognized in janik’s 2012
financial statements. the oversight was discovered during the preparation of janik’s
2013 financial statements. depreciation expense on this machine for 2013 should be
a.$0
b.$160,000
c.$200,000
d.$320,000
7) at the time a company prepays a cost
a.it debits an asset account to show the service or benefit it will receive in the future
b.it debits an expense account to match the expense against revenues earned
c.its credits a liability account to show the obligation to pay for the service in the future
d.more than one of the above
8) on january 1, 2009, russell company purchased a copyright for $2,000,000, having an
estimated useful life of 16 years. in january 2013, russell paid $300,000 for legal fees in
a successful defense of the copyright. copyright amortization expense for the year
ended december 31, 2013, should be
a.$0
b.$125,000
c.$143,750
d.$150,000
9) the cost-recovery method
a.is prohibited under current gaap due to its conservative nature
b.requires a company to defer profit recognition until all cash payments are received
from the buyer
c.is used by sellers when there is a reasonable basis for estimating collectibility
d.recognizes total revenue and total cost of goods sold in the period of sale
10) yount trading stamp co. records stamp service revenue and provides for the cost of
redemptions in the year stamps are sold to licensees. yount’s past experience indicates
that only 80% of the stamps sold to licensees will be redeemed. yount’s liability for
stamp redemptions was $6,000,000 at december 31, 2011. additional information for
2012 is as follows:
if all the stamps sold in 2012 were presented for redemption in 2013, the redemption
cost would be $2,000,000. what amount should yount report as a liability for stamp
redemptions at december 31, 2012?
a.$7,280,000
b.$5,280,000
c.$4,880,000
d.$3,280,000
11) moon inc assigns $3,000,000 of its accounts receivables as collateral for a $2
million loan with a bank. the bank assesses a 3% finance fee and charges interest on the
note at 6%. what would be the journal entry to record this transaction?
a.debit cash for $1,940,000, debit finance charge for $60,000, and credit notes payable
for $2,000,000
b.debit cash for $1,940,000, debit finance charge for $60,000, and credit accounts
receivable for $2,000,000
c.debit cash for $1,940,000, debit finance charge for $60,000, debit due from bank for
$1,000,000, and credit accounts receivable for $3,000,000
d.debit cash for $1,820,000, debit finance charge for $180,000, and credit notes payable
for $2,000,000
12) in preparing titan inc.s statement of cash flows for the year ended december 31,
2013, the following amounts were available:
what amount should be reported on titan, inc.s statement of cash flows for investing
activities?
a.$370,000
b.$160,000
c.$796,000
d.$216,000
13) what is a compensating balance?
a.savings account balances
b.margin accounts held with brokers
c.temporary investments serving as collateral for outstanding loans
d.minimum deposits required to be maintained in connection with a borrowing
arrangement
14) how does accounting help the capital allocation process attract investment capital?
a.provides timely, relevant information
b.encourages innovation
c.promotes productivity
d.a and b above
15) two independent companies, hager co. and shaw co., are in the home building
business. each owns a tract of land held for development, but each would prefer to build
on the other’s land. they agree to exchange their land. an appraiser was hired, and from
her report and the companies’ records, the following information was obtained:
the exchange was made, and based on the difference in appraised fair values, shaw paid
$90,000 to hager. the exchange lacked commercial substance.
the new land should be recorded on shaw’s books at
a.$360,000
b.$450,000
c.$630,000
d.$720,000
16) grove corporation issued $2,400,000 of 8% bonds on october 1, 2012, due on
october 1, 2017. the interest is to be paid twice a year on april 1 and october 1. the
bonds were sold to yield 10% effective annual interest. grove corporation closes its
books annually on december 31.
instructions
(a)complete the following amortization schedule for the dates indicated. (round all
answers to the nearest dollar.) use the effective-interest method.
(b)prepare the adjusting entry for december 31, 2013. use the effective-interest method.
(c)compute the interest expense to be reported in the income statement for the year
ended december 31, 2013.
17) during 2012, martin corporation sold merchandise costing $2,800,000 on an
installment basis for $4,000,000. the cash receipts related to these sales were collected
as follows: 2012, $1,600,000; 2013, $1,400,000; 2014, $1,000,000.
if expenses, other than the cost of the merchandise sold, related to the 2012 installment
sales amounted to $160,000, by what amount would martins net income for 2012
increase as a result of installment sales?
a.$1,440,000
b.$ 480,000
c.$ 360,000
d.$ 320,000