Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) IFRS requires immediate recognition of a loss if the overall contract is going to be
unprofitable.
2) If a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier
delivers the goods to the common carrier.
3) Under the fair value method, companies compute total compensation expense based
on the fair value of options on the date of exercise.
4) A company can exclude a short-term obligation from current liabilities if it intends to
refinance the obligation and has an unconditional right to defer settlement of the
obligation for at least 12 months following the due date.
5) U.S. GAAP has less detailed rules related to the accounting for inventories,
compared to IFRS.
6) In a troubled debt restructuring, the loss recognized by the creditor will equal the
gain recognized by the debtor.
7) Fox Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The
bonds are sold to yield 8%.
Another step in calculating the issue price of the bonds is to
a.multiply $10,000 by the table value for 10 periods and 10% from the present value of
an annuity table
b.multiply $10,000 by the table value for 20 periods and 5% from the present value of
an annuity table
c.multiply $10,000 by the table value for 20 periods and 4% from the present value of
an annuity table
d.None of these answers is correct
8) When a company has acquired a "passive interest" in another corporation, the
acquiring company should account for the investment
a.by using the equity method
b.by using the fair value method
c.by using the effective interest method
d.by consolidation
9) Landis Company purchased $2,000,000 of 8%, 5-year bonds from Ritter, Inc. on
January 1, 2014, with interest payable on July 1 and January 1 . The bonds sold for
$2,083,160 at an effective interest rate of 7%. Using the effective-interest method,
Landis Company decreased the Available-for-Sale Debt Securities account for the
Ritter, Inc. bonds on July 1, 2014 and December 31, 2014 by the amortized premiums
of $7,080 and $7,320, respectively.
At April 1, 2015, Landis Company sold the Ritter bonds for $2,060,000. After accruing
for interest, the carrying value of the Ritter bonds on April 1, 2015 was $2,064,960.
Assuming Landis Company has a portfolio of Available-for-Sale Debt Securities, what
should Landis Company report as a gain or loss on the bonds?
a.($58,740)
b.($43,740)
c.($4,960)
d.$ 0
10) A company issues $10,000,000, 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
$9,802,072. What is interest expense for 2015, using straight-line amortization?
a.$1,026,805
b.$780,000
c.$784,596
d.$789,896
11) Which of the following is a correct statement of one of the capitalization criteria?
a.The lease transfers ownership of the property to the lessor
b.The lease contains a purchase option
c.The lease term is equal to or more than 75% of the estimated economic life of the
leased property
d.The minimum lease payments (excluding executory costs) equal or exceed 90% of the
fair value of the leased property
12) All of the following are key similarities between U.S. GAAP and IFRS with respect
to accounting for inventories except
a.guidelines on ownership of goods are similar
b.costs to include in inventories are similar
c.LIFO cost flow assumption where appropriate is used by both sets of standards
d.fair value valuation of inventories is prohibited by both sets of standards
13) Why did the AICPA create the Accounting Principles Board?
a.The SEC disbanded the previous standard setting organization
b.The previous standard setting organization did not provide a structured set of
accounting principles
c.No such organization existed in the past
d.None of the answer choices are correct
14) Which of the following would not be considered an R & D activity?
a.Adaptation of an existing capability to a particular requirement or customer's need
b.Searching for applications of new research findings
c.Laboratory research aimed at discovery of new knowledge
d.Conceptual formulation and design of possible product or process alternatives
15) Net income is understated if, in the first year, estimated salvage value is excluded
from the depreciation computation when using the
Straight-lineProduction or
MethodUse Method
a.YesNo
b.YesYes
c.NoNo
d.NoYes
16) How would the declaration and subsequent issuance of a 10% stock dividend by the
issuer affect each of the following when the fair value of the shares exceeds the par
value of the stock?
Additional
Common StockPaid-in Capital
a.No effectNo effect
b.No effectIncrease
c.IncreaseNo effect
d.IncreaseIncrease
17) On July 1, 2014, Mendes Corporation purchased factory equipment for $225,000.
Salvage value was estimated to be $6,000. The equipment will be depreciated over five
years using the double-declining balance method. Counting the year of acquisition as
one-half year, Mendes should record depreciation expense for 2015 on this equipment
of
a.$90,000
b.$72,000
c.$70,080
d.$54,000
18) Sterling Co. includes one coupon in each bag of dog food it sells. In return for 4
coupons, customers receive a dog toy that the company purchases for $1.50 each.
Sterling's experience indicates that 60 percent of the coupons will be redeemed. During
2014, 100,000 bags of dog food were sold, 12,000 toys were purchased, and 40,000
coupons were redeemed. During 2015, 120,000 bags of dog food were sold, 16,000 toys
were purchased, and 60,000 coupons were redeemed.
Instructions
Determine the premium expense to be reported in the income statement and the
premium liability on the balance sheet for 2014 and 2015 .
19) Dunbar Company had 500,000 shares of common stock outstanding during the year
2015 . In addition, at December 31, 2013, 90,000 shares were issuable upon exercise of
executive stock options which require a $40 cash payment upon exercise (options
granted in 2013). The average market price during 2015 was $50.
Instructions
Compute the number of shares to be used in determining diluted earnings per share for
2015 .
20) Barkley Corp. obtained a trade name in January 2013, incurring legal costs of
$36,000. The company amortizes the trade name over 8 years. Barkley successfully
defended its trade name in January 2014, incurring $9,800 in legal fees. At the
beginning of 2015, based on new marketing research, Barkley determines that the fair
value of the trade name is $30,000. Estimated total future cash flows from the trade
name are $32,000 on January 4, 2015 .
Instructions
Prepare the necessary journal entries for the years ending December 31, 2013, 2014,
and 2015 . Show all computations.
21) Mareos Company purchased for $3,800,000 a mine estimated to contain 2 million
tons of ore. When the ore is completely extracted, it was expected that the land would
be worth $200,000. A building and equipment costing $1,800,000 were constructed on
the mine site, and they will be completely used up and have no salvage value when the
ore is exhausted. During the first year, 750,000 tons of ore were mined, and $300,000
was spent for labor and other operating costs.
Instructions
Compute the total cost per ton of ore mined in the first year. (Show computations by
setting up a schedule giving cost per ton.)
22) Revenue on the income statement was $125,800. Accounts receivable were $3,500
on January 1 and $3,540 on December 31 . Unearned revenue was $1,050 on January 1
and $1,670 on December 31 .
Show the computation of revenue for the year on a cash basis.
23) Jan Green established a savings account for her son's college education by making
annual deposits of $9,000 at the beginning of each of six years to a savings account
paying 8%. At the end of the sixth year, the account balance was transferred to a bank
paying 10%, and annual deposits of $9,000 were made at the end of each year from the
seventh through the tenth years. What was the account balance at the end of the tenth
year?
24) Users of financial accounting statements have both coinciding and conflicting needs
for information of various types.
