1) which of the following is a change in accounting principle?
a.a change in the estimated service life of machinery
b.a change from fifo to lifo
c.a change from straight-line to double-declining-balance
d.a change from fifo to lifo and a change from straight-line to double-declining- balance
2) dolan co. received merchandise on consignment. as of march 31, dolan had recorded
the transaction as a purchase and included the goods in inventory. the effect of this on
its financial statements for march 31 would be
a.no effect
b.net income was correct and current assets and current liabilities were overstated
c.net income, current assets, and current liabilities were overstated
d.net income and current liabilities were overstated
3) during 2012, which was the first year of operations, oswald company had
merchandise purchases of $985,000 before cash discounts. all purchases were made on
terms of 2/10, n/30. three-fourths of the items purchased were paid for within 10 days
of purchase. all of the goods available had been sold at year end.
which of the following recording procedures would result in the highest net income for
2012?
1> recording purchases at gross amounts
2>recording purchases at net amounts, with the amount of discounts not taken shown
under “other expenses” in the income statement
a.1
b.2
c.either 1 or 2 will result in the same net income.
d.cannot be determined from the information provided.
4) purest owes $2 million that is due on february 28. the company borrows $1,600,000
on february 25 (5-year note) and uses the proceeds to pay down the $2 million note and
uses other cash to pay the balance. how much of the $2 million note is classified as
long-term in the december 31 financial statements.
a.$2,000,000
b.$0
c.$1,600,000
d.$400,000
5) according to statement of financial accounting concepts no. 2, materiality is an
ingredient of the fundamental quality of
relevance faithful representation
a. yes yes
b. no yes
c. yes no
d. no no
6) logan corp.’s trial balance of income statement accounts for the year ended december
31, 2012 included the following:
debit credit
sales revenue$280,000
cost of goods sold$100,000
administrative expenses50,000
loss on disposal of equipment18,000
sales commission expense16,000
interest revenue10,000
freight-out6,000
loss due to earthquake damage24,000
bad debt expense 6,000
totals$220,000$290,000
other information:
logan’s income tax rate is 30%. finished goods inventory:
january 1, 2012$160,000
december 31, 2012140,000
on logan’s multiple-step income statement for 2012,
cost of goods manufactured is
a.$126,000
b.$120,000
c.$86,000
d.$80,000
7) a schedule of machinery owned by mallon co. is presented below:
mallon computes depreciation by the composite method.
the composite life (in years) for these assets is
a.9.1
b.9.3
c.9.8
d.10.0
8) on may 1, 2012, kirmer corp. purchased $600,000 of 12% bonds, interest payable on
january 1 and july 1, for $562,600 plus accrued interest. the bonds mature on january 1,
2018. amortization is recorded when interest is received by the straight-line method (by
months and round to the nearest dollar). (assume bonds are available for sale.)
instructions
(a)prepare the entry for may 1, 2012.
(b)the bonds are sold on august 1, 2013 for $565,000 plus accrued interest. prepare all
entries required to properly record the sale.
9) ortiz co. had the following account balances:
what would ortiz report as total revenues in a single-step income statement?
a.$199,500
b.$ 15,000
c.$216,000
d.$180,000
10) which of the following is not true?
a.the imprest petty cash system in effect adheres to the rule of disbursement by check
b.entries are made to the petty cash account only to increase or decrease the size of the
fund or to adjust the balance if not replenished at year-end
c.the petty cash account is debited when the fund is replenished
d.all of these are not true
11) limitations of the income statement include all of the following except
a.items that cannot be measured reliably are not reported
b.only actual amounts are reported in determining net income
c.income measurement involves judgment
d.income numbers are affected by the accounting methods employed
12) which of the following is not a condition necessary to exclude a short-term
obligation from current liabilities?
a.intend to refinance the obligation on a long-term basis
b.obligation must be due with one year
c.demonstrate the ability to complete the refinancing
d.subsequently refinance the obligation on a long-term basis
13) during 2013, stout inc. had the following activities related to its financial
operations:
the amount of net cash used in financing activities to appear in stout’s statement of cash
flows for 2013 should be
a.$1,790,000
b.$1,976,000
c.$2,336,000
d.$2,348,000
14) willy world began using dollar-value lifo for costing its inventory two years ago.
the ending inventory for the past two years in end-of-year dollars was $120,000 and
$180,000 and the year-end price indices were 1.0 and 1.2, respectively. assuming the
current inventory at end of year prices equals $258,000 and the index for the current
year is 1.25, what is the ending inventory using dollar-value lifo?
a.$213,000
b.$223,680
c.$228,000
d.$226,500
15) assuming that the ideal measure of short-term receivables in the balance sheet is the
discounted value of the cash to be received in the future, failure to follow this practice
usually does not make the balance sheet misleading because
a.most short-term receivables are not interest-bearing
b.the allowance for uncollectible accounts includes a discount element
c.the amount of the discount is not material
d.most receivables can be sold to a bank or factor
16) plank co. uses the retail inventory method. the following information is available
for the current year.
if the ending inventory is to be valued at approximately lifo cost, the calculation of the
cost ratio should be based on cost and retail of
a.$756,000 and $1,104,000
b.$756,000 and $1,064,000
c.$600,000 and $820,000
d.$600,000 and $860,000
17) lynch printing company determines that a printing press used in its operations has
suffered a permanent impairment in value because of technological changes. an entry to
record the impairment should
a.recognize an extraordinary loss for the period
b.include a credit to the equipment accumulated depreciation account
c.include a credit to the equipment account
d.not be made if the equipment is still being used