1) when developing computer software to be sold, which of the following costs should
be capitalized?
a.designing
b.coding
c.testing
d.none of the above
2) of the following costs related to the development of natural resources, which one is
not a part of depletion cost?
a.acquisition cost of the natural resource deposit
b.exploration costs
c.tangible equipment costs associated with machinery used to extract the natural
resource
d.intangible development costs such as drilling costs, tunnels, and shafts
3) which of the following will not result in a temporary difference?
a.product warranty liabilities
b.advance rental receipts
c.installment sales
d.all of these will result in a temporary difference.
4) for each event listed below, select the appropriate category which describes the effect
of the event on a statement of cash flows:
a.cash provided/used by operating activities.
b.cash provided/used by investing activities.
c.cash provided/used by financing activities.
d.not a cash flow.
5) on may 1, 2012, payne co. issued $500,000 of 7% bonds at 103, which are due on
april 30, 2022. twenty detachable stock warrants entitling the holder to purchase for $40
one share of paynes common stock, $15 par value, were attached to each $1,000 bond.
the bonds without the warrants would sell at 96. on may 1, 2012, the fair value of
paynes common stock was $35 per share and of the warrants was $2.
on may 1, 2012, payne should credit paid-in capital from stock warrants for
a.$19,200
b.$20,000
c.$20,600
d.$35,000
6) proponents of historical cost ordinarily maintain that in comparison with all other
valuation alternatives for general purpose financial reporting, statements prepared using
historical costs are more
a.faithfully representative
b.relevant
c.indicative of the entity’s purchasing power
d.conservative
7) which of the following is a generally accepted method of determining the amount of
the adjustment to bad debt expense?
a.a percentage of sales adjusted for the balance in the allowance
b.a percentage of sales not adjusted for the balance in the allowance
c.a percentage of accounts receivable not adjusted for the balance in the allowance
d.an amount derived from aging accounts receivable and not adjusted for the balance in
the allowance
8) watson corporation prepared the following reconciliation for its first year of
operations:
the temporary difference will reverse evenly over the next two years at an enacted tax
rate of 40%. the enacted tax rate for 2013 is 28%. what amount should be reported in its
2013 income statement as the current portion of its provision for income taxes?
a.$280,000
b.$400,000
c.$392,000
d.$560,000
9) what is a possible danger if politics plays too big a role in accounting standard
setting?
a.accounting standards that are not truly generally accepted
b.individuals may influence the standards
c.user groups become active
d.the fasb delegates its authority to elected officials
10) stine co. is a retail store operating in a state with a 6% retail sales tax. the retailer
may keep 2% of the sales tax collected. stine co. records the sales tax in the sales
revenue account. the amount recorded in the sales revenue account during may was
$222,600.
the amount of sales taxes (to the nearest dollar) for may is
a.$13,089
b.$12,600
c.$13,356
d.$14,157
11) on january 1, 2010, knapp corporation acquired machinery at a cost of $500,000.
knapp adopted the double-declining balance method of depreciation for this machinery
and had been recording depreciation over an estimated useful life of ten years, with no
residual value. at the beginning of 2013, a decision was made to change to the
straight-line method of depreciation for the machinery. the depreciation expense for
2013 would be
a.$25,600
b.$36,572
c.$50,000
d.$71,428
12) which of the following is not considered a component of generally accepted
accounting principles?
a.fasb implementation guides
b.widely recognized industry practices
c.articles published in cpa journals
d.aicpa
13) quirk corporation issued a 100% stock dividend of its common stock which had a
par value of $10 before and after the dividend. at what amount should retained earnings
be capitalized for the additional shares issued?
a.there should be no capitalization of retained earnings
b.par value
c.fair value on the declaration date
d.fair value on the payment date
14) in accounting for internally generated intangible assets, u.s. gaap requires that
a.all costs, no matter how immaterial, be capitalized
b.only material costs be capitalized
c.planned costs be capitalized, while costs in excess of plan be expensed
d.all costs be expensed
15) heinz company began operations on january 1, 2012, and uses the fifo method in
costing its raw material inventory. management is contemplating a change to the lifo
method and is interested in determining what effect such a change will have on net
income. accordingly, the following information has been developed:
based on the above information, a change to the lifo method in 2013 would result in net
income for 2013 of
a.$1,070,000
b.$1,030,000
c.$ 954,000
d.$ 950,000
16) leeper corporation incurred the following costs in 2012:
what amount should leeper record as research & development expense in 2012?
a.$ 950,000
b.$ 940,000
c.$1,450,000
d.$1,640,000
17) jenkins corporation has $2,500,000 of short-term debt it expects to retire with
proceeds from the sale of 90,000 shares of common stock. if the stock is sold for $20
per share subsequent to the balance sheet date, but before the balance sheet is issued,
what amount of short-term debt could be excluded from current liabilities?
a.$1,800,000
b.$2,500,000
c.$700,000
d.$0
18) jeremy is in the process of purchasing a car. the list price of the car is $36,000. if
jeremy pays cash for the car, the dealer will reduce the price by 10%. otherwise, the
dealer will provide financing where jeremy must pay $7,706 at the end of each of the
next five years. compute the effective interest rate to the nearest percent that jeremy
would pay if he chooses to make the five annual payments?
a.5%
b.6%
c.7%
d.8%
19) perry corp. reports operating expenses in two categories: (1) selling and (2) general
and administrative. the adjusted trial balance at december 31, 2012, included the
following expense accounts:
accounting and legal fees$280,000
advertising240,000
freight-out150,000
interest120,000
loss on sale of long-term investments60,000
officers’ salaries360,000
rent for office space360,000
sales salaries and commissions220,000
one-half of the rented premises is occupied by the sales department.
how much of the expenses listed above should be included in perry’s selling expenses
for 2012?
a.$460,000
b.$610,000
c.$640,000
d.$790,000
20) rich corporation purchased a limited-life intangible asset for $270,000 on may 1,
2010. it has a useful life of 10 years. what total amount of amortization expense should
have been recorded on the intangible asset by december 31, 2012?
a.$ -0-.
b.$54,000
c.$72,000
d.$81,000