1) which of the following is an advantage for u.s. companies with international
operations to use lifo for u.s. purposes, as opposed to using fifo for foreign subsidiaries?
a.lifo creates paper profits
b.lifo generally approximates the physical flow of items
c.under lifo, inventory is less vulnerable to price declines
d.lifo eliminates balance sheet distortion
2) the carrying amount of an intangible is
a.the fair value of the asset at a balance sheet date
b.the asset’s acquisition cost less the total related amortization recorded to date
c.equal to the balance of the related accumulated amortization account
d.the assessed value of the asset for intangible tax purposes
3) henke co. uses the retail inventory method to estimate its inventory for interim
statement purposes. data relating to the computation of the inventory at july 31, 2012,
are as follows:
under the lower-of-cost-or-market method, henke’s estimated inventory at july 31, 2012
is
a.$132,000
b.$144,000
c.$156,000
d.$220,000
4) preston co., which has a taxable payroll of $700,000, is subject to futa tax of 6.2%
and a state contribution rate of 5.4%. however, because of stable employment
experience, the companys state rate has been reduced to 2%. what is the total amount of
federal and state unemployment tax for preston co.?
a.$81,900
b.$57,400
c.$28,000
d.$19,600
5) gutierrez company is constructing a building. construction began in 2012 and the
building was completed 12/31/12. gutierrez made payments to the construction
company of $2,000,000 on 7/1, $4,400,000 on 9/1, and $4,000,000 on 12/31. average
accumulated expenditures were
a.$2,100,000
b.$2,466,667
c.$6,400,000
d.$10,400,000
6) blue sky companys 12/31/12 balance sheet reports assets of $7,500,000 and liabilities
of $3,000,000. all of blue skys assets book values approximate their fair value, except
for land, which has a fair value that is $450,000 greater than its book value. on
12/31/12, horace wimp corporation paid $7,650,000 to acquire blue sky. what amount
of goodwill should horace wimp record as a result of this purchase?
a.$ -0-
b.$150,000
c.$2,700,000
d.$3,150,000
7) rushia company has an available-for-sale investment in the 10%, 10-year bonds of
pear co. the investments carrying value is $3,200,000 at december 31, 201 on january 9,
2013, rushia learns that pear co. has lost its primary manufacturing facility in an
uninsured fire. as a result, rushia determines that the investment is impaired and now
has a fair value of $2,300,000. in june, 2014, pear co. has succeeded in rebuilding its
manufacturing facility, and its prospects have improved as a result.
if rushia company determines that the fair value of the investment is now $3,900,000
and is using u.s. gaap for its external financial reporting, which of the following is true?
a.rushia is prohibited from recording the recovery in value of the impaired investment
b.rushia may record a recovery of $900,000
c.rushia may record a recovery of $700,000
d.rushia may record a recovery of $1,600,000
8) under which of the following conditions would material flood damage be considered
an extraordinary item for financial reporting purposes?
a.only if floods in the geographical area are unusual in nature and occur infrequently
b.only if the flood damage is material in amount and could have been reduced by
prudent management
c.under any circumstances as an extraordinary item
d.flood damage should never be classified as an extraordinary item
9) the presentation of long-term liabilities in the balance sheet should disclose
a.maturity dates
b.interest rates
c.conversion rights
d.all of the above
10) chase county owned an idle parcel of real estate consisting of land and a factory
building. chase gave title to this realty to patton co. as an incentive for patton to
establish manufacturing operations in the county. patton paid nothing for this realty,
which had a fair market value of $250,000 at the date of the grant. patton should record
this nonmonetary transaction as a
a.memo entry only
b.credit to contribution revenue for $250,000
c.credit to extraordinary income for $250,000
d.credit to donated capital for $250,000
11) a contingent liability
a.definitely exists as a liability but its amount and due date are indeterminable
b.is accrued even though not reasonably estimated
c.is not disclosed in the financial statements
d.is the result of a loss contingency
12) under u.s. gaap, impairment losses
a.can be reversed but only if the reversal is greater than the amount of the original
impairment
b.can be reversed but only if the reversal falls in a subsequent fiscal year of the
company’s operations
c.cannot be reversed for assets to be held and used
d.none of the above