1. A three-year operating lease gives three months free rent, rent of $5,000 for the next 9 months and then requires $6,000 a month for rent for the remaining 24 months. What is the rent expense in the first month of the lease (to the nearest whole dollar)?:*

A) $5,727

B) $5,250

C) $6,000

D) $0

E) $5,500

2. Which of the following is an example of a permanent tax difference?:*

A) Stock-based compensation expense

B) Advance rental receipts

C) Depreciation of property

D) Product warranty liabilities

E) Interest received on municipal bonds

3. Specialty Inc. has a deferred tax asset related to a net operating loss in a prior year that they carried forward. They have a reserve for the full amount of the tax asset because they have had going concern problems and continued losses. However, a new product has turned the business around and in the current year, they made a profit and will be able to start using the net operating loss carryforward. The journal entry to reverse the reserve will include a:*

A) Debit to Tax Expense

B) Credit to Loss on Deferred Tax Asset

C) Debit to Reserve for Deferred Tax Asset

D) Credit to Reserve for Deferred Tax Asset

E) Credit to Gain on Deferred Tax Asset

4. Briston Inc. had Net Income of $45,000 in the current year and 30,000 shares of common stock outstanding on Jan 1st, the start of the current year. Briston Inc. repurchased 3,000 shares of their own common stock on Nov 1st of the current year. They have 2,000 shares of $100, 4%, non-cumulative preferred stock issued and outstanding and no dividends were declared this year. What is basic earnings per share (rounded to the nearest cent)?:*

A) $1.25

B) $1.53

C) $1.50

D) $1.58

E) $1.30

5. Dilutive earnings per share is basic earnings per share adjusted by several items that may include:*

A) adding potentially dilutive shares of contingently issuable shares to the denominator.

B) adding all shares of contingently issuable shares to the denominator.

C) subtracting after-tax interest on dilutive convertible bonds from the numerator.

D) adding after-tax interest on dilutive convertible bonds to the denominator.

E) adding all shares of preferred stock outstanding.

6. Brave Inc.'s pension plan reports a Benefit Pension Obligation of $4,500,000 and Pension Plan Assets of $3,500,000. Which of these is true about the pension plan?:*

A) Brave Inc.'s pension is over funded.

B) Brave Inc.'s pension expense for next year will be zero.

C) Brave Inc.'s interest cost for next year will be the discount rate times $4,500,000.

D) Brave Inc.'s expected return on assets will be the discount rate times $3,500,000.

7. Which of these words is associated with requiring a contingent liability to be disclosed but not accrued?:*

A) possible

B) remote

C) implausible

D) known

E) unlikely

8. Which of these is a change in accounting principle?:*

A) Initial adoption of a new acceptable accounting method

B) Change from direct method write off of bad debts to sales method for estimating bad debts

C) Change from mid-year convention to using actual dates for partial year depreciation

D) Change from LIFO to FIFO for inventory costing

E) Change life of an asset from six years to four years

9. Which of these is an instance of a change in accounting estimate?:*

A) Change from straight line to effective interest method for amortizing discount on Bonds Payable

B) Change from direct method write off of bad debts to sales method for estimating bad debts

C) Change in accrual for warranty costs to reflect higher than expected claims

D) Change from FIFO to LIFO for inventory costing

E) Change from straight-line method for depreciation to double-declining balance

10. If a purchase of inventory on credit for goods already received is not recorded at year-end, in error, what is the impact of this error on the financial statements?:*

A) Liabilities are overstated

B) Liabilities are understated

C) Cash is overstated

D) Cost of Goods Sold is overstated

E) Equity is overstated