Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Theoretically, which of the following costs incurred in connection with a machine purchased for use in a company's manufacturing operations would be capitalized? Insurance

1. Theoretically, which of the following costs incurred in connection with a machine purchased for use in a company's manufacturing operations would be capitalized? Insurance on machine while in transit Testing and preparation of machine for use A. Yes Yes B. Yes No C. No Yes D. No No 2. When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be A. Added to the cost of the land B. Subtracted from the cost of the land C. Expensed D. None of the above 3. During 2005, Burr Co. had the following transactions pertaining to its new office building: Purchase price of land $ 60,000 Legal fees for contracts to purchase land 2,000 Architects' fees 8,000 Demolition of old building on site 5,000 Sale of scrap from old building 3,000 Construction cost of new building (fully completed) 350,000 In Burr's December 31, 2005 balance sheet, what amounts should be reported as the cost of land and cost of building? Land Building A. $60,000 $360,000 B. $62,000 $360,000 C. $64,000 $358,000 D. $65,000 $362,000 4. For 2011, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2010. During 2011, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off Rahal's accounts receivable at December 31, 2011, are: A. $90,500. B. $88,160. C. $82,500. D. $80,160. 5. On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts.What is the correct entry for Flores on December 5, assuming the correct payment was received on that date? a. Cash 8,000 Accounts Receivable 7,840 Discounts revenue 160 b. Cash 8,000 Accounts Receivable 7,840 Discounts revenue 160 c. Cash 8,150 Accounts Receivable 8,000 Interest revenue 160 d. Cash 8,000 Accounts Receivable 8,000 6. On September 1, 2005, Bertz, Inc. exchanged a delivery truck for a parcel of land. Bertz bought this truck in 2003 for $10,000. At September 1, 2005, the truck had a book value of $6,500 and a fair market value of $5,000. Bertz gave $6,000 in cash in addition to the truck as part of this transaction. It is expected that the cash flows from the assets will be significantly different. The previous owner of the land had listed the land for sale at $12,000. At what amount should Bertz record the land? A. $11,000 B. $11,500 C $12,000 D. $12,500 7. Caravan Corporation owned a warehouse located in the path of a proposed highway. Caravan bought the land in 1962 for $10,000. That same year, it built the warehouse at a cost of $50,000. In 2005, after prolonged litigation, the state exercised its right of eminent domain and condemned the property, awarding Caravan $200,000. Depreciation accumulated to the date of the award was $45,000. On its 2005 federal income tax return, Caravan elected not to recognize the gain since replacement property was bought for $225,000. For income statement purposes, Caravan should recognize a gain in 2005 of A. 0 B. $160,000 C. $185,000 D. $200,000 8. Crowder Company acquired a tract of land containing an extractable natural resource. Crowder is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 5,000,000 tons, and that the land will have a value of $1,000,000 after restoration. Relevant cost information follows: Land $9,000,000 Estimated restoration costs 1,500,000 If Crowder maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material? A. $2.10 B. $1.90 C. $1.80 D. $1.60 9. In October 2005 Ewing Company exchanged an old packaging machine, which cost $120,000 and was 50% depreciated, for a dissimilar used machine and paid a cash difference of $16,000. The market value of the old packaging machine was determined to be $70,000. The two machines are expected to have significantly different cash flows. For the year ended December 31, 2005, what amount of gain or loss should Ewing recognize on this exchange? A. $0 B. $6,000 loss C. $10,000 loss D. $10,000 gain 10. On January 1, 2005, Grade Company paid $300,000 for 20,000 shares of Medium Companys common stock which represents a 15% investment in Medium. Grade does not have the ability to exercise significant influence over Medium. Medium declared and paid a dividend of $1 a share to its stockholders during 2005. Medium reported net income of $260,000 for the year ended December 31, 2005, and had a market value of $300,000 at December 31, 2005. The balance in Grades balance sheet account Investment in Medium Company at December 31, 2005, should be A. $280,000 B. $300,000 C. $319,000 D. $339,000 11. On December 29, 2005, BJ Co. sold a marketable equity security that had been purchased on January 4, 2004. BJ owned no other marketable equity security. An unrealized loss was reported as components of Other comprehensive income and Accumulated other comprehensive income in the 2004 balance sheet. A realized gain was reported in the 2005 income statement. Was the marketable equity security classified as a trading security and did its 2004 market price decline exceed its 2005 market price recovery? Trading 2004 market price decline exceeded 2005 market price recovery A. Yes Yes B. Yes No C. No Yes D. No No 12. In 2005, Wallace Corporation purchased marketable securities, and at 12/31/05, had the following marketable equity securities: Cost Market Unrealized gain (loss) In trading portfolio: Security X $80,000 $50,000 $(30,000) Security Y 15,000 20,000 5,000 Totals $95,000 $70,000 $(25,000) In available-for-sale portfolio: Security Q $60,000 $70,000 $10,000 Security R 90,000 45,000 (45,000) Totals $150,000 $115,000 $(35,000) At December 31, 2005, what amounts should be charged to Net income Other comprehensive income A. $0 $60,000 B. $25,000 $0 C. $25,000 $35,000 D. $60,000 $0 13. Dey Corp. began operations in 2005. An analysis of Deys marketable securities portfolio acquired in 2005 shows the following totals at December 31, 2005, for available-for-sale and held-to-maturity securities: Available-for-sale securities Held-to-maturity securities Aggregate cost $45,000 $65,000 Aggregate market value 39,000 57,000 What amount of unrealized loss should Dey report in its December 31, 2005 balance sheet? A. $14,000 B. $9,000 C. $7,000 D. $6,000 14. For marketable debt securities included in a held-to-maturity portfolio, which of the following amounts should be included in the periods net income? I. Unrealized temporary losses during the period. II. Gains on securities sold during the period. III. Permanent decline in value. A. III only B. II only C. II and III D. I, II and III 15. From a theoretical viewpoint, which of the following costs would be considered inventoriable? Freight-In Warehousing A. No No B. No Yes C. Yes No D. Yes Yes 16. The following data appeared in the accounting records of a retail store for the year ended December 31, 2004: Sales $150,000 Purchases 70,000 Inventories: January 1 35,000 December 31 50,000 Sales commissions 5,000 How much was the gross margin? A. $65,000 B. $75,000 C. $90,000 D. $95,000 17. The following data were available from Mith Co.'s records on December 31, 2005: Finished goods inventory, 1/1/05 $120,000 Finished goods inventory, 12/31/05 110,000 Cost of goods manufactured 520,000 Loss on sale of plant equipment 50,000 The cost of goods sold for 2005 was A. $510,000 B. $520,000 C. $530,000 D. $580,000 18. Lin Co. sells its merchandise at a gross profit of 30%. The following figures are among those pertaining to Lin's operations for the 6 months ended June 30, 2005: Sales $200,000 Beginning inventory 50,000 Purchases 130,000 On June 30, 2005, all of Lin's inventory was destroyed by fire. The estimated cost of this destroyed inventory was A. $120,000 B. $70,000 C. $40,000 D. $20,000 19. On December 31, 2004, Kern Company adopted the dollar-value LIFO inventory method. All of Kerns inventories constitute a single pool. The inventory on December 31, 2004, using the dollar-value LIFO inventory method was $600,000. Inventory data for 2005 are as follows: 2/31/05 inventory at year-end prices $780,000 Relevant price index at year-end (base year 2004) 120 Under the dollar-value LIFO inventory method, Kerns inventory at December 31, 2005, would be A. $650,000 B. $655,000 C. $660,000 D. $720,000 20. In preparing its bank reconciliation for the month of March 2006, Derby Company has available the following information: Balance per bank statement, 3/31/06 $36,050 Deposit in transit, 3/31/06 6,250 Outstanding checks, 3/31/06 5,750 Credit erroneously recorded by bank in Derby's account, 3/12/06 250 Bank service charges for March 50 What should be the correct balance of cash at March 31, 2006? A. $35,250 B. $36,250 C. $36,300 D. $36,550 21. On March 31, 2011, Vale Co. had an unadjusted credit balance of $1,000 in its allowance for uncollectible accounts. An analysis of Vale's trade accounts receivable at that date revealed the following: Age Amount Estimated uncollectible 030 days $60,000 5% 3160 days 4,000 10% Over 60 days 2,000 $1,400 What amount should Vale report as allowance for uncollectible accounts in its March 31, 2011 balance sheet? A. $4,800 B. $4,000 C. $3,800 D. $3,000 22. On September 1, 2005, a company borrowed cash and signed a 1-year interest-bearing note on which both the principal and interest are payable on September 1, 2006. How will the note payable and the related interest be classified in the December 31, 2005 balance sheet? Note payable Accrued interest A. Current liability Noncurrent liability B. Noncurrent liability Current liability C. Current liability Current liability D. Noncurrent liability No entry 23. A loss contingency for which the amount of loss can be reasonably estimated should be accrued when the occurrence of the loss is Reasonably possible Remote A. Yes No B. Yes Yes C. No No D. No Yes 24. Northwest Fur Co. started 2011 with $94,000 of merchandise inventory on hand. During 2011, $400,000 in merchandise was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Merchandise with an invoice amount of $5,000 was returned for credit. Cost of goods sold for the year was $380,000. Northwest uses a perpetual inventory system. What is ending inventory assuming Northwest uses the gross method to record purchases? A. $112,490. B. $112,550. C. $116,500. D. $120,300. 25. Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet? a. Accounts payable. b. Inventory. c. Equipment. d. Not on the balance sheet. 26. In a period when costs are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of: A. Weighted average. B. LIFO. C. Moving average. D. FIFO. 27. Bond Company adopted the dollar-value LIFO inventory method on January 1, 2011. In applying the LIFO method, Bond uses internal cost indexes and the multiple-pools approach. The following data were available for Inventory Pool No. 3 for the two years following the adoption of LIFO: Ending Inventory At Current At Year Cost Year Cost End Index 1/1/11 $300,000 $300,000 1.00 12/31/11 345,600 320,000 1.08 12/31/12 420,000 350,000 1.20 Under the dollar-value LIFO method the inventory at December 31, 2012, should be A. $357,600. B. $350,000. C. $351,600. D. None of the above 28. In applying LCM, market cannot be: A. Less than net realizable value. B. Greater than the normal profit. C. Less than the normal profit margin. D. Greater than net realizable value. 29. On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available: Sales, January 1 through July 8 $700,000 Inventory, January 1 130,000 Purchase, January 1, through July 8 610,000 Gross profit ratio 30% What is the estimated inventory on July 8 immediately prior to the fire? A. $192,000 B. $490,000 C. $510,000 D. $250,000 30. When computing the cost-to-retail percentage for the conventional retail method, included in the denominator are: A. Net markups and net markdowns. B. Neither net markups nor net markdowns. C. Net markups, but not net markdowns. D. Net markdowns, but not net markups. 31. Cloverdale, Inc. uses the conventional retail inventory method to account for inventory. The following information relates to current year's operations: Cost Retail Beginning inventory and purchases $313,500 540,000 Net markups 30,000 Net markdowns 20,000 Net sales 480,000 What amount should be reported as cost of goods sold for the year? A. $273,600. B. $272,861. C. $275,000. D. None of the above. 32. The acquisition costs of property, plant, and equipment do not include: A. The ordinary and necessary costs to bring the asset to its desired condition and location for use. B. The net invoice price. C. Legal fees, delivery charges, installation, and any applicable sales tax. D. Maintenance costs during the first 30 days of use 33. Which of the following is not a current liability? A. Accounts payable. B. A note payable due in 2 years. C. Accrued interest payable. D. Sales tax payable. 34. Gain contingencies usually are recognized in a company's income statement when: A. Realized. B. The amount can be reasonably estimated. C. The gain is reasonably possible and the amount can be reasonable estimated. D. The gain is probable and the amount can be reasonably estimated. 35. In the current year, Hanna Company reported warranty expense of $190,000 and the warranty liability account increased by $20,000. What were warranty expenditures during the year? A. $190,000. B. $170,000. C. $210,000. D. $0. 36. On November 5, 2010, a Dunn Corp. truck was in an accident with an auto driven by Bell. Dunn received notice on January 12, 2011, of a lawsuit for $700,000 damages for personal injuries suffered by Bell. Dunn Corp.s counsel believes that it is probable that Bell will be awarded an estimated amount in the range between $200,000 and $450,000 and that $300,000 is a better estimate of potential liability than any other amount. Dunns accounting year ends on December 31, and the 2010 financial statements were issued on March 2, 2011. What amount of loss should Dunn accrue at December 31, 2010? A. $0 B. $200,000 C. $300,000 D. $450,000 37. When bonds are sold at a premium and the effective interest method is used, at each interest payment date, the interest expense: A. Remains constant. B. Is equal to the change in book value. C. Increases. D. Decreases 38. Which of the following is not a requirement for a qualified pension plan? A. It cannot discriminate in favor of highly paid employees. B. It must cover at least 80% of the employees. C. It must be funded in advance of retirement. D. Benefits must vest after a specified period of service, commonly five years. 39. Visor Co. maintains a defined benefit pension plan for its employees. The service cost component of Visors net periodic pension cost is measured using the A. Unfunded accumulated benefit obligation. B. Unfunded vested benefit obligation. C. Projected benefit obligation D. Expected return on plan assets. 40. Mars Inc. has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $7,200. The discount rate applied by the actuary was 8%. What was the beginning PBO? A. $90,000. B. $100,000. C. $107,200. D. $112,000. 41. When bonds are sold at a premium and the effective interest method is used, at each interest payment date, the interest expense: A. Remains constant. B. Is equal to the change in book value. C. Increases. D. Decreases. 42. When the interest payment dates are March 1 and September 1, and the bonds are issued on July 1, the amount of interest expense reported in the December 31 income statement for the year of issue would be for: A. Six months. B. Four months. C. Ten months. D. Twelve months. 43. Downing Company issues $3,000,000, 6%, 5-year bonds dated January 1, 2012 on January 1, 2012. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue? 2.50% 3.00% 5.00% 6.00% PV of a single sum for 5 periods 0.88385 0.86261 0.78353 0.74726 PV of a single sum for 10 periods 0.7812 0.74409 0.61391 0.55839 PV of an annuity for 5 periods 4.64583 4.57971 4.32948 4.21236 PV of an annuity for 10 periods 8.75206 8.5302 7.72173 7.36009 a. $3,000,000 b. $3,129,896 c. $3,131,285 d. $3,130,385 44. On January 2, 2012, a calendar-year corporation sold 8% bonds with a face value of $900,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $830,400 to yield 10%. Using the effective- interest method of computing interest, how much should be charged to interest expense in 2012? a. $72,000. b. $83,040. c. $83,316. d. $90,000. 45. Kraft, Inc. sponsors a defined-benefit pension plan. The following data relates to the operation of the plan for the year 2013. Service cost $ 250,000 Contributions to the plan 220,000 Actual return on plan assets 180,000 Projected benefit obligation (beginning of year) 2,400,000 Fair value of plan assets (beginning of year) 1,600,000 The expected return on plan assets and the settlement rate were both 10%. The amount of pension expense reported for 2013 is a. $250,000. b. $310,000. c. $330,000. d. $490,000. 46 Winter Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Winter's lawyer states that it is probable that Winter will lose the suit and be found liable for a judgment costing Winter anywhere from $1,600,000 to $8,000,000. However, the lawyer states that the most probable cost is $4,800,000. As a result of the above facts, Winter should accrue a. a loss contingency of $1,600,000 and disclose an additional contingency of up to $6,400,000. b. a loss contingency of $4,800,000 and disclose an additional contingency of up to $3,200,000. c. a loss contingency of $4,800,000 but not disclose any additional contingency. d. no loss contingency but disclose a contingency of $1,600,000 to $8,000,000. 47. During the year, Kiner Company made an entry to write off a $16,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $200,000 and the balance in the allowance account was $18,000. The net realizable value of accounts receivable after the write-off entry was a. $200,000. b. $198,000. c. $166,000. d. $182,000. 48. Which of the following is a current liability? a. Preferred dividends in arrears b. A dividend payable in the form of additional shares of stock c. A cash dividend payable to preferred stockholders d. All of these 49. 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 50. A company gives each of its 50 employees (assume they were all employed continuously through 2012 and 2013) 12 days of vacation a year if they are employed at the end of the year. The vacation accumulates and may be taken starting January 1 of the next year. The employees work 8 hours per day. In 2012, they made $21 per hour and in 2013 they made $24 per hour. During 2013, they took an average of 9 days of vacation each. The companys policy is to record the liability existing at the end of each year at the wage rate for that year. What amount of vacation liability would be reflected on the 2012 and 2013 balance sheets, respectively? a. $100,800; $140,400 b. $115,200; $144,000 c. $100,800; $144,000 d. $115,200; $140,400

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Carl Warren

13th Edition

1133607616, 978-1133607618

More Books

Students also viewed these Accounting questions

Question

2. Do not crowd the student. Do not get in the students face.

Answered: 1 week ago

Question

4. Similarity (representativeness).

Answered: 1 week ago