Question 1

Which of the following statements about dollar-value LIFO is not true? Dollar-value LIFO

• assumes that inventory is a quantity of value rather than a quantity of physical goods

• measures increases and decreases in inventory in dollar amounts rather than in the number of objects

• eliminates the need for taking a physical inventory
• None of the above is false

Question 2

BOZ Co. has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory follows:

Estimated selling price	$508,000
Estimated cost of disposal	20,000
Normal profit margin	60,000
Current replacement cost	455,000

BOZ records losses that result from applying the lower-of-cost-or-market (LCM) rule. At its year-end, what should be the net carrying value of BOZ?s inventory?

• $500,000

• $488,000

• $455,000

• None of the above is correct

Question 3

The amount of interest to capitalize during the construction of a qualified asset is the

• lower of specific interest or avoidable interest

• lower of avoidable or actual interest

• lower of specific or actual interest

• higher of specific or avoidable interest

Question 4

Which of the following has no effect on comprehensive income?

• Unrealized gains and losses on held-to-maturity investments

• Unrealized gains and losses on available-for-sale investments

• Unrealized gains and losses on trading securities

• Realized gains and losses on available-for-sale securities that were held in previous periods

Question 5

Given the following information about Ultra Inc.?s portfolio of investments:

	Cost		Fair Value 12/31/04		2005 Purchases		2005 Sales		Fair Value 12/31/05
Held-to-maturity securities
Security J					$128,000				$130,000
Trading equity securities
Security K	$700,000		$725,000						705,000
Security A	100,000		110,000				$150,000
Available-for-sale equity securities
Security S	400,000		380,000				500,000
Security L	100,000		95,000						102,000

Assume that Security J is a debt security that was purchased at a premium. The premium amortization for 2005 was $3,000. All declines in fair value are considered temporary.

What is the carrying amount of Security J at December 31, 2005?

• $125,000

• $128,000

• $130,000

• $131,000

Question 6

The journal entry in the seller?s books to record an account deemed uncollectible in a factoring agreement with recourse would include a

• debit to Bad Debt Expense

• debit to Allowance for Uncollectible Accounts

• debit to Accounts Receivable

• None of the above

Question 7

The journal entry in the buyer?s books to record the honoring by the seller of an account deemed uncollectible in a factoring

agreement with recourse would include a

• debit to Bad Debt Expense

• debit to Allowance for Uncollectible Accounts

• debit to Cash

• debit to Loss on Factoring Agreement

Question 8

Which of the following would not be classified as an operating asset (PP&E)?

• Construction in progress

• Land held as an investment

• Land improvements

• Coal mine

Question 9

Bogus Co. exchanged Building 42 which has an appraised value of $4,800,000, a cost of $7,590,000, and accumulated depreciation of $3,600,000 for Building X belonging to Good Co. Building X has an appraised value of $4,512,000, a cost of $9,030,000, and accumulated depreciation of $4,752,000. The correct amount of cash was also paid. Assume depreciation has already been updated.

How much gain or loss did Good record, assuming no commercial substance?

• 0 gain/loss

• 234,000 gain

• 48,600 gain

• None of the above

Question 10

Which of the following is not an equity security?

• Common stock

• Warrants

• Call Options

• Redeemable preferred stock with a mandatory redemption period

Question 11

Interest received from available-for-sale debt securities should be reported as

• an unrealized holding gain?income

• an unrealized holding gain?equity

• other revenue on the income statement

• a reclassification adjustment on the statement of comprehensive income

Question 12

Information regarding Stone Co.?s portfolio of available-for-sale securities is as follows:

Aggregate cost as of 12/31/05	$170,000
Unrealized gains as of 12/31/05	4,000
Unrealized losses as of 12/31/05	26,000
Net realized gains during 2005	30,000

At December 31, 2004, Stone reported an unrealized holding loss from available-for-sale securities of $1,500 on the statement of stockholders? equity. What amount should Stone report on its December 31, 2005, balance sheet as an unrealized holding loss?

• $26,000

• $22,000

• $20,500

• None of the above

Question 13

Bubba Co.?s beginning inventory at January 1 was understated by $100,000, and its ending inventory was overstated by

$120,000. Bubba?s cost of sales for the year would be

• understated by $100,000

• overstated by $100,000

• understated by $220,000

• overstated by $220,000

Question 14

The Bubba Company uses the gross profit method to estimate inventory and cost of goods sold for interim reporting purposes. The average gross profit rate is 25 percent of sales. The following data relate to the month of May:

Inventory cost, May 1	$30,000
Purchases during the month at cost	80,400
Sales	100,800
Sales returns	3,600

Using the data above, what is the estimated ending inventory at May 31?

• $ 24,300

$25,200

• $34,800
• $37,500

Question 15

The Big Bubba Company began operations on January 1, 2004 and used the FIFO method to assign cost to its inventory. Management is considering a change to the LIFO method. Given the following information: a change to the LIFO method in 2005 would result in net income for 2005 of

Final inventory	2004		2005
FIFO	$24,000		$27,000
LIFO	20,000		21,000
Net income (per FIFO)	$12,000		$17,000

Based on the above information, a change to the LIFO method in 2005 would result in net income for 2005 of

• $11,000

• $15,000

• $17,000

• $23,000

Question 16

Given the following information for Small Bubba Co. for 2015:

Merchandise purchased for resale	$600,000
Freight-in	20,000
Freight-out	10,000
Purchase returns	4,000

The company?s 2015 inventoriable cost is

$600,000

• $606,000
• $616,000
• $626,000

Question 17

. J & J exchanged an asset with a book value of $10,000 and paid $1,000 in cash for a another asset from W & W Company with a book value of $10,300. The fair value of the given asset was $9,500 and the new asset was $10,500. Calculate the gain or loss to be recognized by J & J. Assume commercial substance.

• $10,500

• $9,500

• $11,500

• None of the above

Question 18

Which of the following statements concerning exchanges of like kind assets without commercial substance is not true?

• Always recognize losses

• Gains are not recognized if cash is paid

• Losses are recognized if cash is paid

• Gains are never recognized

Question 19

J & J trades an asset that had a book value of $18,000 for another asset with a fair market value of $20,000. Assume lack of commercial substance. J & J pays $500 in cash. J & J?s asset has a fair market value of $19,500. J & J would record the cost of the new asset at?

• $21,500

• $18,500

• $19,500

• $20,000

Question 20

A loss on the sale of an operating asset results if the proceeds from the sale

• are less than the book value of the asset

• exceed the book value of the asset

• are less than the fair market value of the asset

• exceed the fair market value of the asset

Question 21

During periods of inflation which of the following will yield the highest cost of sales

• average cost

• LIFO

• FIFO

• Gross profit method

Question 22

Which of the following is considered an advantage to using he first-in, first-out method

• higher net income with inflation

• lower income tax with inflation

• higher cash flows from operation with inflation

• a closer match between earnings and current cost income

Question 23

Which of the following will not be a result of a LIFO liquidation?

• The value of ending inventory will decline

Net income will be higher

• The ending inventory will exceed beginning inventory
• None of the above would result from LIFO liquidation

Question 24

Which statement about dollar-value LIFO is false?

• it assumes that inventory is a quantity of value rather than a quantity of physical goods

• it measures increases and decreases in inventory in dollar amounts rather than in the number of objects

• it helps companies avoid some of the problems associated with traditional LIFO

• none of the statements are false

Question 25

J & J began using the dollar-value LIFO method in 2015 when its ending inventory was recorded at $50,000. The 2016 ending inventory at year-end prices was $54,000. Calculate the increase or decrease of inventory for 2016 in real terms assuming 106 percent is the price index

• $7,240 increase

• $3,773 increase

• $943 increase

• $1,000 increase

Question 26

Regarding debt securities, amortized cost is the

• acquisition cost adjusted for the amortization of discounts or premiums

• acquisition cost adjusted for the changes in fair value

• fair value adjusted for the amortization of discounts or premiums

• maturity value adjusted for the amortization of discounts or premiums

Question 27

The journal entry to record an increase in the fair value of an available-for-sale security would include a debit to

• Adjustment?Available-for-Sale Securities and a credit to Unrealized Holding Gain?Equity

• Unrealized Holding Gain?Equity and a credit to Adjustment?Available-for-Sale Securities

• Adjustment?Available-for-Sale Securities and a credit to Unrealized Holding Gain?Income

• Unrealized Holding Gain?Income and a credit to Adjustment?Available-for-Sale Securities

Question 28

On May 1, 2015, J & J purchased bonds issued by W & W Company. The bonds have a face value of $100,000, pay interest annually at 6 percent on November 1and May 1, and mature in five years from the date of purchase. J & J purchased the bonds for $106,000. J & J?s accounting fiscal year ends on December 31.Assume the J & J uses the straight-line method of amortization and the bonds are classified as Held to Maturity. What is the amount of interest income reported on the 2015 income statement?

• $6000

• $3000

• $3,200

• $2,400

Question 29

On May 1, 2015, J & J purchased bonds issued by W & W Company. The bonds have a face value of $100,000, pay interest annually at 6 percent on November 1and May 1, and mature in five years from the date of purchase. J & J purchased the bonds for $106,000. J & J?s accounting fiscal year ends on December 31.Assume the J & J uses the straight-line method of amortization and the bonds are classified as Held to Maturity. What is the amortized cost at December 31, 2015?

$100,000 $105,200 $104,800 106800

Question 30

On May 1, 2015, J & J purchased bonds issued by W & W Company. The bonds have a face value of $100,000, pay interest annually at 6 percent on November 1and May 1, and mature in five years from the date of purchase. J & J purchased the bonds for $106,000. J & J?s accounting fiscal year ends on December 31.Assume the J & J uses the straight-line method of amortization and the bonds are classified as Held to Maturity. What is the amortized cost at December 31, 2015?

• $100,000

• $105,200

• $104,800

• $106,000

Question 1 Which of the following statements about dollar-value LIFO is not true? Dollar-value LIFO a) assumes that inventory is a quantity of value rather than a quantity of physical goods b) measures increases and decreases in inventory in dollar amounts rather than in the number of objects c) eliminates the need for taking a physical inventory d) None of the above is false Question 2 BOZ Co. has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory follows: Estimated selling price $508,000 Estimated cost of disposal 20,000 Normal profit margin 60,000 Current replacement cost 455,000 BOZ records losses that result from applying the lower-of-cost-or-market (LCM) rule. At its year-end, what should be the net carrying value of BOZ's inventory? a) b) c) d) $500,000 $488,000 $455,000 None of the above is correct Question 3 The amount of interest to capitalize during the construction of a qualified asset is the a) lower of specific interest or avoidable interest b) lower of avoidable or actual interest c) lower of specific or actual interest d) higher of specific or avoidable interest Question 4 Which of the following has no effect on comprehensive income? a) Unrealized gains and losses on held-to-maturity investments b) Unrealized gains and losses on available-for-sale investments c) Unrealized gains and losses on trading securities d) Realized gains and losses on available-for-sale securities that were held in previous periods Question 5 Given the following information about Ultra Inc.'s portfolio of investments: Fair Value 2005 Cost 12/31/04 Purchases Held-to-maturity securities Security J $128,000 Trading equity securities Security K Security A $700,000 100,000 $725,000 110,000 Available-for-sale equity securities Security S Security L 400,000 100,000 380,000 95,000 2005 Sales $130,000 705,000 $150,000 500,000 Assume that Security J is a debt security that was purchased at a premium. The premium amortization for 2005 was $3,000. All declines in fair value are considered temporary. What is the carrying amount of Security J at December 31, 2005? a) b) c) d) Fair Value 12/31/05 $125,000 $128,000 $130,000 $131,000 Question 6 The journal entry in the seller's books to record an account deemed uncollectible in a factoring agreement with recourse would include a a) debit to Bad Debt Expense b) debit to Allowance for Uncollectible Accounts c) debit to Accounts Receivable d) None of the above Question 7 The journal entry in the buyer's books to record the honoring by the seller of an account deemed uncollectible in a factoring agreement with recourse would include a 102,000 a) b) c) d) debit to Bad Debt Expense debit to Allowance for Uncollectible Accounts debit to Cash debit to Loss on Factoring Agreement Question 8 Which of the following would not be classified as an operating asset (PP&E)? a) Construction in progress b) Land held as an investment c) Land improvements d) Coal mine Question 9 Bogus Co. exchanged Building 42 which has an appraised value of $4,800,000, a cost of $7,590,000, and accumulated depreciation of $3,600,000 for Building X belonging to Good Co. Building X has an appraised value of $4,512,000, a cost of $9,030,000, and accumulated depreciation of $4,752,000. The correct amount of cash was also paid. Assume depreciation has already been updated. How much gain or loss did Good record, assuming no commercial substance? a) 0 gain/loss b) 234,000 gain c) 48,600 gain d) None of the above Question 10 Which of the following is not an equity security? a) Common stock b) Warrants c) Call Options d) Redeemable preferred stock with a mandatory redemption period Question 11 Interest received from available-for-sale debt securities should be reported as a) b) c) d) an unrealized holding gainincome an unrealized holding gainequity other revenue on the income statement a reclassification adjustment on the statement of comprehensive income Question 12 Information regarding Stone Co.'s portfolio of available-for-sale securities is as follows: Aggregate cost as of 12/31/05 $170,000 Unrealized gains as of 12/31/05 4,000 Unrealized losses as of 12/31/05 26,000 Net realized gains during 2005 30,000 At December 31, 2004, Stone reported an unrealized holding loss from available-for-sale securities of $1,500 on the statement of stockholders' equity. What amount should Stone report on its December 31, 2005, balance sheet as an unrealized holding loss? a) b) c) d) $26,000 $22,000 $20,500 None of the above Question 13 Bubba Co.'s beginning inventory at January 1 was understated by $100,000, and its ending inventory was overstated by $120,000. Bubba's cost of sales for the year would be a) b) c) d) understated by $100,000 overstated by $100,000 understated by $220,000 overstated by $220,000 Question 14 The Bubba Company uses the gross profit method to estimate inventory and cost of goods sold for interim reporting purposes. The average gross profit rate is 25 percent of sales. The following data relate to the month of May: Inventory cost, May 1 $30,000 Purchases during the month at cost 80,400 Sales 100,800 Sales returns 3,600 Using the data above, what is the estimated ending inventory at May 31? a) b) b) c) d) $ 24,300 $25,200 $34,800 $37,500 Question 15 The Big Bubba Company began operations on January 1, 2004 and used the FIFO method to assign cost to its inventory. Management is considering a change to the LIFO method. Given the following information: a change to the LIFO method in 2005 would result in net income for 2005 of Final inventory FIFO LIFO Net income (per FIFO) 2004 $24,000 20,000 $12,000 2005 $27,000 21,000 $17,000 Based on the above information, a change to the LIFO method in 2005 would result in net income for 2005 of a) b) c) d) $11,000 $15,000 $17,000 $23,000 Question 16 Given the following information for Small Bubba Co. for 2015: Merchandise purchased for resale $600,000 Freight-in 20,000 Freight-out 10,000 Purchase returns 4,000 The company's 2015 inventoriable cost is a) a) b) c) d) $600,000 $606,000 $616,000 $626,000 Question 17 . J & J exchanged an asset with a book value of $10,000 and paid $1,000 in cash for a another asset from W & W Company with a book value of $10,300. The fair value of the given asset was $9,500 and the new asset was $10,500. Calculate the gain or loss to be recognized by J & J. Assume commercial substance. a) $10,500 b) $9,500 c) $11,500 d) None of the above Question 18 Which of the following statements concerning exchanges of like kind assets without commercial substance is not true? a) Always recognize losses b) Gains are not recognized if cash is paid c) Losses are recognized if cash is paid d) Gains are never recognized Question 19 J & J trades an asset that had a book value of $18,000 for another asset with a fair market value of $20,000. Assume lack of commercial substance. J & J pays $500 in cash. J & J's asset has a fair market value of $19,500. J & J would record the cost of the new asset at? a) $21,500 b) $18,500 c) $19,500 d) $20,000 Question 20 A loss on the sale of an operating asset results if the proceeds from the sale a) are less than the book value of the asset b) exceed the book value of the asset c) are less than the fair market value of the asset d) exceed the fair market value of the asset Question 21 During periods of inflation which of the following will yield the highest cost of sales a) average cost b) LIFO c) FIFO d) Gross profit method Question 22 Which of the following is considered an advantage to using he first-in, first-out method a) higher net income with inflation b) lower income tax with inflation c) higher cash flows from operation with inflation d) a closer match between earnings and current cost income Question 23 Which of the following will not be a result of a LIFO liquidation? a) The value of ending inventory will decline b) b) Net income will be higher c) The ending inventory will exceed beginning inventory d) None of the above would result from LIFO liquidation Question 24 Which statement about dollar-value LIFO is false? a) it assumes that inventory is a quantity of value rather than a quantity of physical goods b) it measures increases and decreases in inventory in dollar amounts rather than in the number of objects c) it helps companies avoid some of the problems associated with traditional LIFO d) none of the statements are false Question 25 J & J began using the dollar-value LIFO method in 2015 when its ending inventory was recorded at $50,000. The 2016 ending inventory at year-end prices was $54,000. Calculate the increase or decrease of inventory for 2016 in real terms assuming 106 percent is the price index a) $7,240 increase b) $3,773 increase c) $943 increase d) $1,000 increase Question 26 Regarding debt securities, amortized cost is the a) acquisition cost adjusted for the amortization of discounts or premiums b) acquisition cost adjusted for the changes in fair value c) fair value adjusted for the amortization of discounts or premiums d) maturity value adjusted for the amortization of discounts or premiums Question 27 The journal entry to record an increase in the fair value of an available-for-sale security would include a debit to a) AdjustmentAvailable-for-Sale Securities and a credit to Unrealized Holding Gain Equity b) Unrealized Holding GainEquity and a credit to AdjustmentAvailable-for-Sale Securities c) AdjustmentAvailable-for-Sale Securities and a credit to Unrealized Holding Gain Income d) Unrealized Holding GainIncome and a credit to AdjustmentAvailable-for-Sale Securities Question 28 On May 1, 2015, J & J purchased bonds issued by W & W Company. The bonds have a face value of $100,000, pay interest annually at 6 percent on November 1and May 1, and mature in five years from the date of purchase. J & J purchased the bonds for $106,000. J & J's accounting fiscal year ends on December 31.Assume the J & J uses the straight-line method of amortization and the bonds are classified as Held to Maturity. What is the amount of interest income reported on the 2015 income statement? a) $6000 b) $3000 c) $3,200 d) $2,400 Question 29 On May 1, 2015, J & J purchased bonds issued by W & W Company. The bonds have a face value of $100,000, pay interest annually at 6 percent on November 1and May 1, and mature in five years from the date of purchase. J & J purchased the bonds for $106,000. J & J's accounting fiscal year ends on December 31.Assume the J & J uses the straight-line method of amortization and the bonds are classified as Held to Maturity. What is the amortized cost at December 31, 2015? a) b) c) d) $100,000 $105,200 $104,800 106800 Question 30 On May 1, 2015, J & J purchased bonds issued by W & W Company. The bonds have a face value of $100,000, pay interest annually at 6 percent on November 1and May 1, and mature in five years from the date of purchase. J & J purchased the bonds for $106,000. J & J's accounting fiscal year ends on December 31.Assume the J & J uses the straight-line method of amortization and the bonds are classified as Held to Maturity. What is the amortized cost at December 31, 2015? a) $100,000 b) $105,200 c) $104,800 d) $106,000