Professional Documents
Culture Documents
1. The Hasting Company began operations on January 1, 2003 and uses the FIFO
method in costing its raw material inventory. An analyst is wondering what net
income would have been if the company had consistently followed LIFO (instead
of FIFO) from the beginning, 1/1/2003. He has the following information available
to him:
What would net income have been in 2004 if Hastings had used LIFO since
1/1/2003?
$ 110,000
$ 150,000
$ 170,000
$ 230,000
4. On June 30, 2001, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par
value common stock for a patent owned by Gore Co.. The Stone stock was
acquired in 1999 at a cost of $80,000. At the exchange date, Stone common
stock had a fair value of $45 per share, and the patent had a net carrying value
of $160,000 on Gore's books. Cole should record the patent at:
$80,000
$90,000
$135,000
$160,000
Number of Stone Corp.
shares
x Fair value
Cost of patent to be
recorded
3,000
$45
$1,35,000
5. On June 30, 2001, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par
value common stock for a patent owned by Gore Co.. The Stone stock was
acquired in 1999 at a cost of $80,000. At the exchange date, Stone common
stock had a fair value of $45 per share, and the patent had a net carrying value
of $160,000 on Gore's books. Cole should record the patent at:
$80,000
$90,000
$135,000
$160,000
Check once both questions word to word same if 4 is correct then why
cant 5th right kindly check
6. On January 1, 1997, Phillips, Inc. leased a new machine from U.S. Leasing. The
specific information on the lease is as follows:
$275,000
$359,464
$0
$250,000
7. FRC Inc. acquired Marketing Inc on 1/1/2004. Marketing Inc. has 10,000 shares
outstanding. Each share in Marketing Inc. was exchanged for half a share in FRC,
Inc. Shares of FRC Inc., were trading at $100 per share at the date of the
announcement of the transaction. Marketing Inc, had the following assets and
liabilities that were assumed by FRC Inc.
1.
2.
3.
4.
9. Which of the following situations will not cause a deferred income tax amount to
be recorded?
An expense that is recognized in 2005 for income tax purposes and in
2006 for financial statement purposes.
Interest income from municipal bonds that is recognized in 2005 for financial
statement purposes but is tax exempt for income tax purposes.
A revenue is recognized in 2005 for income tax purposes and in 2006 for
financial statement purposes.
None of the above situations would cause a deferred income tax amount.
10.In periods with rising prices and increasing quantities of inventories, which of the
following relationships among inventory valuation methods is generally correct:
FIFO has a higher inventory balance and a lower net income than LIFO.
FIFO has a higher inventory balance and a higher net income than LIFO.
LIFO has a higher inventory balance and a higher net income than FIFO.
LIFO has a higher inventory balance and a lower net income than FIFO.
11.Denny Co. sells major household appliance service contracts for cash. The
service contracts are for a one-year, two-year, or three-year period. Cash
receipts from contracts are credited to Unearned Service Revenues. This account
had a balance of $900,000 at December 31, 2001 before year-end adjustment.
Service contracts still outstanding at December 31, 2001 expire as follows:
12.ABC signed a 5-year operating lease agreement whereby WXY Rentals will
provide a truck which cost WXY $20,000. The lease payments are $2,500,
payable at the end of each year. The truck will revert to WXY at the end of five
years. The truck has a 10-year useful life. At the inception of the lease, ABC
should:
make no journal entry
record rental expense of $2,500 for the first year's rental
record the lease asset and a corresponding liability, at its current market value
record the lease asset and a corresponding liability, at the present value of the
five equal annual lease payments.
14.Ignoring any related tax implications, what is the effect on a company's balance
sheet when depreciation expense is recognized?
This transaction affects only the income statement, so no change on the balance
sheet will occur.
Total assets and total stockholder's equity will decrease by the same
amount.
There will be no change in the total assets, liabilities and stockholders equity
accounts.
Total liabilities will increase and total stockholder's equity will decrease by the
same amount.
15.The Hastco Company had the following balances in their stockholders' equity
accounts as of December 31, 2000:
Paid-in Capital: $53,000
Retained Earnings: $31,000
During the year ended December 31, 2000, The Hastco Company generated
$36,000 in net income, and declared and paid $16,000 in Dividends. The ending
balance in the retained earnings account at December 31, 1999 was:
$11,000
$37,000
$5,000
$61,000
16.All of the following would qualify a lease as a capital lease except:
The lease term is 80% of the asset's estimated useful life.
The lease agreement contains a bargain purchase option.
The present value of the lease payments equals 70% of the fair market value of
the leased asset.
Title to the leased asset transfers to the lessee at the end of the lease term.
17.Which of the following is/are criteria for recognizing revenue from a sale?
Title and risks of ownership have been exchanged.
The company is reasonably assured of collecting the receivable.
The customer has, in turn, sold the product to its own customer.
Both title and risks of ownership have been exchanged and the
company is reasonably assured of collecting the receivable.
19. Downey Company bought a delivery truck for $62,000 on January 1, 2005. They
installed a rear hydraulic lift for $8,000 and paid sales tax of $3,000. In addition,
Downey paid $2,400 for a one-year insurance policy. They estimate the useful life of
the truck to be 10 years and its residual value to be $8,000.
If Downey uses the double declining-balance method, how much is the truck's
depreciation expense for2006?
$11,680
$12,144
$10,400
$11,760
21.Goodwill should
be written off as soon as possible against retained earnings.
absent impairment, not be written off because it has an indefinite life.
written off as soon as possible as an expense.
amortized over a maximum of forty years.
22.Freeman, Inc., reported net income of $40,000 for 2005. However, the
company's income tax return excluded a revenue item of $3,000 (reported on
the income statement) because under the tax laws the $3,000 would not be
reported for tax purposes until 2006. Assuming a 30% income tax rate, this
situation would cause a 2005 deferred tax amount of
$3,000 asset.
$3,000 liability
$ 900 asset.
$ 900 liability.
23.Before closing entries were recorded at the end of the accounting period
(December 31, 2005), the following data were taken from the accounts of
Buynow Corporation:
The total amount of owners' equity that should be reported on the balance sheet
dated December 31, 2005, after all the closing entries, is
$ 338,000.
$128,000.
$300,000.
$304,000.
24. The major accounting difference between interest incurred during a period and
cash dividends declared during the same period is:
Interest decreases retained earnings while dividend declared increases retained
earnings
Interest reduces net income while dividends declared do not affect net
income
Interest does not affect net income while dividends reduce net income
There is no major difference. Both are treated identically for accounting
purposes.
27.The following financial ratios are for Average Corp. and Superior Corp., two
hardware stores.
28.On June 30, 2000, Microsoft Corporation was holding $4.8 billion of cash that it
had collected from customers in advance for future software licenses and the future
delivery of other products and services. In its financial statements, Microsoft
classified and recorded this amount as:
part of revenue on its income statement.
the asset Accounts Receivable on its balance sheet.
the liability Unearned Revenue on its balance sheet.
an expense on its income statement.
30.International, Inc. established an allowance for bad debts at the end of October.
In November, International wrote off a $500 account receivable because
payment was considered to be remote. What would be the effect of the $500
account receivable write-off on International's November financial statements?
Assets would decrease, liabilities would remain constant and retained earning
would decrease.
Assets would remain constant; liabilities would increase and retained earnings
would decrease.