Accounting exam (30 questions) - 77065

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. award:
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4. award:
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Jack Corporation purchased a 20% interest in Jill Corporation for $1,660,000 on January 1, 2013. Jack can
significantly influence Jill. On December 10, 2013, Jill declared and paid $1.8 million in dividends. Jill
reported a net loss of $5.2 million for the year. What amount of loss should Jack report in its income
statement for 2013 relative to its investment in Jill?
rev: 02_17_2014_QC_45261
$1,300,000.
$1,800,000.
$1,660,000.
$1,040,000.
Goofy Inc. bought 15,000 shares of Crazy Co.'s stock for $195,000 on May 5, 2012, and classified the
stock as available for sale. The market value of the stock declined to $126,000 by December 31, 2012.
Goofy reclassified this investment as trading securities in December of 2013 when the market value had
risen to $151,000. What effect on 2013 income should be reported by Goofy for the Crazy Co. shares?
$44,000 net loss.
$0.
$25,000 net gain.
$69,000 net loss.
Bloomfield Bakers accounts for its investment in Clor Confectionary under the equity method. Bloomfield
carried the Clor investment at $150,300 and $165,300 at December 31 of 2012 and 2013, respectively.
During 2013 Clor recognized $75,700 of net income and paid dividends of $20,500. Assuming that
Bloomfield owned the same percentage of Clor throughout 2013, their percentage ownership must have
been (Round your answer to the nearest whole percent):
73%.
27%.
25%.
20%.
Nichols Enterprises has an investment in 30,500 shares of Elliott Electronics that Nichols accounts for as
a security available for sale. Elliott shares are publicly traded on the New York Stock Exchange, and the
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Wall Street Journal quotes a price for those shares of $14 a share, but Nichols believes the market has
not appreciated the full value of the Elliott shares and that a more accurate price is $21 a share. Nichols
should carry the Elliott investment on its balance sheet at:
rev: 11_26_2013_QC_40876
$640,500.
Either $427,000 or $640,500, as either are defensible valuations.
$427,000.
$533,750, the midpoint of Nichols's range of reasonably likely valuations of Elliott.
In May of 2013, Raymond Financial Services became involved in a penalty dispute with the EPA. At
December 31, 2013, the environmental attorney for Raymond indicated that an unfavorable outcome to the
dispute was probable. The additional penalties were estimated to be $765,000 but could be as high as
$1,160,000. After the yearend,
but before the 2013 financial statements were issued, Raymond accepted
an EPA settlement offer of $890,000. Raymond should have reported an accrued liability on its December
31, 2013, balance sheet of:
$270,000
$765,000.
$1,160,000
$890,000.
B Corp. has an employee benefit plan for compensated absences that gives each employee 10 paid
vacation days and 10 paid sick days. Both vacation and sick days can be carried over indefinitely.
Employees can elect to receive payment in lieu of vacation days? however, no payment is given for sick
days not taken. At December 31, 2013, B's unadjusted balance of liability for compensated absences was
$66,000. B estimated that there were 300 total vacation days and 150 sick days available at December 31,
2013. B's employees earn an average of $224 per day. In its December 31, 2013, balance sheet, what
amount of liability for compensated absences is B required to report?
$215,040
$100,800
$147,840
$67,200
Slotnick Chemical received customer deposits on returnable containers in the amount of $300,000 during
2013. Twelve percent of the containers were not returned. The deposits are based on the container cost
marked up 20%. How much profit did Slotnick realize on the forfeited deposits? (Round your final answer
to the nearest whole dollar amount.)
$36,000.
$6,000.
$7,200.
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$0.
Lake Co. receives nonrefundable advance payments with special orders for containers constructed to
customer specifications. Related information for 2013 is as follows ($ in millions):
Customer advances balance, Dec. 31, 2012 $114
Advances received with 2013 orders 187
Advances applicable to orders shipped in 2013 179
Advances from orders canceled in 2013 55
What amount should Lake report as a current liability for advances from customers in its Dec. 31, 2013,
balance sheet?
$122.
$67.
$301.
$0.
Auerbach Inc. issued 3% bonds on October 1, 2013. The bonds have a maturity date of September 30,
2023 and a face value of $325 million. The bonds pay interest each March 31 and September 30, beginning
March 31, 2014. The effective interest rate established by the market was 5%.
How much cash interest does Auerbach pay on March 31, 2014? (Round your answer in millions to two
decimal places.)
$4.88 million
$8.13 million
$16.25 million
$9.75 million
Auerbach Inc. issued 10% bonds on October 1, 2013. The bonds have a maturity date of September 30,
2023 and a face value of $425 million. The bonds pay interest each March 31 and September 30, beginning
March 31, 2014. The effective interest rate established by the market was 12%.
Assuming that Auerbach issued the bonds for $376,250,800, what interest expense would it recognize in
its 2013 income statement? (Do not round your intermediate calculation.)
$0
$11,287,524
$22,575,048
$12,750,000
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On January 1, 2013, Zebra Corporation issued 1,500 of its 7%, $1,000 bonds at 98.2. Interest is payable
semiannually on January 1 and July 1. The bonds mature on January 1, 2023. Zebra paid $58,000 in bond
issue costs. Zebra uses the straightline
amortization method. What is the bond carrying value reported in
the December 31, 2013, balance sheet?
$1,475,700.
$2,250,000.
$2,308,000.
$1,545,700.
Refer to the following lease amortization schedule. The 10 payments are made annually starting with the
inception of the lease. Title does not transfer to the lessee and there is no bargain purchase option or
guaranteed residual value. The asset has an expected economic life of 12 years. The lease is
noncancelable.
Payment
Cash
Payment
Effective
Interest
Decrease
in balance Balance
72,469
1 10,000 10,000 62,469
2 10,000 4,998 5,002 57,466
3 10,000 4,597 5,403 52,064
4 10,000 4,165 5,835 46,229
5 10,000 3,698 6,302 39,927
6 10,000 3,194 6,806 33,121
7 10,000 2,650 7,350 25,771
8 10,000 2,062 7,938 17,833
9 10,000 ? ? ?
10 10,000 ? ? ?
What would the lessee record as annual depreciation on the asset using the straightline
method? (Round
your answer to the nearest dollar.)
$7,247.
$10,000.
$6,247.
$7,311.
ABC Company leased equipment to Best Corporation under a lease agreement that qualifies as a direct
financing lease. The cost of the asset is $127,000. The lease contains a bargain purchase option that is
effective at the end of the fifth year. The expected economic life of the asset is 10 years. The lease term
is five years. The asset is expected to have a residual value of $2,100 at the end of 10 years. Using the
straightline
method, what would Best record as annual depreciation?
$12,700.
$12,910.
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$12,490.
$24,980.
On December 31, 2013, B Corp. sold a machine to Royal and simultaneously leased it back for one year.
Pertinent information at this date follows:
Sales price $759,000
Carrying amount 686,000
Present value of lease rentals 87,700
($7,300 for 12 months at 12%)
Estimated remaining useful life 12 years
In B's December 31, 2013, balance sheet, the deferred revenue from the sale of this machine should be:
$673,000.
$14,700.
$0.
$87,700.
Alamo Inc. had $390 million in taxable income for the current year. Alamo also had a decrease in deferred
tax assets of $28 million and an increase in deferred tax liabilities of $67 million. The company is subject
to a tax rate of 30%. The total income tax expense for the year was:
$485 million.
$273 million.
$245 million.
$212 million.
In 2013, Bodily Corporation reported $220,000 pretax accounting income. The income tax rate for that year
was 30%. Bodily had an unused $129,000 net operating loss carryforward from 2011 when the tax rate
was 33%. Bodily's income tax payable for 2013 would be
$30,030
$66,000
$27,300
$30,950
Bumble Bee Co. had taxable income of $7,400, MACRS depreciation of $5,400, book depreciation of
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$1,950, and accrued warranty expense of $600 on the books although no warranty work was performed.
What is Bumble Bee's pretax accounting income?
$10,250.
$4,550.
$3,350.
$2,850.
The following information relates to Franklin Freightways for its first year of operations (data in millions of
dollars):
Pretax accounting income: $250
Pretax accounting income included:
Overweight fines (not deductible for tax purposes) 6
Depreciation expense 67
Depreciation in the tax return using MACRS: 105
The applicable tax rate is 32%. There are no other temporary or permanent differences.
Franklin's taxable income ($ in millions) is:
$212.
$105.
$218.
$38.
Fox Company received the following reports of its defined benefit pension plan for the current calendar
year:
PBO Plan assets
Balance, January 1 $680,000 Balance, January 1 $550,000
Service cost 364,000 Actual return 53,000
Interest cost 72,000 Annual contribution 227,000
Benefits paid (96,000) Benefits paid (96,000)
Balance, December 31 $1,020,000 Balance, December 31 $734,000
The longterm
expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is
the pension expense for the year?
$392,000.
$383,000.
$436,000.
$364,000.
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The following incomplete (columns have missing amounts) pension spreadsheet is for Old Tucson
Corporation (OTC).
($ in millions) debit (credit) PBO Plan
assets
Prior service
cost
Net
(Gain)
loss
Pension
Expenses Cash
Net
Pension
(Liability)/
Asset
Beginning Balance (480) 54
Service cost 56
Interest cost
Expected return on assets (21)
Gain/loss on assets (2.00)
Amortization of:
Prior service cost (5)
Net gain loss
Loss on PBO (23) (23)
Contribution to funds (50)
Retiree benefits paid 39 (39)
Ending balance (552) 277 50 72 (275)
What was the balance of the net pension asset/liability reported in the balance sheet at the end of the
previous year?
Net pension asset of $237.00.
Net pension liability of $237.00.
Net pension liability of $420.00.
Net pension asset of $420.00.
Assume the actuary estimates the net cost of providing health care benefits to a particular employee
during his retirement years to have a present value of $65,000. If the benefits relate to an estimated 25
years of service and five of those years have been completed: (Do not round your intermediate
calculations.)
The APBO would be $2,600.
The APBO would be $13,000.
The EPBO would be $13,000.
The EPBO would be $2,600.
The following data are for Guava Company's retiree health care plan for the current calendar year.
Number of employees covered 5
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Years employed as of January 1 4 (each)
Attribution period 20 years
EPBO, January 1 $65,000
EPBO, December 31 $70,850
Interest rate 9%
Funding and plan assets None
What is the service cost to be included in the current year's postretirement benefit expense? (Do not round your
intermediate calculations and round your answer to the nearest whole dollar.)
$3,483.
$4,300.
$3,250.
$3,543.
On January 1, 2013, the board of directors of Goby Inc. declared a $560,000 dividend. The following data
are from the balance sheet of Goby on that date:
Common stock $520,000
Paidin
capital – excess of par $320,000
Retained earnings $418,000
Paidin
capital from sale of treasury stock $ 52,000
How much is the liquidating dividend?
$142,000
$240,000
$292,000
None of these is correct.
The following partial information is taken from the comparative balance sheet of Levi Corporation:
Shareholders’ equity 12/31/2013 12/31/2012
Common stock, $5 par value? 36 million shares authorized? 31 million
shares issued and 25 million shares outstanding at 12/31/2012? and
____million shares issued and ____shares outstanding at 12/31/2013. $155 million $125 million
Additional paidin
capital on common stock 523 million 401 million
Retained earnings 192 million 160 million
Treasury common stock, at cost, 6 million shares at 12/31/2013 and 4
million shares at 12/31/2012 (67 million) (45 million)
Total shareholders’ equity $803 million $641 million
What was the average price (rounded to the nearest dollar) of the additional shares issued by Levi in 2013?
rev: 08_09_2013_QC_33612
$5 per share
$25 per share
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$38 per share
Cannot be determined from the given information.
Black Enterprises reported the following ($ in 000s) as of December 31, 2013. All accounts have normal
balances.
Deficit 2,100
Common stock 3,800
Paidin
capitalstock
options 2,900
Treasury stock at cost 230
Paidin
capitalexcess
of par 30,900
During 2014 ($ in 000s), net income was $9,100? 25% of the treasury stock was resold for $500? cash
dividends declared were $620? cash dividends paid were $450? and all of the stock options expired.
What ($ in 000s) was shareholders' equity as of December 31, 2014?
$43,920.
$44,250.
$45,750.
$44,370.
As of December 31, 2013, Warner Corporation reported the following:
Dividends payable 36,000
Treasury stock 760,000
Paidin
capital share
repurchase 36,000
Other paidin
capital accounts 5,600,000
Retained earnings 4,600,000
During 2014, half of the treasury stock was resold for $272,000? net income was $760,000? cash dividends
declared were $1,660,000? and stock dividends declared were $660,000.
What would shareholders' equity be as of December 31, 2014?
$8,848,000
Amount is not shown.
$8,956,000
$9,848,000
C Co. reported a retained earnings balance of $210,000 at December 31, 2012. In September 2013, C
determined that insurance premiums of $42,000 for the threeyear
period beginning January 1, 2012, had
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been paid and fully expensed in 2012. C has a 35% income tax rate. What amount should C report as
adjusted beginning retained earnings in its 2013 statement of retained earnings?
$237,300
$224,000
$238,000
$228,200
A company failed to report the $620,000 additional liability for its underfunded pension plan. Its tax rate is
35%. As result of this error, retained earnings would be:
Unaffected.
Overstated by $620,000.
Overstated by $403,000.
Overstated by $217,000.
In 2013, due to a change in marketing forecasts, Barney Corporation reduced the projected life of its patent
for producing round dice. The cumulative patent amortization prior to 2013 would have been $15 million
higher had the new life been used. Barney's tax rate is 35%. Barney's retained earnings as of December
31, 2013, would be:
Overstated by $9.75 million.
Overstated by $5.25 million.
Overstated by $15 million.
Unaffected.
Red Corp. constructed a machine at a total cost of $66 million. Construction was completed at the end of
2009 and the machine was placed in service at the beginning of 2010. The machine was being depreciated
over a 8year
life using the straightline
method. The residual value is expected to be $3 million. At the
beginning of 2013, Red decided to change to the sumoftheyears'
digits
method. Ignoring income taxes,
what will be Red's depreciation expense for 2013?
$7.9 million
$3.8 million
$4.4 million
$13.13 million

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