Reference no: EM13499622

1. Cost of goods sold is given by:

a. Beginning inventory - net purchases + ending inventory
b. Beginning inventory + accounts payable - net purchases.
c. Net purchases + ending inventory - beginning inventory.
d. Net purchases - ending inventory + beginning inventory.
e. Net Purchases + beginning inventory - ending inventory.
f. None of the above.

2. The Mateo Corporation's inventory at December 31, 2011, was $325,000 based on a physical count priced at cost, and before any necessary adjustment for the following:
• Merchandise costing $30,000, shipped F.o.b. shipping point from a vendor on December 30, 2011, was received on January 5, 2012.
• Merchandise costing $22,000, shipped F.o.b. destination from a vendor on December 28, 2011, was received on January 3, 2012.
• Merchandise costing $38,000 was shipped to a customer F.o.b. destination on December 28, arrived at the customer's location on January 6, 2012.
• Merchandise costing $12,000 was being held on consignment by Traynor Company.

What amount should Mateo Corporation report as inventory in its December 31, 2011, balance sheet?

a. $367,000.
b. $427,000.
c. $325,000.
d. $355,000.
e. $363,000.
f. $347,000.
g. None of the above

3. Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000.

Information pertaining to that inventory is as follows:

 

What should be the carrying value of Montana's inventory under lower of cost or market?

a. $600,000.
b. $620,000.
c. $570,000.
d. $520,000.
e. $590,000.
f. $510,000.
g. None of the above

4. Wilson Inc. owns equipment for which it paid $70 million. At the end of 2011, it had accumulated depreciation on the equipment of $12 million. Due to adverse economic conditions, Wilson's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated undiscounted future cash flows to be provided by the equipment total $60 million, and the equipment's fair value at that point is $50 million. Under these circumstances, Wilson:

a. Would record a $10 million impairment loss on the equipment.
b. Would record a $12 million impairment loss on the equipment
c. Would record a $2 million gain to write up the value of the equipment.
d. Would record no impairment loss on the equipment.
e. Would record an $8 million impairment loss on the equipment.
f. Would record a $20 million impairment loss on the equipment.
g. None of the above is correct.


5. Sloan Company has owned an investment during 2011 that has increased in fair value. After all closing entries for 2011 are completed, the effect of the increase in fair value on total shareholders' equity would be:

a. higher under the available-for-sale approach than under the trading-securities approach.
b. lower under the available-for-sale approach than under the trading-securities approach.
c. the same amount under the available-for-sale and trading-securities approaches.
d. not possible to identify whether the available-for-sale or trading-securities approaches yield higher shareholders' equity given this information.
e. None of the above.


6. Sox Corporation purchased a 40% interest in Hack Corporation for $1,500,000 on Jan 1, 2011. On November 1, 2011, Hack declared and paid $1 million in dividends. On December 31, Hack reported a net loss of $6 million for the year. What amount of loss should Sox report on its income statement for 2011 relative to its investment in Hack?

a. $1,100,000.
b. $2,400,000.
c. $500,000.
d. $5,500,000
e. $1,500,000.
f. $1,600,000.
g. None of the above.

7. Murgatroyd Co. purchased equipment on 1/1/09 for $500,000, estimating a four-year useful life and no residual value. In 2009 and 2010, Murgatroyd depreciated the asset using the sum-of-years'-digits method. In 2011, Murgatroyd changed to straight-line depreciation for this equipment. What depreciation would Murgatroyd record for the year 2011 on this equipment?

a. $150,000.
b. $50,000.
c. $100,000.
d. $37,500
e. $125,000.
f. $75,000.
g. None of the above is correct.


Use the following information to answer questions 8-9

On 1/1/2004 XYZ Corp. purchased a building for $550,000, paid closing costs of $12,500, and paid $37,500 to have the building prepared for use. Management of XYZ Corp. estimates that the building will have a useful life of 20 years (the asset will be used through 12/31/2023) and a salvage value of $75,000. The company depreciates is buildings using double-declining balance.

8. Record the 1/1/2004 journal entry for the purchase of the building. What amount will XYZ record as a debit to building?

a. $600,000.
b. $525,000.
c. $550,000.
d. $562,500.
e. $587,500.
f. $675,000.
g. None of the above.


9. On 1/1/2010 XYZ Corp. sells the building for $300,000. Record the journal entry for this transaction. What is the gain or loss XYZ will record related to this sale?

a. Loss of $18,865.
b. Gain of $7,707.
c. Loss of $12,222.
d. Loss of $141,055.
e. Gain of $13,022.
f. Loss of $131,866.
g. None of the above.

Use the following information to answer questions 10 - 11

On 1/1/2010, Alma-Ata Inc. borrowed $100,000 at 12% payable annually to finance construction of a new building. In 2010, the company made the following expenditures related to the building:

3/1 $ 360,000
6/1 600,000
7/1 1,500,000
12/1 1,500,000

Additional information is provided as follows:
Other debt outstanding:

• 10-year, 13% bond, dated 12/31/2003, interest payable annually-

$4,000,000

• 6-year, 10% note, dated 12/21/2007, interest payable annually -

$1,600,000

The 3/1 expenditure included land costs of $150,000.

Interest revenue earned in 2010 = $49,000.

10. What is the amount of interest to be capitalized in 2010 in relation to the construction of the building for Alma-Alta?

a. $692,000.
b. $680,000.
c. $108,040.
d. $184,995.
e. $198,250.
f. $152,500.
g. None of the above.

11. Prepare the journal entry to record the capitalization of interest and the recognition of interest, if any, at 12/31/2010 for Alma-Ata. What amount of interest expense will be recorded?

a. $583,960.
b. $0.
c. $495,005.
d. $481,750.
e. $692,000.
f. $507,005.
g. None of the above.


12. On September 30, 2011, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bricker records partial-year depreciation based on the number of months in service. Using the sum-of-the-years'-digits method, what is the amount of depreciation reported for 2012 (to the nearest dollar)?

a. $24,545.
b. $31,909.
c. $29,455.
d. $32,727.
e. $35,456.
f. $54,000.
g. None of the above.


13. Texas Petrochemical reported the following April activity for its VC-30 lubricant, which had a balance of 300 qts. @ $2.40 on April 1.

 

What is the ending inventory assuming LIFO and a periodic inventory system?

a. $1,580.
b. $1,510.
c. $1,575.
d. $1,470.
e. $1,526.25.
f. $1,590.
g. $1,440.
h. None of the above.

14. Warren Dunn Company cans a variety of vegetable-type soups. The company adopted dollar-value LIFO on 12/31/2007. The inventory information is given below:
Date              Ending Inventory    Price Index
              (end-of-year prices)
12/31/2007        $80,000         100
12/31/2008        $115,500        105
12/31/2009        $108,000        120
12/31/2010        $131,300        130
12/31/2011        $154,000        140
12/31/2012        $174,000        145 

What is the ending inventory for Warren using dollar-value LIFO at 12/31/2010?

a. $131,300.
b. $101,000.
c. $104,800.
d. $102,500.
e. $81,000.
f. $106,300.
g. None of the above.

15. On January 1, 2011, Nana Company paid $100,000 for 8,000 shares of Papa Company common stock. These securities were classified as trading securities. The ownership in Papa Company is 10%. Papa reported net income of $52,000 for the year ended December 31, 2011. The fair value of the Papa stock on that date was $45 per share. What amount will be reported in the balance sheet of Nana Company for the investment in Papa at December 31, 2011?

a. $100,000.
b. $105,200
c. $284,400.
d. $300,000.
e. $315,600.
f. $360,000.
g. None of the above.

16. On January 2, 2010, Howdy Doody Corporation purchased 12% of Ranger Corporation's common stock for $50,000 and classified the investment as available for sale. Ranger's net income for the years ended December 31, 2010 and 2011, were $10,000 and $50,000, respectively. During 2011, Ranger declared and paid a dividend of $60,000. There were no dividends in 2010. On December 31, 2010, the fair value of the Ranger stock owned by Howdy Doody had increased to $70,000. How much should Howdy Doody show in the 2011 income statement as income from this investment?

a. $26,000.
b. $60,000.
c. $7,200.
d. $20,000.
e. $27,200.
f. $50,000.
g. None of the above.


17. On July 1, 2011, Tremen Corporation acquired 40% of the shares of Delany Company. Tremen paid $3,000,000 for the investment, and that amount is exactly equal to 40% of the fair value of identifiable net assets on Delany's balance sheet. Delany recognized net income of $1,000,000 for 2011, and paid $150,000 quarterly dividends to its shareholders. After all closing entries are made, Tremen's "Investment in Delany Company" account would have a balance of:

a. $3,200,000.
b. $3,160,000.
c. $3,400,000.
d. $3,000,000.
e. $3,080,000.
f. $4,000,000
g. None of the above.


18. White Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes. The balance in the LIFO Reserve account at the end of 2010 was $80,000. The balance in the same account at the end of 2011 is $120,000. White's Cost of Goods Sold account has a balance of $600,000 from sales transactions recorded during the year. What amount should White report as Cost of Goods Sold in the 2011 income statement?

a. $480,000.
b. $560,000.
c. $600,000.
d. $640,000.
e. $720,000.
f. $680,000.
g. None of the above.

19. On September 30, 2011, Sternberg Company sold office equipment for $12,000. The equipment was purchased on March 31, 2008, for $24,000. The asset was being depreciated over a five-year life using the straight-line method, with depreciation based on months in service. No residual value was anticipated. What amount will the company record as a gain or loss on the sale of equipment?

a. Report a gain of $4,800
b. Report a gain of $1,200
c. Report a gain of $2,400
d. Report a loss of $(12,000)
e. Report a loss of $(2,400)
f. Report a gain of $3,600
g. Report a loss of $(4,800)
h. None of the above


20. Santana Company exchanged equipment used in manufacturing operations plus $2,000 in cash for similar equipment used in the operations of Delaware Company. The following information pertains to the exchange:

Santana Delaware
Equipment (cost) $28,000 $28,000
Accumulated Depreciation 19,000 10,000
Fair Value of Equipment 13,500 15,500
Cash given up 2,000 0

Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance. What amount of gain or loss will Santana and Delaware record on the exchange, respectively?

a. Santana will record a gain of $4,500, and Delaware will record a loss of $2,500.
b. Santana will record a gain of $0, and Delaware will record a loss of $0.
c. Santana will record a gain of $4,500, and Delaware will record a loss of $0.
d. Santana will record a gain of $0, and Delaware will record a loss of $2,500.
e. Santana will record a loss of $2,500, and Delaware will record a gain of $0.
f. Santana will record a loss of $2,500, and Delaware will record a gain of $6,500.
g. Santana will record a loss of $0, and Delaware will record a gain of $6,500.
h. None of the above.