Reference no: EM13215060

1. Cummings is a construction company and uses the percentage of completion method. In 2013 they signed a contract to complete a job for $2,000,000. The estimated costs to complete were $1,800,000. At the end of 2013, costs of $540,000 were incurred and the estimated costs to complete are $1,260,000. In 2014 additional costs of $940,000 were incurred and costs to complete were $370,000. How much profit is shown in 2013 and in 2014?
a) $60,000 in 2013, $100,000 in 2014
b) $60,000 in 2013, $60,000 in 2014
c) $0 in 2013 and $0 in 2014
d) $60,000 in 2013 and $47,633

2. Jordan also uses the percentage of completion method. In 2013, they enter into a contract with a sales price of $900,000. The estimated costs are $840,000. In 2013, they incur costs of $435,000 and additional costs of $435,000 are anticipated. In 2014, costs of $301,000 and additional costs are estimated at $184,000. What profit is shown in 2013 and 2014?
a) $15,000 and $20,000 loss
b) $15,000 and $35,000 loss
c) $15,000 and $31,000 loss
d) $15,000 and no profit or loss

3. In 2014, Cummings shows Partial Billings of $360,000 and CIP of $420,000. How would this be shown on the balance sheet?
a) As a current asset of $420,000 and a current liability of $360,000
b) Netted in the current asset section with CIP minus Partial Billings
c) Netted in the current liability section with Partial Billings minus CIP
d) $420,000 in Plant & Equipment and $360,000 in current liability section

4. Olsen sells merchandise on the installment basis and uses the installment basis. Sales in 2012 totaled $100,000, in 2013 they were $120,000 and in 2014 $150,000. The cost of installment sales was $70,000 in 2012, $90,000 in 2013, and $96,000 in 2014. Collections in 2014 were: $30,000 from 2012, $50,000 from 2013 and $60,000 from 2014. How much profit would be reported in 2014 using the installment sales method?
a) $38,100
b) $54,000
c) $35,800
d) $42,000

5. Refer to question 4. Merchandise from 2013 was repossessed in 2014. The original cost was $1,500 and thus far $900 has been collected. The merchandise is worth $500. What effect will this transaction have on income in 2014?
a) A loss of $600
b) A loss of $100
c) A gain of $500
d) A gain of $50

6. A company is preparing a cash flow statement and is using the indirect method for finding cash from operations. One of the transactions involves the sale of surplus equipment that cost $22,000, had accumulated depreciation of $14,500 and was sold for $8,000. On the cash flow statement, how should this be shown?
a) As an $8,000 cash inflow from operations
b) As an $8,000 inflow from investing activities but the gain of $500 must be subtracted from net income to arrive at cash from operations
c) As a $7,500 cash inflow from Investing activities
d) As an $8,000 inflow from financing activities but the gain of $500 must be subtracted from net income to arrive at cash from operations

7. Morrow uses Dollar LIFO. Inventory at year end prices are as follow:
2010 = $90,000. 2011 = $98,700. 2012 = $113,360. 2013 = $115,000. 2014 = $132,000. 2015 = $135,000
Price Indexes are: 2010 = 100. 2011 = 1.05. 2012 = 1.09 2013= 1.15 2014= 1.20 2015 = 1.25
What is the ending inventory for 2015 using dollar LIFO?
a) $117,540
b) $ 130,500
c) $121,540
d) $132,000

8. Izzo uses the direct method for reporting cash from operating activities. Credit sales for 2014 totaled $180,000. Accounts Receivable had a balance of $34,000 on 1-1-2014 and of $39,200 on 12-31-2014. How much cash was collected from customers in 2014?
a) $180,000
b) $185,200
c) $174,800
d) $219,200

9. Adams reports cost of goods sold on the income statement of $250,000. The beginning inventory was $36,000 and the ending was $31,000. Trade Accounts Payable were $22,000 on 1-1-2014 and $25,300 on 12-31-2014. How much cash was paid to suppliers in 2014?
a) $258,300
b) $241,700
c) $248,800
d) $251,700

10. Calvin shows insurance expense of $12,800 on their income statement. The Prepaid Insurance account had a balance of $5,200 on 1-1-2014 and on 12-31-2014 the balance was $6,000. How much cash was paid for insurance during 2014?
a) $12,800
b) $6,000
c) $12,000
d) $13,600

11. Salaries expense in 2014 was $174,000 and Salaries Payable totaled $3,200 on 1-1-2014 and $4,500 on 12-31-2014. How much was paid for salaries in 2014?
a) $174,000
b) $178,500
c) $175,300
d) $172,700

12. Which of the following inventory methods provides the same answer whether a company uses the periodic or perpetual inventory methods?
a) FIFO
b) LIFO
c) Average Cost

Use the following information to answer questions 13-15.
Korah purchased 80 bonds with a par value of $1,000 each and paying interest at 4% A.P.R. They were originally issued on 3-1-2008 and have a 20- year life and pay interest on 9-1 and 3-1. The bonds were sold at 97% and purchased on 11-1-2014.

13. Assume that the bonds were classified as held to maturity. How much interest income would be shown on 12-31-2014?
a) $533
b) $592
c) $472
d) $296

14. Assume the bonds are available for sale, how much interest income would be shown on 12-31-2014?
a) $533
b) $592
c) $472
d) $267

15. Again assume the bonds are available for sale. The market price of the bonds is 99%. What is the consequence of this?
a) An unrealized gain of $1,600 on the income statement
b) An unrealized gain of $1,600 on the comprehensive income statement
c) A realized gain of $1,600 on the income statement
d) No consequence

16. Where are unrealized gains and losses on available for sale securities closed at year- end?
a) To retained earnings
b) To an accumulated other comprehensive income or loss account in the owner's equity section
c) To paid in capital
d) They are not closed

The following information is to be used to answer questions 17 and 18.

Marketable Equity Securities 12-31-2014 at cost = $45,000
Marketable Equity Securities 12-31-2014 at market value = $48,000
During 2015, securities that cost $5,000 were sold for $5,900.
Marketable Equity Securities 12-31-2015 at cost = $51,000
Marketable Equity Securities 12-31-2015 at market value = $50,000

17. The securities are classified as trading. What will be shown on the financial statements in 2014?
a) An unrealized gain on the income statement of $3,000 and in the current asset section Marketable Securities at cost of $45,000 plus a valuation account of $3,000.
b) An unrealized gain of $3,000 on the comprehensive income statement and in the current asset section Marketable Securities at cost of $45,000 plus a valuation account of $3,000
c) No gain or loss and marketable securities in the current asset section at cost of $45,000
d) A realized gain of $3,000 and in the current asset section Marketable Equity Securities at cost of $45,000 plus a valuation allowance of $3,000

18. What is reported in 2015 on the income statement and/or the comprehensive income statement assuming the stock is trading?
a) A realized gain of $900 on the income statement and a $1,000 loss on the income statement
b) A realized gain of $900 on the income statement and an unrealized loss of $1,000 on the comprehensive income statement
c) A $900 realized gain and a $4,000 unrealized loss all on the income statement
d) Only the $900 realized loss on the income statement

19. Meachem had a fire on 3-5-2014 that destroyed their entire inventory. The physical inventory last year showed $68,000 and from 1-1 until 3-5 there was another $190,000 of net purchases made. Sales during that period totaled $310,000 and the average gross profit % for the last several years had been 30%. What is the estimated loss due to the fire?
a) $41,000
b) $68,000
c) $34,000
d) None of the above

20. Evans made an installment sale on 2-1-2012 totaling $200,000. The merchandise cost $140,000. Ignore interest. Collections totaled $40,000 in 2012, $80,000 in 2013 and $30,000 in 2014. Using the cost recovery method, how much profit would be shown in 2012, 2013 and 2014?
a) $12,000, $24,000 and $9,000
b) $0, $0 and $10,000
c) $0, $0 and $3,000
d) $0, $0, and $0