accounts homework mcqs – Green Company, which began operations on January 1, 20X4, appropriately uses the

| June 1, 2016

Question 1. Green Company, which began operations on January 1, 20X4, appropriately uses the installment method of accounting. The following information is available for 20X4:

What is the total amount of Green’s installment sales for 20X4? (Points : 2)





Question 2. A city government has a nine year capital lease for property being used within the general fund. The lease was signed on January 1, Year 4, minimum lease payments total $90,000 but have a current present value of $69,000. Annual payments are $10,000, the effective interest rate is 10% and the first payment is made on December 31, Year 4.
When the lease is recorded on January 1, Year 4, which accounts are credited?
Fund-Based Statements Government-Wide Statements (Points : 2)

Other Financing Uses – $10,000 Capital Lease Liability – $10,000

No Entry Capital Lease Liability – $10,000

Other Fin. Sources – $69,000 Capital Lease Obligation – $69,000

Lease Payable – $69,000 Other Financing Sources – $69,000

Question 3. A lessee had a ten-year capital lease requiring equal annual payments. The reduction of the lease liability in year 2 should equal (Points : 2)

The current liability shown for the lease at the end of year 1.

The current liability shown for the lease at the end of year 2.

The reduction of the lease obligation in year 1.

One-tenth of the original lease liability.

Question 4. The retail inventory method includes which of the following in the calculation of both cost and retail amounts of goods available-for-sale? (Points : 2)

Net markups

Freight in

Sales returns

Purchase returns

Question 5. Although the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) are involved in setting and enforcing generally accepted accounting principles (GAAP) in the U.S., there is only one body of GAAP that applies in the United States because: (Points : 2)

the FASB functions as an independent body with no ties to any particular company.

although the SEC has an extensive list of required filings, quarterly financial reports are rarely audited.

the FASB rules regarding due process lead to its agenda being widely circulated.

the SEC acknowledges the fact that the FASB Codification is authoritative.

Question 6. If it is not practicable for an entity to estimate the fair value of a financial instrument, which of the following should be disclosed?
I. Information pertinent to estimating the fair value of the financial instrument.
II. The reasons it is not practicable to estimate fair value. (Points : 2)

I only.

Both I and II.

II only.

Neither I nor II.

Question 7.Interest cost included in the net pension cost recognized by an employer sponsoring a defined benefit pension plan represents the (Points : 2)

Shortage between the expected and actual returns on plan assets.

Increase in the fair value of plan assets due to the passage of time.

Increase in the projected benefit obligation due to the passage of time.

Amortization of the discount on unrecognized prior service costs.

Question 8. What type of bond matures at different points in time? (Points : 2)

Serial bonds.

Bearer bonds.

Unsecured bonds.

Term bonds.

.Because Jab Co. uses different methods to depreciate equipment for financial statement and income tax purposes, Jab has temporary differences that will reverse during the next year and add to taxable income. Deferred income taxes that are based on these temporary differences should be classified in Jab’s balance sheet as a (Points : 2)

Current liability.

Contra account to current assets.

Noncurrent liability.

Contra account to noncurrent assets.

Question 10. Which of the following statements about segment reporting is NOT correct? (Points : 2)

A reportable segment is a component of a business that has a minimum of 5% of revenues, combined identifiable assets, or operating profit.

Companies that operate in more than one foreign country must disclose information on their foreign operations.

The computation of segment profit is one of the weaknesses of segment reporting requirements.

Accounting rules do not strictly define what constitutes a reportable segment.

Question 11. Pine Football Company had a player contract with Duff that is recorded in its books at $500,000 on July 1st. Ace Football Company had a player contract with Terry that is recorded in its books at $600,000 on July 1st. On this date, Pine traded Duff to Ace for Terry and paid a cash difference of $50,000. The fair value of the Terry contract was $700,000 on the exchange date. Assuming the exchange has commercial substance, the Terry contract should be recorded in Pine’s books at: (Points : 2)





Scott Corp. received cash of $20,000 that was included in revenues in its Year One financial statements, of which $12,000 will not be taxable until Year Two. Scott’s enacted tax rate is 30% for Year One, and 25% for Year Two. What amount should Scott report in its Year One balance sheet for deferred income tax liability? (Points : 2)





Question 13.A firm has a weighted average number of 20,000 common shares selling at an average of $10 throughout the year and 11,000, 10 percent cumulative, $100 par value preferred shares. If the firm earns $210,000 after taxes, what is its Basic EPS? (Points : 2)

$7.50 / share.

$5.00 / share.

$10.00 / share.

$10.50 / share.

Question 14. Oregon Corp.’s stock transactions during the year were as follows:
§ January 1: 320,000 shares issued and outstanding.
§ April 1: 1 for 2 reverse stock split occurred.
§ July 1: Acquisition of Smith, Inc. in exchange for issuance of 60,000 shares in an acquisition method transaction.
§ October 1: 30,000 shares issued for cash.
What is Oregon’s weighted average number of shares outstanding? (Points : 2)





Question 15. Lore Co. changed from the cash basis of accounting to the accrual basis of accounting during the year. How should this change should be reported in Lore’s current year financial statements? (Points : 2)

Prior-period adjustment resulting from the change in accounting principle.

Prior-period adjustment resulting from the correction of an error.

Component of income after extraordinary item.

Component of income before extraordinary item.

An entity purchased shares of its $100 par stock for retirement that was originally issued at $200 per share. The entity repurchased the stock for $250 per share. Upon retirement, which of the following accounts would NOT be affected? (Points : 2)

Treasury stock.

Paid-in capital.

Common stock.

Retained earnings.

Question 17. On January 1, Year 1, the Trimble Corporation (Trimble) leases a piece of equipment to use for eight years. The equipment has an expected life of ten years and no anticipated salvage value. Trimble has an incremental borrowing rate of 5%. Annual payments for this asset are $9,000 with the first payment to be made immediately. At the end of the eight years, Trimble has the right to buy the asset for $10,000 in cash. This amount is expected to be significantly below the expected fair value of the equipment on that date so it is reasonable to expect Trimble to pay this amount. Trimble records depreciation based on the straight-line method and interest based on the effective rate method. The present value of an annuity due of $1 at 5% for eight years is assumed to be 6.80. The present value of an ordinary annuity of $1 at 5% for eight years is assumed to be 6.50. The present value of a single amount of $1 at 5% in eight years is assumed to be 0.66. What amount of depreciation expense should Trimble record for Year 1? (Points : 2)





Question 18. The Eagle Company reports sales in the current year of $300,000. Of this amount, 70 percent were credit sales and the rest were cash sales. The accounts receivable at the first day of the year was $60,000 but rose by $30,000 during the year to a $90,000 balance at the end of the year. The company did not write off any accounts during the year as bad and recognized no bad debt expense. If the company reports on the cash basis of accounting rather than the accrual basis, what amount of revenue should be recognized? (Points : 2)





Question 19. A voluntary health and welfare organization had the following asset inflows:

How should these items be reported?
Revenues Public Support (Points : 2)

$56,000 $2,000

$10,000 $48,000

$8,000 $50,000

$16,000 $42,000

Question 20. If a company uses the equity method to account for an investment in another company, which of the following is true? (Points : 2)

Income of the investee is included in the investor’s income but reduced by any dividends paid to the investor.

Income to the investing company consists of actual dividends, interest, or capital gains.

Income is combined proportionate to ownership.

All of the investee’s income is included in the investor’s income except for income relating to intra-entity transactions.

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