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(solution) 1) An aging of a company's accounts receivable indicates that


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1) An aging of a company's accounts receivable indicates that $4,500 are estimated to be

 

uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the

 

adjustment to record bad debts for the period will require a

 

credit to Allowance for Doubtful Accounts for $4,500.

 

debit to Bad Debt Expense for $4,500.

 

debit to Allowance for Doubtful Accounts for $3,300.

 

debit to Bad Debt Expense for $3,300. 2) The financial statements of the Melton Manufacturing Company reports net sales of

 

$300,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and

 

end of year, respectively. What is the average collection period for accounts receivable in

 

d ays ?

 

96.1

 

60.8

 

36.5

 

48.7

 

3) Stine Company purchased machinery with a list price of $64,000. They were given a 10%

 

discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000. Stine

 

estimates that the machinery will have a useful life of 10 years and a residual value of

 

$20,000. If Stine uses straightline depreciation, annual depreciation will be

 

a) $6,100.

 

b) $4,100.

 

c) $3,760.

 

d) $4,072.

 

4) On January 1, a machine with a useful life of five years and a residual value of $40,000 was

 

purchased for $120,000. What is the depreciation expense for year 2 under the doubledeclining balance method of depreciation?

 

a) $23,040.

 

b) $38,400.

 

c) $28,800.

 

d) $48,000. 5) As a recent graduate of State University you're aware that IFRS requires component

 

depreciation for plant assets. A friend has asked you to succinctly explain what component

 

depreciation means. Which of the following correctly describes component depreciation?

 

The method of depreciation recommended for an asset that is expected to be significantly more productive in the first half of its useful life.

 

The method that requires that significant parts of a plant asset with different useful lives be

 

depreciated separately.

 

The method used to ensure that the depreciation rate remains constant from year to year.

 

The method used to prorate annual depreciation on a time basis.

 

6) Given the following account balances at year end, compute the total intangible assets on the

 

balance sheet of Janssen Enterprises.

 

Cash

 

Accounts Receivable

 

Trademarks

 

Goodwill

 

Research & Development Costs $1,500,000

 

4,000,000

 

1,000,000

 

2,500,000

 

2,000,000 a) $5,500,000.

 

b) $3,500,000.

 

c) $7,500,000.

 

d) $9,500,000.

 

7) Bonds with a face value of $300,000 and a quoted price of 97¼ have a selling price of

 

a) $292,500.

 

b) $291,750.

 

c) $291,006.

 

d) $291,075.

 

8) Sparks Company received proceeds of $423,000 on 10year, 8% bonds issued on January 1,

 

2013. The bonds had a face value of $400,000, pay interest annually on December 31st, and have a

 

call price of 102. Sparks uses the straightline method of amortization. What is the carrying value

 

of the bonds on January 1, 2015?

 

a) $400,000

 

b) $418,400

 

c) $381,600 d) $420,700

 

9) S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement

 

was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $15,000

 

by issuing 8,000 shares of its common stock (par $1). The stock trades on a daily basis

 

and the market price of the stock on the day the debt was settled is $1.80 per share.

 

Given this information, the best journal entry for E. Corp. to record for this transaction

 

is a) b)

 

c)

 

d) Legal Legal Expense

 

Common Stock

 

Paidin Capital in Excess of Par Common 15,000 Legal Expense

 

Common Stock

 

Paidin Capital in Excess of Par Common 14,400 Legal Expense

 

Common Stock 14,400 Expense

 

Common Stock 8,000

 

7,000

 

8,000

 

6,400

 

14,400

 

15,000 15,000 10) Logan Corporation issues 50,000 shares of $50 par value preferred stock for cash at $60 per share. The

 

entry to record the transaction will consist of a debit to Cash for $3,000,000 and a credit or credits to Preferred Stock for $2,500,000 and Retained Earnings for $500,000.

 

Preferred Stock for $3,000,000.

 

Paidin Capital from Preferred Stock for $3,000,000.

 

Preferred Stock for $2,500,000 and Paidin Capital in Excess of Par Value?Preferred Stock

 

for $500,000. 11) Jahnke Corporation issued 8,000 shares of ?2 par value ordinary shares for ?11 per share. The

 

journal entry to record the sale will include

 

a debit to Retained Earnings for ?72,000.

 

a debit to Cash for ?16,000.

 

a credit to Share Premium?Ordinary for ?72,000. a credit to Share Capital?Ordinary for

 

?88,000. 12) Zoum Corporation had the following transactions during 2014:

 

1. Issued $125,000 of par value common stock for cash.

 

2.

 

Recorded and paid wages expense of $60,000.

 

3.

 

Acquired land by issuing common stock of par value $50,000.

 

4.

 

Declared and paid a cash dividend of $10,000.

 

5.

 

Sold a longterm investment (cost $3,000) for cash of $3,000.

 

6.

 

Recorded cash sales of $400,000.

 

7.

 

Bought inventory for cash of $160,000.

 

8.

 

Acquired an investment in Zynga stock for cash of $21,000.

 

9.

 

Converted bonds payable to common stock in the amount of $500,000.

 

10.

 

Repaid a 6 year note payable in the amount of

 

$220,000. What is the net cash provided by financing

 

activities?

 

a) $<105,000>.

 

b) $115,000.

 

c) $395,000. d) $<605,000>.

 

13) Colie Company had an increase in inventory of $120,000. The cost of goods sold was $490,000. There was a $30,000 decrease in accounts payable from the prior period. Using the direct method of reporting

 

cash flows from operating activities, what were Colie's cash payments to suppliers?

 

$310,000.

 

$580,000.

 

$640,000.

 

$370,000.

 

14) Each of the following items may be classified as operating or financing activities

 

under IFRS except

 

a) dividends received.

 

b) all of these answer choices may be classified as such. c) dividends paid.

 

d) interest paid.

 

15) The current assets of Orangatte Company are $227,500. The current liabilities are

 

$130,000. The current ratio expressed as a proportion is

 

1.75:1.

 

$210,000 ÷ $120,000. 175%.

 

.57:1.

 

16) All of the following requirements about internal controls were enacted under the

 

Sarbanes Oxley Act of 2002 except:

 

independent outside auditors must attest to the level of internal control.

 

companies must develop sound internal controls over financial

 

reporting. independent outside auditors must eliminate redundant internal control. companies must continually assess the functionality of internal controls.

 

17) Which of the following is not an internal control activity for cash?

 

The number of persons who have access to cash should be limited.

 

The functions of record keeping and maintaining custody of cash should be combined.

 

Surprise audits of cash on hand should be made occasionally.

 

All cash receipts should be recorded promptly.

 

18) Before a check authorization is issued, the following documents must be in

 

agreement, except for the

 

remittance advice.

 

receiving report.

 

purchase order.

 

invoice.

 

19) Mitchell Corporation bought equipment on January 1, 2014 .The equipment cost

 

$180,000 and had an expected salvage value of $30,000. The life of the equipment was

 

estimated to be 6 years. The book value of the equipment at the beginning of the third

 

year would be

 

$180,000.

 

$150,000.

 

$50,000.

 

$130,000. 20) Brevard Corporation purchased a taxicab on January 1, 2013 for $25,500 to use for

 

its shuttle business. The cab is expected to have a fiveyear useful life and no salvage

 

value. During 2014, it retouched the cab's paint at a cost of $1,200, replaced the

 

transmission for $3,000 (which extended its life by an additional 2 years), and tunedup

 

the motor for $150. If Brevard Corporation uses straightline depreciation, what annual

 

depreciation will Brevard report for 2014?

 

$3,900.

 

$4,100.

 

$5,100.

 

$4,125.

 

21) If a plant asset is retired and is fully depreciated

 

phantom depreciation must be taken as though the asset were still on the books.

 

a gain on disposal will be recorded.

 

a loss on disposal will be recorded.

 

no gain or loss on disposal will be recorded.

 

22) On July 1, 2014, Linden Company purchased the copyright to Norman Computer

 

Tutorials for $140,000. It is estimated that the copyright will have a useful life of 5 years.

 

The amount of Amortization Expense recognized for the year 2014 would be

 

$28,000.

 

$14,000.

 

$13,125.

 

$25,900.

 

23) The following totals for the month of April were taken from the payroll records of Metz

 

Company.

 

Salaries $30,000 FICA taxes withheld 2,295 Income taxes withheld 6,600 Medical insurance deductions 1,200 Federal unemployment taxes

 

State unemployment taxes

 

The entry to record accrual of employer?s payroll taxes would include a

 

a) debit to Payroll Tax Expense for $4,035.

 

b) credit to Payroll Tax Expense for $4,035.

 

c) credit to FICA Taxes Payable for $1,740.

 

d) credit to Payroll Tax Expense for $1,740. 240

 

1,500 24) Thayer Company purchased a building on January 2 by signing a longterm $2,520,000

 

mortgage with monthly payments of $23,100. The mortgage carries an interest rate of 10

 

percent. The amount owed on the mortgage after the first payment will be

 

a) $2,517,900.

 

b) $2,520,000.

 

c) $2,499,000.

 

d) $2,496,900. 25) The following data is available for BOX Corporation at December 31, 2014:

 

Common stock, par $10 (authorized 3 0 , 0 0 0 shares)

 

Treasury stock (at cost $15 per share) $250,000

 

$1,200 Based on the data, how many shares of common stock are outstanding?

 

29,920.

 

24,920.

 

30,000.

 

25,000. 26) Indicate the respective effects of the declaration of a cash dividend on the following

 

balance sheet sections:

 

Total Assets Total Liabilities Total Stockholders' Equity No change Increase Decrease Decrease No change Increase Increase Decrease No change Decrease Increase Decrease 27) Assume the following cost of goods sold data for a company:

 

2015 $1,300,000 2014 1,200,000 2013 1,000,000 If 2013 is the base year, what is the percentage increase in cost of goods sold from 2013 to

 

2015?

 

20%

 

30%

 

70%

 

130% 28) A company has an average inventory on hand of $75,000 and its average days in inventory is

 

36.5 days. What is the cost of goods sold? $1,752,000

 

$1,680,000

 

$750,000

 

$876,000

 

29) The following information is available for Patterson Company:

 

2014

 

Accounts receivable

 

Inventory $ 360,000 2013

 

$ 340,000 280,000 320,000 Net credit sales 3,000,000 2,600,000 Cost of goods sold 1,500,000 840,000 300,000 170,000 Net income The accounts receivable turnover for 2014 is 4.3 times.

 

7.6 times.

 

8.6 times.

 

8.3 times.

 

30) All of the following situtations below might indicate a company has a low quality of earnings except

 

Adoption of a different inventory method for each of the last three years.

 

A lack of disclosure about guaranteed payments that were mentioned in the MD&A of the

 

annual report.

 

Maintenance costs are capitalized and then depreciated.

 

Revenue is recognized when earned.

 

31) IFRS

 

implies that receivables with different characteristics should be reported as one

 

unsegregated amount.

 

requires that receivables with different characteristics should be reported as one

 

unsegregated amount.

 

implies that receivables with different characteristics should be reported separately.

 

requires that receivables with different characteristics should be reported

 

separately.

 


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