West Coast Corporation had 800,000 shares of common stock outstanding on
January 1, issued 200,000 shares on October 1, and had income applicable to
common stock of $2,865,000 for the year ended December 31, 2013. Rounded to
the nearest penny, earnings per share of common stock for 2013 would be
(Points : 7)

$2.86
$3.01
$3.37
$3.58

Question 2.2.Corresponds
to CLO 1(b)
On July 1, 2013, an interest payment date, $120,000 of Tally Corporation
bonds were converted into 3,100 shares of Tally Corporation common stock,
each having a par value of $35 and a market value of $42. There is $5,700
unamortized discount on the bonds. Using the book value method, Tally would
record (Points : 7)

a $5,300 increase
in paid-in capital in excess of par
a $5,800 increase in paid-in capital in excess of par
a $11,500 increase in paid-in capital in excess of par
a $15,900decrease in paid-in capital in excess of par

Question 3.3.Corresponds
to CLO 1(c)
A corporation issues bonds with detachable warrants. The amount to be
recorded as paid-in capital is preferably (Points : 7)

zero.
calculated by the excess of the proceeds over the face amount of the bonds.
equal to the market value of the warrants.
based on the relative market values of the bonds and warrants.

Question 4.4.Corresponds
to CLO 1(d)
On January 1, 2013, Morgan Corporation granted stock options to officers
and key employees for the purchase of 50,000 shares of the company’s $10
par common stock at $25 per share as additional compensation for services
to be rendered over the next three years. The market price of common stock
was $31 per share at the date of grant. The options are exercisable during
a five-year period beginning January 1, 2016 by grantees still employed by
Morgan. The Black-Scholes option pricing model determines total compensation
expense to be $360,000. The journal entry to record the compensation
expense related to these options for 2013 would include a credit to the
Paid-in Capital – Stock Options account for (Points : 7)

$120,000
$180,000
$300,000
$360,000

Question 5.5.Corresponds
to CLO 2(a)
On July 1, 2013, Wilshire Corporation acquired 500, $1,000, 8% bonds at 97
plus accrued interest. The bonds were dated April 1, 2013, and mature on
March 31, 2018, with interest paid each September 30 and March 31. The
bonds will be added to Wilshire’s available-for-sale portfolio. The amount
to record as the cost of this debt investment on July 1, 2013 is (Points :
7)

$485,000
$495,000
$500,000
$540,000

Question 6.6.Corresponds
to CLO 2(b)
On January 1, 2013, Capital Corporation acquired for $400,000 of 10% bonds,
paying $376,100. The bonds mature January 1, 2024; interest is payable each
July 1 and January 1. The discount of $23,900 provides an effective yield
of 11%. Capital Corporation uses the effective-interest method and plans to
hold these bonds to maturity. On July 1, 2013, Capital Corporation should
increase its Debt Investments account for these bonds by (round to the
nearest dollar): (Points : 7)

$4,000
$3,761
$1,195
$686

Question 7.7.Corresponds
to CLO 2(c)
Wright Company’s trading securities portfolio, which is appropriately
included in current assets, is as follows on December 31, 2013: Holmes
Corporation – cost of $300,000 and fair value of $260,000; Woods
Corporation – cost of $500,000 and fair value of $520,000. Ignoring income
taxes, what amount should be reported as a charge against income in
Wright’s 2013 income statement if 2013 is Wright’s first year of operation?
(Points : 7)

$ -0-
$40,000 Unrealized Loss
$20,000 Unrealized Gain
$20,000 Unrealized Loss

Question 8.8.Corresponds
to CLO 2(d)
Canton Corporation owns 3,000 of the 10,000 outstanding shares of Wallis
Corporation. During 2013, Wallis Corporation earns $500,000 and pays cash
dividends of $100,000. What amount should Canton show in the investment
account at December 31, 2013 if the beginning of the year balance in the
account was $600,000? (Points : 7)

$600,000
$630,000
$720,000
$750,000

Question 9.9.Corresponds
to CLO 3(a)
Which of the following are temporary differences that are normally
classified as expenses or losses that are deductible for tax purposes after they are recognized in financial income?
(Points : 7)

Product warranty
liabilities.
Depreciable property.
Fines and expenses resulting from a violation of law.
Advance rental receipts.

Question 10.10.Corresponds
to CLO 3(b)
In 2013, its first year of operations, Anderson Appliance Corporation had
Income (per books before income taxes) of $1,100,000. The following items
are included in Anderson’s pre-tax income: interest income from municipal
bonds of $25,000; accrued warranty costs, estimated to be paid in 2014, of
$85,000; and installment sales revenue of $70,000, which will be collected
in 2014. In additin, Anderson has on its books prepaid rent expense of
$30,000, which will be used in 2014. Assuming the enacted tax rate in
effect for 2013 and 2014 is 40%, what amount should Anderson record as the
net current deferred tax asset or liability for the year ended December 31,
2013? (Points : 7)

$6,000 deferred
tax liability
$6,000 deferred tax asset
$15,000 deferred tax liability
$15,000 deferred tax asset

Question 11.11.Corresponds
to CLO 3(c)
At December 31, 2013, Edwards Corporation reported a deferred tax liability
of $140,000 which was attributable to a taxable temporary difference of
$400,000. The temporary difference is scheduled to reverse in 2018. During
2014, a new tax law increased the corporate tax rate from 35% to 40%.
Edwards should record this change by debiting (Points : 7)

Income Tax
Expense for $14,000
Income Tax Expense for $20,000
Retained Earnings for $14,000
Retained Earnings for $20,000

Question 12.12.Corresponds
to CLO 3(d)
Operating income/(loss) and tax rates for Lombard Corporation for 2012
through 2015 were as follows: 2012: $100,000, 30%; 2013: $250,000, 35%;
2014: ($500,000), 35%; 2015: $600,000, 40%. Assuming that Lombard opts to
carryback its 2014 NOL, what is the amount of income tax payable at
December 31, 2015? (Points : 7)

$40,000
$140,000
$180,000
$240,000

Question 13.13.Corresponds
to CLO 4(a)
Granite Oaks Homebuilding, Inc. is a publicly traded corporation that
follows generally accepted accounting principles. Granite Oaks has a
defined benefit pension plan in place for its employees. Which of the
following measures should Granite Oaks use to determine the company’s
pension liability? (Points : 7)

Vested benefit
obligation
Accumulated benefit obligation
Projected benefit obligation
Granite Oaks may use anyof the above measures.

Question 14.14.Corresponds
to CLO 4(b)
Hathaway, Inc. sponsors a defined-benefit pension plan. The following data
relates to the plan for 2013: Contributions to the plan, $350,000; Service
cost, $425,000; Interest on projected benefit obligation, $360,000;
Amortization of prior service cost due to increase in benefits, $65,000;
Expected return on plan assets, $220,000. What amount should be reported
for pension expense in 2013? (Points : 7)

$1,070,000
$630,000
$350,000
$280,000

Question 15.15.Corresponds
to CLO 4(c)
Johnson, Inc. sponsors a defined-benefit pension plan. The following
balance sheet data relates to the plan on December 31, 2013: Plan assets
(at fair value), $1,000,000; Accumulated benefit obligation, $1,450,000;
Projected benefit obligation, $1,750,000. Contributions of $115,000 were
made to the plan during the year. What amount should Johnson report as its
pension liability on its balance sheet as of December 31, 2013? (Points :
7)

$635,000
$750,000
$1,450,000
$1,750,000

Question 16.16.Corresponds
to CLO 4(d)
Which of the following information about its pension plan would a company
normally be required to disclose in the notes to the financial statements?
(Points : 7)

The number of
employees enrolled in the defined-benefit plan.
The annual pension payments made to current retirees.
The amount of prior service cost changed or credited in previous years.
The rates used in measuring the benefit amounts.

Question 17.17.Corresponds
to CLO 5(a)
Which of the following should be treated as a change in accounting
principle? (Points : 7)

A change from
LIFO to FIFO for inventory valuation.
A change to a different method of depreciation for plant assets.
A change in the estimated useful life of plant assets.
A change from the cash basis of accounting to the accrual basis of
accounting.

Question 18.18.Corresponds
to CLO 5(b)
On January 1, 2011, Graham Corporation acquired machinery at a cost of
$450,000. Graham adopted the double-declining balance method of
depreciation for this machinery and had been recording depreciation over an
estimated useful life of 10 years, with no residual value. At the beginning
of 2013, a decision was made to change to the straight-line method of
depreciation for the machinery. The depreciation expense for 2013 should be
(Points : 7)

$20,057
$36,000
$45,000
$57,600

Question 19.19.Corresponds
to CLO 5(c)
During 2014, a construction company changed from the completed-contract
method to the percentage-of-completion method for accounting purposes but
not for tax purposes. Gross profit figures under both methods for the past
three years follow. Completed-Contract: 2012, $595,000; 2013, $730,000;
2014, $810,000. Percentage-of-Completion: 2012, $700,000; 2013, $850,000;
2014, $900,000. Assuming an income tax rate of 40% for all years, the
affect of this accounting change on prior periods should be reported by a
credit of (Points : 7)

$135,000 on the
2014retained earnings statement
$189,000 on the 2014retained earnings statement
$135,000 on the 2014income statement
$189,000 on the 2014income statement

Question 20.20.Corresponds
to CLO 5(d)
On January 10, 2012, Montgomery Corporation purchased machinery that cost
$750,000. The entire cost was recorded as an expense. The machinery has an
estimated useful life of 10 years and a $30,000 salvage value. Montgomery
uses the straight-line method to account for depreciation expense. The
error was discovered on December 29, 2013. Ignore income tax
considerations. Montgomery’s income statement for
the year ended December 31, 2013, should show the cumulative effect of this
error in the amount of (Points : 7)

$648,000
$576,000
$504,000
$-0-

Question 21.21.Corresponds
to CLO 6(a)
Selected information from Trolley Corporation’s 2013 accounting records is
as follows: Proceeds from sale of land, $150,000; Proceeds from long-term
borrowings, $325,000; Purchases of plant assets, $70,000; Purchases of
inventories, $300,000; Proceeds from sale of Trolley common stock,
$100,000. What is the net cash provided (used) by investing activities for
the year ended December 31, 2013? (Points : 7)

$425,000
$205,000
$80,000
$55,000

Question 22.22.Corresponds
to CLO 6(b)
Selected information from Maxwell Corporation’s 2013 accounting records is
as follows: Proceeds from issuance of common stock, $740,000; Proceeds from
issuance of bonds, $2,400,000; Cash dividends paid on common stock,
$200,000; Cash dividends paid on preferred stock paid, $80,000; Purchases
of treasury stock, $200,000.What is the net cash provided (used) by
financing activities for the year ended December 31, 2013? (Points : 7)

$3,060,000
$2,940,000
$2,860,000
$2,660,000

Question 23.23.Corresponds
to CLO 6(c)
A decrease in accounts receivable during a period would be reported in a
statement of cash flows, using the indirect method, as a(n) (Points : 7)

deduction from
net income in arriving at net cash flow from operating activites.
addition to net income in arriving at net cash flow from operating
activities.
cash inflow from investing activities.
cash inflow from financing activities.

Question 24.24.Corresponds
to CLO 6(d)
Which of the following formulas would a bank or an investor most likely not
use to evaluate a company’s cash flows? (Points : 7)

Quick ratio
Free cash flow
Current cash debt coverage ratio
Cash debt coverage ratio

Question 25.25.Corresponds
to CLO 7(a)
Which of the following statements best describes the full disclosure
principle? (Points : 7)

Companies may use
the cash-basis of accountingin the financial statements, as long as
accrual-basis amounts are disclosed in the notes to the financial statements.
Publicly traded companies should provide a balance sheet, income statement,
statement of cash flows, and statement of owners’ equity.
Companies provide information that is of sufficient importance to influence
the judgment and decisions of an informed user.
To be recognized in the main body of financial statements, an item should be
measurable with sufficient certainty, and be relevant and reliable.

Question 26.26.Corresponds
to CLO 7(b)
The following information pertains to Nolen Corporation and its divisions
for the year ended December 31, 2013:

Segments Total Revenue
(Unaffiliated)
A $600,000
B $100,000
C $500,000
D $650,000

Nolen has a reportable segment if that segment’s revenue exceeds (Points :
7)

$100,000
$0
$185,000
$65,000

Question 27.27.Corresponds
to CLO 7(c)
Under generally accepted accounting principles, (Points : 7)

all companies
that issue an annual report should issue interim financial reports.
the same accounting principles used for the annual report should be used for
interim reports.
the discrete view is the most appropriate approach to take in preparing
interim financial reports.
the integral approach is the most appropriate view to take in preparing
interim financial reports.

Question 28.28.Corresponds
to CLO 7(d)
Which of the following post-balance-sheet events would require adjustment
of the accounts before issuance of the financial statements? (Points : 7)

Issue of a large
amount of capital stock.
Loss on a lawsuit, the outcome of which was deemed uncertain at year end.
Retirement of the company president.
Loss of plant as a result of fire.