FAR practice

A corporation has prepared a 6% bond with a date of January 1, 2014. However, the bond is delayed and actually sold on February 1. The bond will mature in 5 years and requires interest payments on July 1 and January 1 of each year. The bond was sold to investors at par. What would the interest payable be credited as on A. $1.5K B. $0 C. $150 D. $900

C

Drillfast is a drilling corporation with operations at oil rigs around the world. For the 2014 annual report, which business segment should be reported as an operating segment? A. South American segment, which contributes 8% of total revenues, 5% of profits and accounts for 9% of assets. South American operating manager reports to the chief operating officer. B. African segment, which contributes to 9% of the company's assets, 16% of total revenues, and 18% of profits. The African operating manager reports to the British operating manager. C. Australian segment, which contributes 10% of total revenues, 2% of assets, and 4% of profits. The Australian manager reports to the chief operating officer. D. Texas based corporate headquarters.

C

Brayden corporation issues bond on 05/01 of year 1. The bonds are issued at 102% plus accrued interest, 100 of its 6% $1K bonds. The bonds are dated 01/01 year 1. The bonds mature on 01/05 year 5. Interest is payable semiannually on 01/01 and 07/01. Brayden paid the investment bank $7K for the bond issue costs. Based on the information above, Brayden would realize net cash receipts from the bond issuance of ... A. $97K B. $102K C. $99K D. $95K

A

Madden Company owns a tract of land, which it purchased in Year 1 for $100K. The land is held as a future plant site and has a fair market value of $140K on July 1, Year 4. Hall Company also owns a tract of land held as a future plant site. Hall paid $180K for the land in Year 3, and the land has a fair market value of $200K on July 1, Year 4. On this date, Madden exchanged its land and paid $50K cash for the land owned by Hall.It is expected that the cash flows from the two tracts of land will not be significantly different. At what amount should Madden record the land acquired in the exchange? A. $150K B. $160K C. $190K D. $200K

A

Of the following types of funds, which one would account for fixed assets like a "for-profit" organization? A. Enterprise Fund. B. General Fund. C. Internal Service Fund. D. Investment Trust Fund.

A

All of the items below are material items. However, which item should be presented in the income statement separately as an extraordinary item? A. Foreign currency hedging losses. B. Expropriation of oil field by Venezuelan government. C. Almond crop failure in California. D. Goodwill write-off.

B

As of December 31, year 1, Hunter Company had 100,000 shares of common stock issued and outstanding. In year 2, Hunter issued a 10% stock dividend on July 1. At the end of year 2 there were 30,000 unexercised stock options to purchase shares of common stock at $20 per share. During year 2, the average market price of Hunter's common stock was $36 per share. Year 2 net income was $860,000. For year 2, what are the diluted earnings per common share? A. $6.62 B. $6.97 C. $7.81 D. $6.14

B

On January 2, Year 4, Raft Corp. discovered that it had incorrectly expensed a $210K machine purchased on January 2, Year 1. Raft estimated the machine's original useful life to be 10 years and its salvage value to be $10K. Raft uses the straight-line method of depreciation and is subject to a 30% tax rate. In its December 31, Year 4, financial statements, what amount should Raft report as a prior period adjustment? A. $102.9K B. $105K C. $165.9K D. $168K

B

On January 8, Connor entered into a finance lease with a vendor for equipment. The finance lease for seven years. The equipment had no guaranteed residual value. Under the lease terms, Connor had to pay $400,000 annually on January 8. At the inception of the lease, the present value of an annuity due for seven years was 4.15. What amount should Connor capitalize as leased equipment? A. $400K B. $1.66M C. $2.06M D. $2.8M

B

Sun Co. is a wholly owned subsidiary of Star Co. Both companies have separate general ledgers and prepare separate financial statements. Sun requires standalone financial statements. Which of the following statements is correct? A. Consolidated financial statements should be prepared for both Star and Sun. B. Consolidated financial statements should be prepared only by Star and not by Sun. C. After consolidation, the accounts of both Star and Sun should be changed to reflect the consolidated totals for future ease in reporting. D. After consolidation, the accounts of both Star and Sun should be combined into one general-ledger accounting system for future ease in reporting.

B

Tristan, Inc. operates a business manufacturing bamboo cell phone cases. He purchased a wood engraving machine in January year 1 for $30,000 and the estimated useful life was 10 years. The engraving machine was being depreciated using the straight-line method and has no salvage value. In year 5, Tristan, impressed with the machine, decides to extend the useful life to 12 years. What amount of depreciation expense should Tristan report in its financial statements for the year ending December 31, year 5? A. $4.5K B. $2.25K C. $1.8K D. $3K

B

In a statement of cash flows, receipts from the issuance of debt in order to purchase a manufacturing machine should be classified as cash inflows from A. Capital Investing activities. B. Operating activities. C. Financing activities. D. Investing activities.

C

The initial amount recorded by a lessee as a liability in a finance lease should: A. Exceed the present value at the beginning of the lease term of minimum lease payments during the lease term. B. Exceed the total of the minimum lease payments during the lease term. C. Not exceed the fair value of the leased property at the inception of the lease. D. Equal the total of the minimum lease payments during the lease term.

C

Wolf Co.'s grant of 30,000 stock appreciation rights enables key employees to receive cash equal to the difference between $20 and the market price of the stock on the date each right is exercised. The service period is Year 1 through Year 3, and the rights are exercisable in Year 4 and Year 5. The market prices of the stock were $25 and $28 at December 31, Year 1 and Year 2, respectively. What amount should Wolf report as the liability under the stock appreciation rights plan in its December 31, Year 2, balance sheet? A. $0 B. $130K C. $160K D. $240K

C

A lease contains a bargain purchase option. In determining the lessee's capitalizable cost at the beginning of the lease term, the payment called for by the bargain purchase option would A. Be added to the residual value. B. Not be capitalized C. Be subtracted at its present value. D. Be added at its present value.

D

The premium on a 3-year insurance policy expiring on December 31, Year 3, was paid in total on January 1, Year 1. Assuming that the original payment was initially debited to an expense account and that appropriate adjusting entries have been recorded on December 31, Year 1 and Year 2, the balance in the prepaid asset account on December 31, Year 2, would be ... A. Zero. B. Lower than the balance on December 31, Year 3. C. The same as the original payment. D. The same as it would have been if the original payment had been initially debited to a prepaid asset account.

D

Which of the following is not an accrued expense? A. A company prepays for Internet services for one month in advance. B. The lawn maintenance company has completed sprinkler maintenance services yet has not issued an invoice as of yet. C. You receive delivery of a computer on May 5 and the invoice won't post until after June 1. D. The office supply store delivers merchandise and your corporate account is billed. You have 90 days to make the payment.

D