Intermediate ACC Final

Colson Inc. declared a $230,000 cash dividend. It currently has 12,000 shares of 5%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Colson distribute to the common stockholders? A) $120,000 B) $110,000 C) $170,000 D) $0

$110,000

ABC Company purchased a 30% investment in XYZ Inc. for $2,400,000 on January 1, 2025. ABC is correctly accounting for this investment using the equity method. After accounting for dividends received and investee net income, ABC Company reported its investment in XYZ Inc. at $2,600,000 on December 31, 2025. On January 1, 2026, XYZ Inc. issued additional shares of stock to the public, thereby reducing ABC Company's ow from 30% to 15%. The following information is also reported: ABC share of XYZ Income XYZ Dividends Received 2026 2027 2028 $600.000 $350.000 -0- $400.000 $400,000 $210,000 What value would be reported for XYZ investment at December 31, 2026 on ABC Comp. Balance Sheet? A) $2,400,000 B) $2,600,000 C) $2,800,000 D) $3,200,000

$2,600,000

Acme Corporation has a defined-benefit pension plan covering its 1000 employees. Acm to amend its pension benefits. The prior service cost associated with the amendment is S: The employees are grouped according to expected years of retirement, as follows: Group A D Number of Employees 175 290 415 120 Expected Retirement on December 31 2025 2026 2027 2028 What is the cost per service year? A) $125.000 B) $201.61 C) $5.000 D) $5201,613

$201.61

Anders, Inc., has 15,000 shares of 4%, $100 par value, cumulative preferred stock and60,000 shares of $1 par value common stock outstanding at December 31, 2026. There were no dividends declared in 2024. The board of directors declares and pays a $110,000 dividend in 2025 and 2026. What is the amount of dividends received by the common stockholders in 2026? A) $40,000 B) $60,000 C) $0 D) $110,000

$40,000

Hernandez Company has 560,000 shares of $10 par value common stock outstanding. During the year, Hernandez declared a 15% stock dividend when the market price of the stock was $30 per share. Four months later Hernandez declared a $.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased bv A) $1.260.000. B) $420,000. C) $2,842,000. D) $462,000.

$462,000.

On June 30, 2026, when Ermler Co.'s stock was selling at $65 per share, its capital accour 28) _ as tollows• Capital stock (par value $50; 60,000 shares issued) Premium on capital stock Retained earnings $3.000.000 600.000 4,200,000 If a 100% stock dividend were declared and distributed, capital stock would be A) $6,000,000 B) $7,800,000 C) $3,000,000 D) $3,600,000

$6,000,000

At the end of 2024, its first year of operations, Hopkins Company prepared a reconciliatio 95) between pretax financial income and taxable income as follows:Pretax financial incomeEstimated litigation expenseExtra depreciation for taxesTaxable income R $3,000,000 4.000.000 (6.000.000) $1.000,000 The estimated litigation expense of $4,000,000 will be deductible in 2025 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2,000,000 in each of the next three years. The income tax rate is 20% for all years. The deferred tax asset to be recognized is A) $200,000. B) $800,000. C) $400,000. D) $600.000.

$800,000.

Wu, Inc. follows IFS for its external financial reporting. The statement of cash flows reports changes in cash and cash equivalents. Which of the following is not considered cash or a cash equivalent under IFS? A) Accounts receivable B) Bank overdrafts C) Commercial paper D) Coin

Accounts receivable

How should cumulative preferred dividends in arrears be reported in a corporation's balance sheet? A) Increase in stockholders' equity B) Increase in current liabilities C) Note disclosure D) Increase in current liabilities for the amount expected to be declared within the year or the corporation's operating cycle, and increase in long-term liabilities for the balance

Note disclosure

What are compensated absences? A) A form of healthcare C) Payroll deductions B) Unpaid time off D) Paid time off

Paid time off

9) Under IRS, for which of the following areas might a provision be recognized in the financial statement? A) Strike B) Warranties C) Possibility of war D) Business recession

Warranties

If a lease transfers control (or ownership) of the underlying asset to the lessee, then the lease is classified as an) A) financing lease. C) operating lease. B) operating or financing lease. D) leveraged lease.

financing lease.

Bonds that pay no interest unless the issuing company is profitable are called A) revenue bonds. B) income bonds. C) debenture bonds. D) collateral trust bonds.

income bonds.

Liabilities are A) deferred credits that are recognized and measured in conformity with generally accepted accounting principles. B) any accounts having credit balances after closing entries are made. C) obligations to transfer ownership shares to other entities in the future. D) obligations arising from past transactions and payable in assets or services in the future.

obligations arising from past transactions and payable in assets or services in the future.

The sale of an extended warranty is recorded as A) an assurance type warranty which is included in the sales price of the product. B)an expense in the period when the goods or services are sold. C) revenue in the period(s) in which the service-type warranty is in effect. D) a warranty liability for all costs incurred after sale due to correction of defects

revenue in the period(s) in which the service-type warranty is in effect.

Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses are A) securities where a company has holdings of between 20% and 50%. B) securities where a company has holdings of less than 20%. C) securities where a company has holdings of more than 50%. D) securities where a company has holdings of more than 20%.

securities where a company has holdings of less than 20%.

"Gains trading" involves A) reporting investment securities at fair value but liabilities at amortized cost. B) moving securities whose value has decreased since acquisition from available-for-sale to held-to-maturity to avoid reporting losses. C) selling securities whose value has increased since acquisition (winners) while holding those whose value has decreased since acquisition losers). D) All of the above are considered methods of "gains trading" or "cherry-picking."

selling securities whose value has increased since acquisition (winners) while holding those whose value has decreased since acquisition losers).

Blanco Company purchased 200 of the 1,000 outstanding shares of Darby Company's common stock for $600,000 on January 2, 2025. In 2025, Darby declared dividends of $100,000 and reported earnings of $400,000. If Blanco uses the equity method of accounting for its investment in Darby Company, the balance in Equity Investments (Darby) at December 31, 2025 will be A) $600,000. B) $680,000. C) $660.000. D) $580,000.

$660.000.

Harrison Company owns 20,000 of the 50,000 outstanding shares of Taylor, Inc. common stock. During 2025, Taylor earns $1,200,000 and pays cash dividends of $960,000. If the beginning balance in the investment account was $750,000, the balance at December 31, 2025 is A) $846,000. B) $990,000. C) $750,000. D) $1,230,000.

$846,000.

Foxtrot Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the face value by the table value for A) 10 periods and 10% from the present value of 1 table. B) 20 periods and 4% from the present value of 1 table. C) 10 periods and 8% from the present value of 1 table. D) 20 periods and 5% from the present value of 1 table.

20 periods and 4% from the present value of 1 table.

Companies are required to disclose the total of each of the following except A) the total valuation allowance. B) all deferred tax assets. C) all deferred tax liabilities. D) All of these choices must be disclosed.

All of these choices must be disclosed.

The first step in preparing the statement of cash flows requires the use of informationincluded in which comparative financial statements? A) Income statements B) Statements of retained earnings C) Statements of cash flows D) Balance sheets

Balance sheets

Partial satisfaction of multiple performance obligations is reported on the balance sheet A) receivable. B) contract liability. C) unearned service revenue D) Contract asset.

Contract asset.

What does the current ratio reveal about a company? A) The company's liquidity B) The extent of slow-moving inventories C The efficient use of assets D) The company's profitability

The company's liquidity

Carr Corporation retires its $500,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $518,725. Carr's entry to record the redemption will include a A) debit of $25,000 to Premium on Bonds Payable B) credit of $18,725 to Loss on Bond Redemption. C) debit of $18,725 to Premium on Bonds Payable. D) credit of $6,275 to Gain on Bond Redemption.

debit of $18,725 to Premium on Bonds Payable.

Brown Corporation earns $720,000 of net income and pays cash dividends of $240,000during 2025. Dexter Corporation owns 3,000 of the 10,000 outstanding shares of Brown. What will Dexter report in the investment account at December 31, 2025 if the beginning of the year balance in the account was $960,000? A) $1,104,000 B) $1,176,000 C) $1.440,000 D) $960,000

$1,104,000

64) On January 2, 2025, Hanson Leasing Company leases equipment to Foley Co. with 5 equal annual payments of $240,000 each, payable beginning January 2, 2025. Foley Co. agrees to guarantee the $150,000 residual value of the asset at the end of the lease term. The expected value of the residual is $O. Foley's incremental borrowing rate is 10%, however it knows that Hanson's implicit interest rate is 8%. The journal entry Hanson mal January 2, 2025 includes a debit to right-of-use asset for? PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 5 periods 10%, 5 periods 4.31213 4.16986 3.99271 3.79079 .68508 62092 A) $1,061,013. B) $1,137,673. C) $897.674. D) $1.034 911

$1,137,673.

Hayes Construction Corporation contraded lo constructa building for $7,00,00 Constr 34 B began in 2024 and was completed in 2025. Data relating to the contract are summarized Costs incurred Estimated costs to complete Year ended December 31. 2024 2025 $3,000,000 $2,250,000 2,000,000 Hayes uses the percentage-of-completion method as the basis for income recognition. For years ended December 31, 2024, and 2025, respectively, Hayes should report gross profit A) $1,500,000 and $750,000. B)$1.350,000 and $900,000. C) $0 and $2,250,000. D) $4,500,000 and $3,000,000.

$1,500,000 and $750,000.

Bruner Constructors. Inc. has consistently used the percentage-of-completion method ofrecognizing income. In 2024, Bruner started work on a $49.000.000 construction contrac completed in 2025. The following information was taken from Bruner's 2024 accounting $15,400,000 Progress billings Costs incurred Collections Estimated costs to complete 14,700,000 9,600,000 29.400.000 42) What amount of gross profit should Bruner have recognized in 2024 on this contract? A) $3,266,667 B) $2,450,000 C) $4.900,000 D) $1,633,331

$1,633,331

Ernst Company purchased equipment that cost $3,000,000 on January 1, 2023. The entire cost was recorded as an expense. The equipment had a nine-year life and a $120,000 residual value. Ernst uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2025. Ernst is subject to a 20% taxrate. Before the correction was made and before the books were closed on December 31. 2025, retained earnings was understated by A) $1,770,000. B) $1,888,000. C) $2,400,000. D) $1,792,000.

$1,888,000.

A company issues $25,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2024. Interest is paid on June 30 and December 31. The proceeds from the bonds are $24,505,201. If the effective-interest method of amortization is used, what amount of interest expense will be recognized in 2024? A) $1,950,000 B) $1,960,415 C) $975,000 D) $1,960,624

$1,960,624

Horner Corporation has a deferred tax asset at December 31, 2026 of $200,000 due to the recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates are as follows: 30% for 2023-2025; 25% for 2026; and 20% for 2027 and thereafter. Assuming that management expects that only 50% of the related benefits will be realized, a valuation account should be established in the amount of A) $35,000. B)$100,000. C) $30,000 D) $40.000

$100,000.

38) In 2024, Woods Company purchased 80,000 shares of Holmes Corporation common stock for $1.260.000 as an equity investment. The fair value of these shares was $1,200,000 at December 31, 2024. Woods sold all of the Holmes stock for $17 per share on December 3. 2025. incurring $56.000 in brokerage commissions. Woods Company should report a realized gain on the sale of stock in 2025 of A) $160.000. B) $104.000. C) $100,000. D) $44,000.

$104.000.

Mitchell Corporation prepared the following reconciliation for its first year of operations:Pretax financial income for 2025 $1,800,000Tax-exempt interest (150,000)Originating temporary difference. (350.000) Taxable income $1,300,000 The temporary difference will reverse evenly over the next two years at an enacted tax rat 30%. The enacted tax rate for 2025 is 25%. What amount should be reported in its 2025 income statement as the deferred portion of it tax expense? A) $125,000 debit C) $105.000 credit B $125.000 credit D) $105,000 debit

$105,000 debit

87) On December 31, 2025, the stockholders' equity section of Ardt, Inc., was as follows: Common stock, par value $10; authorized 30,000 shares; issued and outstanding 9,000 shar&s 90,000 Additional paid-in capital 116,000 Retained earnings _184.000 Total stockholders' equity $390.000 On March 31, 2026, Arndt declared a 10% stock dividend, and accordingly 900 additiona were issued, when the fair value of the stock was $18 per share. For the three months end March 31, 2026, Arndt sustained a net loss of $40,000. The balance of Art's retained ea of March 31, 2026 is A) $136,800. B) $127,800. C) $135.000. D) $144,000.

$127,800.

The accumulated benefit obligation measures A) the pension obligation based on the plan formula applied to years of service to date and based on existing salary levels. B) the level cost that will be sufficient, together with interest to provide the total benefits at retirement. C) the pension obligation based on the plan formula applied to years of service to date and based on future salary levels. D) the shortest possible period for funding to maximize the tax deduction.

the pension obligation based on the plan formula applied to years of service to date and based on existing salary levels.

When a company receives property, goods, or services in exchange for a note payable, the stated interest rate is presumed to be fair unless A) the imputed interest rate cannot be calculated. B) the stated face amount of the debt instrument is materially different from the current cash sales price for the same or similar items. C) the market rate of interest is higher. D) the prime interest rate is lower.

the stated face amount of the debt instrument is materially different from the current cash sales price for the same or similar items.

Pember Corporation started business in 2015 by issuing 200,000 shares of $20 par common stock for $27 each. In 2025, 25,000 of these shares were purchased for $39 per share by Pember Corporation and held as treasury stock. On June 15, 2026, these 25,000 shares were exchanged for a piece of property that had an assessed value of $760,000.Pember's stock is actively traded and had a market price of $45 on June 15, 2026. The cost method is used to account for treasury stock. The amount of paid-in capital from treasury stock transactions resulting from the above events is A) $450,000 B) $215,000 C) $150,000 D) $750,000

$150,000

Yoder, Ino. has 150,00 shares of SI0 par value common stock and 75,000 shares of S10 24) D par value, 4%, cumulative, participating preferred stock outstanding. Dividends on the preferred stock are one year in arrears. Assuming that Yoder wishes to distribute $270,000 as dividends, the common stockholders will receive A) $60,000 B) $160,000 C $110.000 D)$210,000

$160,000

Nagel Co.'s prepaid insurance was $190,000 at December 31, 2024 and $90,000 at December 31, 2023. Insurance expense was $62,000 for 2024 and $54,000 for 2023. What amount of cash disbursements for insurance would be reported in Nagel's 2024 net cash provided by operating activities presented on a direct basis? A) $128,000 B) $62,000 C) $162,000 D) $198,000

$162,000

The following information relates to Jackson, Incorporated: For the Year Ended December 31. Plan assets (at fair value) Pension expense Projected benefit obligation Annual contribution to plan Accumulated OCI (PSC) 2025 2026 $2,040,000 $2,736,000 855,000 675,000 2.430,000 2,901,000 900.000 675,000 720.000 630.000 The amount reported as the liability for pensions on the December 31, 2026 balance sheet A) $2,901,000. B) $-0-. C) $630,000. D) $165,000.

$165,000.

On January 1, 2026, Newlin Co. has the following balances:Projected benefit obligationFair value of plan assets $3.500,000 3,000,000 The settlement rate is 10%. Other data related to the pension plan for 2026 are: Service cost Amortization of prior service costs due to increase in benefits Contributions Benefits paid Actual return on plan assets Amortization of net gall $300,000 100.000 500,000 225,000 395.000 30.000 The fair value of plan assets at December 31, 2026 is A) $3,670,000. B) $3,440,000. C) $3,895,000. D) $3.500,000.

$3,670,000.

93) In 2024, Gates Corp. started a construction job with a total contract price of $21,000,000. 93) was completed on December 15, 2025. Additional data are as follows: 2024 2025 Actual costs incurred during the year Estimated remaining costs Billed to customer Received from customer $8.100.000 $9.150,00( 8.100.000 7.200.000 13.800,00( 6.000.000 14,400,00( Under the cost-recovery method, what amount of gross profit should Gates recognize for: A) $1.350.000 B $2,850,000 C)$3,750,000 D) $1,875,000

$3,750,000

In 2025, Eaton Co. introduced a new product carrying a two-year warranty against defects 2) estimated warranty costs related to dollar sales are 2% within 12 months following the sal 4% in the second 12 months following the sale. Sales and actual warranty expenditures fo years ended December 31, 2025 and 2026 are as follows: Sales 2025 $ 800,000 2026 1,000.000 $1.800.000 Actual Warranty Expenditures 2025 $12,000 2026 35,000 $47,000 At December 31, 2026, (assuming the accrual method) Eaton should report an estimated liability of A) 35,000 B) $61,000 C) $0 D) $25,000

$61,000

Equipment was purchased at the beginning of 2022 for $850,000. At the time of its purchase, the equipment was estimated to have a useful life of six years and a salvage value of $100,000. The equipment was depreciated using the straight-line method of depreciation through 2024. At the beginning of 2025, the estimate of useful life was revised to a total life of eight years and the expected salvage value was changed to $62,500. The amount to be recorded for depreciation for 2025, reflecting these changes in estimates, is A) $82,500 B) $98,438. C) $95,000. D) $51,562.

$82,500

Swift Company purchased a machine on January 1, 2022 for $900,000. At the date of acquisition, the machine had an estimated useful life of six years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2025, Swift determined, as a result of additional information, that the machine had an estimated useful life of eight years from the date of acquisition with no salvage. An accounting chan made 1n 2025 to reflect this additional information What amount of depreciation expense on this machine should be charged in Swift's income statement for the year ended December 31, 2025? A) $225.000 B)$90,000 C) $180,000 D) $112,500

$90,000

Composite provides extended service contracts on electronic equipment sold through major retailers. The standard contract is for four years. During the current year, Composite provided 42,000 such warranty contracts at an average price of $162 each. The company s $800,000 servicing the contracts during the current year and expects to spend $4,200,000 in the future. What is the net profit that the company will recognize in the current year related to these contracts? A) $6,004,000 B) $1,804,000 C) $800,000 D) $901,000

$901,000

Which of the following statements is correct? A) Correction of an error related to a prior period should be considered as an adjustment to current year net income. B) A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate. C) Changes in accounting principle are always handled only in the current or prospective period. D) Prior statements should be restated for changes in accounting estimates.

A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate.

When preparing a statement of cash flows (indirect method), which of the following is not an adiustment to reconcile net income to net cash provided by operating activities? A) A change in income taxes payable B) A change in dividends payable C) A change in interest payable D) All of these are adjustments.

A change in dividends payable

Presented below is information related to Jensen Inc.'s pension plan for 2026: 57) Service cost Actual return on plan assets Interest on projected benefit obligation Amortization of net loss Amortization or prior service cost due to increase in benefits $1,360,000 240,000 520.000 120.000 220,000 What amount should be reported for pension expense in 2026 if the actual return equals the expected return on plan assets? A) $1,980,000 B) $2,180,000 C) $1,940,000 D) $1,700,000

A) $1,980,000

A temporary difference arises when a revenue item is reported for tax purposes in a period A) After it is reported in financial income - Yes; Before it is reported in financial income - No B) After it is reported in financial income - No; Before it is reported in financial income - No. C) After it is reported in financial income - Yes; Before it is reported in financial income - Yes. D) After it is reported in financial income - No; Before it is reported in financial income - Yes.

After it is reported in financial income - Yes; Before it is reported in financial income - Yes.

Which of the following is not a correct statement about federal income taxes? A) Because of differences between tax rules and GAAP, the amount reported by corporation as expense may differ from the amount of taxes paid. B) Federal income taxes are an expense of the seller. C) Corporations pay federal income taxes but partnerships do not. D) All of these are correct statements about federal income taxes.

All of these are correct statements about federal income taxes.

Which of the following sets of conditions would give rise to the accrual of a contingency 117 Cunder current generally accepted accounting principles? A) Event is unusual in nature and the likelihood of occurrence is possible. B) Event is unusual in nature and the likelihood of occurrence is probable. C) Amount of loss is reasonably estimable and the likelihood of occurrence is probable. D) Amount of loss is reasonably estimable and the likelihood occurrence is possible.

Amount of loss is reasonably estimable and the likelihood of occurrence is probable.

Unruh Corp. and its divisions are engaged solely in manufacturing operations. The follow pertain to the segments in which operations were conducted for the year ended December 2026. A Industry D Revenue $ 8,000,000 6,400,000 4,800,000 2,400,000 3.400,000 1,200.000 $26.200.000 Profit $1,320,000 1,120,000 960.000 440.000 540.000 180.000 $4.560.000 Assets 12/31/26 $16.000,000 14.000.000 10.000,000 5,200,000 5,600,000 2.400.000 $53.200.000 In its segment information for 2026, how many reportable segments does Unruh have? A) Four B) Six C) Five D) Three

Four

Pierson Corporation owned 15,000 shares of Hunter Corporation. These shares were purchased in 2022 for $135,000. On November 15, 2026, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a stockholder. On that date, when the market price of Hunter was $28 per share, there were 135,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would resul from this property dividend? A) Gain -$256,500; Net Reduction in Retained Earnings - $121,500 B) Gain - $0; Net Reduction in Retained Earnings - $121,500 C) Gain -$256,500; Net Reduction in Retained Earnings - $34,000 D) Gain - $O; Net Reduction in Retained Earnings - $378,000

Gain -$256,500; Net Reduction in Retained Earnings - $121,500

Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to A) the market rate multiplied by the beginning-of-period carrying amount of the bonds B) the stated (nominal) rate of interest multiplied by the face value of the bonds. C) the stated rate multiplied by the beginning-of-period carrying amount of the bonds. D) he market rate of interest multiplied by the face value of the bonds.

the market rate multiplied by the beginning-of-period carrying amount of the bonds

Harlan Mining Co. has recently decided to go public and has hired you as an independent 103).One statement that the enterprise is anxious to have prepared is a statement of cash flows.Financial statements for 2025 are provided below. COMPARATIVE BALANCE SHEETS The following additional data were provided: Dividends for the year 2025 were $192,000. During the year, equipment was sold for $240,000. This equipment cost $352,000 orig and had a book value of $288,000 at the time of sale. The loss on sale was incorrectly cha cost of sales. All depreciation expense is in the selling expense category.Under the direct method, the total amount of cash paid for taxes is A) $96.000. B)$136,000 C) $56,000. D) $40.000.

$136,000

A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2024. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14,703,120. If the effective-interest method of amortization is used, what carrying value will be reported for the bonds on the December 31, 2024 balance sheet? A) $14,706,232 B) $15,000,000 C) $14,709,495 D) $14,718,844

$14,709,495

Which of the following is not correct concerning trading securities? A) Any discount or premium is amortized. B) They are held with the intention of selling them in a short period of time. C) Unrealized holding gains and losses are reported as part of net income. D) All of these choices are correct.

All of these choices are correct.

The right-of-use asset is increased by A) lease prepayments made by the lessee and initial direct costs incurred by the lessee. B) prepaid lease payments only. C) initial direct costs incurred by the lessee only. D) lease incentives received.

lease prepayments made by the lessee and initial direct costs incurred by the lessee.

13) Foxtrot Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to A) multiply $5,000 by the table value for 20 periods and 4% from the present value of an annuity table. B) multiply $ 10,000 by the table value for 10 periods and 10% from the present value of an annuity table. C) multiply $10,000 by the table value for 20 periods and 4% from the present value of an annuity table. D) multiply $10,000 by the table value for 20 periods and 5% from the present value ofan annuitv table

multiply $5,000 by the table value for 20 periods and 4% from the present value of an annuity table.

An employee's net pay is determined by gross earnings minus amounts for income tax withholdings and the employee's A) portion of FICA taxes and any union dues B) portion of FICA taxes, unemployment taxes, and any union dues. C) portion of FICA taxes and unemployment taxes. D) and employer's portion of FICA taxes, and unemployment taxes.

portion of FICA taxes and any union dues

In a lease that is recorded as a sales-type lease by the lessor, interest revenue A) should be recognized over the period of the lease using the effective interest method. B) does not arise C) should be recognized over the period of the lease using the straight-line method D) should be recognized in full as revenue at the lease's inception.

should be recognized over the period of the lease using the effective interest method.

A reclassification adjustment is reported in the A) income statement as an Other revenue or expense B) statement of comprehensive income as other comprehensive income. C) statement of stockholders' equity. D) stockholders' equity section of the balance sheet.

statement of comprehensive income as other comprehensive income.

Blanco Company purchased 200 of the 1,000 outstanding shares of Darby Company's common stock for $600,000 on January 2, 2025. In 2025, Darby declared dividends of $100,000 and reported earnings of $400,000. If Blanco uses the fair value method ofaccounting for its investment in Darby, the balance in Equity Investments (Darby) on December 31, 2025 should be A) $660.000. B) $680,000. C) $580,000. D) $600,000.

$600,000.

The adjusted trial balance for Lifesaver Corp. at the end of 2025 included the following are 5-year Bonds Payable 8% Interest Payable Premium on Bonds Payable Notes Payable (3 months.) Notes Payable (5 ут.) Mortgage Payable ($15,000 due currently) Salaries and Wages Payable Income Taxes Payable (due 3/15 of 2026) $3,000,000 50.000 100.000 40.000 165.000 200.000 18.000 25.000 The total long-term liabilities reported on the balance sheet are A) $3,350,000 B) $3,365,000 C) $3,465,000 D) $3,450,000

$3,450,000

On January 2, 2025, Hernandez, Inc. signed a ten-year noncancelable lease for a heavy-du 124) press. The lease stipulated annual payments of $300,000 starting at the beginning of the fi with title passing to Hernandez at the expiration of the lease. Hernandez treated this trans: as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Hernandez uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $2,027,706, based on implicit intere 10%.In its 2025 income statement, what amount of interest expense should Hernandez report fo lease transaction? A) $180,000 B) $0 C) $172,771 D) $150,000

$172,771

Pye Company leased equipment to the Polan Company on July 1, 2025, for a ten-year period expiring June 30, 2036. Equal annual payments under the lease are $240,000 and are due on July 1 of each year. The first payment was made on July 1, 2025. The rate of interest contemplated by Pye and Polan is 9%. The lease receivable before the first payment is $1,680,000 and the cost of the equipment on Pye's accounting records was $1,488,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Pye, what is the amount of profit on the sale and the interest revenue that ye would record for the year ended December 31, 2025? A) $192,000 and $64,800 B) $192,000 and $151,200 C) $192,000 and $129.600 D) $0 and $0

$192,000 and $64,800

On August 5, 2024, Famous Furniture shipped 40 dining sets on consignment to Furniture Outlet. Inc. The cost of each dining set was $350. The cost of shipping the dining sets amounted to $3,600 and was paid for by Famous Furniture. On December 30 2024, the consignee reported the sale of 30 dining sets at $850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense ot $600, and installation and setup costs of $780. The amount of cash received by Famous furniture from the Furniture Outlet. Inc. A) $25,500. B) $23.370 C) $23.970 D) $22,590.

$22,590.

Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $520,000. How much of the proceeds would he allocated to the common stock! A) $236,364 B) $283,636 C) $250,000 D) $276,250

$236,364

116) In January 2026, Post, Inc, estimated that its year-end bonus to executives would be $960,000 for 2026. The actual amount paid for the year-end bonus for 2026 was $880,000. The estimate for 2026 is subject to year-end adjustment. What amount, if any, of expense should be reflected in Post's quarterly income statement for the three months ended March 31, 2026? A) $960.000 B) $220,000 C) $ -0- D) $240,000

$240,000

On October 1, 2024 Macklin Corporation issued 5%, 10-year bonds with a face value of $6,000,000 at 104. Interest is paid on October 1 and April 1, with any premium or discount amortized on a straight-line basis. The entry to record the issuance of the bonds will include a credit of A) $5,760,000 to Bonds Payable. B) $240,000 to Discount on Bonds Payable. C) $240,000 to Premium on Bonds Payable. D) $150,000 to Interest Payable

$240,000 to Premium on Bonds Payable.

Partial financial statements for 2023 and 2024 for Kiner Company are given below: Balance Sheet December 31.2023 Assets Cash Accounts receivable Buildings and equipment Accumulated depreciation buildings and equipment Patents Liabilities & Equity $ 960,000 Accounts payable $ 456,000 864,000 3,600,000 (1,200,000) 432.000 $4.656.000 Common stock2,760,000 Retained earnings_1,440.000 $4.656.000 Statement of Cash Flows For the Year Ended December 31, 2024 Increase (Decrease) in Cash Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Increase in accounts receivable Increase in accounts payable Depreciation-buildings and equipment Gain on sale of equipment Amortization of patents 72.000 Net cash provided by operating activities 1,272,000 Cash flows from investing activities Sale of equipment Purchase of land Purchase of buildings and equipment $1.200.000 § (384,000) 192,000 360,000 (144,000) 48.000 288,000 (600,000) (1.152,000)Net cash used by investing activities (1,464,000) Cash flows from financing activities Payment of cash dividend Sale of common stock Net cash provided by financing activities 600.000 Net increase in cash 408.000 Cash, January 1, 2024 960.000 Cash, December 31, 2024 $1.368.000 (360,000) 960.000 Total assets on the balance sheet at December 31, 2024 are $6,648,000. Accumulated depreciation on the equipment sold was $336,000. The book value of the buildings and equipment reported on the December 31, 2024 balan WaS A) $3,048,000. B) $3,528,000. C)S3,120,000. D) $4,272,000.

$3,048,000.

Horner Construction Co. uses the percentage-of-completion method. In 2024, Horner beg on a contract for $22,000,000; it was completed in 2025. The following cost data pertain 1 Year Ended December 31 2024 2025 $7,800,000 $5,600,000 Cost incurred during the year 5.200,000 Estimated costs to complete at the end of year The amount of gross profit to be recognized on the income statement for the year ended December 31, 2025 is A) $3,600,000. B) $8,600,000. C) $3,440,000. D) $3,200,000.

$3,200,000.

The following information relates to the pension plan for the employees of Turner Compa 1/1/25 12/31/25 12/31/26 Accum. benefit obligation $12,600,000 Projected benefit obligation Fair value of plan assets AOCI - net (gain) or loss $9,240,000 $9.660.000 9,765,000 8,925,000 -0- (1,680,000) 10.458.000 14,007,00( 10.920,000 12,054,00 (1,512,000) Settlement rate (for year) Expected rate of return (for year) 11% 8% 11% 7% Turner estimates that the average remaining service life is 16 years. Turner's contribution was $1,323,000 in 2026 and benefits paid were $987,000. The unexpected gain or loss on plan assets in 2026 is A) $375,480 gain B) $33,600 gain. C) $68,880 loss D) $39,480 gain.

$33,600 gain.

A company offers a cash rebate of $1 on each $4 package of light bulbs it sells during 2026. Historically, 10% of customers mail in the rebate form. In 2026, 3,750,000 packages of light bulbs are sold, and 200,000 $1 rebates are mailed to customers. What are the rebate expense and liability, respectively, shown on the 2026 financial statements? A) $375,000; $375,0009 B) $175,000; $175,000 C) $375,000; $175,000 D) $200,000; $175,000

$375,000; $175,000

At the beginning of 2026, Flaherty Company had retained earnings of $400,000. During the year Flaherty reported net income of $ 100,000, sold treasury stock at a "gain" of $36,000, declared a cash dividend of $60,000, and declared and issued a small stock dividend of 3,000 shares ($10 par value) when the fair value of the stock was $20 per share. The amount of retained earnings available for dividends at the end of 2026 was A) $416,000 B) $446,000 C) $410,000 D) $380,000

$380,000

Geary Co. leased a machine to Dains Co. Assume the lease payments were made on the b 99) that the residual value was guaranteed and Geary gets to recognize all the profits. At the e lease term, before the lessee transfers the asset to the lessor, the leased asset and liability accounts have the following balances: Right-of-Use Asset Less accumulated depreciation-finance lease Interest payable Lease liability $400,000 384.000 $ 16.000 § 1,520 14.480 $16.000 If, at the end of the lease, the fair value of the residual value is $11,800, what gain or loss Dains record? A) $6,280 loss B) $11,800 gain C) $2.680 gain D) $4,200 loss

$4,200 loss

At the beginning of 2024, Winston Corporation issued 10% bonds with a face value of $4,000,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $3,705,578 to yield 12%. Winston uses a calendar-year reporting period. If the effective-interest method of amortization is used, what amount of interest expense should be reported for 2024? (Round your answer to the nearest dollar.) A) $444,666 B) $446,010 C) $458,880 D) $443,334

$446,010

On January 1, 2025, Gore, Inc. purchased a machine for $2,250,000 which will be depreciated by $225,000 per year for financial statement reporting purposes. For income tax reporting, Gore elected to expense $250,000 and to use straight-line depreciation which will allow a cost recovery deduction of $200,000 for 2025. Assume a present and future enacted income tax rate of 20%. What amount should be added to Gore's deferred income tax liability for this temporary difference at December 31, 2025? A) $40,000 B) $50,000 C) $90.000 D) $45,000

$45,000

Didde Corp. prepared the following reconciliation of income per books with income per for the year ended December 31, 2025:Book income before income taxes$2, 700,000Add temporary differenceConstruction contract revenue that will reverse in 2026,000Deduct temporary differenceDepreciation expense that will reverse in equal amounts in each of the next four years (960.000)Taxable income $1,980,000 Didde's effective income tax rate is 25% for 2025. What amount should Didde report in it income statement as the current provision for income taxes? A) $735,600 B) $495,000 C) $675,000 D) $60,000

$495,000

On January 1, 2026, Parks Co. has the following balances: Projected benefit obligation Fair value of plan assets $5.600.000 5.000.000 The settlement rate is 10%. Other data related to the pension plan for 2026 are: Service cost Amortization of prior service costs Contributions Benefits paid Actual return on plan assets Amortization of net gain $320,000 72.000 360.000 335,000 352,000 24,000 The fair value of plan assets disclosed in the notes at December 31, 2026 is A) $4.673,000. B) $5,377,000. C) $5.712.000. D) $3,674,000.

$5,377,000.

Information for Ramirez Corp. is given below: Ramirez Corp. Balance Sheet December 31. 2026 Assets Cash Accounts receivable (net) Inventories 225,000 Plant and equipment, net of depreciation Patents 750,000 Other intangible assets Total Assets $ 300.000 1,950,000 2.439.000 Equities Accounts payables 630,000 Income taxes payable 189,000 Miscellaneous accrued payables 1.983.000 261.000 Bonds payable (8%, due 2028,875,000 Preferred stock ($100 par, 6% cumulative nonparticipating) 75.000 $7.008.000 Common stock (no par, 60,000 shares authorized. issued and outstanding) 1,125,000 Retained earnings2,439,000 Net sales Cost of goods sold Gross profit Operating expenses (including bond interest expense) Income before income taxes Income tax Net income $9,000,000 6.000.000 3,000,000 1.500.000 1,500,00 450.000 $1.050.000 Additional information: There are no preferred dividends in arrears, the balances in the Ar Receivable and Inventory accounts are unchanged from January 1, 2026, and there were n changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2026. that preferred dividends for the current year have not been declared. At December 31, 2026, the book value per share of common stock was A) $59.40. B) $58.65. C) $55.66. D) $58.16.

$58.65.

Green Construction Co. has consistently used the percentage-of-completion method of recognizing revenue. During 2024, Green entered into a fixed-price contract to construct building for $28,000,000. Information relating to the contract is as follows: At December 31 2024 2025 15% 45% $21,000,000 $22,400,000 1,400,000 3,360,000 Percentage of completion Estimated total cost at completion Gross profit recognized (cumulative) Contract costs incurred during 2025 were A) $6,930,000. B) $7,350,000. C) $10,080,000. D) $6,720,000.

$6,930,000

On January 2, 2025, Gold Star Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $160,000 each, payable beginning January 2, 2025. Brick Co. agrees to guarantee the $150,000 residual value of the asset at the end of the lease term. The expected value of the residual value is $50,000. Brick's incremental borrowing rate is 10%, however it knows that Gold Star's implicit interest rate is 8%. What journal entry wi buck o. make at lanuarv 1. 2026 to record the second lease navment? PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 5 periods 10%, 5 periods 4.31213 4.16986 3.99271 3.79079 68508 .62092 A) Debit: Lease Liability $160,000 Credit: Cash $160,000 B) Debit: Lease Liability $117,604 Debit: Interest Expense $42,396 Credit: Cash $160,000 C) Debit: Lease Liability $116,212 Debit: Interest Expense $43,788 Credit: Cash $160,000 D) Debit: Lease Expense $160,000 Credit: Cash $160,000

Debit: Lease Liability $117,604 Debit: Interest Expense $42,396 Credit: Cash $160,000

Which of the following statements is true regarding the receipt of a refundable deposit? A) Assets and equity decrease. B) The resulting liability will always be reported as a current obligation. C) Cash is debited and Refundable Deposit Liability is credited. D) Assets and equity increase.

Cash is debited and Refundable Deposit Liability is credited.

A corporation called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of $1,500,000. To extinguish this debt, the company had to pay a call premium of $500,000. How should these amounts be treated for accounting purposes? A) Charge $500,000 to a loss in the year of extinguishment and amortize $1,500,000over four years. B) Either amortize $1,000,000 over four years or charge $1,000,000 to a loss immediately, whichever management selects. C) Amortize $2,000,000 over four years. D) Charge $2,000,000 to a loss in the year of extinguishment.

Charge $2,000,000 to a loss in the year of extinguishment.

Which of the following is not one of the lease classification tests? A) Purchase option B) Collectibility C) Lease term D) Transfer of ownership

Collectibility

How would the declaration and subsequent issuance of a 10% stock dividend by the issuer affect each of the following when the fair value of the shares exceeds the par value of the stock? A) Common Stock - Increase; Additional Paid-in Capital - No effect B) Common Stock - No effect; Additional Paid-in Capital - No effect C) Common Stock - No effect; Additional Paid-in Capital - Increase D) Common Stock - Increase; Additional Paid-in Capital - Increase

Common Stock - Increase; Additional Paid-in Capital - Increase

Which of the following is an example of an accounting error that would not require correc (Changing from the cash basis to the accrual basis of accounting Failure to include a significant $50,000 salvage value in computing the depreciation base for the straight-line method Adopting a depreciation policy that sets all useful lives at 40 years, regardless of the asset 101) D) Correcting a $2,000 payroll error from a total payroll of $5,000,000

Correcting a $2,000 payroll error from a total payroll of $5,000,000

Bargain Surplus made cash sales during October of $375,000. The sales are subject to a6% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the sale transactions? Credit Sales Taxes Payable for $21,226 Credit Sales Revenue for $347,483 Debit Accounts Receivable for $375,000 Credit Sales Taxes Payable for $22,500

Credit Sales Taxes Payable for $22,500

Which of the following is (are) the proper time period(s) to record the effects of a change 125) in accounting estimate? A) Retrospectively only B) Current period and retrospectively C) Current period only D) Current period and prospectively

Current period and prospectively

Napier Co. provided the following information on selected transactions during 2024: $1.000.000 Purchase of land by issuing bonds Proceeds from issuing bonds Purchases of inventory Purchases of treasury stock Loans made to affiliated corporations Dividends paid to preferred stockholders Proceeds from issuing preferred stock Proceeds from sale of equipment 3,000,000 3,800,000 600,000 1,400,000 400,000 1.600.000 300,000 The net cash provided (used) by investing activities during 2024 was A) $(4,500,000). B) $(2,100,000). C) $300,000. D) $(1,100,000).

D) $(1,100,000).

Botanic Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns period extends 60 days. On February 10, 2024, a customer purchases $4,000 of products (cost $2,000. Assuming that based on prior experience, estimated returns are 20%. The journal entry to record the actual return of $250 of merchandise includes a A) credit to Returned Inventory for $125. B) credit to Allowance for Sales Returns for $250. C) debit to Estimated Inventory Returns for $125. D) debit to Returned Inventory for $125.

D) debit to Returned Inventory for $125.

Which of the following is not an example of an accounting error that would require corres A) Adopting a depreciation policy that sets all useful lives at 40 years, regardless of the asset B) Changing from the cash basis to accrual basis of accounting C) Failure to include a significant $50,000 salvage value in computing the depreciation base for the straight-line method D) Determining a portion of Goodwill recorded in a prior year acquisition has been impaired

Determining a portion of Goodwill recorded in a prior year acquisition has been impaired

Which of the following is true regarding whether errors and or fraud are distortions of facts? A) Errors - No Fraud - Yes B) Errors - No Fraud - No C) Errors - Yes Fraud - No D) Errors - Yes Fraud - Yes

Errors - No Fraud - Yes

Eddy Co. is indebted to Cole under a $1,000,000, 12%, three-year note dated December 31, 2023. Because of financial difficulties that developed in 2025, Eddy owed accrued interest of $120,000 on the note at December 31, 2025. Under a troubled debt restructuring, on December 31, 2025, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of $900,000. Eddy's acquisition cost of the land is $725,000. Ignoring income taxes, on its 2025 income statement Eddy should report as a result of the troubled debt restructuring A) Gain on Disposal - $275,000; Restructuring Gain - $0 B) Gain on Disposal - $395,000; Restructuring Gain - $0 C) Gain on Disposal - $175,000; Restructuring Gain - $220,000 D) Gain on Disposal - $175,000; Restructuring Gain - $100,000

Gain on Disposal - $175,000; Restructuring Gain - $220,000

Which of the following temporary differences results in a deferred tax asset in the year the temporary difference originates? I. Accrual for product warranty liability II. Subscriptions received in advance III. Prepaid insurance expense A) I and III only B) I only C) I only D) I and II only

I and II only

What is the relationship between current liabilities and a company's operating cycle? Current liabilities can't exceed the amount incurred in one operating cycle. Liquidation of current liabilities is reasonably expected within the company's operating cycle (or one year if less). Current liabilities are the result of operating transactions. There is no relationship between the two.

Liquidation of current liabilities is reasonably expected within the company's operating cycle (or one year if less).

Which of the following is not a debt security? A) Commercial paper B) Loans receivable C) Convertible bonds D) All of these are debt securities.

Loans receivable

Which of the following does not allow a company to exclude a short-term obligation from current liabilities? A) The company actually refinanced the obligation. B) The company has a contractual right to defer settlement of the liability for at least one year after the balance sheet date. C) Management indicates that they are going to refinance the obligation. D) The liability is contractually due more than one year after the balance sheet date

Management indicates that they are going to refinance the obligation.

Which of the following are temporary differences that are normally classified as expenses or losses that are deductible after they are recognized in financial income? A)Fines and expenses resulting from a violation of the law B) Depreciable property C) Product warranty liabilities D) Prepaid expenses that are deducted on the tax return in the period paid

Product warranty liabilities

Which of the following disclosures is required for a change from sum-of-the-years-digits to straight-line depreciation method? A) Recomputation of current and future years' depreciation B) Restatement of prior years' income statements C) Cumulative effect on prior years, net of tax, in the current retained earnings statement D) All of the choices are required

Recomputation of current and future years' depreciation

Which of the following disclosures of pension plan information would not normally be required? A) The funded status of the plan and the amounts recognized in the financial statements B) The rates used in measuring the benefit amounts C) The major components of pension expense D) The amount of prior service cost changed or credited in previous years

The amount of prior service cost changed or credited in previous years

On November 1, 2025, Scythian Company borrowed $25,000 from the High Country Bank, signing a 10%, 90-day note. Which of the following statements is true regarding how the note and related accounts will be reported in the December 31, 2025 financial statements? A) The current liabilities section of the balance sheet will report Discount on Notes Payable of $208 as a contra liability. B)The note will be reported at its carrying value of $25,583 in the current liabilities section of the income statement. C) The current liabilities section of the balance sheet will report Notes Payable of $25,000 and Interest Payable of $417. D) Interest expense of $417 will be reported as an operating expense on the income statement.

The current liabilities section of the balance sheet will report Notes Payable of $25,000 and Interest Payable of $417.

Which of the following is a basic limitation associated with ratio analysis? A) The usefulness of a single ratio by itself B) The lack of comparability among firms in a given industry C) The use of fair value accounting costs D) The use of future-oriented data items in accounting

The lack of comparability among firms in a given industry

Which of the following is not a condition allowing a company to exclude a short-term obligation from current liabilities? A) The obligation is subsequently refinanced on a long-term basis. B) The obligation must be due within one year. C) A contractual right to defer settlement of the liability at least a year after the balance sheet date. D) The liability is contractually due to be settled more than a year after the balance sheet date

The obligation must be due within one year.

Tanner, Inc. incurred a financial and taxable loss for 2025. Tanner, therefore, decided to use the carryback provisions as it had been profitable up to this year. How should the amounts related to the carryback be reported in the 2025 financial statements? A) The refund claimed should be shown as a reduction of income tax expense in 2025. B) The refund claimed should be reported as a deferred charge and amortized over five years. C) The refund claimed should be reported as revenue in the current year. D) The reduction of the loss should be reported as a prior period adjustment.

The refund claimed should be shown as a reduction of income tax expense in 2025.

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? A) Paid-in capital in excess of par for the purchase price. B) Treasury stock for the par value and retained earnings for the excess of the purchase price over the par value. C) Treasury stock for the purchase price. D) Treasury stock for the par value and paid-in capital in excess of par for the excess of the purchase price over the par value.

Treasury stock for the purchase price.

A company records an unrealized loss on trading securities. This would result in what type of difference and in what type of deferred income tax? A) Type of Difference - Temporary; Deferred Tax - Asset B) Type of Difference - Temporary; Deferred Tax - Liability ©Type of Difference - Permanent; Deferred Tax - Liability D) Type of Difference - Permanent; Deferred Tax - Asset

Type of Difference - Temporary; Deferred Tax - Asset

Canto Company purchases a call option contract to purchase 100 shares of FranziaCompany stock on January 2. 2025 when Franzia is trading at $125 per share. The cost of the call ontion contract was $50. If the price of Franzia stock increases to $150 per share at June 30, 2025 and a market appraisal indicates that the time value of the call option contract is $25 at that date, Canto will record A) Unrealized Holding Gain - Income of $2,475. B) Unrealized Holding Gain - Income of $2,500 and Unrealized Holding Loss - Income of $25 C) Unrealized Holding Gain - Income of $2,450 and Unrealized Holding LossIncome of $25. D) Unrealized Holding Gain Equity of $2,500 and Unrealized Holding Loss Income of $25

Unrealized Holding Gain - Income of $2,475.

Campbell Co. is being sued by local residents who allege negligence on the company's part. Campbell's legal defense team believes that it is probable that Campbell will lose the suit and will be found liable for a judgment between $2,500,000 to $7,500,000 with the most probable cost being $4,600,000. Based on this information, Campbell should A) accrue a loss contingency of $4,600,000 and disclose an additional contingency of up to $2,900,000. B) accrue a loss contingency of $2,500,000 and disclose an additional contingency of up to $5,000,000. C) not accrue a loss contingency of but disclose a possible loss of between $2,500,000and $7.500.000 D) accrue a loss contingency of $5,000,000 but not disclose any additional possibleToss

accrue a loss contingency of $4,600,000 and disclose an additional contingency of up to $2,900,000.

A lessee with a finance lease containing a bargain purchase option should depreciate the leased asset over the A) life of the asset or the term of the lease, whichever is longer. B) asset's remaining economic life. C) life of the asset or the term of the lease, whichever is shorter. D) term of the lease.

asset's remaining economic life.

When a company has acquired a "passive interest" in another corporation, the acquiring companv should account for the investment A) by using the fair value method. B) by consolidation. C) by using the equity method. D) by using the eftective interest method

by using the fair value method.

In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount of the debt is less than the total future cash flows, the creditor should A) not recognize a loss. B) calculate its loss using the historical effective rate of the loan. C) calculate its loss using the current effective rate of the loan. D) compute a new effective-interest rate.

calculate its loss using the historical effective rate of the loan.

When a company enters into what is referred to as off-balance-sheet financing, the company A) wishes to confine all information related to the debt to the income statement and the statement of cash flow. B) violates generally accepted accounting principles. C) is attempting to conceal the debt from shareholders by having no information about the debt included in the balance sheet. D) can enhance the quality of the balance sheet and permit credit to be obtained more readily and at less cost

can enhance the quality of the balance sheet and permit credit to be obtained more readily and at less cost

A company has satisfied its performance obligation when the A) company has significant risks and rewards of ownership. B) company has legal title to the asset. C) company has transferred physical possession of the asset. D) company expects to receive payment for goods or services

company has transferred physical possession of the asset.

If the parent company owns 90% of the subsidiary company's outstanding common stock, the company should generally account for the income of the subsidiary under the A) fair value method. B) cost method. C) equity method. D) divesture method.

equity method.

An objective of the statement of cash flows is to A) disclose the change in working capital during the period. B) disclose changes during the period in all asset and all equity accounts. C) provide information about the operating, investing, and financing activities of an entity during a period. D) None of the choices are correct.

provide information about the operating, investing, and financing activities of an entity during a period.

If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be A) qualified. B) unqualified. C) adverse. D) exceptional.

qualified.

The converged standard on revenue recognition A) reduces the number of disclosures required for revenue reporting. B) simplify revenue recognition practices across entities and industries. C) recognizes and measures revenue based on changes in assets and liabilities. D) increases the complexity of financial statement preparation.

recognizes and measures revenue based on changes in assets and liabilities.

In a defined contribution plan, a formula is used that A) ensures that employers are at risk to make sure funds are available at retirement. B) requires an employer to contribute a certain sum each period based on the formula. C) defines the benefits that the employee will receive at the time of retirement. D) ensures that pension expense and the cash funding amount will be different.

requires an employer to contribute a certain sum each period based on the formula.

According to the FASB, recognition of a liability is required when the projected benefit obligation exceeds the fair value of plan assets. Conversely, when the fair value of plan assets exceeds the projected benefit obligation, the FASB A) requires recognition of an asset if the excess fair value of plan assets exceeds the corridor amount. B) does not permit recognition of an asset. C) requires recognition of an asset. D) recommends recognition of an asset but does not require such recognition.

requires recognition of an asset.

A feature common to both stock splits and stock dividends is A) a reduction in the contributed capital of a corporation. B) a transfer to earned capital of a corporation. C) that there is no effect on total stockholders' equity. D) an increase in total liabilities to a corporation

that there is no effect on total stockholders' equity.

Franchise revenue is recognized over time if A) franchise rights are transferred at a point in time. B) franchisee fee is payable upon signing of the contract. C) the franchisor is providing access to the right rather than transferring control. D) when performance obligations regarding franchise rights are completed.

the franchisor is providing access to the right rather than transferring control.