QUESTION 1

1. Marr Co. had the following sales and accounts receivable balances, prior to any adjustments at
year end:
 
Credit sales $10,000,000
Accounts receivable 3,000,000
Allowance for doubtful accounts 50,000
Marr uses 3% of accounts receivable to determine its allowance fordoubtful accounts at year end. By what
amount should Marr adjust its allowance for credit losses at year end?

$0

$40,000

$90,000

$140,000

2 points   
QUESTION 2
1. For its first year of operations, Tringali Corporation's reconciliation of pretax GAAP accounting income to
Tax Return taxable income is as follows:
Pretax GAAP accounting income $ 285,000

Temporary difference-depreciation   (20,000)  

Tax Return taxable income $  265,000   
2. Tringali's tax rate is 25%. Assume that no estimated taxes have been paid.
 
What should Tringali report as its GAAP accounting income tax expense?
$5,000.

$75,000.

$71,250

$66,250.

2 points   
QUESTION 3
1.  TGR Enterprises provided the following information from its statement of financial position for the year
ended December 31, Year 1:
  January 1 December 31
Cash $ 10,000 $ 50,000
Accounts receivable 120,000 100,000
Inventories 200,000 160,000
Prepaid expenses 20,000 10,000
Accounts payable 175,000 120,000
Accrued liabilities 25,000 30,000
2.
 3. TGR’s sales and cost of sales for Year 1 were $1,400,000 and $840,000, respectively. What is the accounts
receivable days sales outstanding?
4.
26.1

28.7

31.3

41.7

2 points   
QUESTION 4
1. Roberto Corporation was organized on January 1, 2021. The firm was authorized to issue 100,000 shares of
$5 par common stock. During 2021, Roberto had the following transactions relating to shareholders' equity:
 
Issued 10,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8).
 
What is total shareholders' equity at the end of 2021?
$200,000.

$270,000.

$250,000.

$300,000.

2 points   
QUESTION 5
1. On January 1, 2020, Franchot Co. gave a $100,000, 4-year, noninterest-bearing note in
payment for a machine to be used in its factory. The prevailing interest rate for instruments of this
type is 8%.   Franchot should report interest expense on the note for 2020 equal to approximately

$8,000

$5,880

$6,625

$7,350

2 points   
QUESTION 6
1. Telemarker Co. uses a perpetual inventory system:
 
  No. Units Cost/Unit Total Cost
Beginning inventory 1,000 $60.00 $60,000
May 2, sale 600    
 May 7, purchase 800 78.00 62,400
May 16, sale 400    
May 20, purchase 1,000 79.20 79,200
May 30, sale 1,200    
The cost of the 1,200 units sold on May 30 under the FIFO method is

$86,400

$91,200

$94,800

$94,080

2 points   
QUESTION 7
1. The following amounts pertain to the ABC Corporation at December 31:
Total current assets $ 300,000
Total fixed assets 2,200,000
Total assets 2,500,000
Total current liabilities 120,000
Total liabilities 1,600,000
Total paid-in capital 400,000
Total equity 900,000
 

2.
ABC's working capital at December 31 is
$180,000

$400,000

$500,000

$900,000

2 points   
QUESTION 8
1. CoSteen Co. issued $500,000 of Neets Co. bonds on July 1, 2020. Each 30-year bond has a $1,000 face
amount and pays annual interest at a rate of 7%, payable annually. The market interest rate for similar
bonds is 6%.
 How much did CoSteen receive for the bonds, rounded to the nearest $1,000?

$438,000

$500,000

$521,000

$569,000

2 points   
QUESTION 9
1.     The following information appears in Gantor Company’s financial statements at year end:

  Year 4 Year 5
Cash $    52,500 $    60,000
Trading debt securities (current) 100,000 90,000
Accounts receivable 900,000 800,000
Inventory 1,225,000 1,100,000
Accounts payable 650,000 700,000
Wages payable 32,500 30,000
Current portion of long-term debt 250,000 250,000
Noncurrent portion of long-term debt 1,000,000 750,000
Equity 750,000 850,000
 
 

2. What is the current ratio at the end of Year 5?

3.
1.28 to 1

2.00 to 1

2.09 to 1

2.41 to 1

2 points   
QUESTION 10
 1. Binz Company provides cleaning services and sells garbage bins to office clients. On June 1 st, Binz
delivered 100 garbage bins to a client, and also entered into a 5-year contract for Binz to provide cleaning
services to that client. Which of the following is most likely to be true?
Revenue for the garbage bins and the cleaning services must be recognized on June 1 st.
Binz Company should not recognize any revenue until the end of the 5 th year.
Revenue for the garbage bins is recognized on June 1 st and revenue for the cleaning service is recognized
over the 5 years as those services are performed.
Revenue for the garbage bins is recognized on June 1 st and no revenue will be recognized for the cleaning
services until the end of the 5 th year.

2 points   
QUESTION 11
1. Falmouth Company uses a special machine to fill certain customer needs. This machine is used
only to produce a specific product that differs from the output of other machines. In addition, the
customers served generally do not order other products from Falmouth. Because of the opening of a
competitor that uses more modern equipment, orders for the output of this machine have materially
decreased. Because of the change in circumstances, Falmouth has gathered the following information
to determine whether to recognize an impairment loss:

  Undiscounted Discounted  Original Cost

Book  Future Future
Value Cash Flows Cash Flows  
$525,000 $450,000 $295,000 $630,000

What amount of impairment loss should Falmouth recognize?

$0

$75,000

$230,000

$280,000

2 points   
QUESTION 12
1. Sally's Donut Shop as the following items on its year-end trial balance:
 
 Net sales $500‚000
Common stock 100,000
rent expense 75,000
Wages 50,000
Cost of goods sold 100,000
Cash 40,000
Accounts payable 25,000
Interest payable 25,000
 
 

What is Sally’s gross profit?

$230,000

$275,000

$400,000

$500,000

2 points   
QUESTION 13
1. The following information is provided for a company.
 
Accounts payable $ 15,000  
Buildings   80,000  
Cash   10,500  
Accounts receivable   9,500  
Salaries payable   4,500  
Retained earnings   47,500  
Supplies   40,000  
Notes payable (due in 18 months)   35,000  
Interest payable   3,000  
Common stock   35,000  
2. What is the amount of current assets, assuming the accounts above reflect normal activity?
$20,000.

$140,000.

$175,000.
 $60,000.

2 points   
QUESTION 14
1. New England Co. had net cash provided by operating activities of $351,000 and cash provided by financing
activities of $250,000. New England’s cash balance was $27,000 on January 1. During the year, New
England had the following investing activities: 
1. sale of land that resulted in a gain of $25,000, and proceeds of $40,000 were received from the sale.
2. Paid $390,000 cash for new factory equipment
3.  Purchased in SoCal Corp common stock worth $70,000 and paid cash
What was New England’s cash balance at the end of the year?

$183,000

$40,000

$208,000

$181,000

2 points   
QUESTION 15
1. Marshall Co. paid $40 per share for all of the 100,000 common shares of Fields Co. that are outstanding.
The acquired net tangible assets have a carrying amount and a fair value of $1.8 million and $2.8 million,
respectively. The acquired intangible assets meeting the recognition criteria in the guidance applying to
business combinations have a carrying amount of $400,000 and a fair value of $900,000. As a result of this
transaction, Marshall should record goodwill of

$300,000

$1,200,000

$1,800,000

$2,200,000

2 points   
QUESTION 16
1. Nella Corporation, which computes depreciation to the nearest whole month, placed a new piece of
equipment in operation on July 1, Year 1. It was expected to produce 400,000 units of product in its
estimated useful life of 8 years. Total cost was $300,000; salvage value was estimated to be $30,000. Nella
employs a calendar year for financial reporting purposes. Actual production for the past 3 years was as
follows:
Year 1 -- 34,000 units
Year 2 -- 62,500 units
Year 3 -- 58,400 units
If Nella uses the straight-line method of depreciation, the amount of depreciation computed for this
equipment for financial reporting purposes in Year 3 would be
 $45,000
$33,750
$41,250

$37,500

2 points   
QUESTION 17
1. Maria's Auto Parts Inc.  has been sued for $100
million for producing and selling an unsafe product. Attorneys for the company cannot reasonably predict t
he outcome of the litigation. Maria's Auto Parts Inc. has annual revenue of $200 million.  In its financial
statements, the company should

Report a loss from litigation of $100,000,000 and disclose the lawsuit in the footnotes.

Disclose the lawsuit in the footnotes, but do not record a loss.

Do not record a loss or disclose the lawsuit in the footnotes.

increase Cost of Goods Sold $100,000,000  and disclose the lawsuit in the footnotes

2 points   
QUESTION 18
1. On January 1, 2020 Mary Robin Co. issued 1,000 of its 30-year, $1,000 face amount, 8% bonds. The
market rate for similar securities is 7%, interest is paid annually, and the bonds were sold
for $1,123,720. The bond interest expense for 2020 will be (round to nearest $1,000)

$79,000

$70,000

$80,000

$90,000

2 points   
QUESTION 19
1. NSB, Inc. spent $2,000,000 in 2020 to develop a battery for electric motorcycles. NSB plans to file patents
in 2021 to protect its design.  How should NSB report development costs in 2020?
Expense all costs in 2020 as R&D Expense

Record an intangible asset for the battery design and begin amortization after the patent is filed.

Record an intangible asset for the battery design and begin amortization immediately

Record an intangible asset for the battery design and amortize the costs using the units of
production method for the battery units produced.

2 points   
QUESTION 20
1. Gibbons Corp uses a periodic inventory system. Beginning inventory is $30,000, ending inventory is
$34,000, and purchases are $450,000. What is cost of goods sold for the period?
 $450,000

$30,000

$34,000

$446,000

2 points   
QUESTION 21
1. On January 1, 2021, Gibson Corporation entered into a four-year operating lease. The payments were as
follows: $20,000 for 2021, $18,000 for 2022, $16,000 for 2023, and $14,000 for 2024. What is the correct
amount of total lease expense for 2022?
$17,000.

$19,000.

$20,500.

$18,000.

2 points   
QUESTION 22
1.
Baker Ltd. purchased a technology patent for $75,000.  The patent has 15 years remaining until it
expires.  However, because of technological changes, Baker expects the patent to be useful for 8 years.
Based on this information, Baker should

 Capitalize the $85,000 paid and amortize it over 20 years.
Expense the $85,000 paid as research and development costs.

Capitalize the $85,000 paid and amortize it over 15 years.

Capitalize the $85,000 paid and amortize it over 8 years.

2 points   
QUESTION 23
1. Taza Company reported net income of $225,000 for the year just ended. The following information was av
ailable from Taza Company’s comparative financial statements:
 Decrease in net accounts receivable $30,000
Depreciation   12,000
Decrease in inventory   26,000
Increase in trade accounts payable   17,000
Decrease in wages payable     6,000
Impairment of goodwill     8,000

2. Taza’s net cash inflow from operations was

3.
$245,000

$200,000

$300,000

$312,000

2 points   
QUESTION 24
1.     On June 19, Don Co., a U.S. company, sold and delivered merchandise on a 30-day
account to Cologne GmbH, a German corporation, for 200,000 euros. On July 19, Cologne paid Don in full
. Relevant currency exchange rates were:

  June 19   July 19
Spot rate $.988   $ .995
30-day forward rate .990   1.000
 
 

2. What amount should Don record on June 19 as an account receivable for its sale to Cologne?
3.
$197,600

$198,000

$199,000

$200,000

2 points   
QUESTION 25
1. Misty Company reported the following before-tax items during the current year:
Sales revenue $ 600  
Selling and administrative expenses   260  
Restructuring charges   20  
Loss on discontinued operations   40  
2. Misty's effective tax rate is 25%.
 
What is Misty's net income for the current year?
$210.

$280.

$200.

$240.