Use the following to answer questions 26-27:
On October 12, 2006, Livingston Corporation invested $500,000 inshort-term available-for-sale marketable securities. The marketvalue of this investment was $530,000 at December 31, 2006, but hadslipped to $525,000 by December 31, 2007.
26. Refer to the above data. Infinancial statements prepared on December 31, 2006, LivingstonCorporation reports:
A) The asset Investments in Marketable Securities at $500,000 withfootnote disclosure of the market value of $530,000.
B) The asset Investments in Marketable Securities at$530,000, and a $30,000 Unrealized Holding Gain included in totalstockholders' equity.
C) The asset Investments in Marketable Securities at$530,000, and a $30,000 gain recognized in the incomestatement.
D) The asset Investments in Marketable Securities at $500,000, anda $30,000 Unrealized Holding Gain included in total stockholders'equity.
27. Refer to the above data. Assuming Livingston does not sell thisinvestment; financial statements prepared at December 31, 2007,report:
A) Investments in Marketable Securities of $500,000, reduced by a$30,000 Unrealized Holding Gain on Investments, in the assetsection of the balance sheet.
B) The asset Investments in Marketable Securities of$500,000 in the balance sheet, and a $25,000 Unrealized HoldingLoss on Investments in the income statement.
C) The asset Investments in Marketable Securities of$525,000, and a $5,000 Unrealized Holding Loss deducted from totalstockholders' equity.
D) Investment in Marketable Securities of $525,000 in the assetsection of the balance sheet, with a $25,000 Unrealized HoldingGain on Investments included in the stockholders' equitysection.
28. Anasset which costs $7,200 and has accumulated depreciation of $1,800is sold for $4,500. What amount will be recognized when the assetis sold?
A) A gain of $900
B) A loss of $900
C) A loss of $2,700
D) A gain of $2,700
29. Coca-Cola's famous name printed in distinctive typeface is anexample of:
A) A trademark.
B) A patent.
C) A copyright.
D) Goodwill.
30. CarlsonImports sold a depreciable plant asset for cash of $35,000. Theaccumulated depreciation amounted to $70,000, and a loss of $5,000was recognized on the sale. Under these circumstances, the originalcost of the asset must have been:
A) $65,000.
B) $75,000.
C) $100,000.
D) $110,000.
31. Tivoli Instrumentation solda depreciable asset for cash of $100,000. The original cost of theasset was $400,000. Tivoli recognized a gain of $15,000 on thesale. What was the amount of accumulated depreciation on the assetat the time of its sale?
A) $315,000.
B) $85,000.
C) $385,000.
D) $300,000.
32. Machinery acquired new on January 1 at a cost of $50,000 wasestimated to have a useful life of 10 years and a residual salvagevalue of $20,000. Straight-line depreciation was used. On January1, following six full years of use of the machinery, managementdecided that the estimate of useful life had been too long and thatthe machinery would have to be retired after two more years, thatis, at the end of the eighth year of service. Under this revisedestimate, the depreciation expense for the seventh year of usewould be:
A) $6,000.
B) $8,000.
C) $11,000.
D) $12,000.
33. The ability of a partner toenter into a contract on behalf of all partners is called
a. voluntary agency.
b. mutualagency.
c. unlimitedliability.
d. voluntaryassociation.
34. Which of the following doesnot result in dissolution of a partnership?
a. Admissionof a new partner
b. Sale ofpartnership assets
c. Death of apartner
e. Bankruptcyof a partner
35. Jerry and Rose have agreed toform a partnership. Accordingly Rose will invest $40,000 worth ofequipment which has a note payable of $15, 000 which thepartnership assumes, and Jerry will invest $40,000 in cash. TheRoseâs capital account balance will be.
A. $40,000
B. $25,000
C. $15,000
D. $80,000
36. One method of distributing income and losses is to give eachpartner a stated
ratio of the total income or loss.There are two partners Jerry & Rose, each making an equalcontribution to the firm (50/50). However the partnership agreementstates that distributions would be made 60% and 40% respectively.Jerry and Rose are partners of the firm which had a net income$100,000. Therefore Jerryâs share of income is:
A. $50,000
B. $40,000
C. $100,000
D. $60,000
37. After March, 2004 international standards required thatgoodwill
A) Be capitalized and amortized over 20 years or less.
B) Be capitalized and amortized over 40 years or less.
C) Be capitalized and reviewed annually and its value should beadjusted if impaired.
D) Be expensed immediately.
38. Manufacturing overhead isbest described as:
A) All manufacturing costs other than direct materials and directlabor.
B) All period costs associated with manufacturingoperations.
C) Indirect materials and indirect labor.
D) All operating expenses other than selling expenses and generaland administrative expenses.
39. Which of the followingcosts would not be considered part of the manufacturing overhead ofa furniture manufacturer?
A) The cost of compliance with federal factory safetyregulations.
B) Depreciation expense on factory equipment.
C) The cost of grease used to lubricate factoryequipment.
D) The cost of wood used in furniture construction.
Use the following to answer questions 26-27:
On October 12, 2006, Livingston Corporation invested $500,000 inshort-term available-for-sale marketable securities. The marketvalue of this investment was $530,000 at December 31, 2006, but hadslipped to $525,000 by December 31, 2007.
26. Refer to the above data. Infinancial statements prepared on December 31, 2006, LivingstonCorporation reports:
A) The asset Investments in Marketable Securities at $500,000 withfootnote disclosure of the market value of $530,000.
B) The asset Investments in Marketable Securities at$530,000, and a $30,000 Unrealized Holding Gain included in totalstockholders' equity.
C) The asset Investments in Marketable Securities at$530,000, and a $30,000 gain recognized in the incomestatement.
D) The asset Investments in Marketable Securities at $500,000, anda $30,000 Unrealized Holding Gain included in total stockholders'equity.
27. Refer to the above data. Assuming Livingston does not sell thisinvestment; financial statements prepared at December 31, 2007,report:
A) Investments in Marketable Securities of $500,000, reduced by a$30,000 Unrealized Holding Gain on Investments, in the assetsection of the balance sheet.
B) The asset Investments in Marketable Securities of$500,000 in the balance sheet, and a $25,000 Unrealized HoldingLoss on Investments in the income statement.
C) The asset Investments in Marketable Securities of$525,000, and a $5,000 Unrealized Holding Loss deducted from totalstockholders' equity.
D) Investment in Marketable Securities of $525,000 in the assetsection of the balance sheet, with a $25,000 Unrealized HoldingGain on Investments included in the stockholders' equitysection.
28. Anasset which costs $7,200 and has accumulated depreciation of $1,800is sold for $4,500. What amount will be recognized when the assetis sold?
A) A gain of $900
B) A loss of $900
C) A loss of $2,700
D) A gain of $2,700
29. Coca-Cola's famous name printed in distinctive typeface is anexample of:
A) A trademark.
B) A patent.
C) A copyright.
D) Goodwill.
30. CarlsonImports sold a depreciable plant asset for cash of $35,000. Theaccumulated depreciation amounted to $70,000, and a loss of $5,000was recognized on the sale. Under these circumstances, the originalcost of the asset must have been:
A) $65,000.
B) $75,000.
C) $100,000.
D) $110,000.
31. Tivoli Instrumentation solda depreciable asset for cash of $100,000. The original cost of theasset was $400,000. Tivoli recognized a gain of $15,000 on thesale. What was the amount of accumulated depreciation on the assetat the time of its sale?
A) $315,000.
B) $85,000.
C) $385,000.
D) $300,000.
32. Machinery acquired new on January 1 at a cost of $50,000 wasestimated to have a useful life of 10 years and a residual salvagevalue of $20,000. Straight-line depreciation was used. On January1, following six full years of use of the machinery, managementdecided that the estimate of useful life had been too long and thatthe machinery would have to be retired after two more years, thatis, at the end of the eighth year of service. Under this revisedestimate, the depreciation expense for the seventh year of usewould be:
A) $6,000.
B) $8,000.
C) $11,000.
D) $12,000.
33. The ability of a partner toenter into a contract on behalf of all partners is called
a. voluntary agency.
b. mutualagency.
c. unlimitedliability.
d. voluntaryassociation.
34. Which of the following doesnot result in dissolution of a partnership?
a. Admissionof a new partner
b. Sale ofpartnership assets
c. Death of apartner
e. Bankruptcyof a partner
35. Jerry and Rose have agreed toform a partnership. Accordingly Rose will invest $40,000 worth ofequipment which has a note payable of $15, 000 which thepartnership assumes, and Jerry will invest $40,000 in cash. TheRoseâs capital account balance will be.
A. $40,000
B. $25,000
C. $15,000
D. $80,000
36. One method of distributing income and losses is to give eachpartner a stated
ratio of the total income or loss.There are two partners Jerry & Rose, each making an equalcontribution to the firm (50/50). However the partnership agreementstates that distributions would be made 60% and 40% respectively.Jerry and Rose are partners of the firm which had a net income$100,000. Therefore Jerryâs share of income is:
A. $50,000
B. $40,000
C. $100,000
D. $60,000
37. After March, 2004 international standards required thatgoodwill
A) Be capitalized and amortized over 20 years or less.
B) Be capitalized and amortized over 40 years or less.
C) Be capitalized and reviewed annually and its value should beadjusted if impaired.
D) Be expensed immediately.
38. Manufacturing overhead isbest described as:
A) All manufacturing costs other than direct materials and directlabor.
B) All period costs associated with manufacturingoperations.
C) Indirect materials and indirect labor.
D) All operating expenses other than selling expenses and generaland administrative expenses.
39. Which of the followingcosts would not be considered part of the manufacturing overhead ofa furniture manufacturer?
A) The cost of compliance with federal factory safetyregulations.
B) Depreciation expense on factory equipment.
C) The cost of grease used to lubricate factoryequipment.
D) The cost of wood used in furniture construction.
Related questions
QUESTION 1
Which of the following is not an equity security?
a. Common stock
b.Warrants
c. Call options
d. Redeemable preferred stock with a mandatory redemptionperiod
QUESTION 2
On January 1, 2005, N Inc. purchased 10-year bonds issued by BCompany. The bonds have a face value of $500,000 and pay interestannually at 8 percent on each December 31. N purchased the bondsfor $550,000. N�s accounting year ends on December 31. N�smanagement has chosen to treat the bonds purchased as anavailable-for-sale security. There are no other securities in theavailable-for-sale portfolio. Assume that on December 31, 2005, thefair market value of the bonds was $510,000. The company uses thestraight-line method of amortization. What is the amount ofinterest income to be reported on the 2005 incomestatement?
a.$35,000
b. $40,000
c. $44,000
d. $45,000
QUESTION 3
At December 31, 2005 and 2006, C Corp. had outstanding 4,000shares of $100 par value, 6 percent cumulative preferred stock and20,000 shares of $10 par value common stock. At December 31, 2005,dividends in arrears on the preferred stock were $12,000. Cashdividends declared in 2006 totaled $44,000. Of the $44,000, whatamounts were payable on each class of stock?
Preferred Stock | Common Stock |
a. $44,000 | $0 |
b. $36,000 | $8,000 |
c. $32,000 | $12,000 |
d. $24,000 | $20,000 |
QUESTION 4
A liability for a cash dividend exists atthe
a. end of each year
b. date of declaration
c. date of record
d. date of payment
QUESTION 5
Coe Corp. issued 20,000 shares of $5 par common stock at $10 pershare. On December 31, 2005, Coe's retained earnings were $300,000.In March 2006, Coe reacquired 5,000 shares of its common stock at$20 per share. In June 2006, Coe sold 1,000 of these shares to itscorporate officers for $25 per share. Coe uses the cost method toaccount for its treasury stock. Net income for the year endedDecember 31, 2006, was $60,000. At December 31, 2006, what amountshould Coe report as retained earnings?
a. $360,000
b. $365,000
c.$375,000
d. $380,000
QUESTION 6
William Corp. issued 10,000 shares of its $1 par value commonstock for a building. The building was listed for sale at $500,000.William�s common stock is currently selling for $45 per share.William Corp. should record the buildingat
a.$10,000
b. $440,000
c. $450,000
d. $500,000
QUESTION 7
Assume that S Company makes sales of $400,000 during 2004 andreports the amount as sales revenue on its income statement. Alsoassume that the company wishes to delay the reporting of a portionof that amount for tax purposes and uses the installment salesmethod for tax purposes. Assume that $100,000 of collectionsoccurred during 2004, $150,000 occurred in 2005, and the remainderwill occur in 2006. Assuming a tax rate of 40 percent, what is theamount of the entry into the Deferred Tax account at the end of theyear 2004?
a. $40,000
b.$60,000
c.$120,000
d. $160,000
QUESTION 8
The Company purchases an asset on January 1, 2005, for $200,000.The straight-line method of depreciation is used for book purposes,resulting in depreciation of $50,000 per year. An acceleratedmethod is used for tax purposes, resulting in depreciation of$80,000, $60,000, $40,000, and $20,000 for the years 2005, 2006,2007, and 2008, respectively. Assume that the tax rate is 40percent for all years and that depreciation is the only temporarydifference between book and tax purposes. The 2005 journal entrywould include a
a. debit to Deferred Tax Liability of$12,000
b. debit to Deferred Tax Liability of $4,000
c. credit to Deferred Tax Asset of$4,000
d. credit to Deferred Tax Liability of $12,000
QUESTION 9
Which of the following has no effect on comprehensiveincome?
a. Unrealized gains and losses on held-to-maturityinvestments
b. Unrealized gains and losses on available-for-saleinvestments
c. Unrealized gains and losses on tradingsecurities
d. Realized gains and losses on available-for-sale securitiesthat were held in previous periods
QUESTION 10
Assume that Grandzol Company believes that $120,000 of a$600,000 deduction will not be utilized in future periods and thatthe tax rate is 40 percent for all periods. What is the amount ofthe valuation allowance?
a.$48,000
b. $120,000
c. $192,000
d. $240,000
QUESTION 11
Information regarding Silly Co.�s portfolio ofavailable-for-sale securities is as follows:
a. Aggregate cost as of 12/31/05 $170,000
b. Unrealized gains as of 12/31/05 4,000
c. Unrealized losses as of 12/31/05 26,000
d. Net realized gains during 2005 30,000
At December 31, 2004, Silly reported an unrealized holding lossfrom available-for-sale securities of $1,500 on the statement ofstockholders� equity. Assuming the application of SFAS No. 115,�Accounting for Certain Investments in Debt and Equity Securities,�what amount should Silly report on its December 31, 2005, balancesheet as an unrealized holding loss?
a.$26,000
b. $22,000
c.$20,500
d. $0
QUESTION 12
Treasury stock is a(n)
a. asset account
b. contra-asset account
c. equityaccount
d. contra-equity account
QUESTION 13
On March 1, 2004, LeoCorp. was formed by issuing 100,000 shares of $1 par value commonstock at $5 per share and 20,000 shares of $100 par value preferredstock at $101 per share. If Leo earned $35,000 in its first year ofoperations, total stockholders� equity at year end would be
a. $335,000
b. $735,000
c. $2,135,000.
d. $2,555,000
QUESTION 14
Interest received from available-for-sale debt securities shouldbe reportedas
a. an unrealized holdinggain�income
b. an unrealized holding gain�equity
c. other revenue on the income statement
d. a reclassification adjustment on the statement ofcomprehensive income
QUESTION 15
During 2005, Bob Co. issued 5,000 shares of $100 par convertiblepreferred stock for $110 per share. One share of preferred stockcan be converted into three shares of Bob's $25 par common stock atthe option of the preferred shareholder. On December 31, 2006, whenthe market value of the common stock was $40 per share, all of thepreferred stock was converted. What amount should Bob credit toCommon Stock and to Additional Paid-in Capital as a result of theconversion?
Common Stock | Additional Paid-in-Capital |
a. $375,000 | $175,000 |
b. $375,000 | $225,000 |
c. $500,000 | $50,000 |
d. $600,000 | $0 |
QUESTION 16
If a company reissued at $20 per share 100 shares of treasurystock that it had previously acquired for $28 per share and therewasn�t any Paid-in Capital from Treasury Stock, it would debit
a. Loss on Sale of Treasury Stock for $800
b. Paid-in Capital from Common Stock for $800
c. Retained Earnings for $800
d. Treasury Stock for $800
QUESTION 17
B Corp. issued 200,000 shares of common stock when it beganoperations in 2004 and issued an additional 100,000 shares in 2005.B also issued preferred stock convertible into 100,000 shares ofcommon stock. In 2006, B purchased 75,000 shares of its commonstock and held it in the treasury. At December 31, 2006, how manyshares of B's common stock were outstanding?
a. 400,000
b.325,000
c.300,000
d. 225,000
QUESTION 18
Assume that Bad Company makes sales of $200,000 during 2004 andreports the amount as sales revenue on its income statement. Alsoassume that the company wishes to delay the reporting of a portionof that amount for tax purposes and uses the installment salesmethod for tax purposes. Assume that $60,000 of collectionsoccurred during 2004 and the remainder will occur in 2005. What isthe amount of the temporary difference at the end of the year2004?
a.$200,000
b.$140,000
c.$60,000
d. $0
QUESTION 19
Rent income received in advance that is included for taxpurposes when received, but recorded for book purposes when earnedresults in
a. expense items and deductions being taken for tax purposesbefore bookpurposes
b. expense items and deductions being recorded for book purposesbefore tax purposes
c. purposes income being included for tax purposes beforebook
d. income being recorded for book purposes before taxpurposes.
QUESTION 20
Debt securities that are classified as available-for-salesecurities are reported on the balance sheet at
a. fair value
b. historical cost
c. amortized cost
d. lower of amortized cost or fair value
QUESTION 21
Dividends are a(n)
a.expense
b. distribution to owners
c. asset
d. increase in equity
QUESTION 22
Which of the following does not use the Adjustment andUnrealized Holding Gain (Loss) accounts?
a. Held-to-maturitysecurities
b. Tradingsecurities
c. Available-for-salesecurities
d. Both held-to-maturity and trading securities
QUESTION 23
Other comprehensive income includes changes in the fair valueof
a. held-to-maturity securities
b. tradingsecurities
c. available-for-sale securities
d. investments accounted for under the equity method
