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Wiley CPA Exam Review Problems And Solutions Vol 2 2011-2012 38th Edition O. Ray Whittington, Patrick R. Delaney - Solutions
Bee Co. uses the direct write-off method to account for uncollectible accounts receivable. During an accounting period, Bee’s cash collections from customers equal sales adjusted for the addition or deduction of the following amounts:Accounts written off Increase in accounts receivable balancea.
Net cash used in investing activities during 2010 wasa. $ 80,000b. $530,000c. $610,000d. $660,000
Net cash provided by financing activities for 2010 totaleda. $140,000b. $300,000c. $500,000d. $700,000
Cash payments during 2010 on accounts payable to suppliers amounted toa. $4,670,000b. $4,910,000c. $5,000,000d. $5,150,000
Cash collected during 2010 from accounts receivable amounted toa. $5,560,000b. $5,840,000c. $6,140,000d. $6,400,000
Net cash provided by financing activities wasa. $ 20,000b. $ 45,000c. $150,000d. $205,000
Net cash used in investing activities wasa. $1,005,000b. $1,190,000c. $1,275,000d. $1,600,000
Net cash provided by operating activities wasa. $1,160,000b. $1,040,000c. $ 920,000d. $ 705,000
Which of the following should not be disclosed in an enterprise’s statement of cash flows prepared using the indirect method?a. Interest paid, net of amounts capitalized.b. Income taxes paid.c. Cash flow per share.d. Dividends paid on preferred stock.
Would the following be added back to net income when reporting operating activities’ cash flows by the indirect method?Excess of treasury stock acquisition cost over sales proceeds (cost method)Bond discount amortizationa. Yes Yesb. No Noc. No Yesd. Yes No
How should a gain from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method?a. In investment activities as a reduction of the cash inflow from the sale.b. In investment activities as a cash outflow.c. In operating activities as a deduction from
In a statement of cash flows (using indirect approach for operating activities) an increase in inventories should be presented as a(n)a. Outflow of cash.b. Inflow and outflow of cash.c. Addition to net income.d. Deduction from net income.
Lino Co.’s worksheet for the preparation of its 2010 statement of cash flows included the following:December 31 January 1 Accounts receivable $29,000 $23,000 Allowance for uncollectible accounts 1,000 800 Prepaid rent expense 8,200 12,400 Accounts payable 22,400 19,400 Lino’s 2010 net income is
Metro, Inc. reported net income of $150,000 for 2010.Changes occurred in several balance sheet accounts during 2010 as follows:Investment in Videogold, Inc. stock, carried on the equity basis $5,500 increase Accumulated depreciation, caused by major repair to projection equipment 2,100 decrease
A company’s wages payable increased from the beginning to the end of the year. In the company’s statement of cash flows in which the operating activities section is prepared under the direct method, the cash paid for wages would bea. Salary expense plus wages payable at the beginning of the
In a statement of cash flows, which of the following would increase reported cash flows from operating activities using the direct method? (Ignore income tax considerations.)a. Dividends received from investments.b. Gain on sale of equipment.c. Gain on early retirement of bonds.d. Change from
Cash paid for selling expenses?a. $142,000b. $141,500c. $141,000d. $140,000
Cash paid for income taxes?a. $25,800b. $20,400c. $19,700d. $15,000
Cash paid for interest?a. $4,800b. $4,300c. $3,800d. $1,700
Cash paid for goods to be sold?a. $258,500b. $257,500c. $242,500d. $226,500
Cash collected from customers?a. $541,800b. $541,600c. $536,000d. $535,800
Which of the following is not disclosed on the statement of cash flows when prepared under the direct method, either on the face of the statement or in a separate schedule?a. The major classes of gross cash receipts and gross cash payments.b. The amount of income taxes paid.c. A reconciliation of
Which of the following information should be disclosed as supplemental information in the statement of cash flows?Cash flow per share Conversion of debt to equitya. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following should be reported when preparing a statement of cash flows?Conversion of long-term debt to common stock Conversion of preferred stocka. No Nob. No Yesc. Yes Yesd. Yes No
On July 1, 2010, Dewey Co. signed a twenty-year building lease that it reported as a capital lease. Dewey paid the monthly lease payments when due. How should Dewey report the effect of the lease payments in the financing activities section of its 2010 statement of cash flows?a. An inflow equal to
What amount should Reve report as net cash provided by financing activities?a. $20,000b. $27,000c. $30,000d. $37,000
What amount should Reve report as net cash used in investing activities?a. $170,000b. $176,000c. $188,000d. $194,000
Fara Co. reported bonds payable of $47,000 at December 31, 2009, and $50,000 at December 31, 2010. During 2010, Fara issued $20,000 of bonds payable in exchange for equipment. There was no amortization of bond premium or discount during the year. What amount should Fara report in its 2010 statement
In a statement of cash flows, what amount is included in financing activities for the above transaction?a. Cash payment.b. Acquisition price.c. Zero.d. Mortgage amount.
In a statement of cash flows, what amount is included in investing activities for the above transaction?a. Cash payment.b. Acquisition price.c. Zero.d. Mortgage amount.
On September 1, 2010, Canary Co. sold used equipment for a cash amount equaling its carrying amount for both book and tax purposes. On September 15, 2010, Canary replaced the equipment by paying cash and signing a note payable for new equipment. The cash paid for the new equipment exceeded the cash
In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipmenta. Plus the gain.b. Plus the gain and less the amount of tax attributable to the gain.c. Plus both the gain and the amount of tax
In 2010, a tornado completely destroyed a building belonging to Holland Corp. The building cost $100,000 and had accumulated depreciation of $48,000 at the time of the loss. Holland received a cash settlement from the insurance company and reported an extraordinary loss of $21,000. In Holland’s
Alp, Inc. had the following activities during 2010:• Acquired 2,000 shares of stock in Maybel, Inc. for$26,000. Alp intends to hold the stock as a long-term investment.• Sold an investment in Rate Motors for $35,000 when the carrying value was $33,000.• Acquired a $50,000, four-year
Mend Co. purchased a three-month US Treasury bill.Mend’s policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Mend’s statement of cash flows?a. As an outflow from operating
The primary purpose of a statement of cash flows is to provide relevant information abouta. Differences between net income and associated cash receipts and disbursements.b. An enterprise’s ability to generate future positive net cash flows.c. The cash receipts and cash disbursements of an
At December 31, 2010, Kale Co. had the following balances in the accounts it maintains at First State Bank:Checking account #101 $175,000 Checking account #201 (10,000)Money market account 25,000 90-day certificate of deposit, due 2/28/11 50,000 180-day certificate of deposit, due 3/15/11 80,000
Under IFRS an equity investment may be accounted for using the equity method if the investor has significant influence over the investee. Significant influence is indicated by ownership ofa. At least 10%.b. From 20 to 50%.c. More than 50%.d. More than 70%.
Under IFRS if a company uses the fair value method for accounting for an investment any changes in fair value are recognized ina. Other comprehensive income.b. Retained earnings.c. Profit and loss.d. Revaluation surplus.
Under IFRS, investments are classified in any of the following different ways, excepta. Fair value through profit and loss.b. Held to maturity.c. Tradable.d. Available for sale.
Under IFRS any investment may be accounted for by fair value through profit and loss providinga. It is traded in a active market.b. It is an equity instrument.c. It is a debt instrument.d. The instrument matures within 2 years.
On March 1, 2010, Acadia purchased 1,000 shares of common stock of Marston Corp. for $50,000 and classified the investment as available-for-sale securities. On December 31, 2010, the Marston stock had a fair value of $53,000.Acadia Corp. prepares its financial statements in accordance with IFRS.
Band Co. uses the equity method to account for its investment in Guard, Inc. common stock. How should Band record a 2% stock dividend received from Guard?a. As dividend revenue at Guard’s carrying value of the stock.b. As dividend revenue at the market value of the stock.c. As a reduction in the
In Lake’s 2010 income statement, how much should be reported for rental revenue?a. $43,000b. $48,000c. $53,000d. $53,800
In Lake’s 2010 income statement, how much should be reported for royalty revenue?a. $14,000b. $13,000c. $11,000d. $ 9,000
In Lake’s 2010 income statement, how much should be reported for dividend revenue?a. $16,000b. $ 2,400c. $ 1,000d. $ 150
Upon the death of an officer, Jung Co. received the proceeds of a life insurance policy held by Jung on the officer. The proceeds were not taxable. The policy’s cash surrender value had been recorded on Jung’s books at the time of payment. What amount of revenue should Jung report in its
An increase in the cash surrender value of a life insurance policy owned by a company would be recorded bya. Decreasing annual insurance expense.b. Increasing investment income.c. Recording a memorandum entry only.d. Decreasing a deferred charge.
In 2007, Chain, Inc. purchased a $1,000,000 life insurance policy on its president, of which Chain is the beneficiary.Information regarding the policy for the year ended December 31, 2010, follows:Cash surrender value, 1/1/10 $ 87,000 Cash surrender value, 12/31/10 108,000 Annual advance premium
On January 3, 2008, Falk Co. purchased 500 shares of Milo Corp. common stock for $36,000. On December 2, 2010, Falk received 500 stock rights from Milo. Each right entitles the holder to acquire one share of stock for $85. The market price of Milo’s stock was $100 a share immediately before the
On March 4, 2010, Evan Co. purchased 1,000 shares of LVC common stock at $80 per share. On September 26, 2010, Evan received 1,000 stock rights to purchase an additional 1,000 shares at $90 per share. The stock rights had an expiration date of February 1, 2011. On September 30, 2010, LVC’s common
Stock dividends on common stock should be recorded at their fair market value by the investor when the related investment is accounted for under which of the following methods?Cost Equity Fair valuea. Yes Yes Yesb. Yes No Noc. No Yes Yesd. No No No
Wood Co. owns 2,000 shares of Arlo, Inc.’s 20,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock and 1,000 shares (2%) of Arlo’s common stock.During 2010, Arlo declared and paid dividends of $240,000 on preferred stock. No dividends had been declared or paid during 2009. In
In its financial statements, Pulham Corp. uses the equity method of accounting for its 30% ownership of Angles Corp. At December 31, 2010, Pulham has a receivable from Angles. How should the receivable be reported in Pulham’s 2010 financial statements?a. None of the receivable should be reported,
On January 1, 2010, Point, Inc. purchased 10% of Iona Co.’s common stock. Point purchased additional shares bringing its ownership up to 40% of Iona’s common stock outstanding on August 1, 2010. During October 2010, Iona declared and paid a cash dividend on all of its outstanding common stock.
Peel Co. received a cash dividend from a common stock investment. Should Peel report an increase in the investment account if it has classified the stock as availablefor-sale or uses the equity method of accounting?Available-for-sale Equitya. No Nob. Yes Yesc. Yes Nod. No Yes
An investor in common stock received dividends in excess of the investor’s share of investee’s earnings subsequent to the date of the investment. How will the investor’s investment account be affected by those dividends for each of the following investments?Available-forsale securities Equity
Park Co. uses the equity method to account for its January 1, 2010 purchase of Tun Inc.’s common stock. On January 1, 2010, the fair values of Tun’s FIFO inventory and land exceeded their carrying amounts. How do these excesses of fair values over carrying amounts affect Park’s reported
When the equity method is used to account for investments in common stock, which of the following affects the investor’s reported investment income?Equipment amortization related to purchase Cash dividends from investeea. Yes Yesb. No Yesc. No Nod. Yes No
Pare, Inc. purchased 10% of Tot Co.’s 100,000 outstanding shares of common stock on January 2, 2010, for$50,000. On December 31, 2010, Pare purchased an additional 20,000 shares of Tot for $150,000. There was no goodwill as a result of either acquisition, and Tot had not issued any additional
On January 1, 2010, Mega Corp. acquired 10% of the outstanding voting stock of Penny, Inc. On January 2, 2011, Mega gained the ability to exercise significant influence over financial and operating control of Penny by acquiring an additional 20% of Penny’s outstanding stock. The two purchases
On January 2, 2010, Kean Co. purchased a 30% interest in Pod Co. for $250,000. On this date, Pod’s stockholders’equity was $500,000. The carrying amounts of Pod’s identifiable net assets approximated their fair values, except for land whose fair value exceeded its carrying amount by$200,000.
On January 2, 2010, Well Co. purchased 10% of Rea, Inc.’s outstanding common shares for $400,000. Well is the largest single shareholder in Rea, and Well’s officers are a majority on Rea’s board of directors. Rea reported net income of $500,000 for 2010, and paid dividends of $150,000.Well
On January 2, 2010, Saxe Company purchased 20% of Lex Corporation’s common stock for $150,000. Saxe Corporation intends to hold the stock indefinitely. This investment did not give Saxe the ability to exercise significant influence over Lex. During 2010 Lex reported net income of $175,000 and
Pear Co.’s income statement for the year ended December 31, 2010, as prepared by Pear’s controller, reported income before taxes of $125,000. The auditor questioned the following amounts that had been included in income before taxes:Unrealized gain on available-for-sale investment $40,000
Sage, Inc. bought 40% of Adams Corp.’s outstanding common stock on January 2, 2010, for $400,000. The carrying amount of Adams’ net assets at the purchase date totaled$900,000. Fair values and carrying amounts were the same for all items except for plant and inventory, for which fair values
Moss Corp. owns 20% of Dubro Corp.’s preferred stock and 80% of its common stock. Dubro’s stock outstanding at December 31, 2010, is as follows:10% cumulative preferred stock $100,000 Common stock 700,000 Dubro reported net income of $60,000 for the year ended December 31, 2010. Assume that
In its 2010 income statement, what amount should Grant report as gain from the sale of half of its investment?a. $24,500b. $30,500c. $35,000d. $45,500
In Grant’s December 31, 2009 balance sheet, what should be the carrying amount of this investment?a. $200,000b. $209,000c. $224,000d. $230,000
Before income taxes, what amount should Grant include in its 2009 income statement as a result of the investment?a. $15,000b. $24,000c. $50,000d. $80,000
What amount should Jill report as net unrealized loss on marketable debt securities in other comprehensive income in its 2011 statement of stockholders’ equity?a. $0b. $ 40,000c. $ 45,000d. $120,000
What amount of loss from investments should Jill report in its 2011 income statement?a. $ 40,000b. $ 85,000c. $160,000d. $0
A marketable debt security is transferred from available-for-sale to held-to-maturity securities. At the transfer date, the security’s carrying amount exceeds its market value. Assume the fair value option is not elected to report this security. What amount is used at the transfer date to record
What amount should Sun report as net unrealized loss on marketable debt securities in its 2010 statement of stockholders’equity?a. $ 40,000b. $ 45,000c. $160,000d. $120,000
What amount of loss from investments should Sun report in its 2010 income statement?a. $ 45,000b. $ 85,000c. $120,000d. $0
In its financial statements, Pare, Inc. uses the cost method of accounting for its 15% ownership of Sabe Co. At December 31, 2010, Pare has a receivable from Sabe. How should the receivable be reported in Pare’s December 31, 2010 balance sheet?a. The total receivable should be reported
Pal Corp.’s 2010 dividend revenue included only part of the dividends received from its Ima Corp. investment. Pal Corp. has an investment in Ima Corp. that it intends to hold indefinitely. The balance of the dividend reduced Pal’s carrying amount for its Ima investment. This reflects the fact
How should Deed report the receipt and distribution of the merchandise in its statement of cash flows?a. As both an inflow and outflow for operating activities.b. As both an inflow and outflow for investing activities.c. As an inflow for investing activities and outflow for operating activities.d.
How should Deed report the receipt and distribution of the merchandise in its income statement?a. At fair value for both dividend revenue and employee compensation expense.b. At listed retail price for both dividend revenue and employee compensation expense.c. At fair value for dividend revenue and
For the last ten years, Woody Co. has owned cumulative preferred stock issued by Hadley, Inc. During 2010, Hadley declared and paid both the 2010 dividend and the 2009 dividend in arrears. How should Woody report the 2009 dividend in arrears that was received in 2010?a. As a reduction in cumulative
On both December 31, 2009, and December 31, 2010, Kopp Co.’s only marketable equity security had the same market value, which was below cost. Kopp considered the decline in value to be temporary in 2009 but other than temporary in 2010. At the end of both years the security was classified as a
On January 10, 2010, Box, Inc. purchased marketable equity securities of Knox, Inc. and Scot, Inc., neither of which Box could significantly influence. Box classified both securities as available-for-sale. At December 31, 2010, the cost of each investment was greater than its fair market value. The
On December 29, 2010, BJ Co. sold a marketable equity security that had been purchased on January 4, 2009.BJ owned no other marketable equity security. An unrealized loss was reported in 2009 as other comprehensive income.A realized gain was reported in the 2010 income statement. Was the marketable
Nola has a portfolio of marketable equity securities that it does not intend to sell in the near term. Assume that Nola does not elect the fair value option to report these securities.How should Nola classify these securities, and how should it report unrealized gains and losses from these
Cap Corp. reported accrued investment interest receivable of $38,000 and $46,500 at January 1 and December 31, 2010, respectively. During 2010, cash collections from the investments included the following:Capital gains distributions $145,000 Interest 152,000 What amount should Cap report as
During 2010, Rex Company purchased marketable equity securities as a short-term investment. These securities are classified as available-for-sale. Rex does not elect the fair value option to account for available-for-sale securities.The cost and market value at December 31, 2010, were as
Antonio Corp. acquired a portfolio of marketable equity securities that it does not intend to sell in the near term.Antonio elects the fair value option for reporting its financial assets. How should Antonio classify these securities, and how should it report unrealized gains and losses?Classify as
Data regarding Shannon Corp.’s available-for-sale securities follow:Cost Market value December 31, 2011 $150,000 $130,000 December 31, 2012 150,000 160,000 Differences between cost and market values are considered temporary. Shannon elects to use the fair value option for reporting all
Information regarding Shelton Co.’s portfolio of available-for-sale securities is as follows:Aggregate cost as of 12/31/11 $150,000 Unrealized gains as of 12/31/11 14,000 Unrealized losses as of 12/31/11 26,000 Net realized gains during 2011 30,000 Shelton elects to use the fair value option for
Alton Co. began operations on January 1, 2011. The following information pertains to Alton’s December 31, 2011 portfolio of marketable equity securities:Trading securities Available-forsale securities Aggregate cost $360,000 $550,000 Aggregate market value 320,000 450,000 Aggregate lower of cost
Data regarding Ball Corp.’s available-for-sale securities follow:Cost Market value December 31, 2009 $150,000 $130,000 December 31, 2010 150,000 160,000 Differences between cost and market values are considered temporary. Ball does not elect the fair value option to account for available-for-sale
Stone does not use the fair value option to account for available-for-sale securities. Information regarding Stone Co.’s portfolio of available-for-sale securities is as follows:Aggregate cost as of 12/31/10 $170,000 Unrealized gains as of 12/31/10 4,000 Unrealized losses as of 12/31/10 26,000
Reed Insurance Co. began operations on January 1, 2010. The following information pertains to Reed’s December 31, 2010 portfolio of marketable equity securities:Trading securities Available-forsale securities Aggregate cost $360,000 $550,000 Aggregate market value 320,000 450,000 Aggregate lower
Assume Tyne does not elect the fair value option to report investments. What amount should Tyne report as net unrealized loss on marketable equity securities at December 31, 2010, in accumulated other comprehensive income in stockholders’ equity?a. $0b. $10,000c. $15,000d. $20,000
What amount should Tyne report as unrealized holding gain in its 2010 income statement, assuming Tyne does not elect to use the fair value option to report its investments?a. $50,000b. $55,000c. $60,000d. $65,000
For a marketable debt securities portfolio classified as held-to-maturity, which of the following amounts should be included in the period’s net income, assuming the company elects the fair value option of reporting all of its financial instruments in the portfolio?I. Unrealized temporary losses
Bing Corporation purchased bonds at a discount on the open market as an investment and intends to hold these bonds to maturity. Assume that Bing elects the fair value option. Bing should account for these bonds ata. Cost.b. Amortized cost.c. Fair value.d. Lower of cost or market.
For a marketable debt securities portfolio classified as held-to-maturity, which of the following amounts should be included in the period’s net income, assuming the fair value option is not elected.I. Unrealized temporary losses during the period.II. Realized gains during the period.III. Changes
Kale Co. purchased bonds at a discount on the open market as an investment and intends to hold these bonds to maturity. Kale does not elect the fair value option for the bonds. Kale should account for these bonds ata. Cost.b. Amortized cost.c. Fair value.d. Lower of cost or market.
Saxe uses the straight-line method of amortization and intends to hold the notes to maturity. Saxe does not elect the fair value option for recording the securities. In its October 31, 2010 balance sheet, the carrying amount of this investment should bea. $194,000b. $196,800c. $197,200d. $199,000
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