2. In the hierarchy of generally accepted accounting principles, APB Opinions have the same authority as AICPA A.Statements of Position. B.Industry Audit and Accounting Guides. C.Issues Papers. D.Accounting Research Bulletins.
3. One of the elements of a financial statement is comprehensive income. Comprehensive income excludes changes in equity resulting from which of the following? A.Loss from discontinued operations. B.Prior period error correction. C.Dividends paid to stockholders. D.Unrealized loss on investments in noncurrent marketable equity securities.
4. Under Statements of Financial Accounting Concepts, which of the following relates to both relevance and reliability? A.Timeliness. B.Neutrality. C.Feedback value. D.Consistency.
5. According to the FASB conceptual framework, comprehensive income includes which of the following?
Gross margin Operating income A. No No B. No Yes C. Yes Yes D. Yes No
6. Reporting inventory at the lower of cost or market is a departure from the accounting principle of
A.Historical cost. B.Consistency. C.Conservatism. D. Full disclosure.
7. Martin Company had the following account balances for the year ended December 31, 1993:
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . $120,000
Loss on disposal of noncurrent investment . . . . . . . . . . . . . . . . .80,000
Writedown of plant and equipment to estimated realizable value. . . . . . . . . . . . . . .60,000
In its income statement for 1993, how much should Martin report as total extraordinary items?
A.$0 B.$140,000 C.$180,000 D.$200,000
8. When a segment of a business has been discontinued during the year, the gain or loss on disposal should
A.Be an extraordinary item. B.Exclude operating losses during the phase-out period. C.Include operating losses of the current period up to the measurement date. D.Be net of applicable income taxes.
9. Milton Co. began operations on January 1, 1989. On January 1, 1991, Milton changed its inventory method from LIFO to FIFO for both financial and income tax reporting. If FIFO had been used in prior years, Milton's inventories would have been higher by $60,000 and $40,000 at December 1, 1991 and 1990, respectively. Milton has a 30% income tax rate. What amount should Milton report as the cumulative effect of this accounting change in its income statement for the year ended December 31, 1991?
A.$0 B.$14,000 C.$28,000 D.$42,000
10. Cory Company acquired some machinery on January 2, 1992. Cory was using straight-line depreciation with an estimated life of fifteen years with no salvage value for this machinery. On January 2, 1997, Cory estimated that the remained life of this machinery was six years with no salvage value. How should this change be accounted for by Cory?
A.Making a prior period adjustment and changing to an accelerated depreciation method that will compensate for underdepreciation in prior years. B.Estimating the effects of the change on each year's net earnings, but maintaining the method of depreciation as originally determined. C.Revising future depreciation per year to equal the book value on January 2, 1997, divided by six. D.Revising future depreciation per year to equal the original cost divided by six.
11. Bolte Corp. had the following infrequent gains during l989:
--$210,000 on reacquisition and retirement of bonds --$ 75,000 on repayment at maturity of a long-term note denominated in a foreign currency --$240,000 on sale of a plant facility (Bolte continues similar operations at another location.)
In its 1989 income statement, what amount should Bolte report as total infrequent gains which are not considered extraordinary?
A.$450,000 B. $315,000 C.$285,000 D.$240,000
12. On October 1, 19X5, Mann Company approved a formal plan to sell Mill Division, considered a segment of the business. The sale will occur on March 31, 19X6. The division had operating income of $500,000 for the quarter ended December 31, 19X5, but expects to incur an operating loss of $100,000 for the first quarter of 19X6. Mann also estimates that it will incur a loss of $750,000 on the sale of the division's assets. Mann's tax rate for 19X5 is 40%. In its income statement for the year ended December 31, 19X5, how much should Mann report as "Loss on discontinued operations" of Mill Division?
A.$210,000 loss. B.$150,000 loss. C.$350,000 loss. D.$500,000 gain.
13. During 19X7, Moore Corp. had the following two classes of stock issued and outstanding for the entire year:
* 100,000 shares of common stock, $1 par. * 1,000 shares of 4% preferred stock, $100 par, convertible share for share into common stock.
Moore's 19X7 net income was $900,000, and its income tax rate for the year was 30%. In the computation of basic earnings per share for 19X7, the amount to be used in the numerator is
A. $896,000 B. $898,800 C. $900,000 D. $901,200
14. The next two questions are based on the following data: Information relating to the capital structure of Parke Corporation is as follows: December 19X0 19X1 Outstanding shares of: Common stock 90,000 90,000 Preferred stock, convertible into 30,000 shares of common 30,000 30,000 10% convertible bonds, convertible into 20,000 shares of common $1,000,000 $1,000,000
During 19X1 Parke paid $45,000 dividends on the preferred stock. Parke's net income for 19X1 was $980,000 and the income tax rate was 40%.
For the year ended December 31, 19X1, the basic earnings per share is
A. $10.89 B. $10.39 C. $ 8.17 D. $ 7.79
15. For the year ended December 31, 19X1, the diluted earnings per share is:
A. $9.82 B. $8.29 C. $7.71 D. $7.43