Reference no: EM13600527

1. An income statement shows "income before income taxes and extraordinary items" in the amount of $2,740,000. The income taxes payable for the year are $1,440,000, including $480,000 that is applicable to an extraordinary gain. Thus, the "income before extraordinary items" is
a.) $1,860,000.
b.) $820,000.
c.)$1,780,000.
d.)$900,000.

2. Franco Company uses IFRS and owns property, plant and equipment with a historical cost of 5,000,000 euros. At December 31, 2011, the company reported a valuation reserve of 8,365,000 euros. At December 31, 2012, the property, plant and equipment was appraised at 5,325,000 euros. The property, plant and equipment will be reported on the December 31, 2012 balance sheet at
a.) 8,690,000 euros.
b.) 5,325,000 euros.
c.) 8,365,000 euros.
d.) 5,000,000 euros.

3. An income statement shows "income before income taxes and extraordinary items" in the amount of $2,740,000. The income taxes payable for the year are $1,440,000, including $480,000 that is applicable to an extraordinary gain. Thus, the "income before extraordinary items" is
a.) $1,860,000.
b.) $820,000.
c.)$1,780,000.
d.) $900,000.

4. Sue Gray wants to invest a certain sum of money at the end of each year for five years. The investment will earn 6% compounded annually. At the end of five years, she will need a total of $40,000 accumulated. How should she compute her required annual invest-ment?
a.) $40,000 times the present value of a 5-year, 6% ordinary annuity of 1.
b.) $40,000 times the future value of a 5-year, 6% ordinary annuity of 1.
c.) $40,000 divided by the present value of a 5-year, 6% ordinary annuity of 1.
d.) $40,000 divided by the future value of a 5-year, 6% ordinary annuity of 1.

5. If an annuity due and an ordinary annuity have the same number of equal payments and the same interest rates, then
a.) the future value of the annuity due is equal to the future value of the ordinary annuity.
b.) the present value of the annuity due is less than the present value of the ordinary annuity.
c.) the future value of the annuity due is less than the future value of the ordinary annuity.
d.) the present value of the annuity due is greater than the present value of the ordinary annuity.

6. For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?
a.) A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%.
b.) A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement.
c.) A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%.
d.) A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement.

7. Find the present value of an investment in plant and equipment if it is expected to provide annual earnings of $26,000 for 15 years and to have a resale value of $50,000 at the end of that period. Assume a 10% rate and earnings at year end. The present value of 1 at 10% for 15 periods is .23939. The present value of an ordinary annuity at 10% for 15 periods is 7.60608. The future value of 1 at 10% for 15 periods is 4.17725.
a.) $197,758
b.) $247,758
c.) $209,728
d.) $401,970

8. On January 15, 2012, Dolan Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2016, at an estimated cost of $5,000,000. Dolan plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2012. Future value factors are as follows:
Future value of 1 at 10% for 5 periods 1.61
Future value of ordinary annuity of 1 at 10% for 4 periods 4.64
Future value of annuity due of 1 at 10% for 4 periods 5.11
Dolan should make four annual deposits of

a.) $978,474.
b.) $889,522.
c.) $1,077,586.
d.) $1,250,000.

9. Johnstone Company has a loan receivable with a carrying value of $125,000 at December 31, 2011. On January 1, 2012, the borrower, Ralph Young Industries, declares bankruptcy, and Johnstone estimates that it will collect only 45% of the loan balance.

Assume that on January 4, 2013, Johnstone learns that Ralph Young Industries has emerged from bankruptcy. As a result, Johnstone now estimates that all but $11,500 will be paid on the loan. Under iGAAP, which of the following entries would be made on January 4, 2013?
a.) Bad Debt Expense 11,500
Impairment Loss 11,500

b.) Loan Receivable 11,500
Recovery of impairment loss 11,500

c.) Loan Receivable 57,250
Recovery of Impairment Loss 57,250

No journal entry is allowed under iGAAP.
10. 124Ace Co. prepared an aging of its accounts receivable at December 31, 2012 and determined that the net realizable value of the receivables was $600,000. Additional information is available as follows:
Allowance for uncollectible accounts at 1/1/12-credit balance $68,000
Accounts written off as uncollectible during 2012 46,000
Accounts receivable at 12/31/12 650,000
Uncollectible accounts recovered during 2012 10,000

For the year ended December 31, 2012, Ace's uncollectible accounts expense would be
a.) $18,000.
b.) $32,000.
c.) $50,000.
d.) $46,000.