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CHT 3 & 4 Quiz Summer 2009
CHT 3 & 4 Quiz Summer 2009
CHT 3 & 4 Quiz Summer 2009
4.On September 1, 2010, Lowe Co. issued a note payable to National Bank in the amount of $600,000,
bearing interest at 12%, and payable in three equal annual principal payments of $200,000. On this
date, the bank's prime rate was 11%. The first payment for interest and principal was made on
September 1, 2011. At December 31, 2011, Lowe should record accrued interest payable of
a. $24,000.
b. $22,000.
c. $16,000.
d. $14,667.
5.
Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a
one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service
Revenues. This account had a balance of $1,800,000 at December 31, 2010 before year-end
adjustment. Service contract costs are charged as incurred to the Service Contract Expense account,
which had a balance of $450,000 at December 31, 2010.
Service contracts still outstanding at December 31, 2010 expire as follows:
During 2011
$380,000
During 2012
570,000
During 2013
350,000
6.
7.
8.
What amount should be reported as Unearned Service Revenues in Eaton's December 31, 2010
balance sheet?
a. $1,350,000.
b. $1,300,000.
c. $850,000.
d. $500,000.
Gregg Corp. reported revenue of $1,100,000 in its accrual basis income statement for the year ended
June 30, 2011. Additional information was as follows:
Accounts receivable June 30, 2010
$350,000
Accounts receivable June 30, 2011
530,000
Uncollectible accounts written off during the fiscal year
13,000
Under the cash basis, Gregg should report revenue of
a. $687,000.
b. $700,000.
c. $907,000.
d. $933,000.
Jim Yount, M.D., keeps his accounting records on the cash basis. During 2011, Dr. Yount collected
$360,000 from his patients. At December 31, 2010, Dr. Yount had accounts receivable of $50,000. At
December 31, 2011, Dr. Yount had accounts receivable of $70,000 and unearned revenue of $10,000.
On the accrual basis, how much was Dr. Yount's patient service revenue for 2011?
a. $310,000.
b. $370,000.
c. $380,000.
d. $390,000.
Gross billings for merchandise sold by Lang Company to its customers last year amounted to
$15,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freightout was $140,000. Net sales last year for Lang Company were
a. $15,720,000.
b. $15,350,000.
c. $15,175,000.
d. $15,035,000.
9.
If plant assets of a manufacturing company are sold at a gain of $820,000 less related taxes of
$250,000, and the gain is not considered unusual or infrequent, the income statement for the period
would disclose these effects as
a. a gain of $820,000 and an increase in income tax expense of $250,000.
b. operating income net of applicable taxes, $570,000.
c. a prior period adjustment net of applicable taxes, $570,000.
The effect of these events and transactions on 2010 income from continuing operations net of tax
would be
a. $17,500.
b. $38,500.
c. $66,500.
d. $416,500.
11. The effect of these events and transactions on 2010 net income net of tax would be
a. $17,500.
b. $367,500.
c. $388,500.
d. $416,500.
12.
During 2010, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez
realized a gain of $1,200,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of
taxes, were $1,400,000 in 2010. How should these facts be reported in Lopez's income statement for
2010?
a.
b.
c.
d.
13.
In 2010, Benfer Corporation reported net income of $350,000. It declared and paid common stock
dividends of $40,000 and had a weighted average of 70,000 common shares outstanding. Compute the
earnings per share to the nearest cent.
a.
b.
c.
d.
$4.43
$3.50
$4.50
$5.00
1
2.
3.
4.
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Item
b
b
d
c
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6.
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8.
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Item
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Item
b
c
b
c
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10.
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12.
a
a
b
c
13.
Ans
d.
Item
Ans
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Item
Ans.
3 DERIVATIONS Computational
No.
Answer
Derivation
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