國立彰化師範大學九十四學年度碩士班招生考試試題
系所：會計學系 科目：會計學
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A.
multiple choice.( 60%)
1. Which of the following statements is not an objective of financial reporting? a. Provide information that is useful in investment and credit decisions. b. Provide information about enterprise resources, claims to those resources, and changes to them. c. Provide information on the liquidation value of an enterprise. d. Provide information that is useful in assessing cash flow prospects.
2. Which of the following is not one of the conditions that the International Accounting Standards
Committee must meet in order for a foreign firm to be allowed by the SEC to use IASC standards? a. The standards must be of high quality. b. The standards must be accepted by international accounting firms. c. The core standards must constitute a comprehensive generally accepted basis of accounting. d. The standards must be rigorously interpreted and applied.
3. Accounting information is considered to be relevant when it a. can be depended on to represent the economic conditions and events that it is intended to represent. b. is capable of making a difference in a decision. c. is understandable by reasonably informed users of accounting information. d. is verifiable and neutral.
4. Allowing firms to estimate rather than physically count inventory at interim (quarterly) periods is an example of a trade-off between a. verifiability and reliability. b. reliability and comparability. c. timeliness and verifiability. d. neutrality and consistency.
5. If, during an accounting period, an expense item has been incurred and consumed but not yet paid for or recorded, then the end-of-period adjusting entry would involve a. a liability account and an asset account. b. an asset or contra-asset and an expense account. c. a liability account and an expense account.
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國立彰化師範大學九十四學年度碩士班招生考試試題
系所：會計學系 科目：會計學
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頁 d. a receivable account and a revenue account.
6. Jim Vance, M.D., keeps his accounting records on the cash basis. During 2003, Dr. Vance collected $150,000 from his patients. At December 31, 2002, Dr. Vance had accounts receivable of $25,000. At December 31, 2003, Dr. Vance had accounts receivable of $35,000 and unearned revenue of $5,000. On the accrual basis, how much was Dr. Vance's patient service revenue for
2003? a. $125,000. b. $155,000. c. $160,000. d. $165,000.
7. During 2003, Perez Corporation disposed of Rush Division, a major segment of its business.
Perez realized a gain of $1,500,000, net of taxes, on the sale of Rush's assets. Rush's operating losses, net of taxes, were $1,800,000 in 2003. How should these facts be reported in Perez's income statement for 2003?
Total Amount to be Included in
Income from
Continuing Operations
Results of
Discontinued Operations a. b. c. d.
$1,800,000 loss
300,000 loss
0
1,500,000 gain
$1,500,000 gain
0
300,000 loss
1,800,000 loss
8. Free cash flow is calculated as net cash provided by operating activities less a. capital expenditures. b. dividends. c. capital expenditures and dividends. d. capital expenditures and depreciation.
9. On January 1, 2001, the Carly Company decided to begin accumulating a fund for asset replacement five years later. The company plans to make five annual deposits of $20,000 at
9% each January 1 beginning in 2001. What will be the balance in the fund, within $10, on
January 1, 2006 (one year after the last deposit)? The following 9% interest factors may be used.
4 periods
Present Value of
Ordinary Annuity
3.2397
Future Value of
Ordinary Annuity
4.5731
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國立彰化師範大學九十四學年度碩士班招生考試試題
系所：會計學系 科目：會計學
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5 periods 3.8897 5.9847
6 periods a. $130,466 b. $119,694 c. $109,000
4.4859 7.5233 d. $100,000
10. The cash account shows a balance of $42,000 before reconciliation. The bank statement does not include a deposit of $2,300 made on the last day of the month. The bank statement shows a collection by the bank of $940 and a customer's check for $220 was returned because it was
NSF. A customer's check for $450 was recorded on the books as $540, and a check written for $79 was recorded as $97. The correct balance in the cash account was a. $42,612. b. $42,648. c. $42,828. d. $44,948.
11. On December 31, 2003, Eller Corporation sold for $70,000 an old machine having an original cost of $90,000 and a book value of $40,000. The terms of the sale were as follows:
$10,000 down payment
$30,000 payable on December 31 each of the next two years
The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2003 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 9% for 2 years is 1.75911.) a. $52,773. b. $62,773. c. $60,000. d. $105,546.
12. If inventory levels are stable or increasing, an argument which is not an advantage of the LIFO method as compared to FIFO is a. income taxes tend to be reduced in periods of rising prices. b. cost of goods sold tends to be stated at approximately current cost on the income statement. c. cost assignments typically parallel the physical flow of goods. d. income tends to be smoothed as prices change over time.
13. On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store.
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國立彰化師範大學九十四學年度碩士班招生考試試題
系所：會計學系 科目：會計學
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The following data are available:
Sales, January 1 through April 15
Inventory, January 1
Purchases, January 1 through April 15
Markup on cost
$450,000
75,000
375,000
25%
The amount of the inventory loss is estimated to be a. $90,000. b. $45,000. c. $112,500. d. $75,000.
14. On August 1, 2003, Jorden Corporation purchased a new machine on a deferred payment basis.
A down payment of $1,500 was made and 4 monthly installments of $2,000 each are to be made beginning on September 1, 2003. The cash equivalent price of the machine was $8,000.
Jorden incurred and paid installation costs amounting to $250. The amount to be capitalized as the cost of the machine is a. $8,000. b. $8,250. c. $9,500. d. $9,750.
15. White Printing Company determines that a printing press used in its operations has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should a. recognize an extraordinary loss for the period. b. include a credit to the equipment accumulated depreciation account. c. include a credit to the equipment account. d. not be made if the equipment is still being used.
16. Which of the following research and development related costs should be capitalized and amortized over current and future periods? a. Research and development general laboratory building which can be put to alternative uses in the future b. Inventory used for a specific research project c. Administrative salaries allocated to research and development d. Research findings purchased from another company to aid a particular research project
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國立彰化師範大學九十四學年度碩士班招生考試試題
系所：會計學系 科目：會計學
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17. In March 2002, an explosion occurred at Hall Co.'s plant, causing damage to area properties.
By May 2002, no claims had yet been asserted against Hall. However, Hall's management and legal counsel concluded that it was reasonably possible that Hall would be held responsible for negligence, and that $3,000,000 would be a reasonable estimate of the damages. Hall's
$5,000,000 comprehensive public liability policy contains a $300,000 deductible clause. In
Hall's December 31, 2001 financial statements, for which the auditor's fieldwork was completed in April 2002, how should this casualty be reported? a. As a note disclosing a possible liability of $3,000,000. b. As an accrued liability of $300,000. c. As a note disclosing a possible liability of $300,000. d. No note disclosure of accrual is required for 2001 because the event occurred in 2002.
18. On January 1, 2003, Howell Company sold property to King Company. There was no established exchange price for the property, and King gave Howell a $3,000,000 zero-interest-bearing note payable in 5 equal annual installments of $600,000, with the first payment due December 31, 2003. The prevailing rate of interest for a note of this type is 9%.
The present value of the note at 9% was $2,163,000 at January 1, 2003. What should be the balance of the Discount on Notes Payable account on the books of King at December 31, 2003 after adjusting entries are made, assuming that the effective interest method is used? a. $0 b. $642,330 c. $669,600 d. $837,000
19. Presented below is the stockholders' equity section of Kidd Corporation at
December 31, 2000:
Common stock, par value $20; authorized 75,000 shares; issued and outstanding 45,000 shares
Paid-in capital in excess of par value
Retained earnings
$ 900,000
250,000
500,000
$1,650,000
During 2001, the following transactions occurred relating to stockholders' equity:
2,000 shares were reacquired at $28 per share.
2,000 shares were reacquired at $35 per share.
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國立彰化師範大學九十四學年度碩士班招生考試試題
系所：會計學系 科目：會計學
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1,200 shares of treasury stock were sold at $30 per share.
For the year ended December 31, 2001, Kidd reported net income of $450,000. Assuming
Kidd accounts for treasury stock under the cost method, what should it report as total stockholders' equity on its December 31, 2001, balance sheet? a. $2,010,000. b. $2,007,600. c. $2,044,000. d. $1,560,000.
20. At December 31, 2000, Potts Company had 500,000 shares of common stock outstanding. On
October 1, 2001, an additional 100,000 shares of common stock were issued. In addition, Potts had $5,000,000 of 6% convertible bonds outstanding at December 31, 2000, which are convertible into 225,000 shares of common stock. No bonds were converted into common stock in 2001. The net income for the year ended December 31, 2001, was $1,500,000. Assuming the income tax rate was 30%, the diluted earnings per share for the year ended December 31,
2001, should be (rounded to the nearest penny) a. $3.26. b. $2.40. c. $2.28. d. $2.00.
21. On November 1, 2001, Milner Company purchased 600 of the $1,000 face value, 9% bonds of
Player, Incorporated, for $632,000, which includes accrued interest of $9,000. The bonds, which mature on January 1, 2006, pay interest semiannually on March 1 and September 1.
Assuming that Milner uses the straight-line method of amortization and that the bonds are appropriately classified as available-for-sale, the net carrying value of the bonds should be shown on Milner's December 31, 2001, balance sheet at a. $600,000. b. $623,000. c. $622,080. d. $632,000.
22. Harber Co. uses the installment sales method. When an account had a balance of $2,800, no further collections could be made and the dining room set was repossessed. At that time, it was estimated that the dining room set could be sold for $800 as repossessed, or for $1,000 if the company spent $100 reconditioning it. The gross profit rate on this sale was 70%. The gain or loss on repossession was a
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國立彰化師範大學九十四學年度碩士班招生考試試題
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頁 a. $1,960 loss. b. $2,000 loss. c. $200 gain. d. $60 gain.
23. Trey, Inc. reports a taxable and financial loss of $130,000 for 2003. Its pretax financial income for the last two years was as follows:
2001
2002
$60,000
80,000
The amount that Trey, Inc. reports as a net loss for financial reporting purposes in 2003, assuming that it uses the carryback provisions, and that the tax rate is 30% for all periods affected, is a. $130,000 loss. b. $ -0-. c. $39,000 loss. d. $91,000 loss.
24. Accrued salaries payable of $11,000 were not recorded at December 31, 2001. Office supplies on hand of $5,000 at December 31, 2002 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause a. 2002 net income to be understated $16,000 and December 31, 2002 retained earnings to be understated $5,000. b. 2001 net income and December 31, 2001 retained earnings to be understated $11,000 each. c. 2001 net income to be overstated $6,000 and 2002 net income to be understated $5,000. d. 2002 net income and December 31, 2002 retained earnings to be understated $5,000 each.
Use the following information for questions 25 through 27.
Financial statements for Rich Company are given below:
Cash
Assets
Accounts receivable
Buildings and equipment
Rich Company
Balance Sheet
January 1, 2001
$160,000
Equities
Accounts payable
144,000
600,000
$ 76,000
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國立彰化師範大學九十四學年度碩士班招生考試試題
系所：會計學系 科目：會計學
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Accumulated depreciation—
buildings and equipment
Patents
(200,000)
72,000
$776,000
Capital stock
Retained earnings
460,000
240,000
$776,000
Rich Company
Statement of Cash Flows
For the Year Ended December 31, 2001
Increase (Decrease) in Cash
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accounts receivable
Increase in accounts payable
Depreciation—buildings and equipment
Gain on sale of equipment
Amortization of patents
Net cash provided by operating activities
Cash flows from investing activities
Sale of equipment
$ (64,000)
32,000
60,000
(24,000)
8,000
Purchase of land
Purchase of buildings and equipment
Net cash used by investing activities
Cash flows from financing activities
Payment of cash dividend
Sale of common stock
48,000
(100,000)
(192,000)
(60,000)
160,000
$200,000
12,000
212,000
(244,000)
Net cash provided by financing activities
Net increase in cash
Cash, January 1, 2001
Cash, December 31, 2001
100,000
68,000
160,000
$228,000
Total assets on the balance sheet at December 31, 2001 are $1,108,000. Accumulated depreciation on the equipment sold was $56,000.
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國立彰化師範大學九十四學年度碩士班招生考試試題
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25. When the equipment was sold, the Buildings and Equipment account received a credit of a. $48,000. b. $104,000. c. $80,000. d. $56,000.
26. The book value of the buildings and equipment at December 31, 2001 was a. $508,000. b. $520,000. c. $712,000. d. $588,000.
27. The accounts payable at December 31, 2001 were a. $44,000. b. $108,000. c. $32,000. d. $148,000.
28. In considering interim financial reporting, how does the profession conclude that such reporting should be viewed? a. As a "special" type of reporting that need not follow generally accepted accounting principles. b. As useful only if activity is evenly spread throughout the year so that estimates are unnecessary. c. As reporting for a basic accounting period. d. As reporting for an integral part of an annual period
29. An inventory loss from market decline of $900,000 occurred in May 2003, after its March 31,
2003 quarterly report was issued. None of this loss was recovered by the end of the year. How should this loss be reflected in the company's quarterly income statements? a. $ -0- b. $ -0- c. $ -0-
Three Months Ended
3/31/03 6/30/03 9/30/03 12/31/03
$ -0-
$300,000
$900,000
$ -0-
$300,000
$ -0-
$900,000
$300,000
$ -0- d. $225,000 $225,000 $225,000 $225,000
30. In the earlier years of a lease, from the lessee's perspective, the use of the a. capital method will enable the lessee to report higher income, compared to the operating
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國立彰化師範大學九十四學年度碩士班招生考試試題
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頁 method. b. capital method will cause debt to increase, compared to the operating method. c. operating method will cause income to decrease, compared to the capital method. d. operating method will cause debt to increase, compared to the capital method.
B. Problem.(10%)
Burger Inn charges an initial fee of $200,000 for a franchise, with $40,000 paid when the agreement is signed and the balance in four annual payments. The present value of the annual payments, discounted at 10%, is $126,800. The franchisee has the right to purchase $30,000 of kitchen equipment and supplies for $25,000. An additional part of the initial fee is for advertising to be provided by Burger Inn during the next five years. The value of the advertising is $250 a month.
Collectibility of the payments is reasonably assured and Burger Inn has performed all the initial services required by the contract.
Instructions
Prepare the entry to record the initial franchise fee. Show supporting computations in good form.
1.
Wood Corporation acquired a 30% interest in Pine Corporation in 2004 at a cost of $51,000 in excess of Pine’s book value. The excess purchase cost was attributable to Pine's undervalued equipment. In 2005, the excess will: a.
decrease Wood’s earnings, but not affect the earnings of Pine. b.
decrease Pine’s earnings, but not affect the earnings of Wood. c.
decrease the earnings of both Wood and Pine. d.
appear on Wood’s balance sheet as an intangible asset.
2.
Poe Corporation paid $2,000,000 for the net assets of Dart Corporation and Dart was then dissolved. Dart had no liabilities. The fair values of Dart’s assets were $2,500,000. Dart’s only non-current assets were land and a building with fair values of $160,000 and $640,000, respectively.
At what value will the building be recorded by the surviving entity? a.
$640,000.
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國立彰化師範大學九十四學年度碩士班招生考試試題
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頁 b.
$400,000. c.
$240,000. d.
$0.
3.
Which one of the following will increase consolidated Retained Earnings? a.
The depreciation of a $30,000 excess in the fair value of equipment over its recorded book value . b.
The sale of inventory by a subsidiary that had a $30,000 excess in fair value over recorded book value on the parent's date of acquisition. c.
An increase in the value of goodwill subsequent to the parent's date of acquisition. d.
The amortization of a $30,000 excess in the fair value of a note payable over its recorded book value.
4.
Polk Co. acquired a 60% interest in Strass Co. on January 1, 2004, at book value equal to fair value.
During 2004, Polk sold merchandise that cost $180,000 to Strass for $252,000. One-third of this merchandise remained in Strass’s inventory at December 31, 2004. Strass reported net income of
$160,000 for 2004. Polk’s investment income from Strass for 2004 is: a.
$48,000. b.
$67,200. c.
$72,000. d.
$81,600.
5.
Parlor Corporation acquired a 90% interest in Shaw Corporation in 2002 when Shaw’ book values were equivalent to fair values. Shaw sold equipment with a book value of $80,000 to Parlor for
$130,000 on January 1, 2004. Parlor will fully depreciate the equipment over a 4-year period by using the straight-line method. Shaw’ reported net income for 2004 is $320,000. Parlor’s investment income from Shaw in 2004 is: a.
$288,000. b.
$254,250. c.
$250,500. d.
$243,000.
6.
Pep Corporation acquired a 90% interest in Shep Corporation at its $270,000 book value on
December 31, 2003. A summary of the stockholders’ equity for Shep at the end of 2003 and 2004 is as follows:
12/31/03 12/31/04
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國立彰化師範大學九十四學年度碩士班招生考試試題
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Capital stock, $10 par $ 200,000 $ 200,000
Additional paid-in capital
Retained Earnings
Total stockholders’ equity
$
10,000
90,000
300,000 $
10,000
140,000
350,000
On January 1, 2005, Shep sold 5,000 new shares of its $10 par value common stock for $30 per share. If Shep sold the additional shares to the general public, Pep’s “Investment in Shep” account after the sale of Shep’s additional shares would be: a.
$360,000. b.
$375,000. c.
$415,000. d.
$450,000.
7.
Pirn Corporation paid $450,000 for a 90% interest in Scroll Corporation on December 31, 2004, when Scroll’s stockholders’ equity consisted of $250,000 Common Stock and $50,000 Retained
Earnings. The book values and fair values of Scroll’s assets and liabilities were equal when Pirn acquired its interest. Pirn uses the entity theory in consolidating its financial statements with those of Scroll. Goodwill will be reported in the December 31, 2004 consolidated balance sheet at: a.
$210,000. b.
$200,000. c.
$180,000. d.
$170,000.
Items 8 and 9 are based on the following:
On December 12, 2004, Dunn Co. entered into two forward exchange contracts, each to purchase
100,000 euros in ninety days. The relevant exchange rates are as followed:
Forward rate
Spot rate (for March 12, 2005)
December 12, 2004 0.89 0.90
December 30, 2004 0.91 0.93
8.
Dunn Co. entered into the first forward contract to hedge a purchase of inventory in November
2004, payable in March 2005. At December 31, 2004, what amount of foreign currency transaction gain or loss from this forward contract should Dunn include in net income? a.
gain $2,000.
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國立彰化師範大學九十四學年度碩士班招生考試試題
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頁 b.
loss $2,000. c.
gain$3,000. d.
loss $3,000.
9.
Dunn Co. entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Dunn’s specifications. The expected delivery date is March 2005 at which time settlement is due to the manufacture. The hedge qualifies as a fair value hedge. At December
31, 2004, what amount of foreign currency transaction gain or loss from this forward contract should Dunn include in net income? a.
$0. b.
Loss $2,000. c.
Loss $3,000. d.
Gain $3,000.
10.
A foreign entity is a subsidiary of a US parent company and has always used the current rate method to translate its foreign financial statements on behalf of its parent company. Which one of the following statements is incorrect? a.
Changes in exchange rates between the subsidiary’s country and the parent’s country are not expected to affect the foreign subsidiary’s cash flows. b.
Translation adjustments are not shown on the consolidated income statement. c.
Translation adjustments are shown in stockholders’ equity as increases or decreases in other comprehensive income. d.
The US dollar will be the functional currency of the foreign subsidiary.
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