2012 FAR released questions

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Following are multiple choice questions recently released by the AICPA These

questions were released by the AICPA with letter answers only Our editorial board is currently working on providing detailed explanations for these questions, so please check back to the Becker Knowledgebase soon for the updated file

Please note that the AICPA generally releases questions that it does NOT intend to use again These questions and content may or may not be representative of questions you may see on any upcoming exams

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Burns Corp had the following items:

Loss on early extinguishment of bonds 36,000

Realized gain on sale of available-for-sale securities 28,000

Realized gain on sale of available-for-sale securities 17,000

Which of the following amounts would the statement of comprehensive income report as other comprehensive income or loss?

a $11,000 other comprehensive income

b $16,900 other comprehensive income

c $17,000 other comprehensive loss

d $28,100 other comprehensive loss

Explanation

Choice "c" is correct

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Baler Co prepared its statement of cash flows at year-end using the direct method The following amounts were used in the computation of cash flows from operating activities:

Beginning accounts payable 300,000

Ending accounts payable 200,000

What amount should Baler report as cash paid to suppliers for inventory purchases?

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Which of the following transactions is included in the operating activities section of a cash flow statement prepared using the indirect method?

a Gain on sale of plant asset

b Sale of property, plant and equipment

c Payment of cash dividend to the shareholders

d Issuance of common stock to the shareholders

Explanation

Choice "a" is correct

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Tinsel Co.'s balances in allowance for uncollectible accounts were $70,000 at the beginning of the current year and $55,000 at year end During the year, receivables of $35,000 were written off as uncollectible What amount should Tinsel report as uncollectible accounts expense at year end?

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Alta Co spent $400,000 during the current year developing a new idea for a product that was patented during the year The legal cost of applying for a patent license was $40,000 Also, $50,000 was spent to successfully defend the rights of the patent against a competitor The patent has a life of 20 years What amount should Alta capitalize related to the patent?

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A retail store sold gift certificates that are redeemable in merchandise The gift certificates lapse one year after they are issued How would the deferred revenue account be affected by each of the following?

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On January 2, Vole Co issued bonds with a face value of $480,000 at a discount to yield 10% The bonds pay interest semiannually On June 30, Vole paid bond interest of $14,400 After Vole recorded amortization of the bond discount of $3,600, the bonds had a carrying amount of $363,600 What amount did Vole receive upon issuing the bonds?

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What type of bonds mature in installments?

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Balm Co had 100,000 shares of common stock outstanding as of January 1 The following events occurred during the year:

4/1 Issued 30,000 shares of common stock

6/1 Issued 36,000 shares of common stock

7/1 Declared a 5% stock dividend

9/1 Purchased as treasury stock 35,000 shares of its common stock Balm used the cost method

to account for the treasury stock

What is Balm's weighted average of common stock outstanding at December 31?

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The stockholders of Meadow Corp approved a stock-option plan that grants the company's top three executives options to purchase a maximum of 1,000 shares each of Meadow's $2 par common stock for

$19 per share The options were granted on January 1 when the fair value of the stock was $20 per share Meadow determined that the fair value of the compensation is $300,000 and the vesting period is three years What amount of compensation expense from the options should Meadow record in the year the options were granted?

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At the beginning of the year, the carrying value of an asset was $1,000,000 with 20 years of remaining life The fair value of the liability for the asset retirement obligation was $100,000 At year end, the carrying value of the asset was $950,000 The risk-free interest rate was 5% The credit-adjusted risk-free interest rate was 10% What was the amount of accretion expense for the year related to the asset retirement obligation?

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Blythe Corp is a defendant in a lawsuit Blythe’s attorneys believe it is reasonably possible that the suit will require Blythe to pay a substantial amount What is the proper financial statement treatment for this contingency?

a Accrued and disclosed

b Accrued but not disclosed

c Disclosed but not accrued

d No disclosure or accrual

Explanation

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Jones Co had 50,000 shares of $5 par value common stock outstanding at January 1 On August 1, Jones declared a 5% stock dividend followed by a two-for-one stock split on September 1 What amount should Jones report as common shares outstanding at December 31?

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A transaction that is unusual in nature or infrequent in occurrence should be reported as a(an):

a Component of income from continuing operations, net of applicable income taxes

b Extraordinary item, net of applicable income taxes

c Component of income from continuing operations, but not net of applicable income taxes

d Extraordinary item, but not net of applicable income taxes

Explanation

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Giaconda, Inc acquires an asset for which it will measure the fair value by discounting future cash flows

of the asset Which of the following terms best describes this fair value measurement approach?

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A company owns a financial asset that is actively traded on two different exchanges (market A and market B) There is no principal market for the financial asset The information on the two exchanges is

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Brand Co incurred the following research and development project costs at the beginning of the current year:

Equipment purchased for current and future projects $100,000

Equipment purchased for current projects only 200,000

Research and development salaries for current project 400,000

Equipment has a five-year life and is depreciated using the straight-line method What amount should Brand record as depreciation for research and development projects at December 31?

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How should NSB, Inc report significant research and development costs incurred?

a Expense all costs in the year incurred

b Capitalize the costs and amortize over a five-year period

c Capitalize the costs and amortize over a 40-year period

d Expense all costs two years before and five years after the year incurred

Explanation

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Kenn City obtained a municipal landfill and passed a local ordinance that required the city to operate the landfill so that the costs of operating the landfill, as well as the capital costs, are to be recovered with charges to customers Which of the following funds should Kenn City use to report the activities of the landfill?

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At the beginning of the current year, Paxx County's enterprise fund had a $125,000 balance for accrued compensated absences At the end of the year, the balance was $150,000 During the year, Paxx paid

$400,000 for compensated absences What amount of compensated absences expense should Paxx County's enterprise fund report for the year?

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Which of the following funds would be reported as a fiduciary fund in Pine City's financial statements?

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Belle, a nongovernmental not-for-profit organization, received funds during its annual campaign that were specifically pledged by the donor to another nongovernmental not-for-profit health organization How should Belle record these funds?

a Increase in assets and increase in liabilities

b Increase in assets and increase in revenue

c Increase in assets and increase in deferred revenue

d Decrease in assets and decrease in fund balance

Explanation

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Ragg Coalition, a nongovernmental not-for-profit organization, received a gift of treasury bills The cost to the donor was $20,000, with an additional $500 for brokerage fees that were paid by the donor prior to the transfer of the treasury bills The treasury bills had a fair value of $15,000 at the time of the transfer

At what amount should Ragg report the treasury bills in its statement of financial position?

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In year 2, the Nord Association, a nongovernmental not-for-profit organization, received a $100,000 contribution to fund scholarships for medical students The donor stipulated that only the interest earned

on the contribution be used for the scholarships Interest earned in year 2 of $15,000 was used to award scholarships in year 3 What amount should Nord report as temporarily restricted net assets at the end of year 2?

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Polk Co acquires a forklift from Quest Co for $30,000 The terms require Polk to pay $3,000 down and finance the remaining $27,000 On March 1, year 1, Polk pays the $3,000 down and accepted delivery of the forklift Polk signed a note that requires Polk to pay principal payments of $1,000 per month for 27 months beginning July 1, year 1 What amount should Polk report as an investing activity in the

statement of cash flows for the year ended December 31, year 1?

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A company that is a large accelerated filer must file its Form 10-Q with the United States Securities and Exchange Commission within how many days after the end of the period?

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Each of the following is a component of the changes in the net assets available for benefits of a defined benefit pension plan trust, except:

a The net change in fair value of each significant class of investments

b The net change in the actuarial present value of accumulated plan benefits

c Contributions from the employer and participants

d Benefits paid to participants

Explanation

Choice "b" is correct

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During the year, Hauser Co wrote off a customer’s account receivable Hauser used the allowance method for uncollectable accounts What impact would the write-off have on net income and total assets?

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The original cost of an inventory item is above the replacement cost The inventory item's replacement cost is above the net realizable value Under the lower of cost or market method, the inventory item should be valued at:

a Original cost

b Replacement cost

c Net realizable value

d Net realizable value less normal profit margin

Explanation

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Kauf Co had the following amounts related to the sale of consignment inventory:

Sales value for two-thirds of inventory sold by consignee 80,000

Advertising paid for by consignee, to be reimbursed 4,500 10% commission due the consignee for the sale 8,000 What amount should Kauf report as net profit(loss) from this transaction for the year?

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A manufacturer has the following per-unit costs and values for its sole product:

Net realizable value less normal profit margin 5.20

In accordance with IFRS, what is the per-unit carrying value of inventory in the manufacturer's statement

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At the beginning of the year, Cann Co started construction on a new $2 million addition to its plant Total construction expenditures made during the year were $200,000 on January 2, $600,000 on May 1, and

$300,000 on December 1 On January 2, the company borrowed $500,000 for the construction at 12% The only other outstanding debt the company had was a 10% interest rate, long-term mortgage of

$800,000, which had been outstanding the entire year What amount of interest should Cann capitalize

as part of the cost of the plant addition?

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Bondholders of Balm Co converted their bonds into 90,000 shares of $5 par value common stock In Balm's accounting records, the bonds had a par value of $775,000 and unamortized discount of $23,000

at the time of conversion What amount of additional paid-in capital from the conversion should Balm record?

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On January 1 of the current year, Barton Co paid $900,000 to purchase two-year, 8%, $1,000,000 face value bonds that were issued by another publicly-traded corporation Barton plans to sell the bonds in the first quarter of the following year The fair value of the bonds at the end of the current year was

$1,020,000 At what amount should Barton report the bonds in its balance sheet at the end of the current year?

Tiêu đề	2012 AICPA Newly Released Questions – Financial
Trường học	DeVry University
Chuyên ngành	Financial Accounting
Thể loại	Educational Resource
Năm xuất bản	2012
Thành phố	Chicago

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Số trang	51
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