1. If the interest rate is 10%, the factor for the future value of annuity due of 1 for n = 5, i = 10% is equal to the factor for the future value of an ordinary annuity of 1 for n = 5, i = 10% (Points: 6)


2. Which statement is false? (Points: 6)
The factor for the future value of an annuity due is found by multiplying the ordinary annuity table value by one plus the interest rate.
3. Ed Sloan wants to withdraw $20,000 (including principal) from an investment fund at the end of each year for five years. How should he compute his required initial investment at the beginning of the first year if the fund earns 10% compounded annually? (Points: 6)

4. Ann Ruth 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 investment? (Points: 6)


5. If an annuity due and an ordinary annuity have the same number of equal payments and the same interest rates, then (Points: 6)
6. If a short-term obligation is excluded from current liabilities because of refinancing, the footnote to the financial statements describing this event should include all of the following information except (Points: 6)

7. An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's (Points: 6)

8. Which of these is not included in an employer's payroll tax expense? (Points: 6)


9. Which of the following is a condition for accruing a liability for the cost of compensation for future absences? (Points: 6)
10. The amount of the liability for compensated absences should be based on


11. Which of the following is the proper way to report a gain contingency? (Points: 6)

12. Treasury bonds should be shown on the balance sheet as (Points: 6)

13. An early extinguishment of bonds payable, which were originally issued at a premium, is made by purchase of the bonds between interest dates. At the time of reacquisition (Points: 6)
14. The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as (Points: 6)

15. A company issues $5,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2006. Interest is paid on June 30 and December 31. The proceeds from the bonds are $4,901,036. What is interest expense for 2007, using straight-line amortization? (Points: 6)

16. On January 1, 2007, Foley Co. sold 12% bonds with a face value of $600,000. The bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $646,200 to yield 10%. Using the effective-interest method of amortization, interest expense for 2007 is (Points: 6)

17. On January 2, 2007, a calendar-year corporation sold 8% bonds with a face value of $600,000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $553,600 to yield 10%. Using the effective-interest method of computing interest, how much should be charged to interest expense in 2007? (Points: 6)


18. The December 31, 2006, balance sheet of Eddy Corporation includes the following items:

9% bonds payable due December 31, 2015 $1,000,000
Unamortized premium on bonds payable 27,000

The bonds were issued on December 31, 2005, at 103, with interest payable on July 1 and December 31 of each year. Eddy uses straight-line amortization. On March 1, 2007, Eddy retired $400,000 of these bonds at 98 plus accrued interest. What should Eddy record as a gain on retirement of these bonds? Ignore taxes. (Points: 6)


19. On January 1, 2001, Gonzalez Corporation issued $4,500,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Gonzalez at 105. Gonzalez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method).
On December 31, 2007, when the fair market value of the bonds was 96, Gonzalez repurchased $1,000,000 of the bonds in the open market at 96. Gonzalez has recorded interest and amortization for 2007. Ignoring income taxes and assuming that the gain is material, Gonzalez should report this reacquisition as (Points: 6)

20. The 10% bonds payable of Klein Company had a net carrying amount of $570,000 on December 31, 2006. The bonds, which had a face value of $600,000, were issued at a discount to yield 12%. The amortization of the bond discount was recorded under the effective-interest method. Interest was paid on January 1 and July 1 of each year. On July 2, 2007, several years before their maturity, Klein retired the bonds at 102. The interest payment on July 1, 2007 was made as scheduled. What is the loss that Klein should record on the early retirement of the bonds on July 2, 2007? Ignore taxes. (Points: 6)


21. Pryor Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued? (Points: 6)

22. The issuer of a 5% common stock dividend to common stockholders preferably should transfer from retained earnings to contributed capital an amount equal to the (Points: 6)

23. The balance in Common Stock Dividend Distributable should be reported as a(n) (Points: 6)

24. A feature common to both stock splits and stock dividends is (Points: 6)


25. What effect does the issuance of a 2-for-1 stock split have on each of the following?



26. Which one of the following disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements? (Points: 6)

27. The payout ratio can be calculated by dividing (Points: 6)


28. Windsor Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The liquidation value of the preferred is equal to its par value. The book value per share of the common stock is unaffected by (Points: 6)

29. On July 1, 2007, an interest payment date, $60,000 of Risen Co. bonds were converted into 1,200 shares of Risen Co. common stock each having a par value of $45 and a market value of $54. There is $2,400 unamortized discount on the bonds. Using the book value method, Risen would record (Points: 6)

30. Quayle Corporation had two issues of securities outstanding: common stock and an 8% convertible bond issue in the face amount of $16,000,000. Interest payment dates of the bond issue are June 30th and December 31st. The conversion clause in the bond indenture entitles the bondholders to receive forty shares of $20 par value common stock in exchange for each $1,000 bond. On June 30, 2007, the holders of $2,400,000 face value bonds exercised the conversion privilege. The market price of the bonds on that date was $1,100 per bond and the market price of the common stock was $35. The total unamortized bond discount at the date of conversion was $1,000,000. In applying the book value method, what amount should Quayle credit to the account "paid-in capital in excess of par," as a result of this conversion? (Points: 6)


31. Investments in debt securities should be recorded on the date of acquisition at (Points: 6)


32. An available-for-sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a (Points: 6)


33. APB Opinion No. 21 specifies that, regarding the amortization of a premium or discount on a debt security, the (Points: 6)

34. Which of the following is correct about the effective-interest method of amortization? (Points: 6)

35. Which of the following is not generally correct about recording a sale of a debt security before maturity date? (Points: 6)

36. The method most commonly used to report defaults and repossessions is (Points: 6)

37. Under the installment-sales method, (Points: 6)
revenue, costs, and gross profit are recognized proportionate to the cash that is received from the sale of the product.
38. The realization of income on installment sales transactions involves (Points: 6)


39. A manufacturer of large equipment sells on an installment basis to customers with questionable credit ratings. Which of the following methods of revenue recognition is least likely to overstate the amount of gross profit reported? (Points: 6)


40. A seller is properly using the cost-recovery method for a sale. Interest will be earned on the future payments. Which of the following statements is not correct? (Points: 6)
41. According to the FASB, immediate recognition of a liability (referred to as the minimum liability) is required when the accumulated benefit obligation exceeds the fair value of plan assets. Conversely, when the fair value of plan assets exceeds the accumulated benefit obligation, the Board (Points: 6)

42. Which of the following disclosures of pension plan information would not normally be required by Statement of Financial Accounting Standards No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits"? (Points: 6)
The major components of pension expense
The amount paid from the pension fund to retirees during the period
The funded status of the plan and the amounts recognized in the financial statements
The rates used in measuring the benefit amounts


43. The main purpose of the Pension Benefit Guaranty Corporation is to ____________. (Points: 6)
require minimum funding of pensions
require plan administrators to publish a comprehensive description and summary of their plans
administer terminated plans and to impose liens on the employer's assets for certain unfunded pension liabilities
all of these


44. A lessee with a capital lease containing a bargain purchase option should depreciate the leased asset over the (Points: 6)

45. If the lease were nonrenewable, there was no purchase option, title to the building does not pass to the lessee at termination of the lease and the lease were only for eight years, what type of lease would this be for the lessee? (Points: 6)


46. Huffman Company leases a machine from Lincoln Corp. under an agreement which meets the criteria to be a capital lease for Huffman. The six-year lease requires payment of $102,000 at the beginning of each year, including $15,000 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor's implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. Huffman should record the leased asset at (Points: 6)


47. Which type of accounting change should always be accounted for in current and future periods? (Points: 6)

48. Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate? (Points: 6)


49. When a company decides to switch from the double-declining balance method to the straight-line method, this change should be handled as a (Points: 6)


50. The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years. Based on this information, the accountant should _______________. (Points: 6)