Debt securities that are accounted for at amortized cost, not fair value, are
a. held-to-maturity debt securities.
b. trading debt securities.
c. available-for-sale debt securities.
d. all of the above.

Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders' equity are
d. all of the above.
a. held-to-maturity debt securities.
b. trading debt securities.
c. available-for-sale debt securities.

Unrealized holding gains or losses which are recognized in income are from securities classified as
a. held-to-maturity.
b. available-for-sale.
c. trading.
d. none of these.

A requirement for a security to be classified as held-to-maturity is
a. ability to hold the security to maturity.
b. positive intent.
c. the security must be a debt security.
d. All of these are required.

Use the following information for questions 5 and 6.

KC Company purchased $100,000 of 8 percent bonds of Evermaster Corporation on January 1, 2009, at a discount, paying $92,278. The bonds mature January 1, 2014 and yield 10%; interest is payable each July 1 and January 1.

5. KC Company records the receipt of the first interest payment on July 1, 2009, including
a. a credit to Interest Revenue at 4,000
b. a credit to Interest Revenue at 4,614
c. a debit to Interest Revenue at 4,000
d. a debit to Interest Revenue at 4,614

Question 6
Use the following information for questions 5 and 6.
KC Company purchased $100,000 of 8 percent bonds of Evermaster Corporation on January 1, 2009, at a discount, paying $92,278. The bonds mature January 1, 2014 and yield 10%; interest is payable each July 1 and January 1.

6. The amount of total interest revenue recognized in the year of 2009 is equal to:
a. 8,000
b. 9,259
c. 8,614
d. 8,645

Question 7
Use the following information for questions 7 and 8.
Instrument Corp. has the following investments which were held throughout 2010–2011:
Market Value
Cost 12/31/10 12/31/11
Trading $300,000 $400,000 $380,000
Available-for-sale 300,000 320,000 360,000

7. What amount of gain or loss would Instrument Corp. report in its income statement for the year ended December 31, 2010 related to its investments?
a. $100,000 gain.
b. $100,000 loss.
c. $80,000 gain.
d. $20,000 loss.

Question 8
Use the following information for questions 7 and 8.

Instrument Corp. has the following investments which were held throughout 2010–2011:

Market Value

Cost 12/31/10 12/31/11

Trading $300,000 $400,000 $380,000
Available-for-sale 300,000 320,000 360,000

8. What amount would be reported as accumulated other comprehensive income related to investments in Instrument Corp.’s balance sheet at December 31, 2010?
a. $40,000 gain.
b. $60,000 gain.
c. $20,000 gain.
d. $120,000 gain.

Question 9
An investor has a long-term investment in stocks. Regular cash dividends received by the investor are recorded as

Fair Value Method Equity Method
a. Income Income
b. A reduction of the investment A reduction of the investment
c. Income A reduction of the investment
d. A reduction of the investment Income

Question 10

Use the following information for questions 10 and 11.

Tracy Co. owns 4,000 of the 10,000 outstanding shares of Penn Corp. common stock. During 2010, Penn earns $120,000 and pays cash dividends of $40,000.

10. If the beginning balance in the investment account was $240,000, the balance at December 31, 2010 should be
a. $240,000.
b. $272,000.
c. $288,000.
d. $320,000.

Question 11

Use the following information for questions 10 and 11.
Tracy Co. owns 4,000 of the 10,000 outstanding shares of Penn Corp. common stock. During 2010, Penn earns $120,000 and pays cash dividends of $40,000.

11. Tracy should report investment income for 2010 o
a. $16,000.
b. $32,000.
c. $40,000.
d. $48,000.

Question 12
Which of the following is not an accurate representation concerning revenue recognition?
c. Revenue from permitting others to use enterprise assets is recognized as time passes or as the assets are used.
a. Revenue from selling products is recognized at the date of sale, usually interpreted to mean the date of delivery to customers.
d. Revenue from disposing of assets other than products is recognized at the date of sale.
b. Revenue from services rendered is recognized when cash is received

The principal advantage of the completed-contract method is that
a. reported revenue is based on final results rather than estimates of unperformed work
b. it reflects current performance when the period of a contract extends into more than one accounting period.
c. it is not necessary to recognize revenue at the point of sale.
d. a greater amount of gross profit and net income is reported than is the case when the percentage-of-completion method is used.

Question 14
Winser, Inc. is engaged in extensive exploration for water in Utah. If, upon discovery of water, Winser does not recognize any revenue from water sales until the sales exceed the costs of exploration, the basis of revenue recognition being employed is the
a. production basis.
b. cash (or collection) basis.
c. sales (or accrual) basis.
d. cost recovery basis.

Question 15
Use the following information for questions 15 and 16.
Kiner, Inc. began work in 2010 on a contract for $8,400,000. Other data are as follows:
2010 2011
Costs incurred to date $3,600,000 $5,600,000
Estimated costs to complete 2,400,000 —
Billings to date 2,800,000 8,400,000
Collections to date 2,000,000 7,200,000

15. If Kiner uses the percentage-of-completion method, the gross profit to be recognized in 2010 is
a. $1,440,000.
b. $1,600,000.
c. $2,160,000.
d. $2,400,000.

Question 16
Use the following information for questions 15 and 16.

Kiner, Inc. began work in 2010 on a contract for $8,400,000. Other data are as follows:
2010 2011
Costs incurred to date $3,600,000 $5,600,000
Estimated costs to complete 2,400,000 —
Billings to date 2,800,000 8,400,000
Collections to date 2,000,000 7,200,000

If Kiner uses the completed-contract method, the gross profit to be recognized in 2011 is
a. $1,360,000.
b. $2,800,000.
c. $1,400,000.
d. $5,600,000.

Question 17
Taxable income of a corporation differs from pretax financial income because of
Permanent Temporary
Differences Differences
a. No No
b. No Yes
c. Yes Yes
d. Yes No

A major distinction between temporary and permanent differences is
a. permanent differences are not representative of acceptable accounting practice.
b. temporary differences occur frequently, whereas permanent differences occur only once.
c. once an item is determined to be a temporary difference, it maintains that status; however, a permanent difference can change in status with the passage of time.
d. temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse.

Question 19
Which of the following are temporary differences that are normally classified as expenses or losses that are deductible after they are recognized in financial income?
a. Advance rental receipts.
b. Product warranty liabilities.
c. Depreciable property.
d. Installment sales

Question 20
Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income?
a. Subscriptions received in advance.
b. An installment sale accounted for on the accrual basis for financial reporting purposes and on the installment (cash) basis for tax purposes.
c. Interest received on a municipal obligation.
d. Dividend revenue.

Which of the following will not result in a temporary difference?
a. Product warranty liabilities
b. Advance rental receipts
c. Installment sales
d. All of these will result in a temporary difference

Question 22
Rodd Co. reports a taxable and pretax financial loss of $400,000 for 2011. Rodd's taxable and pretax financial income and tax rates for the last two years were:
2009 $400,000 30%
2010 400,000 35%

The amount that Rodd should report as an income tax refund receivable in 2011, assuming that it uses the carryback provisions and that the tax rate is 40% in 2011, is
a. $120,000.
b. $140,000.
c. $160,000.
d. $180,000.

Debt securities that are accounted for at amortized cost, not fair...