FAR Mini Exam 1 MCQs

F1 and F2 Topics

Atomized Enterprises' Neutron Division qualified as a component held for sale during the year ended December 31, Year 2. The net book value of the division is $1,800,000 while its fair market value is $1,500,000. The Division lost $240,000 during the year ended December 31, Year 1. The Division lost $150,000 in Year 2 prior to qualifying as being held for sale and $80,000 for the balance of that year. Ignoring income taxes, the results of Atomized Enterprises Discontinued Operations displayed in their Year 2 comparative income statements for the year ended December 31, Year 1, would be equal to:

$240,000

Topper Company began operations during the current year and experienced the following events:

I.	Unrealized holding gains from trading debt securities of $12,000.
II.	Realized gains from selling available-for-sale debt securities of $15,000.
III.	Unrealized holding gains from available-for-sale debt securities of $20,000.

Topper's tax rate is 30%.

In Toppers December 31 balance sheet, Accumulated Other Comprehensive Income would be:

$14,000

TGR Enterprises provided the following information from its statement of financial position for the year ended December 31, Year 1:

	January 1	December 31
Cash	10,000	50,000
Accounts receivable	120,000	100,000
Inventories	200,000	160,000
Prepaid expenses	20,000	10,000
Accounts payable	175,000	120,000
Accrued liabilities	25,000	30,000

TGR's sales and cost of sales for Year 1 were $1,400,000 and $840,000, respectively. What is TGR's days sales in accounts receivable?

26.1

Under Regulation S-X, an entity's interim financial statements filed with the SEC should include all of the following, except:

A statement of cash flows for the most recent fiscal quarter

A company had 400,000 shares of common stock issued and outstanding on January 1, year 1, and had the following equity transactions for year 1:

Transactions	Date
Issued 200,000 new shares for cash	April 1
Issued new shares as a result of a 3-for-1 stock split	July 1
Purchased 300,000 shares treasury stock for cash	October 1

What should the company use as the denominator for the calculation of basic earnings per share for year ended December 31, year 1?

1,575,000

Baker, Inc. reported the following stockholders' equity balances:

8% cumulative preferred stock, par value $100 per share; 10,000 shares issued and outstanding (liquidation value $107)	1,000,000
Common stock, par value $10 per share, 50,000 shares issued and outstanding	500,000
Additional paid-in capital	75,000
Retained earnings	450,000

Dividends are in arrears on the preferred stock for three years including the current year. What is book value per share of common stock?

$14.30

In accounting for its merchandise inventory, Ingewald International, a company that uses U.S. GAAP, changed from LIFO to FIFO. Assuming the change in beginning inventory was $400,000 and that the change at the end of the year was $300,000 and that the tax rate was 30 percent, what was the amount of the cumulative effect of an accounting change that should have been displayed in Ingewald's retained earnings statement?

$280,000

Which of the following is not a valuation technique that can be used to measure the fair value of an asset or liability?

The impairment approach

Pugh Co. reported the following in its statement of stockholders' equity on January 1 of the current year:

Common stock, $5 par value, authorized 200,000 shares, issued 100,000 shares	500,000
Additional paid-in capital	1,500,000
Retained earnings	516,000
	2,516,000
Less treasury stock, at cost, 5,000 shares	(40,000)
Total stockholders' equity	2,476,000

The following events occurred during the current year:

May 1	1,000 shares of treasury stock were sold for $10,000.
July 9	10,000 shares of previously unissued common stock were sold for $12 per share.
October 1	The distribution of a 2-for-1 stock split resulted in the common stock's per share par value being halved.

Pugh accounts for treasury stock under the cost method. Laws in the state of Pugh's incorporation protect shares held in treasury from dilution when stock dividends or stock splits are declared.

The number of outstanding common shares at December 31 should be:

212,000

Which of the following is not a disclosure requirement related to risks and uncertainties under U.S. GAAP?

Disclosure of vulnerability due to all identified concentrations

On November 15, Quazar Co. declared a property dividend of marketable securities to be distributed on December 15 to stockholders of record on December 1. The market value of the securities was as follows:

November 15	225,000
December 1	220,000
December 15	260,000

The marketable securities originally cost Quazar $200,000. What is the net effect on Quasar's retained earnings as a result of declaring this property dividend?

$200,000

The Arts & Crafts Theater had unearned ticket revenues of $20,000 as of December 31, Year 1 and unearned revenues of $40,000 at December 31, Year 2. The theater's records included $500,000 and $340,000 in cash receipts during the years ended December 31, Year 2 and Year 1, respectively. What were ticket revenues for the year ended December 31, Year 2?

$480,000

In computing the weighted-average number of shares outstanding during the year, which of the following midyear events must be treated as if it had occurred at the beginning of the year?

Declaration and distribution of stock dividend

Which of the following is not a comprehensive basis of accounting other than generally accepted accounting principles?

Basis of accounting used by an entity to comply with the financial reporting requirements of a lending institution

In September, Year 1, West Corp. made a dividend distribution of one right for each of its 120,000 shares of outstanding common stock. Each right was exercisable for the purchase of 1/100 of a share of West's $50 variable rate preferred stock at an exercise price of $80 per share. On March 20, Year 5, none of the rights had been exercised, and West redeemed them by paying each stockholder $0.10 per right. As a result of this redemption, West's stockholders' equity was reduced by:

$12,000

The following costs were incurred by Griff Co., a manufacturer, during the current year:

Accounting and legal fees	$25,000
Freight-in	175,000
Freight-out	160,000
Officers salaries	150,000
Corporate office insurance	85,000
Sales representatives salaries	215,000

What amount of these costs should be reported as general and administrative expenses for the current year?

$260,000

Fogg Co., a U.S. company, contracted to purchase foreign goods. Payment in foreign currency was due one month after the goods were received at Fogg's warehouse. Between the receipt of goods and the time of payment, the exchange rates changed in Fogg's favor. The resulting gain should be included in Fogg's financial statements as a(an):

Component of income from continuing operations