71. For a firm to recognize an asset
A. a resource must represent a future economic benefit that the firm controls as a result of a past transaction or exchange.
B. the firm must be able to measure the resource with sufficient reliability.
C. must impose a future economic sacrifice because of a past event or transaction that the firm has little or no discretion to avoid.
D. Both choices a and b are correct.
E. None of these answer choices is correct.
72. The principal objective of accounting reports as currently prepared is to present ______ the results of operations and the financial condition of the firm.
A. fairly
B. accurately
C. objectively
D. subjectively
E. correctly
73. Accountants record assets at
A. acquisition cost
B. the present value of the future net cash flows based on estimated receipts
and operating expenses
C. current economic value
D. current replacement cost
E. appraised value
74. Assume that Trader Pete’s, an organic food retailer in the United States, recently purchased a new refrigeration system for its Washington, DC, store. Trader Pete’s paid $1.3 million for the refrigeration unit and paid an additional $120,000 to modify the unit to meet its specific needs. Trader Pete’s paid $55,000 for the transportation and installation of the unit, plus $48,000 for an annual insurance premium for the first year, which begins next month. Finally, assume that Trader Pete’s hired a refrigeration technician, who is charged with the maintenance of the unit; that technician’s annual salary is $80,000. How much should Trader Pete’s record as the acquisition cost of the refrigeration unit?
A. $1,300,000
B. $1,420,000
C. $1,475,000
D. $1,523,000
E. $1,603,000
75. On January 1, Year 3, All Business Machines (ABM) issued 1,000 shares of its common stock for a building. Real estate appraisers estimated the building to have a market value of $55,000 on the date of acquisition. The common stock of ABM sold for $50 per share on the date of the acquisition. On January 1, Year 3, ABM paid $650 in real estate transfer taxes, $500 in real estate legal fees for recording the transaction, $1,750 in property taxes for Year 3, and $2,000 for a two-year insurance policy beginning January 1, Year 3. At what amount should the building appear in the Building account of ABM on January 1, Year 3?
A. $51,150
B. $52,900
C. $56,150
D. $59,900
E. $61,900
76. The acquisition cost for nonmonetary assets includes
A. invoice price, only.
B. invoice price and transportation costs, only.
C. invoice price, transportation costs, and installation costs, only.
D. invoice price, transportation costs, installation costs, and handling charges, only.
E. invoice price, transportation costs, installation costs, handling charges, and first year’s maintenance cost.
77. When analyzing a balance sheet
A. one looks for a reasonable match between the nature and mix of assets and mix of liabilities plus shareholders' equity.
B. the proportion of short-term versus long-term financing should match the proportion of current assets versus noncurrent assets.
C. the mix of long-term debt versus shareholders' equity should reflect the degree of operating risk.
D. Answers a, b, and c are correct.
E. None of these answer choices is correct.
78. Which of the following is not cash?
A. coins and currency
B. bank checks and money orders
C. bank deposits and time deposits
D. corporate stocks and bonds that the firm plans to hold for a relatively short period of time
E. All of these answer choices are categorized as cash.
79. At December 31, Year 1, Adam Corporation has 5,000 shares of par value common stock, additional paid-in capital of $25,000, total shareholders' equity of $80,000, and retained earnings of $45,000. What is the par value per share?
A. $1.00
B. $1.50
C. $2.00
D. $2.50
E. $3.00
80. At December 31, Year 1, Bolton Corporation has par value common stock with a par value of $1.50 per share, Additional paid-in capital of $60,000, total shareholders' equity of $100,000, and retained earnings of $25,000. What is the number of common stock shares?
A. 5,000
B. 10,000
C. 15,000
D. 20,000
E. 25,000