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CPA EXAM Practice CH4 questions with answers
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CPA EXAM Practice CH4
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CPA EXAM Practice CH4Brock Corp. reports operating expenses in two categories: (1) selling and (2) general
and administrative. The adjusted trial balance at December 31, 20x5 included the
following expense and loss accounts:
Accounting and legal fees $120,000
Advertising150,000
Freight-out80,000
Interest70,000
Loss on the sale of long-term investments 30,000
Officers' salaries 225,000
Rent for office space220,000
Sales salaries and commissions 140,000
One-half of the rented premises is occupied by the sales department.
Brock's total selling expenses for 20x5 are: - answer480,000
Advertising$150,000
Freight-out 80,000
Rent for office space ($220,000 × .50)=110,000
Sales salaries and commissions 140,000
Equals total selling expenses $480,000
Advertising is part of the overall selling effort. Freight-out is delivery expense. Offering
delivery service is also part of the overall sales effort. Only 1/2 the rent is included in
selling expenses because the sales department occupies only 1/2 the premises.
In a multi-step Income Statement: - answergross profit (margin) is shown as a separate
item
In Baer Food Co.'s 20x5 single-step Income Statement, the section titled "Revenues"
consisted of the following:
Net sales revenue$187,000Results from discontinued operations:Loss from operations
of the segment (net of $1,200 tax effect)$(2,400)Gain on the disposal of segment (net of
, $7,200 tax effect)14,40012,000Interest revenue10,200Gain on the sale of
equipment4,700Total revenues$213,900
In the revenues section of the 20x5 Income Statement, Baer Food should have reported
total revenues of: - answer201,900
Net sales$187,000
Interest revenue 10,200
Gain on equipment 4,700
Total revenues $201,900
This answer includes the gain on the sale of equipment. It is the best answer from
among the four because this answer less the gain is not represented. However, many
would argue that the gain is not a revenue. Discontinued operations is not a revenue;
rather, it is a special item of disclosure found below income from continuing operations
in the Income Statement.
Which of the following should be included in general and administrative expenses?
Interest Advertising
Yes Yes
Yes No
No Yes
No No - answerno , no
Burns Corp. had the following items:
Sales revenue$45,000Loss on early extinguishment of bonds36,000Realized gain on
sale of available-for-sale debt securities28,000Unrealized holding loss on available-for-
sale debt securities17,000Loss on write-down of inventory3,100
Which of the following amounts would the statement of comprehensive income report as
other comprehensive income or loss? - answer17, 000 other comprehensive loss
The Statement of Changes in Equity: - answerReconciles all of the beginning and
ending balances in the equity accounts.
Rock Co.'s financial statements had the following balances at December 31:
Gain on the sale of equipment$ 50,000Foreign currency translation gain$100,000Net
income$400,000Unrealized gain on the available-for-sale debt securities$ 20,000
What amount should Rock report as comprehensive income for the year ended
December 31? - answer520,000
For Rock Co. comprehensive income would be computed as:Net income (includes the
gain on sale)$400,000Items of other comprehensive income:Foreign currency
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