302 Exam 1 WileyPlus

If preferred stock is cumulative, and dividends have not been declared in the past two years or in the current year, what amount should be deducted from net income in the EPS calculation? -Only the current year's dividend. -Only the dividends in arrears. -Both the current year's dividend and the dividends in arrears. -Nothing should be deducted because no dividends were declared.

only current year

During 2021 Pharoah Company purchased 9200 shares of Sheridan Inc. for $22 per share. During the year Pharoah Company sold 2100 shares of Sheridan, Inc. for $27 per share. At December 31, 2021 the market price of Sheridan, Inc.'s stock was $20 per share. What is the total amount of gain/(loss) that Pharoah Company will report in its income statement for the year ended December 31, 2021 related to its investment in Sheridan, Inc. stock?

-3,700 1. (27-22) x 2,100= 10,500 2. (22-20) x 7,100)= 14,200 10,500-14,200= -3,700

Crane Company purchased $1190000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1239996 at an effective interest rate of 7%. Using the effective interest method, Crane Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $4148 and $4292, respectively.At February 1, 2022, Crane Company sold the Carlin bonds for $1225900. After accruing for interest, the carrying value of the Carlin bonds on February 1, 2022 was $1230500. Assuming Crane Company has a portfolio of available-for-sale debt investments, what should Crane Company report as a gain (or loss) on the bonds?

-4,600 1,230,500 - 1,225,900 (sold more than valued)

Baker Co. issued 100,000 shares of common stock in the current year. On October 1, Baker repurchased 20,000 shares of its common stock on the open market for $50.00 per share. At that date, the stock's par value was $1.00 and the average issue price was $40.00 per share. Baker uses the cost method for treasury stock transactions. On December 1, Baker reissued the stock for $60.00 per share. What amount should Baker report as treasury stock gain at December 31?

0 -no gain when reissue price is greater than purchase price (40>50)

On December 1, 20X4, Line Corp. received a donation of 2,000 shares of its $5 par value common stock from a stockholder. On that date, the stock's market value was $35 per share. The stock was originally issued for $25 per share. By what amount would this donation cause total stockholders' equity to decrease?

0 no change; income closes out into retained earnings

Vaughn Manufacturing had 1,000,000 shares of common stock issued and outstanding at December 31, 2020. On July 1, 2021 an additional 1,000,000 shares were issued for cash. Vaughn also had stock options outstanding at the beginning and end of 2021 which allow the holders to purchase 313000 shares of common stock at $28 per share. The average market price of Vaughn's common stock was $35 during 2021. The number of shares to be used in computing diluted earnings per share for 2021 is:

1,562,600 beginning balance 1,000,000 July 1: 1,000,000 x (6/12)= 500,000 stock option: (35-28)/35 x 313,000=62,600 =total is 1,562,600

The stockholders' equity of Vaughn Manufacturing at July 31, 2021 is presented below: Common stock, par value $20, authorized 400,000 shares; issued and outstanding 169000 shares $3380000 Paid-in capital in excess of par 167000 Retained earnings 657000 Total $4204000 On August 1, 2021, the board of directors of Vaughn declared a 15% stock dividend on common stock, to be distributed on September 15th. The market price of Vaughn's common stock was $68 on August 1, 2021, and $74 on September 15, 2021. What is the amount of the debit to retained earnings as a result of the declaration and distribution of this stock dividend?

1,723,800 169,000 x 15% x 68

A firm with a net income of $30,000 and weighted average actual shares outstanding of 15,000 for the year also had the following two securities outstanding the entire year: (1) 2,000 options to purchase one share of stock for $12 per share. The average share price during the year was $20, (2) cumulative convertible preferred stock with an annual dividend commitment of $4,500. Total common shares issued on conversion are 2,900. Compute diluted EPS for this firm.

1.60 30,000/(15,000 + 800 + 2,900) 1. 2,000 x $12= $24,000 $24,000/$20= 1,200 shares 2,000-1,200= 800 2. 2,900 given

During 2020, Blossom Company purchased 90000 shares of Splish Corporation common stock for $1360000 as an equity investment. The fair value of these shares was $1290000 at December 31, 2020. Blossom sold all of the Splish stock for $16 per share on December 3, 2021, incurring $66000 in brokerage commissions. Blossom Company should report a realized gain on the sale of stock in 2021 of

14,000 (90,000 x $16) - 66,000= 1,374,000 - 1,360,000= 14,000

Pharoah Company purchased $1700000 of 11% bonds of Scott Company on January 1, 2021, paying $1602506. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $97494 provides an effective yield of 12%. Pharoah Company uses the effective-interest method and plans to hold these bonds to maturity.For the year ended December 31, 2021, Pharoah Company should report interest revenue from the Scott Company bonds of:

192,459 1,602,506 x 12%

Presented below is the stockholders' equity section of Vaughn Manufacturing at December 31, 2020: Common stock, par value $20; authorized 75,000 shares; issued and outstanding 45600 shares $ 912000 Paid-in capital in excess of par value 345000 Retained earnings 492000 Total: $1749000 During 2021, the following transactions occurred relating to stockholders' equity: 2500 shares were reacquired at $28 per share. 3300 shares were reacquired at $34 per share. 1700 shares of treasury stock were sold at $31 per share. For the year ended December 31, 2021, Vaughn reported net income of $441000. Assuming Vaughn accounts for treasury stock under the cost method, what should it report as total stockholders' equity on its December 31, 2021, balance sheet?

2,060,500 1,749,000 - (2500 x 28) - (3300 x 34) + (1700 x 31) + 441,000

On January 1, 2019, Sunland Company granted Sam Wine, an employee, an option to buy 1,000 shares of Sunland Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $6360. Wine exercised his option on October 1, 2021 and sold his 1,000 shares on December 1, 2021. Quoted market prices of Sunland Co. stock in 2021 were: July 1 $28 per share October 1 $34 per share December 1 $38 per share The service period is for three years beginning January 1, 2021. As a result of the option granted to Wine, using the fair value method, Sunland should recognize compensation expense for 2019 on its books in the amount of

2,120 6,360/3 years

Sunland Company has 551000 shares of $10 par value common stock outstanding. During the year, Sunland declared a 14% stock dividend when the market price of the stock was $28 per share. Four months later Sunland declared a $0.50 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by

2,473,990 -551,000 x 14% x 28= 2,159,920 2,159,920 + (551,000 x 1.14 x .5) = 2,473,990

Crane Company purchased $1450000 of 9% bonds of Scott Company on January 1, 2021, paying $1362375. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $87625 provides an effective yield of 10%. CraneCompany uses the effective-interest method and plans to hold these bonds to maturity.On July 1, 2021, Crane Company should increase its Debt Investments account for the Scott Company bonds by

2,869 1,450,000 x 9%= 130,500/2= 62,250 1,362,375 x 10%= 136,238/2= 68,119 DR cash 62,250 DR debt inv ? CR interest revenue 68,119

Bramble Corp. had net income for the year of $717000 and a weighted average number of common shares outstanding during the period of 243000 shares. The company has a convertible bond issue outstanding. The bonds were issued four years ago at par ($2960000), carry a 8% interest rate, and are convertible into 49300 shares of common stock. The company has a 45% tax rate. Diluted earnings per share are (rounded to the nearest penny)

2.90 1. convertible bonds= 49,300 (given) 2. after tax income: 2,960,000 x 8% x (1-45%)= 130,240 (717,000 + 130,240) / (243,000 + 49,300)= 2.90

On January 1, 2021, Coronado Industries had 111000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 11600 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $13, the corporation declared a 16% stock dividend to be issued to stockholders of record on December 16, 2021. What was the impact of the 16% stock dividend on the balance of the retained earnings account?

206,752 increase 99,400 x 16% x 13

Cullumber Corporation purchased 37000 shares of common stock of the Sherman Corporation for $52 per share on January 2, 2020. Sherman Corporation had 100000shares of common stock outstanding during 2021, paid cash dividends of $162000during 2021, and reported net income of $620000 for 2021. Cullumber Corporation should report revenue from investment for 2021 in the amount of

229,400 620,000 x (37,000/100,000)

Coronado Industries issued 10000 shares of its $5 par value common stock having a fair value of $30 per share and 15200 shares of its $10 par value preferred stock having a fair value of $25 per share for a lump sum of $521000. How much of the proceeds would be allocated to the common stock?

229,853 CS= 10,000 x 30= 300,000 PS= 15,200 x 25= 380,000 % of CS= 300,000=(300,000+380,000)= .44 .44 x 521,000= 229,853

Sunland Company purchased $1260000 of 8%, 5-year bonds from Oriole, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1309896 at an effective interest rate of 7%. Using the effective interest method, Sunland Company decreased the Available-for-Sale Debt Securities account for the Oriole, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $4848 and $4992, respectively. At December 31, 2021, the fair value of the Oriole, Inc. bonds was $1326000. What should Sunland Company report as other comprehensive income and as a separate component of stockholders' equity?

25,944 1,326,000 - (1,309,896 - 4,848-4992)

Oriole Company's equity securities portfolio which is appropriately included in current assets is as follows: Catlett Corp: cost= 290,000 FV= 239,000 unrealized gain/loss= -51,000 Lynman: cost= 272,000 FV= 295,000 unrealized gain/loss= 23,000 Ignoring income taxes, what amount should be reported as a charge against income in Oriole's 2021 income statement if 2021 is Oriole's first year of operation?

28,000 loss -51,000 + 23,000

During 2021, Oriole Company issued at 105 540, $1000 bonds due in ten years. One detachable stock warrant entitling the holder to purchase 15 shares of Oriole's common stock was attached to each bond. At the date of issuance, the market value of the bonds, without the stock warrants, was quoted at 95. The market value of each detachable warrant was quoted at $50. What amount, if any, of the proceeds from the issuance should be accounted for as part of Oriole's stockholders' equity?

28,350 (540,000 x .95) + (540 x 50) = 540,000 540,000 x 1.05= 567,000 (27,000/540,000) x 567,000= 28,350 -27,000= 540 x 50

Sunland Corporation earns $780000 and pays cash dividends of $270000 during 2021. Dexter Corporation owns 3600 of the 10000 outstanding shares of Sunland. How much investment income should Dexter report in 2021?

280,800 780,000 x (3,600/10,000)

Faucet Company has 2,500,000 shares of common stock outstanding on December 31, year 1. An additional 500,000 shares of common stock were issued on April 1, year 2, and 250,000 more on July 1, year 2. On October 1, year 2, Faucet issued 5,000, $1,000 face value, 7% convertible bonds. Each bond is convertible into 40 shares of common stock. No bonds were converted into common stock in year 2. What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively, for the year ended December 31, year 2?

3,000,000 and 3,050,000 beginning balance 2,500,000 April 1: 500,000 x (9/12)= 375,000 July 1: 250,000 x (6/12)= 125,000 total= 3 mil 5,000 x 40 x (3/12)= 50,000 3 mil + 50,000= 3,050,000

On January 3, 2020, Ivanhoe Company acquires $518000 of Tamarisk Company's 10-year, 10% bonds at a price of $552090 to yield 8%. Interest is payable each December 31. The bonds are classified as held-to-maturity. Assuming that Ivanhoe Company uses the straight-line method, what is the amount of premium amortization that would be recognized in 2022 related to these bonds?

3,409 (552,090-518,000)/10

Coronado Industries was organized on January 2, 2021, with 507000 authorized shares of $10 par value common stock. During 2021, Coronado had the following capital transactions: January 5—issued 380250 shares at $16 per share. July 27—purchased 25350 shares at $13 per share. November 25—sold 15210 shares of treasury stock at $15 per share. Coronado used the cost method to record the purchase of the treasury shares. What would be the balance in the Paid-in Capital from Treasury Stock account at December 31, 2021?

30,420 15,210 x $2 (15-13)

On January 2, 2021, Waterway Industries issued at par $1980000 of 6% convertible bonds. Each $1000 bond is convertible into 10 shares of common stock. No bonds were converted during 2021. Waterway had 193000 shares of common stock outstanding during 2021. Waterway's 2021 net income was $908000 and the income tax rate was 25%. Waterway's diluted earnings per share for 2021 would be (rounded to the nearest penny):

4.69 1. convertible bonds: ($1,980,000 / $1,000) x 10 shares= 19,800 2. after tax income: 1,980,000 x 6% x (1-25%) = 89,100 4,69= (908,000 +89,100)/ (193,000 + 19,800)

n its December 31, 2020 balance sheet, Oriole Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2021 in the composition of Oriole's portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio: Security X: cost 112,000 FV 12/31/21 133,000 Y: cost 82,000 FV 76,500 Z cost 139,000 FV 89,000 total cost= 333,000 total FV= 298,500 The amount of unrealized loss to appear as a component of comprehensive income for the year ending December 31, 2021 is

44,500 333,000 - 298,500= 34,500 cost>FV: loss (debit balance) 34,500 debit + 10,000 debit= 44,500

Presented below is information related to Schoenthaler Corporation: Common Stock , $5 par $1,100,000 Paid-in Capital in Excess of Par - Common Stock 400,000 Preferred 5 ½% Stock, $100 par 1,500,000 Paid-in Capital in Excess of Par—Preferred Stock 500,000 Retained Earnings 2,000,000 Paid-in Capital from Treasury Stock 150,000 The total stockholders' equity of Schoenthaler Corporation is

5,650,000 add all together (no treasury stock account; paid in capital is its own)

Olive Branch Inc. had 400,000 shares of common stock issued and outstanding at December 31, 2016. On July 1, 2017 an additional 200,000 shares were issued for cash. Olive Branch also had stock options outstanding at the beginning and end of 2017, which allow the holders to purchase 60,000 shares of common stock at $28 per share. The average market price of Olive Branch's common stock was $35 during 2017. The number of shares to be used in computing diluted earnings per share for 2017 is

512,000 beginning: 400,000 July 1: 200,000 x (6/12)= 100,000 stock option outstanding: (35-28)/35 x 60,000= 12,000 add up= 512,000

Carla Vista Corporation has the following investment which was held throughout 2021-2022: equity investment: FV cost= 956,000 FV 12/31/21= 1,263,000 FV 12/31/22= 1,210,000 What amount of gain or loss would Carla Vista Corporation report in its income statement for the year ended December 31, 2022 related to its investment, if the fair value method of accounting was used?

53,000 loss 1,263,000-1,210,000 (loss bc fair value was less in 2022 than 2021)

Blossom Company purchased 200 of the 1000 outstanding shares of Sunland Company's common stock for $580000 on January 2, 2021. During 2021, Sunland Company declared dividends of $90000 and reported earnings for the year of $380000. If Blossom Company used the fair value method of accounting for its investment in Sunland Company, its Equity Investments (Sunland) account on December 31, 2021 should be

580,000 *acquisition cost

Pharoah Company purchased 200 of the 1000 outstanding shares of SheridanCompany's common stock for $560000 on January 2, 2021. During 2021, SheridanCompany declared dividends of $75000 and reported earnings for the year of $410000. If Pharoah Company uses the equity method of accounting for its investment in SheridanCompany, its Equity Investments (Sheridan) account at December 31, 2021 should be

627,000 200/1000= 20% 560,000 + (410,000 x .2) - (75,000 x .2) + 560,000= 627,000

On December 1, 2021, Marigold Corp. issued 620 of its 8%, $1,000 bonds at 103. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Marigold's common stock. On December 1, 2021, the market value of the bonds, without the stock warrants, was 95, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be

628,600 (620,000 x .95) + (620 x 50)= 620,000 620,000 x 1.03= 638,600

On January 1, 2017, Western Carolina Company granted Andy Eggers, an employee, an option to buy 2,000 shares of Western Carolina Co. stock for $25 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $21,000. Eggers exercised his option on September 1, 2017, and sold his 2,000 shares on December 1, 2017. Quoted market prices of Western Carolina Co. stock during 2017 were January 1 $25 per share September 1 $30 per share December 1 $34 per share The service period is for three years beginning January 1, 2017. As a result of the option granted to Eggers, using the fair value method, Western Carolina should recognize compensation expense for 2017 on its books in the amount of

7,000 21,000/3 years

Presented below is information related to Waterway Industries: Common Stock, $1 par $3590000 Paid-in Capital in Excess of Par―Common Stock 548000 Preferred 8 1/2% Stock, $50 par 1860000 Paid-in Capital in Excess of Par―Preferred Stock 417000 Retained Earnings 1580000 Treasury Common Stock (at cost) 159000 The total stockholders' equity of Waterway Industries is:

7,836,000 add everything and subtract treasury stock

During the current year, Comma Co. had outstanding: 25,000 shares of common stock, 8,000 shares of $20 par, 10% cumulative preferred stock, and 3,000 bonds that are $1,000 par and 9% convertible. The bonds were originally issued at par, and each bond was convertible into 30 shares of common stock. During the year, net income was $200,000, no dividends were declared, and the tax rate was 30%.What amount was Comma's basic earnings per share for the current year?

7.36 cumulative: subtract PD PD= 8,000 x 20 x 10%=16,000 (200,000-16,000)/25,000= 7.36

Cullumber Company purchased $3050000 of 9%, 5-year bonds from Vaughn, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $3174740 at an effective interest rate of 8%. Using the effective-interest method, Cullumber Company decreased the Available-for-Sale Debt Securities account for the Vaughn, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $10720 and $11080, respectively.At December 31, 2021, the fair value of the Vaughn, Inc. bonds was $3230000. What should Cullumber Company report as other comprehensive income and as a separate component of stockholders' equity?

77,060 3,230,000 - (3,174,740 - 10,720 - 11,080)

On its December 31, 2020 balance sheet, Crane Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2021 in the composition of Crane's portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio: Security X: cost 163,000 FV 12/31/21 215,000 Y: cost 122,000 FV 101,000 Z cost 208,000 FV 169,000 total cost= 493,000 total FV= 485,000 What amount of unrealized loss on these debt securities should be included in Crane's stockholders' equity section of the balance sheet at December 31, 2021?

8,000 (493,000 - 485,000)

An analysis of stockholders' equity of Marigold Corp. as of January 1, 2021, is as follows: Common stock, par value $20; authorized 100,000 shares; issued and outstanding 89000 shares: $1780000 Paid-in capital in excess of par 890000 Retained earnings 752000 Total $3422000 Marigold uses the cost method of accounting for treasury stock and during 2021 entered into the following transactions: Acquired 2470 shares of its stock for $74100. Sold 2020 treasury shares at $34 per share. Sold the remaining treasury shares at $22 per share. Assuming no other equity transactions occurred during 2021, what should Marigoldreport at December 31, 2021, as total additional paid-in capital?

894,480 890,000 + (2,020 x 4) - (450 x 8) 2,470-2,020= 450 74,100/2,470= $30 4= 34-30 8= 30-22

Sheffield Corp. owned 18700 shares of Ivanhoe Company purchased in 2017 for $514250. On December 15, 2020, Sheffield declared a property dividend of all of its Ivanhoe Company shares on the basis of one share of Ivanhoe for every 10 shares of Sheffield common stock held by its stockholders. The property dividend was distributed on January 15, 2021. On the declaration date, the aggregate market price of the Ivanhoeshares held by Sheffield was $896000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of

896,000

In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)? -Annual preferred dividend divided by the income tax rate. -Annual preferred dividend times the income tax rate. -Annual preferred dividend times (one minus the income tax rate). -Annual preferred dividend.

Annual preferred dividend.

Lang Co. issued bonds with detachable common stock warrants. Only the warrants had a known market value. The sum of the fair value of the warrants and the face amount of the bonds exceeds the cash proceeds. This excess is reported as -Paid-in Capital in Excess of Par—Stock Warrants. -Discount on Bonds Payable. -Common Stock Subscribed. -Premium on Bonds Payable.

Discount on Bonds Payable.

With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure? -Ownership interest not consisting solely of common stock. -Earnings derived from one primary line of business. -Common stock, preferred stock, and convertible securities outstanding in lots of even thousands. -Ownership interest consisting solely of common stock.

Ownership interest consisting solely of common stock.

Which of the following statements about property dividends is not true? -A property dividend is usually in the form of securities of other companies. -Property dividends may be merchandise or real estate. -A property dividend is also called a dividend in kind. -The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.

The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.

Which of the following is not generally correct about recording a sale of a debt security before maturity date? -Accrued interest will be received by the seller even though it is not an interest payment date. -The entry to amortize a premium to the date of sale includes a credit to the Premium on Debt Investments. -A gain or loss on the sale is reported as an other revenue or expense. -An entry must be made to amortize a discount to the date of sale.

The entry to amortize a premium to the date of sale includes a credit to the Premium on Debt Investments.

When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? -The investor should always use the equity method to account for its investment. -The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee. -The investor should always use the fair value method to account for its investment. -The investor must use the fair value method unless it can clearly demonstrate the ability to exercise "significant influence" over the investee.

The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee.

A convertible bond issue should be included in the diluted earnings per share computation as if the bonds had been converted into common stock, if the effect of its inclusion is: Dilutive, Antidilutive -Yes, no -Yes, yes -No, yes -No, no

Yes, no

On June 30, 2017, an interest payment date, $1,000,000 of Greenville Co. bonds were converted into 25,000 shares of Greenville Co. common stock each having a par value of $5 and a market value of $54. There is $350,000 unamortized discount on the bonds. Using the book value method, Greenville would record -a $350,000 increase in paid-in capital in excess of par. -a $135,000 increase in paid-in capital in excess of par. -a $525,000 increase in paid-in capital in excess of par. -no change in paid-in capital in excess of par.

a $525,000 increase in paid-in capital in excess of par. 1,000,000 - (25,000 x $5) - 350,000

At the date of declaration of a small common stock dividend, the entry should not include -a credit to common stock dividend distributable. -a credit to Paid-in Capital in Excess of Par. -a debit to Retained Earnings. -a credit to Common Stock.

a credit to common stock

Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes -a debit to Debt Investments at $300,000. -a credit to Premium on Debt Investments of $15,000. -a debit to Debt Investments at $315,000. -none of these choices are correct.

a debit to Debt Investments at $315,000.

At the date of declaration of a large common stock dividend, the entry should include -a debit to Retained Earnings. -a credit to Cash. -a credit to Paid-in Capital in Excess of Par. -a credit to Common Stock Dividend Payable.

a debit to Retained Earnings.

All of the following statements are true regarding preferred stock except: -the dividend preference for preferred stock is expressed as a percentage of the par value. -companies usually issue preferred stock with a par value. -a company often issues preferred stock instead of debt, because of a high debt-to-equity ratio. -a preference as to dividends assures the payment of dividends.

a preference as to dividends assures the payment of dividends.

Coronado Industries purchased its own par value stock on January 1, 2020 for $18600and debited the treasury stock account for the purchase price. The stock was subsequently sold for $10500. The $8100 difference between the cost and sales price should be recorded as a deduction from -retained earnings. -net income. -additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings. -additional paid-in capital without regard as to whether or not there have been previous net "gains" from sales of the same class of stock included therein.

additional paid-in capital without regard as to whether or not there have been previous net "gains" from sales of the same class of stock included therein.

The proceeds from the sale of debt with detachable stock warrants should be allocated between the two securities based on the: -fair market value of the bonds. -face value of the bonds and market value of the warrants. -aggregate fair market value of the bonds and the warrants. -face value of the bonds.

aggregate fair market value of the bonds and the warrants.

Which of the following is not correct in regard to trading securities? -They are held with the intention of selling them in a short period of time. -Unrealized holding gains and losses are reported as part of net income. -Any discount or premium is amortized. -All of these choices are correct.

all correct

In computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is the -preferred dividends in arrears. -preferred dividends in arrears times (one minus the income tax rate). -annual preferred dividend times (one minus the income tax rate). -annual preferred dividend.

annual preferred dividend.

The diluted EPS computation considers all of the following except the impact of: -convertible securities. -stock warrants. -antidilutive securities. -stock options.

antidilutive securitiew

In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation would -fairly present diluted earnings per share on a prospective basis. -reflect the excess of the number of shares assumed issued over the number of shares assumed reacquired as the potential dilution of earnings per share. -fairly present the maximum potential dilution of diluted earnings per share on a prospective basis. -be antidilutive.

be antidilutive

Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders -have the rights to specific assets of the business. -bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. -are entitled to a dividend every year in which the business earns a profit. -can negotiate individual contracts on behalf of the enterprise.

bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

Kelley Co. has $2,000,000 of 8% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2017, the holders of $500,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $112,500. Kelley should record, as a result of this conversion, a -credit of $421,875 to Paid-in Capital in Excess of Par. -credit of $78,125 to Paid-in Capital in Excess of Par. -loss of $540,000. -credit of $28,125 to Premium on Bonds Payable.

credit of $78,125 to Paid-in Capital in Excess of Par. 1. (2,000,000/500,000) x 112,500= 28,125 2. (5,000,000/1,000) x $30 x 30 shares= 450,000 3. 500,000 +28,125 - 450,000= 78,125

An available-for-sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a -debit to Interest Revenue. -none of these answers are correct. -debit to Debt Investments. -debit to the discount account.

debit to Debt Investments.

What effect does the issuance of a 2-for-1 stock split have on each of the following? Par Value, Retained earnings -decrease, decrease -no effect, no effect -increase, no effect -decrease, no effect

decrease, no effect

In January 2020, Bonita Industries, a newly formed company, issued 11400 shares of its $8 par common stock for $13 per share. On July 1, 2020, Bonita Industries reacquired 1140 shares of its outstanding stock for $10 per share. The acquisition of these treasury shares -decreased total stockholders' equity. -increased total stockholders' equity. -did not change total stockholders' equity. -decreased the number of issued shares.

decreased total SE

The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding -may increase or decrease paid-in capital in excess of par but does not change total stockholders' equity. -decreases retained earnings but does not change total stockholders' equity. -increases retained earnings and increases total stockholders' equity. -increases common stock outstanding and increases total stockholders' equity.

decreases retained earnings but does not change total stockholders' equity.

The issuance of warrants arises under all of the following situations except to: -provide compensation to executives. -give existing stockholders a preemptive right to purchase stock. -make different types of securities more attractive to new investors. -give bondholders the preemptive right to purchase additional stock.

give bondholders the preemptive right to purchase additional stock.

Of what will the numerator of the diluted EPS calculation consist when convertible preferred stock is being included? -Net income. -Net income + Preferred dividends (Net of tax effect). -Net income - Preferred dividends. -Net income + Preferred dividends.

net income diluted: no preferred stock

Santo Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods? Fair value method, equity method -increase, decrease -no effect, decrease -decrease. no effect -no effect, no effect

no effect, decrease

In computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is the -preferred dividends in arrears. -preferred dividends in arrears times (one minus the income tax rate). -annual preferred dividend times (one minus the income tax rate). -none of these answer choices is correct.

none of these answer choices is correct.

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be -reflected currently in income as a discontinued operations item. -treated as a prior period adjustment. -treated as an adjustment of additional paid-in capital. -reflected currently in income.

reflected currently in income.

The residual interest in a corporation belongs to -the common stockholders. -the preferred stockholders. -the board of directors. -management.

the common stockholders

The major difference between convertible debt and stock warrants is that upon exercise of the warrants -the stock is held by the company for a defined period of time before they are issued to the warrant holder. -the holder has to pay a certain amount of cash to obtain the shares. -no paid-in capital in excess of par can be a part of the transaction. -the stock involved is restricted and can only be sold by the recipient after a set period of time.

the holder has to pay a certain amount of cash to obtain the shares.

On its December 31, 2020, balance sheet, Sunland Company reported its investment in equity securities, which had cost $660000, at fair value of $608000. At December 31, 2021, the fair value of the securities was $639000. What should Sunland report on its 2021 income statement as a result of the increase in fair value of the investments in 2021? -Unrealized gain of $31000. -Realized gain of $31000. -Unrealized loss of $21000. -$0.

unrealized gain of 31,000 639,000 - 608,000 gain: FV 2021>FV 2020