ACCT 302 Exam 2 Conceptual Questions

Perform a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value.

A company reported $6 million of goodwill in last year's statement of financial position. How should the company account for the reported goodwill in the current year? Determine whether the fair value of the reporting unit is greater than the carrying amount and report a gain on goodwill in the income statement. Determine whether the fair value of the reporting unit is greater than the carrying amount and report the recovery of any previous impairment in the income statement. Perform a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. Determine the current year's amortizable amount and report the current-year's amortization expense.

results in an issuance of shares when specific events occur

A contingent issue agreement.

Yes No

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 Anti dilutive

Decrease Decrease

A corporation declared a dividend, a portion of which was liquidating. How would this distribution affect each of the following? Additional Paid-in Capital Retained Earnings

based on the relative market values of the two securities involved.

A corporation issues bonds with detachable warrants. The amount to be recorded as paid-in capital is preferably based on the relative market values of the two securities involved. zero. calculated by the excess of the proceeds over the face amount of the bonds. equal to the market value of the warrants.

No Yes

A corporation was organized in January 2018 with authorized capital of $10 par value common stock. On February 1, 2018, shares were issued at par for cash. On March 1, 2018, the corporation's attorney accepted 7200 shares of common stock in settlement for legal services with a fair value of $93000. Additional paid-in capital would increase on February 1, 2018 March 1, 2018

liquidating dividend.

A dividend which is a return to stockholders of a portion of their original investments is a property dividend. liability dividend. participating dividend. liquidating dividend.

pension plan assets at fair value exceed the accumulated benefit obligation.

A pension asset is created when pension plan assets at fair value exceed the accumulated benefit obligation. the accumulated benefit obligation exceeds the fair value of pension plan assets. pension plan assets at book value exceed the projected benefit obligation. the accumulated benefit obligation exceeds the fair value of pension plan assets, but accrued pension cost and unrecognized prior service cost is greater than this excess.

both income retained by the corporation and contributions by stockholders.

A primary source of stockholders' equity is contributions by stockholders. income retained by the corporation. appropriated retained earnings. both income retained by the corporation and contributions by stockholders.

is; the recoverability test and then the fair value test

A purchased limited-life intangible asset ______ amortized and is impairment tested using _______________. is; the fair value test only is; the recoverability test and then the fair value test is not; the fair value test only is not; the recoverability test and then the fair value test

included as a liability.

According to the FASB, redeemable preferred stock should be included as a contra item in stockholders' equity. included with common stock. included as a liability. included in stockholders' equity.

the fair value method.

Accounting for stock option plans must be based on: the fair value method. either the fair value method or the intrinsic value method. the intrinsic value method. the option-pricing method.

no-par stock.

Additional paid-in capital is not affected by the issuance of: no par with a stated value stock. preferred stock. no-par stock. par value stock.

It is prohibited.

After an impairment loss is recognized, the adjusted carrying amount of the intangible asset shall be its new accounting basis. Which of the following statements about subsequent reversal of a previously recognized impairment loss is correct? It is required when the reversal is considered permanent. It must be disclosed in the notes to the financial statements. It is encouraged, but not required. It is prohibited.

Stock splits.

All of the following decrease Retained Earnings, except: Stock dividends. Property dividends. Cash dividends. Stock splits.

d. all of these answers are correct.

All of the following increase pension expense except: a. service cost. b. interest on the liability. c. amortization of prior service cost. d. all of these answers are correct.

a preference as to dividends assures the payment of dividends.

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

years of service method.

Amortization of prior service costs is based on the: units of production method. years of service method. number of employees method. none of these answers are correct.

should be ignored in all earnings per share calculations.

Antidilutive securities are those whose inclusion in earnings per share computations would cause basic earnings per share to exceed diluted earnings per share. include stock options and warrants whose exercise price is less than the average market price of common stock. should be ignored in all earnings per share calculations. should be included in the computation of diluted earnings per share but not basic earnings per share.

funded status relative to the projected benefit obligation.

Appalachian Company maintains a defined-benefit pension plan for its employees. At each balance sheet date, Appalachian should report a pension asset / liability equal to the projected benefit obligation. actual return on the plan assets. accumulated benefit obligation funded status relative to the projected benefit obligation.

smaller earnings per share adjustment.

Assume there are two dilutive convertible securities. The one that should be used first to recalculate earnings per share is the security with the smaller earnings adjustment. smaller earnings per share adjustment. greater earnings adjustment. greater earnings per share adjustment.

purchase of treasury stock.

At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the declaration of a stock split. purchase of treasury stock. payment in full of subscribed stock. declaration of a stock dividend.

faithful representation winning out over relevance.

Capitalizing goodwill only when it is purchased in an arm's-length transaction, and not capitalizing any goodwill generated internally, is an example of GAAP winning out over IFRS. financial accounting winning out over managerial accounting. accrual accounting winning out over cash-basis accounting. faithful representation winning out over relevance.

outstanding.

Cash dividends are paid on the basis of the number of shares issued. outstanding. outstanding less the number of treasury shares. authorized.

unlimited liability of stockholders.

Characteristics of the corporate form of organization include all of the following except: facility for attracting and accumulating large amounts of capital. unlimited liability of stockholders. variety of ownership interests. capital stock or share system.

an addition to common stock.

Common stock dividends distributable is reported on the balance sheet as: a reduction of total stockholders' equity. an addition to additional paid-in capital. an addition to common stock. a current liability.

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

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. are entitled to a dividend every year in which the business earns a profit. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership. can negotiate individual contracts on behalf of the enterprise.

employer

Commonly, in a defined benefit plan, the contributions to the plan are made by the: independent third party. employee. employer. both employee and employer.

impairment.

Companies should test indefinite life intangible assets at least annually for recoverability. amortization. impairment. estimated useful life.

allocated to the periods benefited by the employee's required service.

Compensation expense resulting from a compensatory stock option plan is generally allocated over the periods of the employee's service life to retirement. recognized in the period of the grant. allocated to the periods benefited by the employee's required service. recognized in the period of exercise.

may be exchanged for equity securities.

Convertible bonds pay interest only in the event earnings are sufficient to cover the interest. may be exchanged for equity securities. have priority over other indebtedness. are usually secured by a first or second mortgage.

common stock.

Convertible bonds are usually converted into: common stock. other bonds at a lower interest rate. stock warrants. preferred stock.

expensed as incurred

Costs incurred internally to create intangibles are capitalized capitalized if they have an indefinite life expensed as incurred expensed only if they have a limited life.

a footnote.

Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as an increase in current liabilities. an increase in stockholders' equity. an increase in current liabilities for the current portion and long-term liabilities for the long- term portion. a footnote.

paid-in capital.

Detachable stock warrants outstanding should be classified as reductions of capital contributed in excess of par value. paid-in capital. prepaid expenses. contingent liabilities

Dilutive Securities

Dilutive Securities

1. a reduction of additional paid-in capital

Direct costs incurred to sell stock such as underwriting costs should be accounted for as 1. a reduction of additional paid-in capital 2. an expense of the period in which the stock is issued. 3. an intangible asset.

treasury common stock.

Dividends are not paid on noncumulative preferred stock. nonparticipating preferred stock. treasury common stock. cumulative preferred stock.

EPS

EPS

Bonds issued with detachable warrants.

For which of the following securities is an allocation of the sales proceeds necessary? Bonds issued with either detachable or nondetachable warrants. Bonds issued with detachable warrants. Bonds issued with nondetachable warrants. Convertible bonds.

one company acquires another in a business combination.

Goodwill may be recorded when it is identified within a company. one company acquires another in a business combination. the fair value of a company's assets exceeds their cost. a company has exceptional customer relations.

Litigation costs would be capitalized if the patent right is successfully defended.

Grayson Co. incurred significant costs in defending its patent rights. Which of the following is the appropriate treatment of the related litigation costs? Litigation costs would be capitalized regardless of the outcome of the litigation. Litigation costs would be capitalized if the patent right is successfully defended. Litigation costs would be capitalized only if the patent was purchased rather than internally developed. Litigation costs would be expensed regardless of the outcome of the litigation.

The use of expected return for component 3 of pension expense

How many of the following four aspects of accounting for pension gains and losses contribute to the reduction in volatility of reported pension expense: (1) use of corridor amortization as an acceptable method, (2) gains and losses cancel, (3) spreading the amount subject to amortization over the average remaining service period of plan participants, (4) the use of expected return for component 3 of pension expense?

Note disclosure

How should cumulative preferred dividends in arrears be shown in a corporation's balance sheet? Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in long-term liabilities for the balance Increase in stockholders' equity Note disclosure Increase in current liabilities

sweetener

If a company offers additional considerations to convertible bondholders in order to encourage conversion, it is called a(an): additional conversion. forced conversion. end conversion. sweetener.

Only the current year's dividend.

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 dividends in arrears. Nothing should be deducted because no dividends were declared. Only the current year's dividend. Both the current year's dividend and the dividends in arrears.

the par value of all capital stock issued.

In a corporate form of business organization, legal capital is best defined as the amount of capital the federal government allows a corporation to generate. the total capital raised by a corporation within the limits set by the Securities and Exchange Commission. the amount of capital the state of incorporation allows the company to accumulate over its existence. the par value of all capital stock issued.

d. agency to ensure that funds are available to meet retirees' claims. making the periodic contributions to a funding agency to ensure that funds are available to meet retirees' claims.

In a defined-benefit plan, the process of funding refers to... a. determining the amount that might be reported for pension expense. b. determining the projected benefit obligation. c. determining the accumulated benefit obligation. making the periodic contributions to a funding d. making the periodic contributions to a funding agency to ensure that funds are available to meet retirees' claims.

requires an employer to contribute a certain sum each period based on the formula.

In a defined-contribution plan, a formula is used that defines the benefits that the employee will receive at the time of retirement. requires an employer to contribute a certain sum each period based on the formula. ensures that employers are at risk to make sure funds are available at retirement. ensures that pension expense and the cash funding amount will be different.

are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share.

In applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants are not used to calculate the number of common shared repurchased at the average market price, when computing diluted earnings per share are added, net of tax, to the numerator of the calculation for diluted earnings per share. are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share. are disregarded in the computation of earnings per share if the exercise price of the options and warrants is less than the ending market price of common stock.

considered outstanding at the beginning of the earliest year reported.

In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are considered outstanding at the beginning of the earliest year reported. weighted by the number of days outstanding. weighted by the number of months outstanding. considered outstanding at the beginning of the year.

none of these answer choices is 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). none of these answer choices is correct.

deducted from net income whether declared or not.

In determining diluted earnings per share, dividends on nonconvertible cumulative preferred stock should be added back to net income whether declared or not. deducted from net income only if declared. disregarded. deducted from net income whether declared or not.

be antidilutive.

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 be antidilutive. 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 diluted earnings per share on a prospective basis. fairly present the maximum potential dilution of diluted earnings per share on a prospective basis.

be antidilutive.

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. be antidilutive. fairly present the maximum potential dilution of 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.

separately from other assets.

Intangible assets are reported on the balance sheet with an accumulated depreciation account. in the property, plant, and equipment section. separately from other assets. none of these answer choices are correct.

Intangibles

Intangibles

are not paid or disclosed.

Noncumulative preferred dividends in arrears are disclosed as a liability until paid. are paid to preferred stockholders if sufficient funds remain after payment of the current preferred dividend. are not paid or disclosed. must be paid before any other cash dividends can be distributed.

Net income.

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

a liability for the entire proceeds.

On January 2, 2018, Farr Co. issued 10-year convertible bonds at 105. During 2018, these bonds were converted into common stock having an aggregate par value equal to the total face amount of the bonds. At conversion, the market price of Farr's common stock was 50 percent above its par value. On January 2, 2018, cash proceeds from the issuance of the convertible bonds should be reported as paid-in capital for the portion of the proceeds attributable to the conversion feature and as a liability for the balance. a liability for the entire proceeds. paid-in capital for the entire proceeds. a liability for the face amount of the bonds and paid-in capital for the premium over the face amount.

a liability for the entire proceeds

On January 2, 2018, Farr Co. issued 10-year convertible bonds at 105. During 2018, these bonds were converted into common stock having an aggregate par value equal to the total face amount of the bonds. At conversion, the market price of Farr's common stock was 50 percent above its par value. On January 2, 2018, cash proceeds from the issuance of the convertible bonds should be reported as...

Pensions

Pensions

d. years-of-service method or on a straight-line basis over the average remaining service life of active employees.

Prior service cost is amortized on a... a. straight-line basis over the average remaining service life of active employees or 15 years, whichever is longer. b. straight-line basis over the expected future years of service. c. straight-line basis over 15 years. d. years-of-service method or on a straight-line basis over the average remaining service life of active employees.

the warrants issued with the debt securities are nondetachable.

Proceeds from an issue of debt securities having stock warrants should not be allocated between debt and equity features when exercise of the warrants within the next few fiscal periods seems remote. the warrants issued with the debt securities are nondetachable. the market value of the warrants is not readily available. the allocation would result in a discount on the debt security.

Fair market value of the stock issued or the property received, whichever is more readily determinable.

Stock issued in non-cash transactions should be recorded at the: Fair market value of the property received. Par value of the stock issued. Fair market value of the stock issued or the property received, whichever is more readily determinable. Fair market value of the stock issued.

paid-in capital-stock warrants.

Stock warrants outstanding should be classified as assets. paid-in capital-stock warrants. liabilities. reductions of capital contributed in excess of par value.

Stockholders' Equity

Stockholders' Equity

earned capital and contributed capital.

Stockholders' equity is generally classified into two major categories: appropriated capital and retained earnings. retained earnings and unappropriated capital. earned capital and contributed capital. contributed capital and appropriated capital.

years-of-service method.

The FASB prefers that unrecognized prior service cost be amortized using the: double-declining balance method. straight-line method. sum-of-the-years' digits method. years-of-service method.

the pension obligation on the basis of the plan formula applied to all years of employee service, both vested and nonvested, to date and based on current salary levels.

The accumulated benefit obligation measures the shortest possible period for funding to maximize the tax deduction. an estimated total benefit at retirement and then computes the level cost that will be sufficient, together with interest expected to accumulate at the assumed rate, to provide the total benefits at retirement. the pension obligation on the basis of the plan formula applied to all years of employee service, both vested and nonvested, to date and based on current salary levels. the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels.

projected benefit obligation.

The approach adopted by the accounting profession to measure a firm's pension obligation is the: vested benefit obligation. accumulated benefit obligation. projected benefit obligation. defined benefit obligation.

addition to capital stock.

The balance in Common Stock Dividend Distributable should be reported as a(n) contra current asset. deduction from common stock issued. addition to capital stock. current liability.

the asset's acquisition cost less the total related amortization recorded to date.

The carrying value of an intangible is the fair value of the asset at a balance sheet date. the asset's acquisition cost less the total related amortization recorded to date. equal to the balance of the related accumulated amortization account. the assessed value of the asset for intangible tax purposes.

understating assets and overstating expenses.

The controversy surrounding the policy to expense all research and development costs associated with internally created intangible assets results in understating assets and overstating expenses. understating assets and understating expenses. overstating assets and understating expenses. overstating assets and overstating expenses.

book value method.

The conversion of bonds is most commonly recorded by the proportional method. book value method. market value method. incremental method.

treated as a direct reduction of retained earnings.

The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be reflected currently in income. treated as a prior period adjustment. reflected currently in income as a discontinued operations item. treated as a direct reduction of retained earnings.

book value method.

The conversion of preferred stock is recorded by the market value method. par value method. book value method. incremental method.

amortized over the remaining estimated useful life of the patent.

The cost of successfully defending a patent suit should be charged off in the current period. amortized over the legal life of the purchased patent. added to factory overhead and allocated to production of the product. amortized over the remaining estimated useful life of the patent.

requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.

The cumulative feature of preferred stock means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends. limits the amount of cumulative dividends to the par value of the preferred stock. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders.

is granted the option.

The date on which to measure the compensation element in a stock option granted to a corporate employee ordinarily is the date on which the employee may first exercise the option. has performed all conditions precedent to exercising the option. exercises the option. is granted the option.

antidilutive securities.

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

No Yes

The distribution of stock rights to existing common stockholders will increase paid-in capital at the Date of Issuance of the Rights Date of Exercise of the Rights

net balance in the memo record at year end.

The ending balance in the Pension Asset/Liability column should equal the balance of the Accumulated Pension Obligation. net balance in the memo record at year end. balance of the Plan Assets. balance of the Projected Benefit Obligation.

c. projected benefit obligation and the fair value of plan assets.

The ending balance in the Pension Asset/Liability is the difference between the: a. accumulated benefit obligation and the fair value of plan assets. b. projected benefit obligation and the market-related asset value. c. projected benefit obligation and the fair value of plan assets. d. accumulated benefit obligation and the market-related asset value.

all of these answer choices are correct.

The excess cost of the purchase over the fair market value of a company's identifiable net assets is sometimes referred to as all of these answer choices are correct. a master valuation account. a gap filler. goodwill.

True

The fair value of pension plan assets is used to determine the corridor and to calculate the expected return on plan assets.

reflects the rates at which pension benefits could be effectively settled.

The interest on the projected benefit obligation component of pension expense reflects the incremental borrowing rate of the employer. reflects the rates at which pension benefits could be effectively settled. is the same as the expected return on plan assets. may be stated implicitly or explicitly when reported.

d. reflects the rates at which pension benefits could be effectively settled.

The interest on the projected benefit obligation component of pension expense... a. is the same as the expected return on plan assets. b. may be stated implicitly or explicitly when reported. c. reflects the incremental borrowing rate of the employer. d. reflects the rates at which pension benefits could be effectively settled.

settlement rate.

The interest rate used to determine the interest on the liability component of pension expense is the: expected rate on plan assets. employer's incremental rate. settlement rate. actuarial rate used to calculate the present value of pension benefits.

Decrease, PE no effect, PL

The journal entry to recognize the amortization of $50 of net gain causes what effect on (1) pension expense, and (2) pension liability?

administer terminated plans and to impose liens on the employer's assets for certain unfunded pension liabilities.

The main purpose of the Pension Benefit Guaranty Corporation is to require minimum funding of pensions. require plan administrators to publish a comprehensive description and summary of their plans. administer terminated plans and to impose liens on the employer's assets for certain unfunded pension liabilities. all of the answers are correct.

share proportionately in any new issues of stock of the same class.

The preemptive right of a common stockholder is the right to share proportionately in corporate assets upon liquidation. receive cash dividends before they are distributed to preferred stockholders. share proportionately in any new issues of stock of the same class. exclude preferred stockholders from voting rights.

Partially as stockholders' equity, and partially as bonds payable.

The proceeds from a bond issued with detachable stock purchase warrants should be accounted for Partially as unearned revenue, and partially as bonds payable. Entirely as stockholders' equity. Entirely as bonds payable. Partially as stockholders' equity, and partially as bonds payable.

common stockholders.

The residual interest in a corporation belongs to the preferred stockholders. creditors. common stockholders. management.

The BV of the property transferred

The total change in S/E resulting from a property dividend is equal to what?

stock options and warrants.

The treasury stock method of computing incremental shares applies to: convertible bonds only. stock options and warrants. convertible preferred stock only. all convertible securities.

Liability Gains and Losses

The unexpected gains or losses that result from changes in the projected benefit obligation are called....

b. beginning projected benefit obligation or the market-related asset value.

The unrecognized net gain or loss balance must be amortized when it exceeds 10% of the larger of the: a. beginning accumulated benefit obligation or the market-related asset value. b. beginning projected benefit obligation or the market-related asset value. c. ending projected benefit obligation or the market related asset value. d. ending accumulated benefit obligation or the market-related asset value.

a claim against a portion of the total assets of a company.

Total stockholders' equity represents a claim to specific assets contributed by the owners. the maximum amount that can be borrowed by a company. a claim against a portion of the total assets of a company. only the amount of earnings that have been retained in the business.

limited-life or indefinite-life.

Under current accounting practice, intangible assets are classified as amortizable or unamortizable. limited-life or indefinite-life. specifically identifiable or goodwill-type. legally restricted or goodwill-type.

evenly over the service period.

Under the fair value method, compensation expense is recorded: evenly over the service period. evenly over the period from the grant date to the measurement date. on the date of grant. on the date of exercise.

a higher compensation cost relative to the intrinsic-value method.

Under the fair-value method of recording stock options, companies will report the same compensation expense relative to the intrinsic-value method. a higher compensation cost relative to the intrinsic-value method. a lower compensation cost relative to the intrinsic- value method. no increase in compensation expense.

Decrease No effect

What effect does the issuance of a 2-for-1 stock split have on each of the following? Par Value per Share Retained Earnings

Decrease and increase

What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively? Decrease and increase Increase and decrease Decrease and no effect Increase and no effect

expense

When a bond issuer offers some form of additional consideration (a "sweetener") to induce conversion, the sweetener is accounted for as a(n) extraordinary item. expense. loss. none of these answer choices is correct.

All of these answer choices are correct.

When a new company is acquired, which of these intangible assets, unrecorded on the acquired company's books, might be recorded in addition to goodwill? A brand name. A patent. A customer list. All of these answer choices are correct.

assumed converted only if they are dilutive.

When computing diluted earnings per share, convertible bonds are: assumed converted only if they are dilutive. ignored. assumed converted only if they are antidilutive. assumed converted whether they are dilutive or antidilutive.

reflected currently in income.

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 treated as a prior period adjustment. reflected currently in income. treated as an adjustment of additional paid-in capital. reflected currently in income as a discontinued operations item.

When it exceeds 10% of the larger of the beginning balances of the projected benefit obligation or the market-related value of the plan assets.

When is the balance of the Unrecognized Net Gain or Loss account subject to amortization? When it exceeds 10% of the larger of the beginning balances of the projected benefit obligation or the market-related value of the plan assets. When it equals 10% of the beginning balance of the projected benefit obligation. When it equals 10% of the beginning balance of the market-related value of the plan assets. Never. The Unrecognized Net Gain or Loss account remains unrecognized.

d. the excess is debited to Other Comprehensive Income (PSC).

When preparing the journal entry with a plan amendment, if the pension liability exceeds the unrecognized prior service cost: a. the Additional Pension Liability account is decreased. b. no entry is necessary to record the liability. c. the Additional Pension Liability account is credited for the amount of the unrecognized prior service cost. d. the excess is debited to Other Comprehensive Income (PSC).

premium on bonds payable.

When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to additional paid-in capital from stock warrants. premium on bonds payable. retained earnings. a liability account.

noncontributory plan.

When the employer bears the entire cost of a pension plan's costs, the plan is called a funded plan. voluntary plan. contributory plan. noncontributory plan.

bargain purchase.

When the purchaser in a business combination pays less then the fair value of the identifiable net assets, such a situation is referred to as a: goodwill purchase. bargain purchase. residual purchase. blanket purchase.

both the pension expense and the projected benefit obligation are usually greater than before.

Whenever a defined-benefit plan is amended and credit is given to employees for years of service provided before the date of amendment both the pension expense and the projected benefit obligation are usually greater than before. both the pension expense and the projected benefit obligation are usually less than before. the expense and the liability should be recognized at the time of the plan change. the expense should be recognized immediately, but the liability may be deferred until a reasonable basis for its determination has been identified.

Basic and diluted EPS.

Which earnings per share amounts are reported in a complex capital structure? Basic and simple EPS. Basic EPS only. Diluted EPS only. Basic and diluted EPS.

Research and development costs.

Which of the following costs incurred internally to create an intangible asset is generally expensed? Research and development costs. Filing costs. Legal costs. All of these answer choices are correct.

Neither

Which of the following costs of goodwill should be amortized over their estimated useful lives? Costs of goodwill from abusiness combination Costs of developing goodwill internally

They are financial instruments.

Which of the following does not describe intangible assets? They lack physical existence. They are financial instruments. They provide long-term benefits. They are classified as long-term assets.

b. Projected benefit obligation.

Which of the following does the FASB argue indicates a more realistic measure of the employer's obligation under the pension plan on a going-concern basis and should be used as the basis for determining service cost? a. Vested benefit obligation. b. Projected benefit obligation. c. Accumulated benefit obligation. d. None of these answers are correct.

Redeemable

Which of the following features of preferred stock makes it more like a debt than an equity instrument? Redeemable Noncumulative Participating Voting

Goodwill.

Which of the following intangible assets cannot be sold by a business to raise needed cash for a capital project? Patent. Copyright. Goodwill. Brand Name.

Goodwill

Which of the following intangible assets should be shown as a separate item on the balance sheet? Goodwill Franchise Patent Trademark

Perpetual franchises

Which of the following intangible assets should not be amortized? Copyrights Customer lists Perpetual franchises All of these intangible assets should be amortized.

It never becomes completely worthless.

Which of the following is an advantage of a restricted-stock plan? It never becomes completely worthless. It creates new job opportunities in a company. It increases the market price of the stock. It increases the profit of a company.

Pension Asset/Liability.

Which of the following is formally recognized in the accounts of a company? Pension Asset/Liability. Gains/Losses. Prior Service Cost. All of these answers are correct.

An interest rate that is lower than nonconvertible debt.

Which of the following is generally associated with the terms of convertible debt securities? An interest rate that is lower than nonconvertible debt. An initial conversion price that is less than the market value of the common stock at time of issuance. A feature to subordinate the security to nonconvertible debt. A noncallable feature.

The amount distributed in any one year can never exceed the net income reported for that year.

Which of the following is not a legal restriction related to profit distributions by a corporation? The amount distributed in any one year can never exceed the net income reported for that year. Profit distributions must be formally approved by the board of directors. Dividends must be in full agreement with the capital stock contracts as to preferences and participation. The amount distributed to owners must be in compliance with the state laws governing corporations.

Expected return.

Which of the following is not included in determining the balance of plan assets? Actual returns. Benefits paid. Contributions made. Expected return.

(Net income - Preferred dividends) ÷ Weighted average number of shares outstanding

Which of the following is the formula for computing EPS? (Net income - Preferred dividends) ÷ Average number of shares outstanding (Net income - Preferred dividends) ÷ Weighted average number of shares outstanding (Net income + Preferred dividends) ÷ Weighted average number of shares outstanding Net income ÷ Number of shares outstanding

Actual return on plan assets.

Which of the following may decrease the annual pension expense amount? Service Cost. Actual return on plan assets. Interest on the liability. Amortization of prior service cost.

Straight-line

Which of the following methods of amortization is normally used for intangible assets? Sum-of-the-years'-digits Straight-line Units of production Double-declining-balance

Copyrights.

Which of the following represents a federally granted right? Goodwill. Franchise. Copyrights. Internet domain names.

Authorized shares

Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? Authorized shares Issued shares Unissued shares Outstanding shares

Liability gains.

Which of the following results from unexpected decreases in the pension obligation? Liability losses. Asset losses. Asset gains. Liability gains.

Trade name amortization expense.

Which of the following should be reported under the "Other Expenses and Losses" section of the income statement? Goodwill impairment losses. Trade name amortization expense. Patent impairment losses. Loss on sale of patent.

Dividends must be paid in the period declared.

Which of the following statements related to dividends is incorrect? Dividends must be declared by the Board of Directors. Distributions to owners must be in compliance with the state laws. Dividends must be paid in the period declared. Before declaring a dividend, management must consider availability of funds to pay the dividend.

b. Amortization of projected benefit obligation.

Which one of the following is not a component of pension expense? a. Actual return on plan assets. b. Amortization of projected benefit obligation. c. Gain or loss. d. Amortization of prior service cost.

To share proportionately in all management decisions.

Which one of the following is not a right of common stockholders? To share proportionately in all management decisions. To share proportionately in corporate assets upon liquidation. To share proportionately in any new issues of stock of the same class. To share proportionately in profits and losses.

Ownership interest consisting solely of common stock.

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

patents and amortized over the remaining useful life of the patent.

Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to patents and amortized over the legal life of the patent. legal fees and amortized over 5 years or less. expenses of the period. patents and amortized over the remaining useful life of the patent.