Acct 304 exam 2

When we assume conversion of convertible bonds, the numeration is increased by:

the amount of after tax interest

How many types of potential common shares must a corporation have in order to be said to have a complex capital structure?

1

Omega leased a machine for a ten-year non-cancelable term. At the end of the ten-year term, Omega has five consecutive one-year renewal options. A replacement machine can be acquired at the end of the term for the leased machine, but due to an expensive installation process and Omega's lease term for its store, Omega expects to lease the machine for 12 years. What is the lease term?

15 years

Barr Corp. is the lessee in a finance lease. Barr would record:

A right-of-use asset

Preferred dividends are subtracted from earnings when computing earnings per share whether or not the dividends are declared or paid if the preferred stock is:

Cumulative

All other thing equal, what is the effect on earnings per share when a corporation acquires shares of its own stock on the open market?

Decrease

Loyola Co. is the lessor in connection with an operating lease less than 1 year. Loyola Co. would record

Depreciation expense

Loyola declared and paid cash dividends in January of the current year to its common shareholders. The dividend:

Has no effect on the earnings per share for the coming year

When we take into account the dilutive effect of convertible securities in the calculation of EPS, the method used is called the:

If converted method.

When computing earnings per share, noncumulative preferred dividends not declared should be:

Ignored

Basic earnings per share is computed using:

Weighted-average common shares outstanding for the year.

For the lessor, a guaranteed residual value at the beginning of a finance lease should be:

Included as part of lease payments only to the extent that guaranteed residual value is expected to exceed estimated residual value.

Exelon Co. is the lessor in a six-year lease that the lessor classifies as a sales-type lease. The lease payments begin December 31, 2018. The agreement specifies that JBL Corp. make equal annual lease payments on December 31 of each year. In its 2019 income statement:

JBL will report interest expense and depreciation/amortization expense.

When several types of potential common shares exist, the one that enters the computation of diluted EPS first is the one with the:

Lowest incremental EPS

A simple capital structure might include:

Nonconvertible preferred stock.

Nonconvertible bonds affect the calculation of: Basic earnings per share Diluted earnings per share

None of these answer choices are correct.

Basic and diluted earnings per share data are required to be reported:

On the face of the income statement.

Which of the following is not a potential common stock?

Participating preferred stock

Which of the following will require a recalculation of weighted-average shares outstanding for all years presented?

Stock dividends and stock splits

In connection with a lease transaction, the lessor would not record:

a liability.

In connection with a lease of more than 12 months, the lessee always will record each of the following except:

interest revenue.

The single accounting number in the annual report that receives the most attention by investors is:

earnings per share

Interest expense is not calculated as the effective interest rate times the amount of the debt outstanding during the interest period for:

lease receivable.

In an operating lease that is longer than 1 year but does not meet the criteria for being recognized as a finance lease , the depreciation/amortization of the right-of-use asset in the third year is:

less than in the fourth year.

In a ten-year finance lease agreement, the portion of the periodic lease payment that represents interest in the third year is:

more than in the fourth year.

Cook the Books is the lessee in a lease agreement. From the perspective of the lessee, the lease may be classified as:

operating or finance.

ABC Enterprises is the lessor in a lease agreement. From the perspective of the lessor, the lease may be classified as:

operating, finance, or sales-type

In an operating lease that is longer than 1 year but does not meet the criteria for being recognized as a finance lease:

the lessee records an asset and a liability for the present value of lease payments

In a finance lease:

the lessee records an asset and a liability for the present value of lease payments.

In a finance lease, the depreciation/amortization of the right-of-use asset in the third year is:

the same as in the fourth year.