Intermediate Acc 2 (Exam 2)

An available-for-sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a

debit to Debt Investments.

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

decrease, decrease

The issuer of a 5% common stock dividend to common stockholders should transfer from retained earnings to paid-in capital an amount equal to the

fair value of the shares issued.

All cash dividends received by an investor from the investee decrease the investment's carrying value under the equity method.

true

In a contingent issue agreement, the contingent shares are considered outstanding for computing diluted EPS when the earnings or market price level is met by the end of the year.

true

When a stock dividend is less than 20-25 percent of the common stock outstanding, a company is required to transfer the fair value of the stock issued from retained earnings.

true

On January 2, 2021, Bramble Corp. issued at par $301000 of 6% convertible bonds. Each $1,000 bond is convertible into 60 shares. No bonds were converted during 2021. Bramble had 104000 shares of common stock outstanding during 2021. Bramble's 2021 net income was $153000 and the income tax rate was 35%. Bramble's diluted earnings per share for 2021 would be (rounded to the nearest penny)

$1.35

Vaughn Manufacturing issues 3500 shares of its $10 par value common stock having a fair value of $25 per share and 5500 shares of its $15 par value preferred stock having a fair value of $30 per share for a lump sum of $204200. What amount of the proceeds should be allocated to the preferred stock?

$133438

Crane Company purchased $900000 of 11% bonds of Scott Company on January 1, 2021, paying $848385. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $51615 provides an effective yield of 12%. Crane Company uses the effective-interest method and plans to hold these bonds to maturity.For the year ended December 31, 2021, Crane Company should report interest revenue from the Scott Company bonds of:

101890

On January 1, 2021, Marigold Corp. had 385000 shares of its $2 par value common stock outstanding. On March 1, Marigold sold an additional 744000 shares on the open market at $20 per share. Marigold issued a 20% stock dividend on May 1. On August 1, Marigold purchased 415000 shares and immediately retired the stock. On November 1, 592000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2021?

1131750

Correct answer iconYour answer is correct. Marigold Corp. issues 6800 shares of its $10 par value common stock having a fair value of $30 per share and 9800 shares of its $15 par value preferred stock having a fair value of $30 per share for a lump sum of $311000. The proceeds allocated to the common stock is

127398

Crane Company had 804000 shares of common stock outstanding on January 1, issued 126000 shares on May 1, purchased 63000 shares of treasury stock on September 1, and issued 60000 shares on November 1. The weighted average shares outstanding for the year is

877000.

The conversion of preferred stock is recorded by the

Book value method

Presented below is information related to Crane Company: Common Stock, $1 par $3470000 Paid-in Capital in Excess of Par―Common Stock 551000 Preferred 8 1/2% Stock, $50 par 2080000 Paid-in Capital in Excess of Par―Preferred Stock 392000 Retained Earnings 1480000 Treasury Common Stock (at cost) 157000 The total stockholders' equity of Crane Company is

Common Stock + Paid-in Capital in Excess of Par 3470000+551000=4021000

Which dividends do not reduce stockholders' equity?

Stock dividends

At December 31, 2021, Pharoah Company has an equity portfolio valued at $136000. Its cost was $116000. If the Securities Fair Value Adjustment has a debit balance of $7200, which of the following journal entries is required at December 31, 2021?

Fair Value Adjustment 12800 Unrealized Holding Gain or Loss-Income 12800

All dividends, except for liquidating dividends, reduce the total stockholders' equity of a corporation.

False

In computing diluted earnings per share, stock options are considered dilutive when their option price is greater than the market price.

False

Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholders' equity.

False

The Unrealized Holding Gain/Loss—Income account for equity securities is reported as a part of other comprehensive income.

False

When stock dividends or stock splits occur, companies must restate the shares outstanding after the stock dividend or split, in order to compute the weighted-average number of shares.

False

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

No Effect Decrease

Judd, Inc., owns 35% of Cosby Corporation. During the calendar year 2021, Cosby had net earnings of $300,000 and paid dividends of $30,000. Judd mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively?

Understate, understate, understate

On July 1, 2021, an interest payment date, $153000 of Oriole Company bonds were converted into 3070 shares of Oriole Company common stock each having a par value of $45 and a market value of $54. There is $5900 unamortized discount on the bonds. Using the book value method, Oriole would record

a $8950 increase in paid-in capital in excess of par.

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 $315,000.

On its December 31, 2020 balance sheet, Sunland Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2021 in the composition of Sunland's portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio: Security Cost Fair value at 12/31/21 X $148000 $190000 Y 112000 96000 Z 193000149000 $453000$435000 What amount of unrealized loss on these debt securities should be included in Sunland's stockholders' equity section of the balance sheet at December 31, 2021?

$18000.

At December 31, 2020, Marigold Corp. had 1130000 shares of common stock outstanding. In addition, Marigold had 440000 shares of preferred stock which were convertible into 744000 shares of common stock. During 2021, Marigold paid $1180000 cash dividends on the common stock and $795000 cash dividends on the preferred stock. Net income for 2021 was $6790000 and the income tax rate was 40%. The diluted earnings per share for 2021 is (rounded to the nearest penny)

$3.62.

At December 31, 2021, Vaughn Manufacturing had 512000 shares of common stock issued and outstanding, 408000 of which had been issued and outstanding throughout the year and 104000 of which were issued on October 1, 2021. Net income for the year ended December 31, 2021, was $1705000. What should be Vaughn's 2021 earnings per common share, rounded to the nearest penny?

$3.93

Crane Company purchased $900000 of 11% bonds of Scott Company on January 1, 2021, paying $834375. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The discount of $65625 provides an effective yield of 12%. Crane Company 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

$563.

Bramble Corp. owned 18900 shares of Blossom Company purchased in 2017 for $519750. On December 15, 2020, Bramble declared a property dividend of all of its Blossom Company shares on the basis of one share of Blossom for every 10 shares of Bramble 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 Blossom shares held by Bramble was $912000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of

$912000.

Carla Vista Company owns 30000 of the 50000 outstanding shares of Taylor, Inc. common stock. During 2021, Taylor earns $1340000 and pays cash dividends of $1065000.If the beginning balance in the investment account was $820000, the balance at December 31, 2021 should be

$985000.

A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

A paid-in capital account.

What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively?

Decrease and increase

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, no effect

Which of the following best describes a possible result of treasury stock transactions by a corporation?

May decrease but not increase retained earnings.

Sunland Company issued 100000 shares of $10 par common stock for $1310000. A year later Sunland acquired 16500 shares of its own common stock at $14 per share. Three months later Sunland sold 7700 of these shares at $18 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 7700 treasury shares, Sunland should credit

Treasury Stock for $107800 and Paid-in Capital from Treasury Stock for $30800.

On September 1, 2020, Swifty Corporation reacquired 30800 shares of its $15 par value common stock for $20 per share. Swifty uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit

Treasury Stock for $616000.

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?

Treasury stock for the purchase price.