ACC 302 Final Exam (Ch. 14, 15, 16, 17, 19, & 20)
Mozart & Company issued 2,500 shares of 5%, $50 par value, preferred stock for $180,000. The board of directors declared preferred dividends for one year on December 30, to be paid in January. What journal entry is necessary to record the declaration of dividends?
Dividends — preferred 6,250 > Dividends payable−preferred > 6,250
Price Co. reported net income of $16,000 for the current year. It had unrealized losses on available−for−sale debt securities of $1,800 after tax, and a foreign currency translation loss of $900 after tax. What is comprehensive income for the current year? A. $14,200 B. $16,900 C. $15,100 D. $13,300
$13,300
Barker Industries issued 2,000 $1,000 bonds at 104. Each bond contains 20 detachable stock warrants that allow the bondholder to purchase a share of Barker's common stock for $50. Immediately after the issue, the warrants were selling for $4 each and the bonds without the warrants were selling for $988. How much will be credited to Additional Paid−in Capital—Stock Warrants? (Round intermediate calculations to four decimal places and your final answer to the nearest dollar.) Use the proportional method. A. $160,000 B. $80,000 C. $0 D. $155,804
$155,804
Eagle Exporters purchased 80,000 of the 200,000 outstanding shares of Giant Distributors for $2,000,000. Eagle has significant influence over Giant and will account for this investment using the equity method. During the year, Giant declared dividends of $110,000 and reported Net Income of $800,000. What is the balance in the Investment in Giant account at year end? A. $1,724,000 B. $2,276,000 C. $2,364,000 D. $1,636,000
$2,276,000
Gordon Corporation issued $300,000 par value, 6%, 5−year bonds on January 1, 2023. The bonds mature on December 31, 2027 and pay semi−annual interest. The market rate on the date of issue is 8%. Assuming that Gordon uses the straight−line method, what amount of discount amortization is recorded on June 30, 2023? A. $1,533.30 B. $2,559.10 C. $4,026.00 D. $2,433.30
$2,433
Zambrano Corp. decided to go into the market to repurchase bonds before their due date. The following are the balances of the accounts on the date of the retirement: Bonds Payable $5,000,000 Discount on Bonds Payable $80,000 If Zambrano pays $4,894,000 to retire the bond, what is the gain or loss on the early extinguishment of the debt? A. $26,000 gain B. $80,000 loss C. $86,000 loss D. No gain or loss is recognized.
$26,000 gain
Danio Inc.'s income before taxes is $150,000 and its tax rate is 20%. Danio included $30,000 of interest from municipal bonds in the $150,000. There are no other book−tax differences. What is the effective tax rate for Danio Inc.? (Do not round intermediate calculations. Only round your final answer to the nearest percent.) A. 16% B. 20% C. 24% D. 13%
16%
On July 1, Year 1, Fairfield Company purchased $4 million of Hampton Corporation's 6% bonds for $3,214,548. The bonds were purchased to yield 8% interest and were classified as held−to−maturity securities. The bonds mature in 20 years and pay interest annually on July 1. Assuming that Fairfield uses the effective interest method of amortization, what amount should it report for its investment in bonds on December 31, Year 1? (Round all calculations to the nearest cent, and your final answer to the nearest dollar.) A. $3,231,712 B. $3,205,966 C. $3,454,548 D. $3,223,130
$3,223,130
George Manufacturing had net income of $325,000 and declared preferred dividends of $15,000 during the current year. George began the year with 10,000 common shares outstanding. It issued 50,000 shares on June 30 and repurchased 6,000 of the newly issued shares on November 1. Compute George's weighted−average common shares outstanding for the year. A. 59,000 B. 34,000 C. 60,000 D. 54,000 (Lowest?)
$34,000
On January 1 of the current year, Beta Company paid $200,000 for 18,000 shares of Gamma Company common stock. Beta owns 10% of Gamma Company. Gamma reported net income of $62,000 for December 31 of the current year. The fair value of the Gamma stock on that date was $20. What amount will be reported in Beta's balance sheet for the investment in Gamma at December 31? A. $262,000 B. $298,000 C. $360,000 D. $422,000
$360,000
The following information applies to the operations of MK Inc. for 2022 and 2023. Assume a tax rate of 25% for both years. 2022 information: Sales on account in the amount of $655,000 Warranty expense and associated liability in the amount of $150,000 No other expenses incurred. 2023 information: Sales on account in the amount of $200,000 Warranty repairs made in the amount of $67,000 No expenses incurred. What is the amount of MK's deferred tax asset or deferred tax liability for 2022? A. $112,500 B. $9,375 C. $37,500 D. $16,750
$37,500
Parrish Industries has bonds outstanding (originally sold for $4,340,000) in the face amount of $4,600,000 with a current bond discount of $100,000. The bonds were selling at 104 on the market at its year end. If Parrish elects the fair value option for these bonds, at what value should it report these bonds on its balance sheet at year end? A. $4,600,000 B. $4,784,000 C. $4,700,000 D. $4,500,000
$4,784,000
George Manufacturing had net income of $200,000 and declared preferred dividends of $20,000 during the current year. George began the year with 16,000 common shares outstanding. It issued 50,000 shares on June 30 and repurchased 6,000 of the newly issued shares on November 1. Compute George's basic EPS for the year. (Round your answer to the nearest cent.) A. $5.00 B. $11.25 C. $4.50 D. $4.39 (Second lowest?)
$4.50
Hudson Motors reported $535,000 net income for the current year. Beginning common shares outstanding were 100,000. Hudson also had 10,000, 6% nonconvertible, cumulative, $100 par value preferred shares outstanding for the entire year. No cash dividends were declared. Compute basic earnings per share. (Round your answer to the nearest cent.) A. $4.75 B. $5.34 C. $4.32 D. $5.35 (Second lowest?)
$4.75
Premier Sports Inc has a beginning PBO balance of $627,000 and a beginning market−related value of plan assets of $520,000. The net actuarial gain at the beginning of the period is $71,000 and the average employee base has a remaining service life of 20 years. What is the required amortization of actuarial gains or losses for the current year? A. $415 B. $3,135 C. $3,550 D. $8,300 (Lowest?)
$415
On January 1, 2020, Warhol Company issued 1,000 shares of 10%, $100 par value, cumulative preferred stock for $200,000. No preferred dividends were declared in 2020 and 2021. On December 30, 2022, the Board declared $5,000 in dividends. How much of the dividend is allocated to preferred and common shareholders?
$5,000 preferred, $0 common
Charlotte Engineering reported net income of $600,000 for the year. It declared $45,000 in preferred dividends on December 23. It began the year with 100,000 common shares outstanding. On July 1, Charlotte declared a 10% common stock dividend. Compute the basic EPS for the year.(Round your answer to the nearest cent.) (Lowest?)
$5.05
The following information applies to the operations of MK Inc. for 2022 and 2023. Assume a tax rate of 20% for both years. 2022 information: Sales on account in the amount of $690,000 Warranty expense and associated liability in the amount of $140,000 No other expenses incurred. 2023 information: Sales on account in the amount of $245,000 Warranty repairs made in the amount of $66,000 No expenses incurred. What is MK's book income for 2022? A. $830,000 B. $624,000 C. $690,000 D. $550,000
$550,000
On January 1, Year 1, Fields Corporation granted 200,000 stock options to certain executives. The options are exercisable no sooner than December 31, Year 3 and expire on January 1, Year 7. The vesting period is 3 years. Each option can be exercised to acquire one share of $10 par common stock for $15. An appropriate option−pricing model estimates the fair value of each option to be $10 on the date of grant. What amount should Fields recognize as compensation expense for Year 1? A. $0 B. $2,000,000 C. $300,000 D. $666,667 (Third lowest?)
$666,667
On January 1, Year 1, Gibson Corporation purchased bonds issued by Williamson Company. These bonds were classified as held−to−maturity securities. The face value of these bonds is $300,000, pay 4% interest and were purchased to yield 2%. The bonds mature in 10 years and pay interest on an annual basis. If Gibson Corporation paid $353,896 for these bonds, how much interest revenue should it report on the bonds at December 31, Year 1? Assume that Gibson used the effective interest method. A. $14,156 B. $12,000 C. $7,078 D. $6,000
$7,078
On January 3, 2023, Sheppard Corporation purchased 15% of Meredith Corporation's common stock for $64,000. Meredith's net income for the years ended December 31, 2023 and 2024 were $18,000 and $56,000 respectively. Meredith declared no dividends during 2023; however, during2024, the company declared a $70,000 dividend. On December 31, 2023, the fair value of Meredith's stock that Sheppard Corporation owned had increased to $73,000; in 2024, it increased again to $76,000. What will be the balance in the investment account at the end of December 31, 2023? A. $64,000 B. $76,000 C. $73,000 D. $91,000
$73,000
Caesar Corporation reported income before taxes of $220,000 for the years 2020, 2021, and 2022. In 2023 they experienced a loss of $220,000. The company had a tax rate of 35% in 2020 and 2021, and a rate of 45% in 2022 and 2023. Assuming Caesar uses the carryback provisions for the net operating loss, by what amount will the income tax benefit reduce the net loss in 2023? A. $220,000 B. $88,000 C. $99,000 D. $77,000
$77,000
Bateman Enterprises invested in the bonds of Greater Gloucester on January 1, 2022. These 10−year, $800,000 bonds pay interest of 2% with semiannual payments every June 30 and December 31. The effective rate of interest for similar bonds on January 1 was 4%. What is the semi−annual interest payment received by Bateman for these bonds? A. $9,333.33 B. $16,000 C. $8,000 D. $6,666.67
$8,000
Caesar Company issued 2,100 shares of its $4 par value common stock for $18 per share. They will record ________ in the common stock account at par value and ________ as additional paid−in capital in excess of par−common. A. $8,400; $37,800 B. $29,400; $37,800 C. $37,800; $8,400 D. $8,400; $29,400
$8,400; $29,400
TLR Productions reported income before taxes of $155,000 for the years 2020, 2021, and 2022. In 2023 they experienced a loss of $500,000. TLR had a tax rate of 25% in 2020 and 2021, and a rate of 35% in 2022 and 2023. Assuming the company uses the carryback provisions for the net operating loss and that the jurisdiction allows losses to be carried back two years, what amount should be reported as Income Tax Refund Receivable in 2023? A. $175,000 B. $93,000 C. $38,750 D. $159,500
$93,000
Martin, Inc. is preparing its financial statements for December 31, 2022. Martin has a $2,400,000 short−term note that is due in June, 2023. Martin has an existing long−term line of credit of $1,000,000, which will be used to remove part of the short−term debt. Due to the existing long−term line of credit, the company will report how much short−term liability? A. $2,400,000 B. $0 C. $1,000,000 D. $1,400,000
1,400,000
Greenwell Coffee Company began operations on the first day of the year. On that day they issued 70,000 shares. On March 1 they issued 21,000 shares and on July 1, another 40,000 shares. On December 1, Greenwell repurchased 3,000 shares of outstanding shares. Compute the weighted−average shares of stock for the first year of operation. (Round your final answer to the nearest whole number.) A. 107,750 B. 107,250 C. 107,500 D. 128,000 (Lowest?)
107,250
Dali Design's net income is $11,000, the market value of common stock is $140,000, and the book value of common stockholders' equity is $100,000. What is the Price to Earnings Ratio for Dali's? (Round your answer to two decimal places, X.XX.) A. 0.11 B. 12.73 C. 9.09 D. 0.08
12.73
Gustav & Co.'s net income is $10,000, the market value of common stock is $128,000, and the book value of commonstockholders' equity is $75,000. Gustav's P/E Ratio is ________ and the Price to Book Ratio is ________. (Round your answer to two decimal places, X.XX.) A. 0.13; 0.59 B. 0.59; 0.13 C. 12.8; 1.71 D. 1.71; 12.8
12.8; 1.71
Hawks, Inc. has 66,000 shares authorized, 52,000 shares issued, and 16,000 shares of treasury stock. ________ shares are outstanding, and ________ shares are unissued. A. 50,000; 16,000 B. 16,000; 50,000 C. 36,000; 14,000 D. 14,000; 36,000
36,000; 14,000
Jorge Corp. issued $600,000 of 6%, 10−year bonds on January 2, 2022 for $590,000. In addition, the company incurred $50,000 in bond issue costs. Interest is paid annually. What is the effective interest rate for the bonds given the information provided? Round your answer to two decimal places. A. 8.43% B. 6.81% C. 7.45% D. 6.00%
7.45%
If an unexpected forfeiture of options occurs under a stock option plan, the change in compensation is treated as ________.
a change in estimate
Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 120,000 options were granted for 120,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $3 based upon an option pricing model. What is the entry to record the expiration of 15% of the options on December 31, Year 5?
APIC−Stock Options 54,000 > APIC—Expired Stock Options > 54,000
Given the following information from an amortization table for December 31, prepare the journal entry to record the payment of interest. 6% Cash Interest $42,000 7% Effective Interest $35,953 Premium Amortization $6,047 Carrying Value $507,567
Account Debit Credit December 31 Interest Expense 35,953 Premium on Bonds Payable 6,047 > Cash > 42,000
Hornet Motors purchased a custom−made metal press for use in repairing wrecked cars. The press had no known market value. Hornet agreed to pay $500,000 at the end of three years and asked for a 3% interest rate. At the time, Hornet's incremental borrowing rate was 7%. How should the seller and buyer record the transaction?
Each should record the transaction at the present value of the note payable/receivable.
________ is a major component/section of stockholders' equity on the balance sheet.
Contributed capital
S & C Company issues 1,700 shares of common stock with a $3 par value. The issue price of the stock is $13 per share. What is the journal entry required to record the issuance of the shares?
Cash 22,100 > Common Stock—$3 par > 5,100 > Addl. Paid−in Capital in Excess of Par—Common > 17,000
Dante, Inc. reacquired 58,000 shares of its $1 par common stock for $18 per share on January 31. On March 1 they sold 9,000 treasury shares for $25 per share. On April 1 they sold 6,000 treasury shares for $17 per share. What is the necessary journal entry for March 1?
Cash 225,000 > Treasury Stock > 162,000 > Addl. Paid−in Capital from Treasury Stock Transactions > 63,000
Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 80,000 options were granted for 80,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $4 based upon an option pricing model. What is the journal entry to record the exercise of 85% of the options during Year 4 when the market price of the stock was $10.
Cash 408,000 APIC − Stock Options 272,000 > Common Stock > 68,000 > APIC in Excess of Par − Common > 612,000
Monet's Minions, Inc. reacquired 12,000 shares of its $1 par common stock for $9 per share on August 1. On October 31 they sold 8,000 treasury shares for $7 per share. Assuming a zero balance in the Additional Paid−in Capital from Treasury Stock Transactions account, what is the necessary journal entry for the October transaction?
Cash 56,000 Retained Earnings 16,000 > Treasury Stock > 72,000
Dante, Inc. reacquired 20,000 shares of its $1 par common stock for $18 per share on January 31. On March 1 they sold 8,000 treasury shares for $27 per share. On April 1 they sold 4,000 treasury shares for $17 per share. What is the necessary journal entry for April 1?
Cash 68,000 Addl. Paid−in Capital from Treasury Stock Transactions 4,000 > Treasury Stock > 72,000
Cider Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates. At the time of the acquisition, the book value ofAngel's net assets equals their fair market value. Angel declared and paid dividends of $285,000 during the year. Which of the following is the correct journal entry for this transaction?
Cash 85,500 > Investment in Angel & Associates > 85,500
Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 100,000 options were granted for 100,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $5 based upon an option pricing model. What is the journal entry to record compensation expense for Year 1? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.) (500,000 or 166,667)
Compensation Expense 166,667 > APIC− > Stock Options 166,667
On January 1, 2021, Cable Corporation issues 5,500 stock−appreciation rights to its key executives. The terms of the plan state that the holders of the rights will receive a cash payment equal to the difference between the market price of the stock on the date of exercise and the pre−established price of $11 per share. There is a three−year vesting period and the rights may be exercised on January 1, 2024. The rights expire on January 1, 2026. The closing market prices follow: December 31, 2021 $14 per share December 31, 2022 $17 per share December 31, 2023 $16 per share What is the appropriate journal entry on December 31, 2021? (Do not round any intermediate calculations. Round your final answer to the nearestdollar.) (Lowest?)
Compensation Expense 5,500 > Obligation under SAR Plan > 5,500
Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 100,000 options were granted for 100,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $4 based upon an option pricing model. At the end of the first year, it is expected that 100% of employees will exercise the options. By the end of Year 2, it is expected that only 80% of the options will be exercised. Schmidt chooses to adjust the fair value of the options for the estimated forfeitures. What is the journal entry to record compensation expense for year 2? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.) (80,000 or 320,000)
Compensation Expense 80,000 > APIC − Stock Options > 80,000
Arco, Inc. issued $412,500 of 4%, 10−year convertible bonds at par on July 1, 2022. Each bond has a par value of $1,375. The bonds include the option for bondholders to convert each bond into 55 $1 par value shares of common stock beginning two years after the date of issue. The market price of the stock at the time of issue is $31 per share and the beneficial conversion option is valued at $99,000. On July 2, 2024, when the market price of the stock is $41 and the balance in the Discount account is $90,000, all of the bondholders convert the bonds. What is the proper entry to record the conversion of the bonds?
Date Account Debit Credit July 2, 2024 Bonds Payable 412,500 Add. Paid−in Capital—Bene. Conv. Option 99,000 > Discount on Bonds Payable > 90,000 > Common Stock, $1 par, 16,500 shares > 16,500 > Add. Paid−in Capital in Excess of Par− Common > 405,000
Which of the following statements regarding stock options is true?
Employee stock options are a restricted form of a call option.
Which of the following is a characteristic of a defined−contribution pension plan?
Employer contributions are typically based upon salary levels of employees.
Greene Co. has book income of $415,000, and a tax rate of 20%. Assuming there are no book−tax differences, what will the journal entry be to record the income taxexpense? (166,000 or 83,000)
Income Tax Expense 83,000 > Income Tax Payable > 83,000
Given the following information from an amortization table, compute the interest expense, discount amortization, and the carrying value for the next line of the table, rounding your answer to the nearest dollar:: 6% Cash Interest $42,000 7% Effective Interest $47,714 Discount Amortization $5,714 Carrying Value $687,344
Interest Expense $48,114; Discount Amortization $6,114; Carrying Value $693,458
Jardon Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates. At the time of the acquisition, the book value ofAngel's net assets equals their fair market value. Angel declared Net Income of $8,250,000 for the year. How will Angel's Net Income be recorded by Jardon?
Investment in Angel & Associates 2,475,000 > Income from Investment > 2,475,000
JayBird Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates. At the time of the acquisition, the book value ofAngel's net assets equals their fair market value. Angel declared dividends of $284,000 during the year. How will JayBird record the last transaction?
JayBird will decrease the investment account by $85,200.
Keller Jewelers purchased 3,000,000 of the outstanding 10,000,000 shares of Angel & Associates. At the time of the acquisition, the book value ofAngel's net assets equals their fair market value. Angel declared Net Income of $4,250,000 for the year. How will Angel's Net Income impact Keller's books?
Keller will increase the Investment account and Income from the Investment for $1,275,000.
Merciful Industries has a beginning PBO balance of $800,000 and a settlement rate of 6%. As a result of an amendment to the current unioncontract, there are prior service costs of $56,500. What is the journal entry to record the change to the current union contract? (Highest?)
Other Comprehensive Income−Prior Service Costs 56,500 > Projected Benefit Obligation > 56,500
Packer Publications purchased 160,000 of the outstanding 400,000 shares of Bear Homes. How should Packer account for this investment?
Packer should account for this investment using the equity method, as Packer has significant influence over the investee.
Merciful Industries has a beginning PBO balance of $800,000 and a settlement rate of 6%. What is the journal entry to record interest expense on the pension obligation? (48,000 or 800,000)
Pension Expense 48,000 > Projected Benefit Obligation > 48,000
Merciful Industries has a beginning PBO balance of $700,000 and a settlement rate of 8%. As a result of an amendment to the current unioncontract, there are prior service costs of $38,000. What is the journal entry to record amortization of the prior service costs for the second year, assuming that the company uses a 5 year amortization period. (Second highest?)
Pension Expense 7,600 > Other Comprehensive Income−Prior Service Costs > 7,600
________ differences between book income and taxable income result in an effective tax rate that differs from the statutory tax rate.
Permanent
In which of the following instances would a company most likely choose the carryforward option for a net operating loss?
The company expects higher tax rates in the future compared to the past.
When should a company use the equity method to account for an investment in another company's common stock?
The investor exerts significant influence over the investee.
Veneto Vineyards reacquired 20,000 shares of its $1 par common stock for $21 per share. What is the journal entry necessary to record this transaction?
Treasury Stock 420,000 > Cash > 420,000
Pollyanna & Partners reacquired 30,000 shares of its $1 par common stock for $30 per share. What is the journal entry needed to record this transaction?
Treasury Stock 900,000 > Cash > 900,000
________ is the corporation's own shares repurchased by the corporation and held for some future use.
Treasury stock
Brightney purchased common shares of Company A and B for $7,000 and $12,000, respectively on 12/15. Brightney intends to sell these securities within 30 days. At 12/31, Investments in Company A & B had a fair value of $9,000 and $15,000, respectively. Brightney does not have significant influence over the investees. Assuming an existing $1,000 debit balance in Fair Value Adjustment − Equity Investments, what is the unrealized gain or loss for these securities and how is it reported?
Unrealized Gain of $4,000, reported as part of Net Income
L & J purchased common shares of Company A and B for $10,000 and $10,000, respectively on 12/15. L & J intends to sell these securities within 30 days. At 12/31, Investments in Company A & B had a fair value of $9,000 and $15,000, respectively. L & J does not have significant influence over the investees. Assuming an existing $1,300 credit balance in Fair Value Adjustment − Equity Investments, what is the unrealized gain or loss for these securities and how is it reported?
Unrealized Gain of $5,300, reported as part of Net Income
Which one of the following is required in the notes to the financial statements for EPS?
a discussion of antidilutive securities that were excluded from the computation of diluted EPS
Investments in debt securities that cannot be readily classified in two reporting categories are classified as ________.
available−for−sale securities
Compensation expense associated with stock options is ________.
based upon the estimated fair value of the options
Harvey Inc. reported net earnings of $200,000 for the year. Harvey has 200,000 shares of common stock outstanding all year. Two years ago the company granted 20,000 stock options that allow employees to purchase 20,000 shares for $15 each. The company stock has averaged $20 in the market during the year. Compute the basic and diluted EPS. (Highest & second lowest?)
basic EPS $1.00; diluted EPS $0.98
Colselo has 200,000 common shares outstanding for the year and net income of $600,000. It has issued options to acquire 10,000 shares of common stock and has 20,000 shares of $100, 6% cumulative nonconvertible preferred stock, both of which were outstanding for the entire year. The exercise price for the options is $20 per share and the average market price during the year is $15 per share. Compute basic and diluted EPS. (Lowest and same #'s?)
basic EPS $2.40; diluted EPS $2.40
Austin Products reported $380,000 net income for the year with 100,000 common shares outstanding all year. Austin also had 21,000 shares of$100, 8% convertible preferred shares outstanding all year. Each preferred share is convertible into 10 shares of common stock. Determine the numerator for both basic and diluted EPS. (Same # beginning?)
basic EPS $212,000; diluted EPS $380,000
McManus Inc. reported net earnings of $700,000 for the year. McManus has 200,000 shares of common stock outstanding all year. On March 31, the company granted 40,000 stock options that allow employees to purchase 40,000 shares for $15 each. The company stock has averaged $20 in the market during the year. Compute the basic and diluted EPS. (Highest & lowest?)
basic EPS $3.50; diluted EPS $3.37
Accounting standards require which one of the following groups of presentations on the income statement?
basic and diluted EPS for all periods presented for income from continuing operations, discontinued operations, and net income
When applying the if−converted assumption for potentially dilutive securities, conversions are assumed to occur at the ________.
beginning of the current year or on the issue date of the dilutive security if issued during the current year
When computing diluted EPS, both the numerator and denominator are affected by ________.
convertible bonds
Inferno Inc. is embroiled in a lawsuit. In 2022, they recognize that a loss of $65,000 is probable. Given a tax rate of 40%, how will this be treated in the accounting records?
deferred tax asset of $26,000
For U.S. GAAP reporters, short−term debt can be reclassified as long−term when the company intends to refinance on a long−term basis and the company can ________.
demonstrate the ability to consummate the refinancing
The fixed price paid by an employee to acquire a share of stock under an option plan is the ________.
exercise price
Zenith Corporation reports its investments in debt securities at cost. This method of accounting is consistent with the qualitative characteristic of________ from the conceptual framework.
faithful representation
Which of the following is not a method of measuring a company's pension benefit obligation to a company?
future benefit obligation
When a potentially dilutive security is present, a company must test the security to see if it is dilutive or antidilutive. Antidilutive securities occur when diluted EPS is ________.
greater than basic EPS
Which of the following is a debt security for which management has both the positive intent and ability to hold the debt investment until all principal and interest is fully paid?
held−to−maturity security
Xenia Corporation issued 3,000 term bonds with a face value of $1,000 each and no additional features for $3,200,000. The bonds' selling price indicated that the bonds were paying interest that was ________.
higher than the market rate
The fair value option for liabilities reports unrealized gains and losses that are not related to changes in instrument−specific credit risk ________.
in net income
Sheldon, Inc. declared a stock dividend of 50,000 shares on a date when the company's common stock was selling for $24 per share. Prior to this date, Sheldon had 500,000 outstanding shares of $3 par value common stock. As a result of this stock dividend, Sheldon's common stock will ________, the additional paid−in capital will ________, and the retained earnings will ________.
increase $150,000; increase $1,050,000; decrease
Interest cost will ________.
increase the PBO and increase pension expense
Treasury shares are considered to be ________.
issued shares
Investors' perceptions of a firm's expected future profitability and prospects is reflected in the ________.
market value of a firm's common stock
When there are multiple dilutive securities in a firm, the antidilution test for the sequence should be from ________.
most dilutive to least dilutive
The two major components of comprehensive income are ________ and ________.
net income; other comprehensive income
Treasury shares reduce the number of shares ________.
outstanding
When bonds are sold at a discount between interest dates, the buyer ________.
pays the issuer interest from the date on the bonds to the purchase date
Which one of the following does not require the computation of diluted earnings per share?
preferred stock
When determining how to compute the present value of a bond, the buyer computes the ________.
present value of the par value and the present value of the interest discounted at the market interest rate
Which of the following measures of benefit obligations does the FASB require for pension computations?
projected benefit obligation
The increase in the projected benefit obligation from one additional year of service from employees is referred to as ________.
service cost
Edwards Corporation has three potentially dilutive securities. Computation of the antidilution sequencing recorded the following: Security Increase in Income Increase in Common Shares Convertible Preferred Stock $30,000 10,000 Stock Warrants $0 6,000 Convertible Bonds $20,000 5,000 What is the correct order of entry into the EPS computation? (Round any calculations to the nearest cent.) (Messed up question)
stock warrants, convertible preferred stock, convertible bonds
The amount of income that a company reports on its tax return is known as ________.
taxable income
Which of the following is a debt security that a company intends to hold only for the short term?
trading security
Bonds are priced in the market so that their ________ is the same as the market rate of interest.
yield