ACC 312 FInal
If a pension plan is underfunded, it means that the_______
PBO exceeds plan assets
Onopea Inc. considered two contingencies at the end of 2016: *a probable loss in the range of $200,000 to $800,000 **a reasonably possible loss of $150,000 Under U.S. GAAP, what is the balance for contingent liabilities at the end of 2016?
$200,000
__________ represents the amounts that common and preferred shareholders contribute in excess of the stated or par value.
Additional paid-in capital
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 $300,000 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
Ripa, Inc. issued $8,000,000 of bonds at par. The bonds contained nondetachable stock warrants. Similar bonds without the warrants were selling at 99. By what amount will Additional Paid-in Capital-Stock Warrants be credited?
$0
On January 1, Year 1, Fields Corporation granted 500,000 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 $12 on the date of grant. What amount should Fields recognize as compensation expense for Year 1?
$2,000,000
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 retirement: Bonds payable $5,000,000 Discount on Bonds Payable $76,000 If Zambrano pays $4,900,000 to retire the bond, what is the gain or loss on the early extinguishment of the debt?
$24,000 gain
On April 1, 2018, Ellucian Corporation invested in the bonds issued by the City of Westminster on January 1, 2018. These 10-year, $700,000 bonds pay interest of 2% with semiannual payments every June 30 and December 31. Ellucian paid par value plus accrued interest. What is the amount of accrued interest at the time of purchase?
$3,500
Harrison Corporation borrowed $31,000 from F&M Bank on June 1 of the current year. The bank required 9% interest. Interest will be paid when the nine-month note becomes due. What is the interest expense for the subsequent year in which the note is due and paid?
$465 (31,000*9%*(2/12))
On January 1, 2016, Warhol Company issued 1,000 shares of 10%, $200 par value, cumulative preferred stock for $300,000. No preferred dividends were declared in 2016 and 2017. On December 30, 2019, the Board declared $10,000 in dividends. What amount, if any, of preferred dividends are in arrears as of December 31, 2018?
$50,000
Greene Co. has book income of $425,000 and a tax rate of 30%. Assuming there are no book-tax differences, what will the journal entry be to record the income tax expense?
Income Tax Expense 127,500 Income Tax Payable 127,500
Which of the following is not a situation in which employee compensation is classified as a liability?
The option is granted for the acquisition of securities classified as equity securities
The contra-asset to the deferred tax asset account is called _____
Valuation allowance for deferred tax asset
In U.S. GAAP, bond issue costs are considered __________
an element in determining the carrying value of the bonds outstanding
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 of Angel'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 A & A 85,500
___________ receive dividend distributions after the company has paid all the other providers of capital their return on investment
Common shareholders
All of the following are key questions that must be addressed when accounting for investments in debt and equity except ________.
How is the return on equity impacted by the investment?
Piper, Inc. reported a net deferred tax asset balance of $166,650 resulting from an estimated warranty expense accrual for book purposes. The total book-tax difference related to this balance changed from 33% to 28%, effective immediately. What journal entry will Piper need to make to adjust for this change in tax rates?
Income tax expense 22,250 Deferred Tax Asset 22,250
Goo Goo Enterprises invested in the bonds of Greater Glouster. These bond pay interest of 2%. The effective rate of interest for similar bonds on the date of investment was 6%. Did Goo Goo purchase the bonds at a discount or a premium?
These bonds were purchased at a discount because the market rate exceeds the stated rate
If an unexpected forfeiture of options occurs under a stock option plan, the change in compensation is treated as ______.
a change in estimate
Under U.S. GAAP, if a firm writes down inventory for obsolescence, which of the following is created?
a deferred tax asset
Prior to 2019, lessees did not include the right-of-use asset and the lease liability for operating leases on their balance sheets. Both FASB and IASB wrote new standards to require that lessees nearly always report an asset and liability on their balance sheets when they engage in a lease transaction. This accounting reseults in which of the following?
a more faithful representation of the rights and obligations arising from leases
Changes in which of the following are included in operating activities on the statement of cash flows?
accounts payable
Which of the following represents amounts owed for goods, supplies, or services purchased?
accounts payable
Which of the following is not a cash equivalent?
accounts receivable expected to be collected in 30 days
Under the indirect method, which of the following would be added to net income when determining net cash flows from operations?
amortization expense
The statement of cash flows assists financial statement users in all of the following ways except ________.
assessing the ability of the entity to satisfy its customers
Compensation expense associated with stock options is ___________.
based upon the estimated fair value of the options.
The contract between a corporation and its bondholders is a __________
bond indenture
Changes in which of the following are included in financing activities on the statement of cash flows?
bonds payable
Which of the following terms refers to gift card sales that are never redeemed?
breakage
When bondholders decide to exercise their convertible bonds, the company values the common stock at the ___________. Assume there is no beneficial conversion option at bond issue.
carrying value of the bonds
Accounting changes detract from which one of the following enhancing qualitative characteristics of accounting information?
comparability
___________ preferred stock shares allow the shareholder to convert his shares to common shares at a predetermined rate or exchange ration
convertible
When a company depreciates a fixed asset at a faster rate for tax purposes than book purposes, this creates a
deferred tax liability
Which of the following best describes the accounting for assurance-type warranty costs?
expensed based on estimates in year of sale of the associated product
A bond issuer incurs a technical default when it
fails to meet required debt covenants at year end
Which of the following is not a required section of the cash flow statement?
funding activities section
Under the indirect method, which of the following would be subtracted from net income when determining net cash flows from operations?
gain on the sale of a used truck
Firms report cash flows from investing activities using the ________.
gross method
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
The _______ date is when the lease is signed. The ________ date is the date on which the lessee is allowed to being using the leased asset.
lease inception, lease commencement
Investments in equity securities whereby the investor does not have significant influence over the investees require ______ percentage of ownership in the investees.
less than 20%
The two major components of comprehensive income are _________ and _______
net income, other comprehensive income
Treasury shares reduce the number of shares _________
outstanding
Which of the following items would be reported in the financing activities section of the statement of cash flows?
payment of dividends
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
The selling price of a bond is the ________-
present value of the par value plus the present value of the interest payments
When a company amends their existing pension plan to increase the defined-benefit rate, the associated expense is referred to as _______
prior service cost
If a company is able to estimate the rate of redemption for gift cards, the should use the ________ method to account for breakage
proportional
All of the following are examples of situations that may create temporary book-tax differences except ______-
receipt of municipal bond interest
Which of the following is not a required disclosure item for the statement of cash flows?
reconciliation of net income to total net cash flows
Stock issue costs are treated as a __________
reduction of additional paid in capital
In determining net cash flow from operating activities, a decrease in accounts payable during a period ________.
requires a subtraction adjustment to net income under the indirect method
In cases where the standalone price is highly variable or uncertain, the lessee may use what type of method for determining standalone princes?
residual method
Which of the following is not an estimate that might be revised as a natural part of the accounting process?
salary expense
For a __________ lease, a lessor recognizes revenue on the sale and records the asset, _________ lease. It also removes the leased asset from its accounts and records the _________.
sales-type, net investment in lease-sales -type, cost of goods sold
Which of the following situations typically results in unearned revenues?
selling magazine subscriptions
The retroactive assumption for stock splits and stock dividends assumes that all splits and stock dividends occur at the beginning of the year, if the stock is outstanding at the beginning of the year. The retroactive assumption is also retroactive to ________.
the date of issue of the common shares
When a company has current debt that can be reclassified as long-term, it should do so because _________-.
the debt will no longer require the use of current assets or the creation of another current liability
When accounting for cash dividends, a formal journal entry is made for which dates?
the declaration date and payment date
Which one of the following would not be a required disclosure for a change in accounting principle?
the estimated effect on future earnings per share
The compensation associated with a share of stock under a restricted stock plan is computed as _____
the market price of an unrestricted share of the same stock
When a note receivable is issued at a discount, __________.
the market rate of interest exceeds the stated rate
Firms account for material error corrections ________.
with the retrospective method