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