ACCTG 433 Final

On November 30, 2016, Pearman Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP, and was properly classified as held for sale on December 31, 2016, the end of the company's fiscal year. The division was tested for impairment and a $400,000 loss was indicated. The division's loss from operations for 2016 was $1,000,000. The final sale was expected to occur on February 15, 2017. What amount(s) should Pearman report as loss on discontinued operations in its 2016 income statement, assuming a 20% tax rate?

$1,120,000 loss

Bridge Company's results for the year ended December 31, 2016, include the following material items: Sales Revenue- $5,000,000 COGS- $3,000,000 Admin Expenses- $1,000,000 Gain on Sale of Equip- $200,000 Loss on Discontinued Operations- $400,000 Understatement of depreciation expense in 2015 caused by mathematical error- $250,000 Bridge Company's income from continuing operations before income taxes for 2016 is:

$1,200,000

On January 1, 2017, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224 and pay interest each July 1 and January 1. JWS uses the effective interest method. What is the amount of the credit to Discount on Bonds Payable which would be recorded at December 31, 2017? Assume an 8% effective interest rate.

$1,424

25,000 shares reacquired by Elixir Corporation (i.e., Treasury Stock) for $53 per share were exchanged for undeveloped land that has an appraised value of $1,700,000. At the time of the exchange, the common stock was trading at $62 per share on an active, organized exchange. At what amount would the land be capitalized?

$1,550,000

Bedard Corporation reported net income of $300,000 in 2017 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at $10 per share. The average market price of the stock during the year was $15. Compute diluted EPS

$1.40

Amortization of actuarial pension loss (using corridor approach): - increases OCI - decreases pension expense - increases PBO - decreases plan assets

increases OCI

Amortization of prior service cost: - decreases pension expense - decreases PBO - increases OCI - increases plan assets

increases OCI

Service cost: - increases pension expense - decreases PBO - decreases OCI - decreases cash

increases pension expense

Interest cost on the PBO: - decreases cash - increases plan assets - decreases pension expense - increases the PBO

increases the PBO

n/a

n/a

The yield rate which is the rate of interest actually earned by bondholders is also known by all of the following names EXCEPT: - effective rate - market rate - nominal rate

nominal rate

The market price of a bond issued at a discount is the present value of its principal amount at the market (effective) rate of interest: - less the present value of all future interest payments at the market (effective) rate of interest - plus the present value of all future interest payments at the rate of interest stated on the bond - plus the present value of all future interest payments at the market (effective) rate of interest - less the present value of all future interest payments at the rate of interest stated on the bond

plus the present value of all future interest payments at the market (effective) rate of interest

In its December 31, 2016, balance sheet, Shin Co.had income taxes payable of $13,000 and a current DTA of $20,000 before determining the need for a valuation account. Shin had reported a current DTA of $15,000 at December 31, 2015. No estimated tax payments were made during 2016. At December 31, 2016, Shin determined that it was more likely than that 10% of the deferred tax asset would not be realized. In its 2016 income statement, what amount should Shin report as TOTAL income tax expense?

$10,000

Farraro, Inc. established a stock-appreciation rights program on January 1, 2017, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $20 on 5,000 SARs. The required service period is 2 years. The fair value of the SARs are determined to be $4 on December 31, 2017, and 9$ on December 31, 2018. Compute compensation expense for 2017 and 2018.

$10,000; $35,000

Long Co. had 100,000 shares of common stock issued and outstanding at January 1, 2016. During 2016, Long took the following actions: March 15: Declared a 2-1 stock split, when the fair value of the stock was $80 per share December 15: Declared a $0.50 per share cash dividend In Long's statement of shareholders' equity for 2016, what amount should Long report as dividends?

$100,000

The following information is available for the pension plan of Radcliffe Company for the year 2017. Actual and expected return on plan assets $15,000 Benefits paid to retirees $40,000 Contributions (funding) $90,000 Interest/discount rate 10% Prior service cost amortization $8,000 Projected benefit obligation, Jan. 1, 2017 $500,000 Service cost $60,000 What is pension expense for 2017?

$103,000

Oxford Corporation began operations in 2017 and reported pretax financial income of $225,000 for the year. Oxford's tax depreciation exceeded its book depreciation by $40,000. Oxford's tax rate for 2017 and years thereafter is 30%. In its December 31, 2017, balance sheet what amount of deferred tax liability should be reported?

$12,000

Dix Inc. a calendar-year corporation, reported the following operating income (loss) before income tax for the first three years of operations: 2014 $100,000 2015 (200,000) 2016 400,000 There are no permanent or temporary differences between operating income (loss) for financial and income tax reporting purposes. When filing its 2015 tax return, Dix did not elect to forego the carryback of its loss for 2015. Assume a 40% tax rate for all years. What amount should Dix report as its income tax liability at December 31, 2016?

$120,000

During 2017, Williamson Company changed from FIFO to weighted average inventory pricing. Pretax income in 2016 and 2015 (Williamson's first year of operations) under FIFO was $160,000 and $180,000, respectively. Pretax income using weighted-average pricing in the prior years would have been $145,000 in 2016 and $170,000 in 2015. In 2017, Williamson reported pretax income (using weighted-average pricing) of $180,000. At what amount would Williamson report 2017 after-tax income? The tax rate in all years is 30%.

$126,000

Wolf Inc. began a defined benefit pension plan for its employees on January 1, 2016. The following data are provided for 2016 as of December 31, 2016: Projected benefit obligation $385,000 Accumulated benefit obligation $340,000 Plan assets at fair value $255,000 Pension expense $95,000 Employer's cash contribution at year end $255,000 What amount should Wolf report as a net pension liability at December 31, 2016?

$130,000

Rockland Corporation earned net income of $300,000 in 2017 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $800,000 of 9% bonds, which are convertible into 16,000 shares of common. Rockland's tax rate is 40%. Compute Rockland's 2017 diluted EPS.

$2.96

In Baer Food Co.'s 2016 single-step income statement, the section titled "Revenues" consisted of the following: Net Sales Revenue: $187,000 Income from discontinued operations, including gain on disposal of $21,000 and tax expense of $6,000: $13,500 Interest Revenue: $10,200 Gain on sale of equipment: $4,700 Total Revenues: $215,000 In the Revenues section of the 2016 income statement, Baer Food should have reported total revenues of:

$201,900

DiCenta Corporation reported net income of $270,000 in 2017 and had 50,000 shares of common stock outstanding throughout the year. Also outstanding all year were 5,000 shares of cumulative preferred stock, each convertible into 2 shares of common. The preferred stock pays an annual dividend of $5 per share. DiCenta's tax rate is 40%. Compute DiCenta's 2017 diluted EPS.

$4.50

On January 1, 2017, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224 and pay interest each July 1 and January 1. JWS uses the effective interest method. What is the amount of Interest expense that would be recorded on July 1, 2017? Assume an 8% effective interest rate.

$22,369

On January 1, 2017, Richards Inc. had cash and common stock of $60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2017, it purchased for cash $20,000 of debt securities that it classified as available for sale. It received interest of $3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $4,000. What is the amount of 2017 net income, ignoring taxes?

$3,000

Scott Corporation received cash of $20,000 that was included in revenues in its 2016 financial statements, of which $12,000 will not be taxable until 2017. Scott's enacted tax rate is 30% for 2016 and 25% for 2017. What amount should Scott report in its 2016 balance sheet for deferred income tax liability?

$3,000

Ravonette Corporation issued 300 shares of $10 par value common stock and 100 shares of $50 par value preferred stock for a lump sum of $13,500. The common stock has a market price of $20 per share and the preferred stock has a market price of $90 per share. What is the dollar amount which will be credited to the PIC in excess of par - preferred stock?

$3,100

Kalin Corporation had 2017 net income of $1,000,000. During 2017, Kalin paid a dividend of $2 per share on 100,000 shares of preferred stock. During 2017, Kalin had outstanding 250,000 shares of common stock. Compute Kalin's 2017 EPS.

$3.20 p/s

The stockholders' equity section of Hendly Corporation appears below as of December 31, 2017. 7% preferred stock, $50 par value, authorized 100,000 shares, outstanding 90,000 shares $4,500,000 Common Stock, $1.00 par, authorized and issued 10 million shares $10,000,000 Additional Paid-in Capital $20,500,000 Retained Earnings $167,000,000 Net income for 2017 reflects a total effective tax rate of 34%. Included in Net Income of $33,000,000 is a loss of $18,000,000 (before tax) as a result of a non-recurring major casualty. Preferred stock dividends of 360,000 were declared and paid in 2017. Dividends of $1,000,000 were declared and paid to common stockholders in 2017. What is EPS?

$3.26

On January 1, 2017, Richards Inc. had cash and common stock of $60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2017, it purchased for cash $20,000 of debt securities that it classified as available for sale. It received interest of $3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $4,000. What is the amount of 2017 other comprehensive income?

$4,000

On January 1, 2017, Richards Inc. had cash and common stock of $60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2017, it purchased for cash $20,000 of debt securities that it classified as available for sale. It received interest of $3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $4,000. What is the amount of accumulated other comprehensive income at the end of 2017 and on what financial statement would it be found?

$4,000 on Balance Sheet

Bearings Manufacturing Company Inc. Purchased a new machine on January 1, 2017 for $100,000. The company uses the straight-line depreciation method with an estimated equipment life of 5 years and a zero salvage value for financial statement purposes, and uses the 3-year Modified Accelerated Cost Recovery System (MACRS) for income tax purposes. Bearings is subject to a 35% marginal income tax rate. Assume that the DTL at the beginning of the year is $0 and that Bearings has a positive earnings tax position (i.e., no Valuation Allowance will be required). The MACRS depreciation rates for 3-year equipment are shown below: Year 1 33.33% Year 2 44.45% Year 3 14.81% Year 4 7.41% What is the DTL at December 31, 2017 (rounded to the nearest whole number)? Hint: Calculate the difference between SL and MACRS depreciation for years 2-4 multipled by the tax rate. The first two years are positive and the next 3 are negative as the differences start to reverse out. You will note that the total for years 2-4 are equal to year 1 difference. You can use that fact as a shortcut but only when tax rates don't change over the years.

$4,667

Archer, Inc. issued $4,000,000 par value, 7% convertible bonds at 99 for cash. If the bonds had not included the conversion feature, they would have sold for 95. What the the amount that should be debited to Discount on Bonds Payable upon issuance of the bonds?

$40,000

Copper, Inc. initially issued 100,000 shares of $1 par value stock for $500,000 in 2013. In 2015, the company repurchased 10,000 shares for $100,000. In 2016, 5,000 of the repurchased shares were resold for $80,000. In its balance sheet dated December 31, 2016, Copper Inc.'s Treasury Stock account shows a balance of:

$50,000

On June 27, 2016, Brite Co. distributed to its common stockholders 100,000 outstanding common shares of its investment in Quik, Inc., an unrelated party. The carrying amount on Brite's books of Quik's $1 par common stock was $2 per share. Immediately after the distribution, the market price of Quick's stock $2.50 per share. In its income statement for the year ended June 30, 2016, what amount should Brite report as gain before income taxes on disposal of the stock?

$50,000

Nottebart Corporation has outstanding 10,000 shares of $100 par value, 6% preferred stock and 60,000 shares of $10 par value common stock. The preferred stock was issued in January 2017 and no dividends were declared in 2017 or 2018. In 2019, Nottebart declares a cash dividend of $300,000. How will the dividend be shared by common and preferred stockholders if the preferred is noncumulative?

$60,000 to preferred stockholders; $240,000 to common stockholders

On January 1, 2017, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $644,636 and pay interest each July 1 and January 1. JWS uses the effective interest method. What is the carrying value of the bonds on July 1, 2017, assuming an 6% effective interest rate?

$642,975

On January 1, 2017, Richards Inc. had cash and common stock of $60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2017, it purchased for cash $20,000 of debt securities that it classified as available for sale. It received interest of $3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $4,000. What is the amount of 2017 comprehensive income?

$7,000

West Corporation. leased a building and received the $36,000 annual rental payment on June 15, 2016. The beginning of the lease was July 1, 2016. Rental income is taxable when received. West's tax rates are 30% for 2016 and 40% thereafter. West had no other permanent or temporary differences. West determined that no valuation allowance was needed. What amount of deferred tax asset should West report in its December 31, 2016, balance sheet?

$7,200

Stone Co. began operations in 2016 and reported $225,000 in income before income taxes for the year. Stone's 2016 tax depreciation exceeded its book depreciation by $25,000. Stone also had nondeductible book expenses of $10,000 related to permanent differences. Stone's tax rate for 2016 was 40% and the enacted rate for years after 2016 is 35%. In its December 31, 2016, balance sheet, what amount of deferred income tax liability should Stone report?

$8,750

On June 30, 2016, King Co. had outstanding 9%, $5,000,000 face value bonds maturing on June 30, 2021. Interest was payable semiannually every June 30 and December 31. On June 30, 2016, after amortization was recorded for the period, the unamortized bond premium and bond issuance costs were $30,000 and $50,000, respectively. On that date, King acquired all its outstanding bonds on the open market at 98 and retired them. At June 30, 2016, what amount should King recognize as gain before income taxes on redemption of bonds?

$80,000

The following information pertains to Camp Corp's issuance of bonds on July 1, 2016: Face value of $800,000, 10-year bonds, with a stated rate of 6% interest to be paid annually on July 1, were sold to yield 9%. What should be the issue price of each $1,000 bond?

$807

On January 31, 2016, Beau Corp. issued $300,000 maturity value, 12% bonds for $300,000 cash. The bonds are dated December 31, 2015 and mature on December 31, 2025. Interest will be paid semiannually on June 30 and December 31. What amount of accrued interest payable should Beau report on its September 30, 2016 balance sheet?

$9,000

Black Co. organized on January 2, 2016, had pretax financial statement income of $500,000 and taxable income of $800,000 for the year ended December 31, 2016. The only temporary differences are accrued product warranty costs, which Black expects to pay as follows: 2017 $100,000 2018 $ 50,000 2019 $ 50,000 2020 $100,000 The enacted income tax rates are 25% for 2016, 30% for 2017 through 2019, and 35% for 2020. Black believes that future years' operations will produce profits. In its December 31, 2016, balance sheet, what amount should Black report as DTA?

$95,000

Which one of the following temporary differences will result in a deferred tax asset? - Advance rental receipts accounted for on the accrual basis for financial statement purposes and on a cash basis for tax purposes. - Installment sale profits accounted for on the accrual basis for financial statement purposes and on a cash basis for income tax purposes - Use of the straight-line depreciation method for financial statement purposes and MACRS for income tax purposes - Investment gains accounted for under the equity method for financial statement purposes and under the cost method for income tax purposes

- Advance rental receipts accounted for on the accrual basis for financial statement purposes and on a cash basis for tax purposes.

Pechstein Corporation issued 2,000 shares of $10 par value common stock upon conversion of 1,000 shares of $50 par value preferred stock. The preferred stock was originally issued at $60 per share. The common stock is trading at $26 per share at the time of conversion. All of the following are TRUE with respect to the required journal entry EXCEPT: - Credit PIC in Excess of par - CS $50,000 - Credit Common Stock $20,000 - Debit PIC in excess of par - P/S $10,000 - Debit Preferred Stock $50,000

- Credit PIC in Excess of par - CS $50,000

Petrenko Corporation has outstanding 2,000 $1,000 bonds, each convertible into 50 shares of $10 par value common stock. The bonds are converted on December 31, 2017 when the unamortized discount is $30,000 and the market price of the stock is $21 per share. Which of the following is true regarding the journal entry to record the conversion using the book value approach? - Credit PIC in excess of par - C/S $970,000 - Credit PIC in excess of par - C/S $110,000 - Credit Bonds Payable $2,000,000 - Dr. Discount on Bonds Payable $30,000

- Credit PIC in excess of par - C/S $970,000

On Janaury 1, 2017, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood's $5 par value common stock at $50 per share at any time during the next five years. The market price of the stock is $65 per share on date of grant. The fair value of the options at the grant date is $150,000. The period of benefit is 2 years. Which of the below is the correct journal entry for 12/31/2017? - Dr Compensation Expense $162,500; PIC - Stock Option $162,500 - Dr Compensation Expense $30,000; Cr PIC - Stock Options $30,000 - Dr Compensation Expense $75,000; Cr PIC - Stock Options $75,000 - Dr. Prepaid Compensation Expense $162,500; Cr Common Stock $125,000; Cr PIC - Stock Options$37,500

- Dr Compensation Expense $75,000; Cr PIC - Stock Options $75,000

On Janaury 1, 2017, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood's $5 par value common stock at $50 per share at any time during the next five years. The market price of the stock is $65 per share on date of grant. The period of benefit is 2 years. Assume that instead of options, Barwood granted 2,000 shares of restricted stock. What is the correct journal entry at the grant date? - Dr Unearned compensation $130,000; Cr Common Stock $10,000; Cr. PIC in excess of par - Common Stock $120,000 - Deferred Compensation $130,000; Cr Common Stock $10,000; Cr. PIC in excess of par - Common Stock $120,000 - Dr Unearned compensation $325,000; Cr Common Stock $10,000, Cr PIC in excess of par - Restricted Stock $315,000 - Dr Deferred Compensation $325,000; Cr Common Stock $10,000; Cr PIC in excess of par - Restricted Stock $315,000

- Dr Unearned compensation $130,000; Cr Common Stock $10,000; Cr. PIC in excess of par - Common Stock $120,000

Shlee Corporation issued a 4-year, $60,000, zero-interest-bearing note to Garcia Company on January 1, 2017, and received cash of $60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-year period. The market rate of interest for notes of similar risk is 12%. All of the following are true with respect to the journal entry on January 1 to record the issuance of the note EXCEPT: - Cr. Notes Payable for $60,000 - Credit Unearned Sales Revenue for $21,869 - Dr. Discount on Notes Payable for $21,869 - Dr. Cash for $38,131

- Dr. Cash for $38,131

Oxford Corporation began operations in 2017 and reported pretax financial income of $225,000 for the year. Oxford's tax depreciation exceeded its book depreciation by $40,000. Oxford's tax rate for 2017 and years thereafter is 30%. Assume this is the only difference between Oxford's pretax financial income and taxable income. How will the two liabilities, Deferred Tax Liability and Income Taxes Payable, appear on the balance sheet in 2017? - Both liabilities are current. - Both liabilities are noncurrent. - Income Taxes Payable is current and Deferred Tax Liability is noncurrent. - Deferred Income Taxes is current and Income Taxes Payable is noncurrent.

- Income Taxes Payable is current and Deferred Tax Liability is noncurrent.

The following information is available for the pension plan of Radcliffe Company for the year 2017. Actual and expected return on plan assets $15,000 Benefits paid to retirees $40,000 Contributions (funding) $90,000 Interest/discount rate 10% Prior service cost amortization $8,000 Projected benefit obligation, Jan. 1, 2017 $500,000 Service cost $60,000 Which of the following would be true of the year-end journal entry made by Radcliffe? - OCI - PSC is debited for $8,000 - Pension Asset/Liability is credited for $5,000 - Pension Asset/Liability is credited for $55,000 - Cash is credited for $40,000

- Pension Asset/Liability is credited for $5,000

All of the following are true of dilutive securities EXCEPT: - When dilutive securities are exchanged for common stock, there will be a reduction (i.e. dilution) - in EPS. - These are types of stock that are issued without the preemptive right usually due to common stockholders. - These are securities such as convertible debt or stock options that can become common stock. - Companies issue dilutive securities to raise equity capital without giving up more ownership control than necessary.

- These are types of stock that are issued without the preemptive right usually due to common stockholders.

Ace Company had 200,000 shares of common stock outstanding on December 31, 2018. During the year 2019, the company issued 8,000 shares on May 1 and retired 14,000 shares on October 31. For the year 2019, Ace Company reported net income of $249,690 after a loss from discontinued operations of $40,600 net of tax. All of the following are true statements EXCEPT: -When determining the weighted average number of shares outstanding, the 14,000 retired shares are subtracted from the 208,000 previously issued shares and are multiplied by 2/12 of a year. -When determining the weighted average number of shares outstanding, the 8,000 additional shares issued are added to the original 200,000 shares and the total is multiplied by 6/12 of a year. - When determining the weighted average number of shares outstanding, the beginning 200,000 shares are weighted by 5/12 of a year. -Income per share from continuing operations was equal to $1.43

- When determining the weighted average number of shares outstanding, the beginning 200,000 shares are weighted by 5/12 of a year.

A statement of comprehensive income for a company with a defined benefit pension plan does NOT include: - gains from the return on assets exceeding expectations - losses from changes in estimates regarding the pension obligation - the return on plan assets -net income

- the return on plan assets

An example of intraperiod income tax allocation is: -Rental income included in income for income tax purposes when collected but deferred for financial statement purposes until earned in a subsequent year. - Interest income on municipal bonds - Estimated expenses for major repairs accrued for financial statement purposes in one year, but deducted for income tax purposes when paid in a subsequent year -Reporting discontinued operations in the income statement, net of direct tax effects

-Reporting discontinued operations in the income statement, net of direct tax effects

Douglas Corporation had 120,000 shares of stock outstanding on January 1, 2017. On May 1, 2017, Douglas issued 60,000 shares. On July 1, Douglas purchased 10,000 treasury shares, which were reissued on October 1. Compute Douglas' weighted average number of shares outstanding for 2017

157,500

A bond issued on June 1, 2016, has interest payment dates of April 1 and October 1. The journal entry to record bond interest expense at December 31, 2016, is for a period of:

3 months

Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2017. On May 1, Tomba issued 30,000 shares. Compute the weighted average shares assuming the 30,000 shares were issued for cash, and again assuming the 30,000 shares were issued in a stock dividend.

320,000; 330,000

Which of the following items would NOT be included in the Operating Section of the Income Statement? a. A reduction in the allowance for Doubtful Accounts balance is taken because the account appears to be considerably in excess of the probable loss from the uncontrollable receivables b. An immaterial amount of additional depreciation is calculated due to an error in computing depreciation for the previous year c. A company wrote-off $1,000,000 of inventory that was considered obsolete d. A profit-sharing bonus to employees computed as a percentage of net income is awarded

A company wrote-off $1,000,000 of inventory that was considered obsolete

McIntyre Corporation issued 2,000 $1,000 bonds at 101. Each bond was issued with one detachable stock warrant. After issuance, the bonds were selling separately at 98. The market price of the warrants without the bonds cannot be determined. Use the incremental method to record the issuance of the bonds and warrants. What account and amount is used to record the stock warrants? The cost of the warrants is not broken out. A debit to Prepaid Stock Warrants $60,000 A credit of $60,000 to PIC - Stock Warrants A credit of PIC - Stock Warrants $40,000

A credit of $60,000 to PIC - Stock Warrants

Which of the following items is(are) of interest to investors and creditors? a. Uncertainty of future cash flows b. Amount of future cash flows c. Timing of future cash flows d. All of the items are of interest

All of the items are of interest

Roco Company manufactures both industrial and consumer electronics. Due to a change in its strategic focus, the company decided to exit the consumer electronics business, and in 2016 sold the division to Sunny Corporation. The consumer electronics division qualifies as a component of the entity according to GAAP. How should Roco report the sale in its 2016 income statement? - None of the listed options is correct. - Include in income from continuing operations as a nonoperating gain or loss - As restructuring costs - As a discontinued operation, reported below income from continuing operations

As a discontinued operation, reported below income from continuing operations

When stock is purchased with cash and held in treasury, what is the impact on the balance sheet equation? - Assets increase and stockholders' equity decreases - No change - the reduction of the asset Cash is offset with the addition of the asset Treasury Stock - Assets decrease and stockholders' equity increases - Assets decrease and stockholders' equity decreases

Assets decrease and stockholders' equity increases

Which statement regarding dividends is FALSE? - Dividends in arrears are not listed as a liability until dividends are declared - Both stock and cash dividends reduce retained earnings - Cash dividends paid to stockholders reduce net income - Dividends represent a sharing of corporate profits with owners

Cash dividends paid to stockholders reduce net income

Moonwalker Corporation issued 2,000 shares of its $10 par value common stock for $60,000. Moonwalker also incurred $1,500 of costs associated with issuing the stock. If you record the transaction with one journal entry that Debits Cash for $58,500 ($60,000 - 1,500), then what would be the adjustment to PIC in excess of par - CS? - Debit of $38,500 - Credit of $1,500 - Credit of $38,500 - Debit of $1,500

Credit of $38,500

Graves Mining Company declared, on April 20, a dividend of $500,000 payable on June 1. Of this amount, $125,000 is a return of capital. Which of the following is the correct journal entry for April 20? Dr Retained Earnings $500,000; Cr Dividends $375,000, Cr PIC in excess of par - Common Stock $125,000 Dr Retained Earnings $375,000, Dr PIC in excess of par - common stock $125,000; Credit Dividends Payable $500,000 Debit Retained Earnings $375,000, Dr. Dividend Expense $125,000; Cr Dividends Payable $500,000 Dr Dividends $375,000; Cr Dividends Payable $375,000

Dr Retained Earnings $375,000, Dr PIC in excess of par - common stock $125,000; Credit Dividends Payable $500,000

A journal entry is not recorded on what date? - Date of record - Date of payment - Date of declaration - All of the options listed require a journal entry.

Date of record

Which of the following items is NOT included in the determination of income from continuing operations? (CMA) - Restructuring Costs - Discontinued Operations - Long-lived asset impairment loss - Unusual loss from a write-down of inventory

Discontinued Operations

In a multiple step income statement for a retail company, all of the following are included in the operating section EXCEPT: a. Dividend Revenue b. Sales c. Cost of goods sold d. Administrative and Selling Expenses

Dividend Revenue

Sprinkle Inc. has outstanding 10,000 shares of $10 par value common stock. On July 1, 2017, Sprinkle reacquired 100 shares at $87 per share. On September 1, Sprinkle reissued 60 shares at $90 per share. On November 1, Sprinkle reissued 40 shares at $83 per share. What is the correct journal entry to record the November 1 reissuance? Dr. Cash $3,320, Dr. PIC in excess of Par - Common Stock $160; Cr Treasury Stock $3,480 Dr. Cash $3,320; Cr Treasury Stock $3,320 Dr Cash $3,320, Dr Retained Earnings $160; Cr Treasury Stock $3,480 Dr Cash $3,320, Dr. PIC from Treasury Stock $160; Cr Treasury Stock $3,480

Dr Cash $3,320, Dr Retained Earnings $160; Cr Treasury Stock $3,480

Buttercup Corporation issued 300 shares of $10 par value common stock for $4,500. Which of the following is the correct journal entry? Dr. Cash $4,500; Cr Common Stock $3,000; Cr Retained Earnings $1,500 Dr. Cash $3,000; Cr Common Stock $3,000 Dr Cash $4,500; Cr Common Stock $4,500 Dr Cash $4,500; Cr. Common Stock $3,000, Cr. PIC in Excess of par - CS $1,500

Dr Cash $4,500; Cr. Common Stock $3,000, Cr. PIC in Excess of par - CS $1,500

Whipple Company has 1,000,000 shares of common stock authorized with a par value of $3 per share, of which 600,000 shares are outstanding. When the market value was $8 per share, Whipple issued a stock dividend whereby for each six shares held one share was issued as a stock dividend. The par value of the stock was not changed. What entry should Whipple make to record this transaction? Hint: First determine if this is a small or large stock dividend. - Dr Retained Earnings $800,000; Cr. Common Stock $300,000, Cr PIC in excess of Par- CS $500,000 - PIC in excess of Par - Treasury Stock $800,000; Cr Common stock $300,000, Cr Retained Earnings $500,000 - Dr. Retained Earnings $300,000; Cr Common Stock $300,000 - PIC in excess of Par - Treasury Stock $300,000; Cr. Common Stock $300,000

Dr Retained Earnings $800,000; Cr. Common Stock $300,000, Cr PIC in excess of Par- CS $500,000

Arantax has outstanding 20,000 shares of $5 per value common stock. On August 1, 2017, Arantxa reacquired 200 shares of $80 per share. On November 1, Arantxa reissued the 200 shares at $70 per share Arantax had no previous treasury stock transactions. Which of the following is the correct journal entry for November 1? Dr. Cash $14,000, Dr Retained Earnings $2,000; Credit Treasury Stock $16,000 Dr. Cash $14,000; Dr Loss on Treasury Stock Reissue $2,000; Cr. Treasury Stock $16,000 Dr. Cash $14,000; Cr Treasury Stock $14,000 Dr Cash $14,000, Cr PIC in excess of par - Common Stock; Cr. Treasury Stock $16,000

Dr. Cash $14,000, Dr Retained Earnings $2,000; Credit Treasury Stock $16,000

Devers Corporation issued $400,000 of 6% bonds on May 1, 2017. The bonds were dated January 1, 2017, and mature January 1, 2020, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Which of the following is the correct journal entry for the date of issuance? - Dr. Cash $400,000; Cr. Bonds Payable $400,000 - Dr. Cash $408,000; Cr Bonds Payable $400,000, Cr. Interest Expense $8,000 - Dr. Cash $408,000; Cr Bonds Payable $400,000, Cr. Interest Payable $8,000 - Dr. Cash $404,000; Cr. Bonds Payable $400,000, Cr. Interest Expense $4,000

Dr. Cash $408,000; Cr Bonds Payable $400,000, Cr. Interest Expense $8,000

Samson issued a 4-year, $75,000, zero-interest-bearing note to Brown Company on January 1, 2017 and received cash of $47,664. The implicit interest rate is 12%. Which of the following journal entries is correct with respect to the January 1 issuance? - Dr. Cash $75,000; Cr. Discount on N/P $27,336; Cr. Notes Payable $47,664 - Dr. Cash $47,664, Dr. Discount on N/P of $27,336; Credit Notes Payable $75,000 - Dr. Cash $47,664; Dr.Prepaid Interest $27,336; Cr. Notes Payable $75,000 - Dr. Cash $47,664; Cr. Notes Payable $47,664

Dr. Cash $47,664, Dr. Discount on N/P of $27,336; Credit Notes Payable $75,000

Samson issued a 4-year, $75,000, zero-interest-bearing note to Brown Company on January 1, 2017 and received cash of $47,664. The implicit interest rate is 12%. Which of the following journal entries is correct with respect to the December 31 recognition of interest? - Dr. Interest Expense $5,720; Cr. Interest Payable $5,720 - No journal entry is required as this is a zero-interest-bearing note - Dr. Discount on Notes Payable $5,720; Cr. Interest Payable $5,720 - Dr. Interest Expense $5,720; Cr. Discount on N/P $5,720

Dr. Interest Expense $5,720; Cr. Discount on N/P $5,720

When a company issues a stock dividend which of the following would be affected? - Total assets - Total stockholders' equity - Earnings per share - Total liabilities

Earnings per share

Which of the following transactions will decrease the return on equity (net income/ total equity)? - Approve a retained earnings restriction - Declare and issue a cash dividend - Declare and issue a stock dividend - Issue additional shares of common stock

Issue additional shares of common stock

A bond issue sold at a premium is valued on the statement of financial position at the: - Maturity value plus the unamortized portion of the premium - Maturity Value - Maturity value less the unamortized portion of the premium - Cost at the date of investment

Maturity value plus the unamortized portion of the premium

US GAAP requires that companies record most items, including unusual or infrequent ones, as part of net income. This concept is called the: - current operating performance approach - multiple-step income statement - single-step income statement - modified all-inclusive concept

Modified all-inclusive concept

N/A

N/A

Which of the following statements about stock dividends is true? - None of the options. - Stock dividends increase total stockholders' equity. - Stock dividends are reported on the income statement. - Stock dividends decrease total stockholders' equity

None of the options

Which statement regarding treasury stock is FALSE? - Treasury stock is considered to be issued but not outstanding. - Treasury stock reduces total stockholders' equity on the balance sheet - None of the options is false. - Treasury stock has no voting, dividend, or liquidation rights

None of the options is false

Which of the following options shows the correct order of income statement sections? a. Operating section; nonoperating section; income tax; discontinued operations; noncontrolling interest; EPS b. Operating section; nonoperating section; noncontrolling interest; income tax; discontinued operations; EPS c. Operating section; nonoperating section income tax; discontinued operations; EPS; noncontrolling interest d. Operating section; nonoperating section; discontinued operations; income tax; noncontrolling interest; EPS

Operating section; nonoperating section; income tax; discontinued operations; noncontrolling interest; EPS

On January 1, 2017, Henderson Corporation redeemed $500,000 of bonds at 99. At the time of redemption, the unamortized premium was $15,000. All of the following statements are true with respect to the journal entry to record the reacquisition of the bonds EXCEPT: - Gain on Redemption of Bonds is credited for $20,000 - Cash is credited for $495,000 - Premium on Bonds Payable is credited for $15,000 - Bonds Payable is debited for $500,000

Premium on Bonds Payable is credited for $15,000

Which of the following items would be subject to intraperiod tax allocation (i.e., net of tax treatment)? - Reporting of Discontinued Operations - Interest Revenue - Gain on Sale of Machinery - Loss from Employee Strike

Reporting of Discontinued Operations

Which of the following is ordered from the largest number of shares to the smallest number of shares? - Shares authorized, shares issued, shares outstanding - Shares issued, shares outstanding, shares authorized - Shares outstanding, shares issued, shares authorized - Shares in treasury, shares outstanding, shares issued

Shares authorized, shares issued, shares outstanding

Which of the following is statements is FALSE regarding the measurement of income? a. The final net income figure should be the same under either approach given the same valuation base b. That income numbers are affected by the accounting methods employed is true ONLY under the transaction approach c. The capital maintenance approach lists only the net change in owners equity as a measure of income d. The transaction approach provides not only the net change in owners' equity (income) but also the components of income (revenues and expenses).

That income numbers are affected by the accounting methods employed is true ONLY under the transaction approach

What is the major distinction between revenues and gains (or expenses and losses)? - The classification depends on the timing of the transaction; if it occurs close to period end, the amount is considered peripheral or incidental. - The classification depends on the uncertainty of the cash flows; uncertain accruals are deemed to be gains or losses. - The classification depends on the ongoing major or central operations of the company. - The classification depends on the size of the transaction with immaterial amounts being classified as gains/losses.

The classification depends on the ongoing major or central operations of the company

Which of the following statements is FALSE regarding the format of the income statement? a. A single step income statement consists of just two groupings of accounts: revenues and expenses b. The single-step income statement is more useful than the multiple step income in determining the amount, timing and uncertainty of future cash flows c. The primary advantage of the single-step format is its simple presentation and the avoidance of having to determine which activities are central and ongoing and which are incidental or peripheral d. The condensed income statement with supporting schedules is the most commonly used format

The single-step income statement is more useful than the multiple step income in determining the amount, timing and uncertainty of future cash flows

In a previous year, a supply warehouse with an expected useful life of 7 years was erroneously expensed. Where should this item appear on the company's current income statement? - This requires the correction of an error and is considered to be a prior period adjustment and the beginning balance of Retained Earnings should be restated, if material - The previous years' of depreciation that should have been taken will be reported in the Operating Expenses section along with the current year's depreciation expense - The warehouse is capitalized and one-seventh of its cost is depreciated in the current year - The previous years' of depreciation that should have been taken will be reported in the Other Expenses and Losses section

This requires the correction of an error and is considered to be a prior period adjustment and the beginning balance of Retained Earnings should be restated, if material.

Sprinkle Inc. has outstanding 10,000 shares of $10 par value common stock. On July 1, 2017, Sprinkle reacquired 100 shares at $87 per share. On September 1, Sprinkle reissued 60 shares at $90 per share. On November 1, Sprinkle reissued 40 shares at $83 per share. What account(s) is/are credited for the September 1 reissuance? Treasury Stock $5,400 Treasury Stock $5,220 and Common Stock $180 Treasury Stock $5,220 and PIC from Treasury Stock $180 Treasury Stock $8,700

Treasury Stock $5,220 and PIC from Treasury Stock $180

Employer contributions: - decrease plan assets - decrease pension expense - decrease cash - decrease PBO

decrease cash

Excess of expected return over actual return on plan assets: - decreases PBO - decreases OCI - increases OCI - decreases cash

decreases OCI

Payment of retirement benefits: - decreases pension expense - increases plan assets - decreases PBO - decreases Cash

decreases PBO

The planned timing of revenues, expenses, gains and losses to smooth out bumps in earnings is known as: - good quality of earnings - earnings management - good business practice - distortion free accounting

earnings management

For a bond issue that sells for less than its face value, the market rate of interest is: - less than the rate stated on the bond - dependent on the rate stated on the bond - higher than the rate stated on the bond - equal to the rate stated on the bond

higher than the rate stated on the bond