Ch 15 & 16 Acct

Lang Co. issued bonds with detachable common stock warrants. Only the warrants had a known market value. The sum of the fair value of the warrants and the face amount of the bonds exceeds the cash proceeds. This excess is reported as a. Discount on Bonds Payable. b. Premium on Bonds Payable. c. Common Stock Subscribed. d. Paid-in Capital in Excess of Par—Stock Warrants

A

On March 31, 2021, Arndt declared a 10% stock dividend, and accordingly 900 additional shares were issued, when the fair value of the stock was $18 per share. For the three months ended March 31, 2021, Arndt sustained a net loss of $40,000. The balance of Arndt's retained earnings as of March 31, 2021, should be a. $127,800. b. $135,000. c. $136,800. d. $144,000.

A

The if-converted method of computing earnings per share data assumes conversion of convertible securities as of the a. beginning of the earliest period reported (or at time of issuance, if later). b. beginning of the earliest period reported (regardless of time of issuance). c. middle of the earliest period reported (regardless of time of issuance). d. ending of the earliest period reported (regardless of time of issuance).

A

A corporation declared a dividend, a portion of which was liquidating. How would this distribution affect each of the following? Additional Paid-in Capital Retained Earnings a. Decrease No effect b. Decrease Decrease c. No effect Decrease d. No effect No effect

B

At December 31, 2021 and 2020, Miley Corp. had 180,000 shares of common stock and 12,000 shares of 6%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2021 or 2020. Net income for 2021 was $450,000. For 2021, earnings per common share amounted to a. $2.49. b. $2.10. c. $1.83. d. $1.70.

B

Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2020. No common stock was issued during 2021. On January 1, 2021, Didde issued 200,000 shares of nonconvertible preferred stock. During 2021, Didde declared and paid $100,000 cash dividends on the common stock and $80,000 on the preferred stock. Net income for the year ended December 31, 2021 was $620,000. What should be Didde's 2021 earnings per common share? a. $2.07 b. $1.80 c. $1.73 d. $1.47

B

Foyle, Inc., had 830,000 shares of common stock issued and outstanding at December 31, 2020. On July 1, 2021, an additional 40,000 shares of common stock were issued for cash. Foyle also had unexercised stock options to purchase 32,000 shares of common stock at $15 per share outstanding at the beginning and end of 2021. The average market price of Foyle's common stock was $20 during 2021. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2021? a. 850,000 b. 858,000 c. 878,000 d. 882,000

B

In 2020, Hobbs Corp. acquired 15,000 shares of its own $1 par value common stock at $18 per share. In 2021, Hobbs issued 10,000 of these shares at $25 per share. Hobbs uses the cost method to account for its treasury stock transactions. What accounts and what amounts should Hobbs credit in 2021 to record the issuance of the 10,000 shares? a. TS- $180,000 RE- $175,000 b. TS- $180,000 PIC-$70,000 c. PIC-$240,000 CS-$10,000 d. PIC-$170,000 RE-$70,000 CS-$10,000

B

On July 1, 2021, Nall Co. issued 2,500 shares of its $10 par common stock and 5,000 shares of its $10 par convertible preferred stock for a lump sum of $140,000. At this date Nall's common stock was selling for $24 per share and the convertible preferred stock for $18 per share. The amount of the proceeds allocated to Nall's preferred stock should be a. $70,000. b. $84,000. c. $90,000. d. $77,000.

B

When computing diluted earnings per share, convertible securities are a. ignored. b. recognized only if they are dilutive. c. recognized only if they are antidilutive. d. recognized whether they are dilutive or antidilutive.

B

At December 31, 2020 and 2021, Plank Corp. had outstanding 4,000 shares of $100 par value 6% cumulative preferred stock and 20,000 shares of $10 par value common stock. At December 31, 2020, dividends in arrears on the preferred stock were $12,000. Cash dividends declared in 2021 totaled $45,000. What amounts were payable on each class of stock? Preferred Stock Common Stock a. $24,000 $21,000 b. $33,000 $12,000 c. $36,000 $9,000 d. $45,000 $0

C

At its date of incorporation, Sauder, Inc. issued 100,000 shares of its $10 par common stock at $11 per share. During the current year, Sauder acquired 20,000 shares of its common stock at a price of $16 per share and accounted for them by the cost method. Subsequently, these shares were reissued at a price of $12 per share. There have been no other issuances or acquisitions of its own common stock. What effect does the reissuance of the stock have on the following accounts? Retained Earnings Additional Paid-in Capital a. Decrease Decrease b. No effect Decrease c. Decrease No effect d. No effect No effect

C

Horton Co. was organized on January 2, 2021, with 500,000 authorized shares of $10 par value common stock. During 2021, Horton had the following capital transactions: January 5—issued 375,000 shares at $14 per share. July 27—purchased 25,000 shares at $11 per share. November 25—sold 15,000 shares of treasury stock at $13 per share. Horton used the cost method to record the purchase of the treasury shares. What would be the balance in the Paid-in Capital from Treasury Stock account at December 31, 2021? a. $0. b. $15,000. c. $30,000. d. $45,000.

C

On January 1, 2020, Sharp Corp. granted an employee an option to purchase 15,000 shares of Sharp's $5 par value common stock at $20 per share. The Black-Scholes option pricing model determines total compensation expense to be $350,000. The option became exercisable on December 31, 2021, after the employee completed two years of service. The market prices of Sharp's stock were as follows: January 1, 2020 $30 December 31, 2021 50 For 2021, should recognize compensation expense under the fair value method of a. $225,000. b. $75,000. c. $175,000. d. $0.

C

A corporation was organized in January 2021 with authorized capital of $10 par value common stock. On February 1, 2021, shares were issued at par for cash. On March 1, 2021, the corporation's attorney accepted 7,000 shares of common stock in settlement for legal services with a fair value of $90,000. Additional paid-in capital would increase on February 1, 2021 March 1, 2021 a. Yes No b. Yes Yes c. No No d. No Yes

D

Farmer Corp. owned 20,000 shares of Eaton Corp. purchased in 2017 for $550,000. On December 15, 2020, Farmer declared a property dividend of all of its Eaton Corp. shares on the basis of one share of Eaton for every 10 shares of Farmer common stock held by its stockholders. The property dividend was distributed on January 15, 2021. On the declaration date, the aggregate market price of the Eaton shares held by Farmer was $900,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of a. $0. b. $350,000. c. $550,000. d. $900,000.

D

How would the declaration and subsequent issuance of a 10% stock dividend by the issuer affect each of the following when the fair value of the shares exceeds the par value of the stock? Additional Common Stock Paid-in Capital a. No effect No effect b. No effect Increase c. Increase No effect d. Increase Increase

D

In determining diluted earnings per share, dividends on nonconvertible cumulative preferred stock should be a. disregarded. b. added back to net income whether declared or not. c. deducted from net income only if declared. d. deducted from net income whether declared or not.

D

Marsh Co. had 2,400,000 shares of common stock outstanding on January 1 and December 31, 2021. In connection with the acquisition of a subsidiary company in June 2020, Marsh is required to issue 100,000 additional shares of its common stock on July 1, 2022, to the former owners of the subsidiary. Marsh paid $200,000 in preferred stock dividends in 2021, and reported net income of $3,400,000 for the year. Marsh's diluted earnings per share for 2021 should be a. $1.42. b. $1.36. c. $1.34. d. $1.28.

D

On January 2, 2021, Farr Co. issued 10-year convertible bonds at 105. During 2021, these bonds were converted into common stock having an aggregate par value equal to the total face amount of the bonds. At conversion, the market price of Farr's common stock was 50 percent above its par value. On January 2, 2021, cash proceeds from the issuance of the convertible bonds should be reported as a. paid-in capital for the entire proceeds. b. paid-in capital for the portion of the proceeds attributable to the conversion feature and as a liability for the balance. c. a liability for the face amount of the bonds and paid-in capital for the premium over the face amount. d. a liability for the entire proceeds.

D

On May 1, 2021, Ziek Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Ziek had 200,000 shares of $1 par value common stock issued and outstanding. The fair value of Ziek 's common stock was $25 per share on May 1, 2021. As a result of this stock dividend, Ziek's total stockholders' equity a. increased by $500,000. b. decreased by $500,000. c. decreased by $25,000. d. did not change.

D