Intermediate Gleim

On January 2, Well Co. purchased 10% of Rea, Inc.'s outstanding common shares for $400,000, which equaled the carrying amount and the fair value of the interest purchased in Rea's net assets. Well did not elect the fair value option. Because Well is the largest single shareholder in Rea, and Well's officers are a majority on Rea's board of directors, Well exercises significant influence over Rea. Rea reported net income of $500,000 for the year and paid dividends of $150,000. In its December 31 balance sheet, what amount should Well report as investment in Rea?

$435,000

In computing the weighted-average number of shares outstanding during the year, which of the following midyear events must be treated as if it had occurred at the beginning of the year?

Declaration and distribution of a stock dividend.

Which one of the following transactions does not affect the balance of retained earnings?

Declaration of a stock split

Which of the following statements is correct regarding deferred revenues recorded by a company that provides services to customers?

Deferred revenue is a liability until the service has been performed.

A deferred tax liability may result from which of the following items?

Depreciation of tangible assets.

On May 1, Rhud Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Rhud had 100,000 shares of $1 par value common stock issued and outstanding. The fair value of Rhud's common stock was $30 per share on May 1. As a result of the stock dividend, Rhud's total equity

Did not change

The amount recorded initially by the lessee as a lease liability should normally

Equal the present value of the lease payments at the beginning of the lease.

Which of the following circumstances would result in a deferred tax asset for the current year?

Expenses that are recognized in financial income this year and deductible next year.

A measurement alternative may be elected for an investment in equity securities if the

Fair value of the investment is not readily determinable and the investment does not result in control or significant influence over the investee.

An entity should report an investment in marketable equity securities that does not result in significant influence or control over the investee at

Fair value, with holding gains and losses included in earnings.

A tax rate other than the current tax rate may be used to calculate the deferred income tax amount on the statement of financial position if a(n)

Future tax rate has been enacted into law.

A 5-year term bond was issued on January 1, Year 1, at a discount. The carrying amount of the bond at December 31, Year 2, will be

Higher than the carrying amount at December 31, Year 1.

For a bond issue that sells for less than its par value, the market rate of interest is

Higher than the rate stated on the bond.

Which of the following should be disclosed in an entity's financial statements related to deferred taxes? The types and amounts of existing temporary differences. The types and amounts of existing permanent differences. The nature and amount of each type of operating loss and tax credit carryforward.

I and III only

For available-for-sale debt securities included in noncurrent assets, which of the following amounts should be included in the period's net income? Unrealized holding losses during the period Realized gains during the period Changes in fair value during the period

II only

Kamchatka sells a durable good on January 1, Year 1, and the customer is automatically given a 1-year standard warranty against manufacturing defects. The customer also buys an extended warranty package, extending the coverage for an additional 2 years to the end of Year 3. At the time of the original sale, the company expects warranty costs to be incurred evenly over the life of the warranty contracts. The customer has only one warranty claim during the 3-year period, and the claim occurs during Year 2. The company will recognize revenue from the sale of the extended warranty

In Years 2 and 3.

Which one of the following statements with regard to marketable securities is incorrect?

In the available-for-sale portfolio of marketable debt securities, unrealized gains and losses are recorded on the income statement.

Unrealized gains and losses on trading debt securities should be presented in the

Income Statement

The per-share amount must be reported on the face of a public company's income statement for which of the following items?

Income from continuing operations.

An investor uses the equity method to account for an investment in common stock. After the date of acquisition, the investment account of the investor is

Increased by its share of the earnings of the investee, and is decreased by its share of the losses of the investee.

Under ASC 606, adjustment of the transaction price to reflect the time value of money results in

Interest income or expense that is presented in the income statement separately from revenue.

In Year 5, Lee Co. acquired, at a premium, Enfield, Inc., 10-year bonds as a long-term investment. At December 31, Year 6, Enfield's bonds were quoted at a small discount. Which of the following situations is the most likely cause of the decline in the bonds' fair value?

Interest rates have increased since Lee purchased the bonds.

Which one of the following statements regarding treasury stock is correct?

It is reflected in shareholders' equity as a contra account.

On January 15, Year 5, Rico Co. declared its annual cash dividend on common stock for the year ended January 31, Year 5. The dividend was paid on February 9, Year 5, to shareholders of record as of January 28, Year 5. On what date should Rico decrease retained earnings by the amount of the dividend?

January 15, year 5

Quick Company's lease payments are made at the end of each period. Quick's liability for a finance lease will be reduced periodically by the

Lease payment less the portion of the lease payment allocable to interest.

Aldrich Co. distributes cash dividends to its shareholders during the current year. The dividends are declared on March 9 and are payable to shareholders as of the date of record, which is April 15. The dividends are actually paid on May 19. At which of the following dates would the dividends become a liability to Aldrich?

March 9

The relationship between income tax currently payable and income tax expense is that income tax currently payable

May differ from income tax expense.

A deferred tax asset must be reduced by a valuation allowance if it is

More likely than not that some portion will not be realized.

An investor purchased a bond as a long-term investment between interest dates at a premium. At the purchase date, the cash paid to the seller is

More than the face amount of the bond.

Murphy Co. had 200,000 shares outstanding of $10 par common stock on March 30 of the current year. Murphy reacquired 30,000 of those shares at a cost of $15 per share and recorded the transaction using the cost method on April 15. Murphy reissued the 30,000 shares at $20 per share and recognized a $50,000 gain on its income statement on May 20. Which of the following statements is correct?

Murphy's net income for the current year is overstated.

Which of the following is usually associated with payables classified as accounts payable?

No, No

Because Jab Co. uses different methods to depreciate equipment for financial statement and income tax purposes, Jab has temporary differences that will reverse during the next year and add to taxable income. Deferred income taxes that are based on these temporary differences should be classified in Jab's balance sheet as a

Noncurrent liability.

An entity declared a cash dividend on its common stock in December Year 1, payable in January Year 2. Retained earnings will

Not be affected on the date of payment.

Spring Corp. entered into a 5-year lease agreement with Fall Corp. Spring, the lessee, paid an additional $5,000 nonrefundable lease bonus to Fall upon signing the operating lease agreement. When would Fall recognize in income the nonrefundable lease bonus paid by Spring?

Over the life of the asset

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

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

On July 1, Goblette Company sold some machinery to another company. The two companies entered into an installment sales contract at a predetermined interest rate. The contract required 5 equal annual payments with the first payment due on July 1, the date of sale. What present value concept is appropriate for this situation?

Present value of an annuity due of $1 for 5 periods.

Which one of the following would most likely cause basic earnings per share to increase?

Purchasing treasury stock.

Which of the following does not result in recognition of a deferred tax asset?

Receipt of municipal bond interest.

Income-tax-basis financial statements differ from those prepared under GAAP because they

Recognize certain revenues and expenses in different reporting periods.

When computing diluted earnings per share (DEPS), convertible securities that are potential common stock are

Recognized only if they are dilutive.

On January 1, Year 1, Lessee entered into a 4-year lease and did not incur initial direct costs. At the lease commencement date, Lessee

Recognizes the same amount for the right-of-use asset and the lease liability under a finance lease and an operating lease.

A company whose stock is trading at $10 per share has 1,000 shares of $1 par common stock outstanding when the board of directors declares a 30% common stock dividend. Which of the following adjustments should be made when recording the stock dividend?

Retained earnings is debited for $300.

In a lease that is recorded as a sales-type lease by the lessor, interest revenue

Should be recognized over the period of the lease using the effective-interest method.

The revenue recognition from contracts with customers standard (ASC 606) provides a <List A> model that <List B>.

Single principles-based Eliminates most current industry-specific guidance

A premium on bonds payable arises when

The amount received from sale of the bonds at issuance exceeds the face value of the bonds.

Which of the following is not a criterion that must be met for a contract with a customer to be accounted for under the revenue recognition standard (ASC 606)?

The costs to fulfill the contract are expected to be recovered.

Which of the following situations may result in recognition over time of revenue from a contract with a customer by an entity?

The customer simultaneously receives and consumes the benefits from performance as the entity performs.

Which one of the following statements regarding dividends is correct?

The declaration and payment of a 10% stock dividend will result in a reduction of retained earnings at the fair market value of the stock.

Wood Co.'s dividends on noncumulative preferred stock have been declared but not paid. Wood has not declared or paid dividends on its cumulative preferred stock in the current or the prior year and has reported a net loss in the current year. For the purpose of computing basic earnings per share, how should the income available to common stockholders be calculated?

The dividends on the noncumulative preferred stock and the current-year dividends on the cumulative preferred stock should be added to the net loss.

A lease is classified as a finance lease because it contains a purchase option that the lessee is reasonably certain to exercise. Over what period of time should the lessee amortize the right-of-use asset?

The economic life of the asset.

In Year 1, a company reported in other comprehensive income an unrealized holding loss on an investment in available-for-sale debt securities. During Year 2, these securities were sold at a loss equal to the unrealized loss previously recognized. The reclassification adjustment should include which of the following?

The unrealized loss should be credited to the other comprehensive income account.

Which of the following statements is a primary objective of accounting for income taxes?

To recognize the amount of deferred tax liabilities and deferred tax assets reported for future tax consequences.

Debt securities held primarily for sale in the near term to generate income on short-term price differences are known as

Trading Securities

How would the proceeds received from the advance sale of nonrefundable tickets for a theatrical performance be reported in the seller's financial statements before the performance?

Unearned revenue for the entire proceeds.

On July 1, Alto Corp. split its common stock 5-for-1 when the market value was $100 per share. Prior to the split, Alto had 10,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock

Was reduced to $2

Vadis Co. sells appliances that include a standard 3-year assurance-type warranty. Service calls under the warranty are performed by an independent mechanic under a contract with Vadis. Based on experience, warranty costs are estimated at $30 for each machine sold. When should Vadis recognize these warranty costs?

When the machines are sold.

Kale Co. purchased bonds at a discount on the open market as an investment and has the intent and ability to hold these bonds to maturity. Absent an election of the fair value option, Kale should account for these bonds at

amortized cost

In computing diluted earnings per share (DEPS), the equivalent number of shares of convertible preferred stock is added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is preferred as to dividends, which amount should be added as an adjustment to the numerator (earnings available to common shareholders)?

annual preferred dividend

An entity receives an advance payment for special order goods that are to be manufactured and delivered within 6 months. The advance payment should be reported in the company's balance sheet as a

current liab.

Bal Corp. declared a $25,000 cash dividend on May 8 to shareholders of record on May 23, payable on June 3. As a result of this cash dividend, working capital

deceased may 8

When an entity declares a cash dividend, retained earnings is decreased by the amount of the dividend on the date of

declaration

At December 31, Year 3 and Year 4, Apex Co. had 3,000 shares of $100 par, 5% cumulative preferred stock outstanding. No dividends were in arrears as of December 31, Year 2. Apex did not declare a dividend during Year 3. During Year 4, Apex paid a cash dividend of $10,000 on its preferred stock. Apex should report dividends in arrears in its Year 4 financial statements as a(n)

disclosure of 20,000

Able Co. leased equipment to Baker under a noncancelable lease with a transfer of title. After recognition of the lease, will Able record any depreciation expense on the leased asset and interest revenue related to the lease?

no, yes

When debt is issued at a discount, interest expense over the term of debt equals the cash interest paid

plus discounts

On September 1, Year 1, an entity purchased a new machine that it does not have to pay for until September 1, Year 3. The total payment on September 1, Year 3, will include both principal and interest. Assuming interest at a 10% rate, the cost of the machine will be the total payment multiplied by what time value of money factor?

present value of $1

When purchasing a bond, the present value of the bond's expected net future cash inflows discounted at the market rate of interest provides what information about the bond?

price

What type of bonds mature in installments?

serial

During December of Year 1, Nile Co. incurred special insurance costs but did not record these costs until payment was made during the following year. These insurance costs related to inventory that had been sold by December 31, Year 1. What is the effect of the omission on Nile's accrued liabilities and retained earnings at December 31, Year 1?

under, over

An automobile dealer sells service contracts. The contracts stipulate that the dealer will perform specific repairs on covered vehicles. The contracts vary in length from 12 to 36 months. Do the following increase when service contracts are sold?

yes, no

At the end of the accounting period, which of the following costs should be accrued?

yes, yes

Pubco is a public company that uses a calendar year and has a complex capital structure. Pubco reported in the first quarter income from continuing operations (net of tax) of $1 million and a loss on discontinued operations (net of tax) of $1.2 million. The average market price of Pubco's common stock for the first quarter was $25, the shares outstanding at the beginning of the period equaled 300,000, and 12,000 shares were issued on March 1. At the beginning of the quarter, Pubco also had outstanding 120,000 shares of preferred stock paying a dividend of $.10 per share at the end of each quarter and convertible to common stock on a one-to-one basis. Holders of 60,000 shares of preferred stock exercised their conversion privilege on February 1. The BEPS amount for Pubco's net income or loss available to common shareholders for the first quarter is

.6

Poe Co. had 300,000 shares of common stock issued and outstanding at December 31, Year 1. No common stock was issued during Year 2. On January 1, Year 2, Poe issued 200,000 shares of nonconvertible preferred stock. During Year 2, Poe declared and paid $75,000 of cash dividends on the common stock and $60,000 on the preferred stock. Net income for the year ended December 31, Year 2, was $330,000. What should be Poe's Year 2 basic earnings per common share?

.9

Day Co. received dividends from its common stock investments during the year ended December 31 as follows: A stock dividend of 400 shares from Parr Corp. on July 25 when the market price of Parr's shares was $20 per share. Day owns less than 1% of Parr's stock. A cash dividend of $15,000 from Lark Corp. in which Day owns a 25% interest. Day did not elect the fair value option to account for its investment in Lark. What amount of dividend revenue should Day report in its income statement?

0

During the current year, Onal Co. purchased 10,000 shares of its own stock at $7 per share. The stock was originally issued at $6. The firm sold 5,000 of the treasury shares for $10 per share. The firm uses the cost method to account for treasury stock. What amount should Onal report in its income statement for these transactions?

0

Ray Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares of $2 par value common stock, which had a fair value of $5 per share before the stock dividend was declared. This stock dividend was distributed 60 days after the declaration date. By what amount did Ray's current liabilities increase as a result of the stock dividend declaration?

0

Universe Co. issued 500,000 shares of common stock in the current year. Universe declared a 30% stock dividend. The market value was $50 per share, the par value was $10, and the average issue price was $30 per share. By what amount will Universe decrease shareholders' equity for the dividend?

0

Ray Company has 530,000 common shares outstanding at year end. At December 31, for basic-earnings-per-share purposes, Ray computed its weighted, average number of shares as 500,000. Prior to issuing its annual financial statements, but after year end, Ray split its stock 2 for 1. Ray's weighted-average number of shares to be used for computing annual basic earnings per share is

1,000,000

On January 1 of the current year, Barton Co. paid $900,000 to purchase two-year, 8%, $1,000,000 face value bonds that were issued by another publicly-traded corporation. Barton plans to sell the bonds in the first quarter of the following year. The fair value of the bonds at the end of the current year was $1,020,000. At what amount should Barton report the bonds in its balance sheet at the end of the current year?

1,020,000

A company reported net income available to common stockholders of $2,000,000 for the year ended December 31, Year 2. The company had 1,500,000 shares of common stock outstanding as of January 1, Year 2, and issued 500,000 additional shares of common stock on May 1, Year 2. What amount is the company's basic earnings per share for the year ended December 31, Year 2?

1.09

A bond issued on March 1 has interest payment dates of April 1 and October 1. Bond interest expense for the year ended December 31 is for a period of

10 months

A corporation issuing stock should charge retained earnings for the fair value of the shares issued in a(n)

10% stock Dividend

Long Co. had 100,000 shares of common stock issued and outstanding at January 1. During the year, Long took the following actions: March 15 -- declared a 2-for-1 stock split, when the fair value of the stock was $80 per share December 15 -- declared a $.50 per share cash dividend In Long's statement of changes in equity for the year, what amount should Long report as dividends?

100,000

Jones Co. had 50,000 shares of $5 par value common stock outstanding at January 1. On August 1, Jones declared a 5% stock dividend followed by a two-for-one stock split on September 1. What amount should Jones report as common shares outstanding at December 31?

105,000

On December 1, Clay Co. declared and issued a 6% stock dividend on its 100,000 shares of outstanding common stock. There was no other common stock activity during the year. What number of shares should Clay use in determining basic earnings per share (BEPS) for the year?

106,000

On January 1, Apex Company, whose stock is publicly traded, had 100,000 shares of common stock issued and outstanding. On April 1, Apex issued a 10% stock dividend. The number of shares to be used in the computation of basic earnings per share for the fiscal year ending on December 31 is

110,000

The following information was extracted from Gil Co.'s December 31 balance sheet: Noncurrent assets: Available-for-sale debt securities (carried at fair value) $96,450 Equity: Accumulated other comprehensive income (OCI) Unrealized gains and losses on available-for-sale debt securities (19,800) Historical cost of the available-for-sale debt securities was

116,250

Album Co. issued 10-year $200,000 debenture bonds on January 2. The bonds pay interest semiannually. Album uses the effective interest method to amortize bond premiums and discounts. The carrying amount of the bonds on January 2 was $185,953. A journal entry was recorded for the first interest payment on June 30, debiting interest expense for $13,016 and crediting cash for $12,000. What is the annual stated interest rate for the debenture bonds?

12%

Brass Co. reported income before income tax expense of $60,000 for Year 2. Brass had no permanent or temporary differences for tax purposes. Brass has an effective tax rate of 30% and a $40,000 net operating loss carryforward from Year 1. What is the maximum income tax benefit that Brass can realize from the loss carryforward for Year 2?

12,000

East Corp. manufactures stereo systems that carry a 2-year warranty against defects. Based on past experience, warranty costs are estimated at 4% of sales for the warranty period. During the year, stereo system sales totaled $3 million, and warranty costs of $67,500 were incurred. In its income statement for the year ended December 31, East should report warranty expense of

120,000

East Co. issued 1,000 shares of its $5 par-value common stock to Howe as compensation for 1,000 hours of legal services performed. Howe usually bills $160 per hour for legal services. On the date of issuance, the stock was trading on a public exchange at $140 per share. By what amount should the additional paid-in capital account increase as a result of this transaction?

135,000

Deck Co. had 120,000 shares of common stock outstanding at January 1. On July 1, it issued 40,000 additional shares of common stock. Outstanding all year were 10,000 shares of nonconvertible cumulative preferred stock. What is the number of shares that Deck should use to calculate basic earnings per share?

140,000

On November 1, Mason Corp. issued $800,000 of its 10-year, 8% term bonds dated October 1. The bonds were sold to yield 10%, with total proceeds of $700,000 plus accrued interest. Interest is paid every April 1 and October 1. What amount should Mason report for interest payable in its December 31 balance sheet?

16,000

Johnstone Company owns 10,000 shares of Breva Corporation's stock; Breva currently has 40,000 shares outstanding. During the year, Breva had net income of $200,000 and paid $160,000 in dividends. At the beginning of the year, there was a balance of $150,000 in Johnstone's equity method investment in Breva Corporation account. At the end of the year, the balance in this account should be

160,000

A hotel enters into a contract with a customer to provide 10 rooms for 10 nights for $200 per room per night. In addition to the room price per night, the hotel collects a city occupancy tax of $7 per room per night. According to the hotel's promotion, each customer that purchases in total more than 50 room nights is entitled to a credit of $3,000 on the entire purchase. What is the total transaction price of the contract?

17,000

On May 18, Sol Corp.'s board of directors declared a 10% stock dividend. The market price of Sol's 3,000 outstanding shares of $2 par value common stock was $9 per share on that date. The stock dividend was distributed on July 21, when the stock's market price was $10 per share. What amount should Sol credit to additional paid-in capital for this stock dividend?

2,100

Janson traded stock in Flax Co. marketable equity securities during Year 1 as follows: Number of shares purchased (sold) Price per share February 3, Year 1 1,100 $11 April 15, Year 1 2,500 9 May 28, Year 1 (750) 13 July 5, Year 1 1,400 12 September 30, Year 1 (4,000) 15 No other transactions took place for Flax during the remainder of the year. At December 31, Year 1, Flax is trading at $10 per share. Janson trades securities on a last in, first out basis. What amount is the net value of the investment in Flax at year end?

2,500

Koby Co. entered into a lease with a vendor for equipment on January 2 for 7 years. The equipment has no guaranteed residual value. The lease required Koby to pay $500,000 annually on January 2, beginning with the current year. The present value of an annuity due for seven years was 5.35 at the inception of the lease. What amount should Koby recognize for the lease asset?

2,675,000

Collins Company reported net income of $350,000 for the year. The company had 10,000 shares of $100 par value, noncumulative, 6% preferred stock and 100,000 shares of $10 par value common stock outstanding. Also, 5,000 shares of common stock were in treasury during the year. Collins declared and paid all preferred dividends as well as a $1 per share dividend on common stock. Collins Company's basic earnings per share of common stock for the year was

2.90

On January 1, Korn Co. sold to Kay Corp. $400,000 of its 10% bonds for $354,118 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Korn report as interest expense for the 6 months ended June 30?

21,247

Jent Corp. purchased bonds at a discount of $10,000. Subsequently, Jent sold these bonds at a premium of $14,000. During the period that Jent held this investment, amortization of the discount amounted to $2,000. What amount should Jent report as gain on the sale of bonds?

22,000

Beck Corp. issued 200,000 shares of common stock when it began operations in Year 1 and issued an additional 100,000 shares in Year 2. Beck also issued preferred stock convertible to 100,000 shares of common stock. In Year 3, Beck purchased 75,000 shares of its common stock and held it in treasury. At the end of Year 3, how many shares of Beck's common stock were outstanding?

225,000

Plack Co. purchased 10,000 shares (2% owner ship) of Ty Corp. on February 14 and did not elect the fair value option. Plack received a stock dividend of 2,000 shares on April 30, when the market value per share was $35. Ty paid a cash dividend of $2 per share on December 15. In its income statement for the year, what amount should Plack report as dividend income?

24,000

Selected information from the accounts of Row Co. at December 31, Year 4, follows: Total income since incorporation $420,000 Total cash dividends paid 130,000 Total value of property dividends distributed 30,000 Excess of proceeds over cost of treasury stock sold, accounted for using the cost method 110,000 In its December 31, Year 4, financial statements, what amount should Row report as retained earnings?

260,000

On December 31, Ott Co. had investments in equity securities as follows: Fair Cost Value Man Co. $10,000 $ 8,000 Kemo, Inc. 9,000 11,000 Fenn Corp. 11,000 9,000 $30,000 $28,000 Ott's December 31 balance sheet should report the equity securities as

28,000

The following information pertains to Lark Corp.'s available-for-sale debt securities: December 31 Year 2 Year 3 Cost $100,000 $100,000 Fair value 90,000 120,000 Differences between cost and fair values are considered to be temporary. The decline in fair value was properly accounted for at December 31, Year 2. Ignoring tax effects, by what amount should other comprehensive income (OCI) be credited at December 31, Year 3?

30,000

An entity enters into a contract with a customer to sell products X, Y, and Z in exchange for $250,000. Control over the products will be transferred to the customer at different points in time. The entity determines that the delivery of each product is a distinct performance obligation. Products X and Y are regularly sold separately and their standalone selling prices of $40,000 and $120,000, respectively, are directly observable. The standalone selling price of product Z of $160,000 was estimated using the adjusted market assessment approach. The entity determined that the discount provided to the customer does not relate to one or more specific products in the contract. What revenue will be recognized by the entity on the sale of product X?

31,250

East Co. issued 2,000 shares of its $5 par common stock to Krannik as compensation for 1,000 hours of legal services performed. Krannik usually bills $200 per hour for legal services. On the grant date of the shares, the stock was trading on a public exchange at $160 per share. By what amount should the additional paid-in capital account increase?

310,000

In its Year 4 financial statements, Cris Co. reported interest expense of $85,000 in its income statement and cash paid for interest of $68,000 in its cash flow statement. There was no prepaid interest or interest capitalization at either the beginning or the end of Year 4. Accrued interest at December 31, Year 3, was $15,000. What amount should Cris report as accrued interest payable in its December 31, Year 4, balance sheet?

32,000

On December 31, Year 2, Case, Inc., had 300,000 shares of common stock issued and outstanding. Case issued a 10% stock dividend on July 1, Year 3. On October 1, Year 3, Case purchased 24,000 shares of its common stock for its treasury and recorded the purchase by the cost method. What number of shares should be used in computing basic earnings per share for the year ended December 31, Year 3?

324,000

Pubco is a public company that uses a calendar year and has a complex capital structure. The average market price of Pubco's common stock for the first quarter was $25, the shares outstanding at the beginning of the period equaled 300,000, and 12,000 shares were issued on March 1. At the beginning of the quarter, Pubco had outstanding $2 million of 5% convertible bonds, with each $1,000 bond convertible into 10 shares of common stock. No bonds were converted

344,000

On January 1, Year 4, Harrow Co., as lessee, signed a 5-year noncancelable equipment lease with annual payments of $100,000 beginning December 31, Year 4. Harrow treated this transaction as a finance lease. The five lease payments have a present value of $379,000 at January 1, Year 4, based on interest of 10%. What amount should Harrow report as interest expense for the year ended December 31, Year 4?

37,900

Fact Pattern: Sun Corp. had investments in trading debt securities costing $650,000. On June 30, Year 2, Sun decided to hold the investments indefinitely and accordingly reclassified them as available-for-sale debt securities on that date. The investments' fair value was $575,000 at December 31, Year 1, $530,000 at June 30, Year 2, and $490,000 at December 31, Year 2. What amount should Sun report as net unrealized loss on available-for-sale securities in its Year 2 other comprehensive income?

40,000

Fact Pattern: Sun Corp. had investments in trading debt securities costing $650,000. On June 30, Year 2, Sun decided to hold the investments indefinitely and accordingly reclassified them as available-for-sale debt securities on that date. The investments' fair value was $575,000 at December 31, Year 1, $530,000 at June 30, Year 2, and $490,000 at December 31, Year 2. What amount of loss should Sun report in its Year 2 earnings?

45,000

Ryan Co. sells major household appliance service contracts for cash. The service contracts are for a 1-year, 2-year, or 3-year period. Cash receipts from contracts are credited to unearned service contract revenues. This account had a balance of $720,000 at December 31, Year 1, before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of $180,000 at December 31, Year 1. Outstanding service contracts at December 31, Year 1, expire as follows:

475,000

On July 31, Year 4, Dome Co. issued $1,000,000 of 10%, 15-year bonds at par and used a portion of the proceeds to call its 600 outstanding 11%, $1,000 face amount bonds due on July 31, Year 14, at 102. On that date, unamortized bond premium relating to the 11% bonds was $65,000. In its Year 4 income statement, what amount should Dome report as gain or loss, before income taxes, from retirement of bonds?

53,000 gain

On January 1 of the current year, Tell Co. leased equipment from Swill Co. under a 9-year lease. The equipment had a cost of $400,000 and an estimated useful life of 15 years. Semiannual lease payments of $44,000 are due every January 1 and July 1. The present value of lease payments at the discount rate of the lease of 12% was $505,000, which equals the fair value of the equipment. What amount should Tell recognize as amortization expense on the right-of-use asset in the current year?

56,111

Rudd Corp. had 700,000 shares of common stock authorized and 300,000 shares outstanding at December 31, Year 3. The following events occurred during Year 4: January 31 Declared 10% stock dividend June 30 Purchased 100,000 shares August 1 Reissued 50,000 shares November 30 Declared 2-for-1 stock split At December 31, Year 4, how many shares of common stock did Rudd have outstanding?

560,000

During Year 3, Rex Co. introduced a new product carrying a 2-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, Year 3 and Year 4, are as follows:

57,000

Green Corp. owns 30% of the outstanding common stock and 100% of the outstanding noncumulative nonvoting preferred stock of Axel Corp. In Year 1, Axel declared dividends of $100,000 on its common stock and $60,000 on its preferred stock. Green exercises significant influence over Axel's operations and uses the equity method to account for the investment in the common stock. What amount of dividend revenue should Green report in its income statement for the year ended December 31, Year 1?

60,000

On July 1, Year 1, Eagle Corp. issued 600 of its 10%, $1,000 bonds at 99 plus accrued interest. The bonds are dated April 1, Year 1, and mature on April 1, Year 11. Interest is payable semiannually on April 1 and October 1. What amount did Eagle receive from the bond issuance?

609,000

On December 30, Chang Co. sold a machine to Door Co. in exchange for a noninterest-bearing note requiring 10 annual payments of $10,000. Door made the first payment on December 30. The market interest rate for similar notes at date of issuance was 8%. Information on present value factors is as follows:

62,500

Dana Co.'s officers' compensation expense account had a balance of $490,000 at December 31, Year 1, before any appropriate year-end adjustment relating to the following: No salary accrual was made for the week of December 25-31, Year 1. Officers' salaries for this period totaled $18,000 and were paid on January 5, Year 2. Bonuses to officers for Year 1 were paid on January 31, Year 2, in the total amount of $175,000. The adjusted balance for officers' compensation expense for the year ended December 31, Year 1, should be

683,000

A bond issued on June 1, Year 4, has interest payment dates of April 1 and October 1. Bond interest expense for the year ended December 31, Year 4, is for a period of

7 months

During the current year, Comma Co. had outstanding: 25,000 shares of common stock; 8,000 shares of $20 par, 10% cumulative preferred stock; and 3,000 bonds that are $1,000 par and 9% convertible. The bonds were originally issued at par, and each bond was convertible into 10 shares of common stock. During the year, net income was $200,000, no dividends were declared, and the tax rate was 30%. What amount was Comma's basic earnings per share for the current year?

7.36

On January 1, Esther Pharmaceuticals had a balance of 10,000 shares of common stock outstanding. On June 1, the company issued an additional 2,000 shares of common stock for cash. A total of 5,000 shares of cumulative 6%, $100 par, nonconvertible preferred stock was outstanding all year. Esther's net income was $120,000 for the year. The earnings per share for the year were

8.06

During the current year, Moore Corp. had the following two classes of stock issued and outstanding for the entire year: 100,000 shares of common stock, $1 par. 1,000 shares of 4% preferred stock, $100 par, convertible share for share into common stock. This stock is cumulative, whether or not earned, and no preferred dividends are in arrears. Moore's current-year net income was $900,000, and its income tax rate for the year was 30%. Diluted earnings per share (DEPS) for the current year are

8.91

On January 1, Dyer Co. acquired as a long-term investment a 20% common stock interest in Eason Co. Dyer paid $700,000 for this investment when the fair value and carrying amount of Eason's net assets was $3.5 million. Dyer can exercise significant influence over Eason's operating and financial policies. For the year ended December 31, Eason reported net income of $400,000 and declared and paid cash dividends of $160,000. How much revenue from this investment should Dyer report the year?

80,000

Hill Corp. began production of a new product. During the first calendar year, 1,000 units of the product were sold for $1,200 per unit. Each unit had a two-year warranty. Based on warranty costs for similar products, Hill estimates that warranty costs will average $100 per unit. Hill incurred $12,000 in warranty costs during the first year and $22,000 in warranty costs during the second year. The company uses the expense warranty accrual method. What should be the balance in the estimated liability under warranties account at the end of the first calendar year?

88,000

At December 31, Year 1, Lex, Inc., had 600,000 shares of common stock outstanding. On April 1, Year 2, an additional 180,000 shares of common stock were issued for cash. Lex also had $5 million of 8% convertible bonds outstanding at December 31, Year 2, which are convertible into 150,000 shares of common stock. The bonds were dilutive in the Year 2 DEPS computation. No bonds were issued or converted into common stock during Year 2. What is the number of shares that should be used in computing DEPS for Year 2?

885,000

Ross Co. pays all salaried employees on a Monday for the 5-day workweek ended the previous Friday. The last payroll recorded for the year ended December 31, Year 4, was for the week ended December 25, Year 4. The payroll for the week ended January 1, Year 5, included regular weekly salaries of $80,000 and vacation pay of $25,000 for vacation time earned in Year 4 not taken by December 31, Year 4. Ross had accrued a liability of $20,000 for vacation pay at December 31, Year 3. In its December 31, Year 4, balance sheet, what amount should Ross report as accrued salary and vacation pay?

89,000

Jen Co. had 200,000 shares of common stock and 20,000 shares of 10%, $100 par value cumulative preferred stock. No dividends on common stock were declared during the year. Net income was $2,000,000. What was Jen's basic earnings per share?

9,00

Fact Pattern: On January 1, Evangel Company issued 9% bonds in the face amount of $100,000, which mature in 5 years. The bonds were issued for $96,207 to yield 10%, resulting in a bond discount of $3,793. Evangel uses the effective interest method of amortizing bond discount. Interest is payable annually on December 31. What is the amount of interest Evangel will pay at the end of the first year?

9,000

On July 2, Year 4, Wynn, Inc., purchased as a short-term investment a $1 million face-value Kean Co. 8% bond for $910,000 plus accrued interest to yield 10%. The bonds mature on January 1, Year 11, and pay interest annually on January 1. On December 31, Year 4, the bonds had a fair value of $945,000. On February 13, Year 5, Wynn sold the bonds for $920,000. In its December 31, Year 4, balance sheet, what amount should Wynn report for the bond if it is classified as an available-for-sale security?

945,000

The following information is relevant to the computation of Chan Co.'s earnings per share to be disclosed on Chan's income statement for the year ending December 31: Net income for the year is $600,000. $5,000,000 face amount 10-year convertible bonds outstanding on January 1. The bonds were issued four years ago at a discount that is being amortized in the amount of $20,000 per year. The stated rate of interest on the bonds is 9%, and the bonds were issued to yield 10%. Each $1,000 bond is convertible into 20 shares of Chan's common stock. Chan's corporate income tax rate is 25%.

952,500

A company issues bonds at 98, with a maturity value of $50,000. The entry the company uses to record the original issue should include which of the following?

A debit to bond discount of $1,000.

On March 1, Year 1, Somar Co. issued 20-year bonds at a discount. By September 1, Year 6, the bonds were quoted at 106 when Somar exercised its right to retire the bonds at 105. How should Somar report the bond retirement on its Year 6 income statement?

A loss in continuing operations.

When an investor uses the equity method to account for investments in common stock, the investment account will be increased when the investor recognizes

A proportionate interest in the net income of the investee.

An entity recognizes revenue from a long-term contract over time. However, early in the performance of the contract, it cannot reasonably measure the outcome, but it expects to recover the costs incurred. Revenue should be recognized based on

A zero profit margin.

In determining earnings per share, interest expense, net of applicable income taxes, on dilutive convertible debt should be

Added back to net income for diluted earnings per share.

In computing the loss per share of common stock, cumulative preferred dividends not earned should be

Added to the loss for the year.

Day Corp. holds 10,000 shares of its $10 par value common stock as treasury stock reacquired in Year 2 for $120,000. On December 12, Year 4, Day reissued all 10,000 shares for $190,000. Under the cost method of accounting for treasury stock, the reissuance resulted in a credit to

Additional paid-in capital of $70,000.

Investments classified as held-to-maturity are measured at

Amortized cost, with no unrealized gains or losses reported.

When accounting for income taxes, a temporary difference occurs in which of the following scenarios?

An item is included in the calculation of net income in one year and in taxable income in a different year.

The best evidence of a standalone selling price of a promised good or service to a customer is

An observable price.

At the beginning of Year 2, a company invested $40,000 in a debt security. At that time the security was appropriately classified as an available-for-sale security. At the end of Year 2, the security had a fair value of $28,500. The change in fair value is deemed temporary. How should this change in fair value be reported in the financial statements?

As an unrealized loss of $11,500 as part of other comprehensive income.

Under current generally accepted accounting principles, which approach is used to determine income tax expense?

Asset-and-liability approach.

Long Co. invested in marketable securities. At year-end, fair-value changes in this investment were included in Long's other comprehensive income. How would Long classify this investment?

Available-for-sale debt securities.

With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure?

Common stock, preferred stock, and debt outstanding.

Clay Township owned an idle parcel of real estate consisting of land and a factory. Clay gave title to this realty to Wolf Co. as an incentive for Wolf to establish a factory in the Township. Wolf paid nothing for this realty, which had a fair value of $200,000 at the date of the grant. In accordance with traditional practice, Wolf may record this nonmonetary transaction as a

Credit to a contributed capital account for $200,000.

If a corporation sells some of its treasury stock at a price that exceeds its cost, this excess should be

Credited to additional paid-in capital.

Long-term obligations that are or will become callable by the creditor because of the debtor's violation of a provision of the debt agreement at the balance sheet date should be classified as

Current liabilities unless the creditor has waived the right to demand repayment for more than 1 year from the balance sheet date.