Acct 410 final review

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 shareholders' equity decrease as a result of the dividend? A. $0 B. $1,500,000 C. $4,500,000 D. $7,500,000

$0

On February 1, Hyde Corp., a newly formed company, had the following stock issued and outstanding: Common stock, no par, $1 stated value, 10,000 shares originally issued for $15 per share Preferred stock, $10 par value, 3,000 shares originally issued for $25 per share If Hyde combines its APIC accounts for presentation purposes, the February 1 statement of equity should report A. $150,000 common stock, $30,000 preferred stock, $45,000 additional paid-in capital B. $150,000 common stock, $75,000 preferred stock, $0 additional paid-in capital C. $10,000 common stock, $75,000 preferred stock, $140,000 additional paid-in capital D. $10,000 common stock, $30,000 preferred stock, $185,000 additional paid-in capital

$10,000 common stock, $30,000 preferred stock, $185,000 additional paid-in capital

Best Company issued 1,500 shares of $5 par value common stock and 1,000 shares of $15 par value preferred stock to an investor on 1/1/20Y3 during an initial public offering (IPO) for $500K. The fair market value at the time of issuance was $10 per common stock share and $50 for each preferred stock share. What value should Best allocate to the common stock?

$115,385

Which of the following regarding stock dividends is true? A. There is a transfer of equity from contributed capital to earned capital on the date of declaration. B. A common reason to issue a large stock dividend or stock split is to manipulate the stock price. C. On the date of declaration of a stock dividend, retained earnings will decrease and dividends payable will increase. D. All stock dividends will be valued at par value on the date of declaration.

. B. A common reason to issue a large stock dividend or stock split is to manipulate the stock price

In 20Y2, executives at Penny Manufacturing were granted options to acquire 12,000 shares of the company's common stock at an option price of $30 per share. The options were still outstanding on 12/31/Y4. Penny earned after-tax net income of $500,000 in 20Y4 and had 200,000 shares of common stock outstanding during the year. The average market price of the company's common stock was $36 per share during 20Y4. What amount would Penny report for 20Y4 diluted earnings per share? A. $2.36 B. $2.38 C. $2.48 D. $2.50

2.48

JNP Corporation sold some of its manufacturing equipment for $75,000 cash during 20Y6. The original cost of the equipment was $750,000 and accumulated depreciation at date of sale was $700,000. Assuming JNP uses the indirect method of reporting cash flows, how would it report the sale of the equipment on its Statement of Cash Flows for the year ended December 31, 20Y6? A. A subtraction from net income of $25,000 and a $75,000 increase in cash flows from investing activities. B. A subtraction from net income of $25,000 and a $50,000 increase in cash flows from financing activities. C. An addition to net income of $25,000 an

A subtraction from net income of $25000 and a $75000 increase in cash flows from investing activities

Riordan Plastics had the following cash transactions during 20Y6: Proceeds from sale of land $210,000 Proceeds from long-term borrowings 400,000 Purchases of plant assets 144,000 Purchases of inventories 680,000 Proceeds from sale of Riordan common stock 240,000 What is Riordan's net cash provided from investing activities for the year ended December 31, 20Y6? A. $66,000. B. $210,000. C. $256,000. D. $850,000. 11. Effective April 27,

A). $66000

Which of the following affects the value of defined benefit plan assets? a). Employee contributions to the plan b). Benefits paid from the plan c). Dividends and interest on the assets held by the plan d). All of the above

All of the above

When computing the weighted-average number of shares outstanding, a stock dividend or stock split is A. weighted by the number of days outstanding. B. weighted by the number of months outstanding. C. considered outstanding at the beginning of the year. D. considered outstanding at the beginning of the earliest year reported.

Considered outstanding at the beginning of the year

Which of the following does not affect pension expense in a defined benefit plan? a). Service cost b). Interest cost c). Employer contributions to the plan d). Expected return on plan assets

Employer contributions to the plan

Which of the following statements regarding the defined benefit pension plan worksheet is false? CH 20 A. If there is a beginning balance in the OCI - Net Gain/Loss column, the balance must be amortized over the average remaining service life of remaining employees. B. The difference between the actual and expected asset return may result in an unrecognized gain or loss. C. Benefits paid to retirees will decrease the projected benefit obligation and the plan assets. D. If the OCI - Prior Service Cost account has a beginning debit balance, current period amortization will increase pension expense.

If there is a beginning balance in the OCI - Net Gain/Loss column, the balance must be amortized over the average service life of remaining employees.

When preparing a statement of cash flows, an increase in inventory would require which of the following adjustments in determining cash flows from operating activities?

Indirect method - decrease Direct method - decrease

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? A. Murphy's comprehensive income for the current year is correctly stated. B. Murphy's net income for the current year is overstated. C. Murphy's net income for the current year is understated. D Murphy should have recognized a $50,000 loss on its income statement in the current year

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

Which of the following events would create a deferred tax liability a). Recording unearned revenue b). Recording a lower-of-cost-or-market inventory write-down c). Recording a long-term installment sale

Recording a long-term installment sale

Which of the following events would create a deferred tax asset? a). Recording impairment of land b). Recording the first year of an asset's depreciation expense c). Recording an unrealized holding gain on equity investments

Recording impairment of land

8. In a sales-type lease, the lessor CH 21 A. has the option to expense or capitalize costs related to the issuance of the lease, depending on the classification of the costs. B. keeps the leased asset on its books and continues to depreciate it. C. records profit equal to the difference between the asset's FMV and the lessor's acquisition cost. D. realizes revenue equal to the entire present value of the lease payments at the inception of the lease.

Records profit equal to the difference between the asset's FMV and the lessor's acquisition cost.

In the tax expense journal entry, tax payable (aka current tax liability) is calculated as a). Taxable income * tax rate b). Pre-tax accounting income * tax rate c). Balance in the deferred tax account * tax rate

Taxable income * tax rate

Which of the following statements regarding defined benefit pension plans is true? A. Current year increases in service cost, interest cost, expected asset return and the amortization of prior service cost will increase the current year pension expense. B. Changes in actuarial assumptions that affect the projected benefit obligation will result in an asset gain/loss. C. The corridor approach is used to control the volatility of pension expense as a result of unexpected gains and losses within the plan. D. A positive asset return will require a credit adjustment in the plan assets column of the pension worksheet.

The corridor approach is used to control the volatility of pension expense as a result of unexpected gains and losses within the plan.

XYZ company bought a five-year depreciable asset two years ago. The deferred tax amount that is associated with this depreciable asset and that is presented on the balance sheet at the end of year two would equal. a). The depreciable asset's cumulative temporary difference multiplied by the tax rate b). The depreciable asset's cumulative temporary difference c). The depreciable asset's current year temporary difference multiplied by the tax rate

The depreciable asset's cumulative temporary difference multiplied by the tax rate

Which of the following statements regarding the accounting for long-term finance leases is false? A. The lessor will always include the leased asset's residual value in its present value calculation. B. The lessee should amortize the right-of-use asset over its useful life in a finance lease with a bargain purchase option. C. The lessee will record a loss if the FMV of the leased asset is less than its expected value at the end of the lease, even if the residual value is unguaranteed. D. The lessee uses the lessor's desired return rate if it is known by the lessee.

The lessee will record a loss if the FMV of the leases asset is less than its expected value at the end of the lease, even if the residual value is unguaranteed.

In a defined benefit pension plan, A. employer contributions to the plan are usually based on a percentage of employee contributions. B. the pension plan administrator will make payments to the retirees. C. minimum funding rules are mandated by ERISA. Defined benefit plans must be fully funded. D. there are alternative methods to measure the pension liability. The largest liability amount will be calculated as the Accumulated Benefit Obligation (ABO).

The pension plan administrator will make payments to the retirees

Which of the following statements regarding dilutive securities is true? A. Restricted stock is dilutive on the day it vests. B. When preferred stock is converted to common stock, the transaction is valued based on the book value of the preferred stock. C. The period of service in a stock option plan is the time between the grant date and the date the options are exercised. D. Debt issued with detachable warrants is recorded as 100% debt until the time the warrants are exercised.

When preferred stock is converted to common stock, the transaction is valued based on teh book value of the preferred stock

Which of the following regarding stockholder's equity is false? A. When cash dividends and property dividends are declared, earned capital will decrease. B. No par stock eliminates the minimum legal liability for the investor. C. When stock is issued for non-cash assets, you must always value the asset received at the FMV of what the company gave up. D. Transaction costs associated with issuing stock will not affect net income.

When stock is issued for non-cash assets, you must always value the asset received at the FMV of what the company gave up

On January 1, 20Y3 Collings Corporation leased some equipment from BHB Manufacturing. The equipment had a fair market value of $1 million and a cost of BHB of $750,000. The lease requires annual payments of $200,000 for 6 years and the estimated economic life of the equipment is 7 years. The equipment has a residual value of $40,000. Collings is required to guarantee this value and expects that the equipment will be worth $30,000 when its returned to BHB. BHB's return on the lease is 9.08% (known to Collings) and Collings has an incremental borrowing rate. a). Which values should be included in the 90% test for lease classification? b). What value should be included in the calculation of Collings' initial ROU asset and lease liability c). Annual interest expense on the lease liability will _______ over time

a). PVA of 200,000 + PV of 10,000 b). PVA of 200,000 + PV of 10,000 c). Decrease

Accounting for defined contribution plans is more complicated than accounting for defined benefit plans a). True b). False

b). False

How do you calculate the deferred tax liability/asset? a). tax rate * (financial income +/- permanent differences) b). tax rate * temporary differences c). tax rate * taxable income

b). tax rate * temporary differences

21). Which of the following are permanent differences? a). installment sales b). accelerated depreciation c). fines and expenses resulting from violation of law d). warranty expense

fines and expenses resulting from violation of law

How do calculate Tax Expense? a). tax rate * (financial income +/- permanent differences) b). tax rate * temporary differences c). tax rate * taxable income tax rate

tax rate * (financial income +/- permanent differences)

How do you calculate taxes payable? a). tax rate * (financial income +/- permanent differences) b). tax rate * temporary differences c). tax rate * taxable income

tax rate * taxable income