Acct 302 Final Exam Practice

At December 31, 2015, Atlanta Company has a stock portfolio valued at $80,000. Its cost was $66,000. If the Securities Fair Value Adjustment (Available-for-Sale) has a debit balance of $4,000, which of the following journal entries is required at December 31, 2015? A. Fair Value Adjustment (available-for-sale)(dr) 14,000 Unrealized Holding Gain or Loss-Equity(cr) 14,000 B. Fair Value Adjustment (available-for-sale)(dr) 10,000 Unrealized Holding Gain or Loss-Equity(cr)10,000 C. Unrealized Holding Gain or Loss-Equity(dr) 14,000 Fair Value Adjustment (available-for-sale)(cr)14,000 D. Unrealized Holding Gain or Loss-Equity(dr) 10,000 Fair Value Adjustment (available-for-sale)(cr) 10,000

B. Fair Value Adjustment (available-for-sale)(dr) 10,000 Unrealized Holding Gain or Loss-Equity(cr)10,000

The recording of convertible bonds at the date of issue is the same as the recording of straight debt issues. (t/f)

true

Elmer Corporation has $1,800,000 of short-term debt it expects to retire with proceeds from the sale of 50,000 shares of common stock. If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from the current liabilities? a. $1,000,000 b. $1,800,000 c. $800,000 d. $0

a. $1,000,000 50,000 share x $20 per share = $1,000,000

On January 1, 2015, Reston Company purchased 25% of Ace Corporation's common stock; no goodwill resulted from the purchase. Reston appropriately carries this investment at equity and the balance in Reston's investment account was $1,120,000 at December 31, 2015. Ace reported net income of $700,000 for the year ended December 31, 2015, and paid common stock dividends totaling $280,000 during 2015. How much did Reston pay for its 25% interest in Ace? a. $1,015,000. b. $1,190,000. c. $1,225,000. d. $1,365,000.

a. $1,015,000 ???

Jump Corporation has $2,500,000 of short-term debt it expects to retire with proceeds from the sale of 85,000 shares of common stock. If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what about of short-term debt could be excluded from current liabilities? a. $1,700,000 b. $2,500,000 c. $800,000 d. $0

a. $1,700,000 85,000 x $20

Colson Inc. declared a $320,000 cash dividend. It currently has 12,000 shares of 7% $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How much cash will Colson distribute to the common stockholder? a. $152,000 b. $168,000 c. $236,000 d. none

a. $152,000 12000 x 7% x 100 = 84,000 per year 320,000 - (84,000 x 2) = 152,000

Gibbs Corporation owned 20,000 shares of Oliver Corporation's $5 par value common stock. These shares were purchased in 2011 for $180,000. On September 15, 2015, Gibbs declared a property dividend of one share of Oliver for every ten shares of Gibbs held by a stockholder. On that date, when the market price of Oliver was $28 per share, there were 180,000 shares of Gibbs outstanding. What NET reduction in retained earnings would result from this property dividend? a. $162,000 b. $504,000 c. $171,000 d. $342,000

a. $162,000 FMV: (180,000/10) x 28 = $504,000 Cost: 180,000 x 18/20 = $162,000 504,000 - (504,000 - 162,000) = 162,000

During 2015, Greta Company earned net income of $212,000 which included depreciation expense of $39,000. In addition, the company experienced the following changes in the account balances listed below: accounts receivable $6,000 decrease accounts payable $22,500 increase prepaid expenses $16,500 decrease inventory $18,000 increase accrued liabilities $12,000 decrease Based upon this information, what amount will be shown for net cash provided by operating activities for 2015? a. $266,000 b. $252,500 c. $162,500 d. $153,500

a. $266,000 $212,000 + $39,000 + $6,000 + $22,500 + $16,500 - $18,000 - $12,000 = $266,000

Net cash flow from operating activities for 2015 for Spencer Corporation was $400,000. The following items are reported on the financial statements for 2015: Cash dividends paid on common stock $20,000 Depreciation and amortization 12,000 Increase in accounts receivables 24,000 Based on the information above, Spencer's net income for 2015 was a. $412,000. b. $396,000. c. $364,000. d. $356,000.

a. $412,000 X + $12,000 - $24,000 = $400,000; X = $412,000

In order to retain certain key executives, Jensen Corporation granted them incentive stock options on December 31, 2014. 90,000 options were granted at an option price of $35 per share. Market prices of the stock were as follows: December 31, 2015 $46 per share December 31, 2016 $51 per share The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2015. The Black-Scholes option pricing model determines total compensation expense to be $900,000. What amount of compensation expense should Jensen recognize as a result of this plan for the year ended December 31, 2015 under the fair value method? a. $450,000. b. $900,000. c. $990,000. d. $3,150,000.

a. $450,000 900,000 / 2 = 450,000

On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. Bond interest expense reported on the December 31, 2014 income statement of Macklin Corporation would be: a. $46,000 b. $50,000 c. $54,000 d. $92,000

a. $46,000 Interest expense: 4000000*5/100*3/12 = $50000 Amortizing value: 4000000*4/100*1/10*3/12 = 4000 Total interest expense charged to Income statement = $46,000

The stockholders' equity section of Gunkel Corporation as of December 31, 2014, was as follows: Common stock, par value $2; authorized 20,000 shares; issued and outstanding 10,000 shares $20,000 Paid-in capital in excess of par $30,000 Retained earnings $95,000 $145,000 On March 1, 2015, the board of directors declared a 15% stock dividend, and accordingly 1,500 additional shares were issued. On March 1, 2015, the fair value of the stock was $6 per share. For the two months ended February 28, 2015, Gunkel sustained a net loss of $15,000. What amount should Gunkel report as retained earnings as of March 1, 2015? a. $71,000. b. $77,000. c. $81,000. d. $87,000.

a. $71,000 $95,000-$15,000-(1,500 x $6) = 71,000

Equipment that cost $525,000 and had a book value of $234,000 was sold for $270,000. Data from the comparative balance sheets are: 12/31/15 12/31/14 Equipment- $3,240,000 $2,925,000 Accumulated Depreciation- $990,000 $855,000 Equipment purchased during 2015 was a. $840,000. b. $525,000. c. $315,000. d. $549,000.

a. $840,000 $3,240,000 - $2,925,000 + $525,000 = $840,000 *make a t-chart

A company issues $10,000,000, 7.8%, 20-year bond to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $9,802,072. Using effective-interest amortization, what will the carrying value of the bonds be on December 31, 2014 balance sheet? a. $9,806,321 b. $10,000,000 c. $9,812,563 d. $9,804,155

a. $9,806,321

Direct costs incurred to sell stock such a underwriting costs should be accounted for as 1. a reduction of additional paid-in-capital 2. an expense of the period in which the stock is issued 3. an intangible asset a. 1 b. 2 c. 3 d. 1 or 3

a. 1

In computing depreciation of a leased asset (that remains in the ownership of the lessor at the end of the lease), the lessee should subtract a. a guaranteed residual value and depreciate over the term of the lease. b. an unguaranteed residual value and depreciate over the term of the lease. c. a guaranteed residual value and depreciate over the life of the asset. d. an unguaranteed residual value and depreciate over the life of the asset.

a. a guaranteed residual value and depreciate over the term of the lease.

Koehn Corporation accounts for its investment in the common stock of Sells Company under the equity method. Koehn Corporation should ordinarily record a cash dividend received from Sells as a. a reduction of the carrying value of the investment. b. additional paid-in capital. c. an addition to the carrying value of the investment. d. dividend income.

a. a reduction of the carrying value of the investment.

Porter Corp. purchased its own stock on January 1, 2014 for $20,000 and debited the treasury account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from a. additional paid-in-capital - treasury stock to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings b. additional paid-in-capital - treasury stock without regard at to whether or not there have been previous net "gains" from sales of the same class of stock included therein c. retained earnings d. net income

a. additional paid-in-capital - treasury stock to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings

Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? a. authorized shares b. issued shares c. unissued shares d. outstanding shares

a. authorized shares

Fogel Co. has $3,000,000 of 8% convertible bonds outstanding. Each $1,000 bond is convertible into 30 shares of $30 par value common stock. The bonds pay interest on January 31 and July 31. On July 31, 2014, the holders of $960,000 bonds exercised the conversion privilege. On that date the market price of the bonds was 105 and the market price of the common stock was $36. The total unamortized bond premium at the date of conversion was $210,000. Fogel should record, as a result of this conversion, a a. credit of $163,200 to Paid-in Capital in Excess of Par. b. credit of $144,000 to Paid-in Capital in Excess of Par. c. credit of $67,200 to Premium on Bonds Payable. d. loss of $9,600.

a. credit of $163,200 to Paid-in Capital in Excess of Par. BP= 960,000 premium= 210,000 x 960,000/3,000,000 = 67,200 common stock issued= (960,000 x 30/1,000) x 30 =864,000 paid-in-capital = 960,000+67,200-864,000 = 163,200

An available-for-sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a a. debit to debt investments b. debit to the discount account c. debit to interest revenue d. none of these

a. debit to debt investments

The issuer of a 5% common stock dividend to common stockholders should transfer from retained earnings to paid-in capital an amount equal to the a. fair value of the shares issued b. book value of the shares issued c. minimum legal requirements d. par or stated value of the shares issued.

a. fair value of the shares issued

The date on which to measure the compensation element in a stock option granted to a corporate employee ordinarily is the date on which the employee a. is granted the option b. has performed all conditions precedent to exercising the option c. may first exercise the option d. exercises the option

a. is granted the option

Fleming Company provided the following information on selected transactions during 2015: Dividends paid to preferred stockholders $ 250,000 Loans made to affiliated corporations 700,000 Proceeds from issuing bonds 800,000 Proceeds from issuing preferred stock 1,050,000 Proceeds from sale of equipment 400,000 Purchases of inventories 1,200,000 Purchase of land by issuing bonds 300,000 Purchases of treasury stock 600,000 The net cash provided (used) by investing activities during 2015 is a. $(600,000) b. $(300,000) c. $100,000 d. $400,000

b. $(300,000) $400,000 - $700,000

On January 1, Martinez Inc. issued $5,000,000, 11% bonds for $5,325,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report unamortized bond premium of: a. $308,550 b. $307,500 c. $289,250 d. $275,000

b. $307,500 Bond amortization = 5,325,000 @10% = $532,500 interest expense = $5,000,000@11% = $550,000 Amortization = $550,000 - 532,500 = $17,500 unamortized = 325,000 - 17,500 = $307,500

Venible Newspapers sold 6,000 of annual subscriptions (that provide a monthly paper delivery) at $125 each on June 1. How much unearned revenue will exist as of December 31? a. $437,500 b. $312,500 c. $375,000 d. $750,000

b. $312,500 6,000 x 125 x 5/12 = 312,500

*Craig borrowed $350,000 on October 1, 2014 and is required to pay $360,000 on March 1, 2015. What amount is the note payable recorded at on October 1, 2014 and how much interest is recognized from October 1 to December 31, 2014? a. $360,000 and $0 b. $350,000 and $6,000 c. $350,000 and $0 d. $360,000 and $10,000

b. $350,000 and $6,000 interest expense: ($360,000 - $350,000) x 3/5 = $6,000

Equipment that cost $525,000 and had a book value of $234,000 was sold for $270,000. Data from the comparative balance sheets are: 12/31/15 12/31/14 Equipment- $3,240,000 $2,925,000 Accumulated Depreciation- $990,000 $855,000 Depreciation expense for 2015 was: a. $462,000. b. $426,000. c. $81,000. d. $54,000

b. $426,000 $990,000 - $855,000 + ($525,000 - $234,000) = $426,000 *make a t-chart

On December 1, 2014, Lester Company issued at 103, five hundred of its 9%, $1,000 bonds. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Lester's common stock. On December 1, 2014, the market value of the bonds, without the stock warrants, was 95, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be a. $484,100 b. $489,250 c. $500,000 d. $515,000

b. $489,250 market value: (500 x 1000 x .95) + (500 x 50) = 500,000 issue price: 500 x 1000 x 1.03 = 515,000 carrying value: ((500,000 x .95)/500,000) x 515,000 = 489,250

Litke Corporation issued at a premium of $5,000 a $100,000 bond issue convertible into 2,000 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $2,000, the market value of the bonds is $110,000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds? a. $65,000 b. $62,000 c. $72,000 d. $60,000

b. $62,000 book value: 100,000 + (5,000 - (5,000 - 2,000)) = 102,000 Convertible: 2,000 x 20 = 40,000 paid-in capital: 102,000 - 40,000 = 62,000

Wooten Co. is being sued for illness caused to local residents a a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Wooten's lawyer states that it is probable that Wooten will lose the suit and be found liable for a judgment costing Wooten anywhere from $1,600,000 to $8,000,000. However, the lawyer states that the most probable cost is $4,800,000. As a result of the above facts, Wooten should accrue... a. a loss contingency of $1,600,000 and disclose an additional contingency of up to $6,400,000 b. a loss contingency of $4,800,000 and disclose an additional contingency of up to $3,200,000 c. a loss contingency of $4,800,000 but *not* disclose any additional contingency d. no loss contingency but disclose a contingency of $1,600,000 to $8,000,000

b. a loss contingency of $4,800,000 and disclose an additional contingency of up to $3,200,000 The most probable cost is what would be accrued but disclose additional

Which of the following sets of conditions would give rise to the accrual of a contingency under current generally accepted accounting principles? a. amount of loss is reasonably estimable and event occurs frequently b. amount of loss is reasonably estimable and occurrence of event is probable c. event is unusual in nature and occurrence of event if probable d. event is unusual in nature and event occurs frequently

b. amount of loss is reasonably estimable and occurrence of event is probable

A corporation declared a dividend, a portion of which was liquidating. How would this distribution affect each of the following? a. apic: decrease; retained earnings: no effect b. apic: decrease; retained earnings: decrease c. apic: no effect; retained earnings: decrease d. apic: no effect; retained earnings: no effect

b. apic: decrease; retained earnings: decrease

When a company has acquired a "passive interest" in another corporation, the acquiring company should account for the investment a. by using the equity method b. by using the fair value method c. by using the effective interest method d. by consolidation

b. by using the fair value method

Kant Corporation retires its $300,000 face value bonds at 102 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $288,750. The entry to record the redemption will include a a. credit of $11,250 to loss on bond redemption b. credit of $11,250 to discount on bonds payable c. debit of $17,250 to gain on bond redemption d. debit of $16,000 to premium on bonds payable

b. credit of $11,250 to discount on bonds payable 300,000 - 288,750 = 11,250

*The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding a. increases common stock outstanding and increases total stockholders' equity b. decreases retained earnings but does not change total stockholders' equity c. may increase or decrease paid-in-capital in excess of par but does not change total stockholders' equity d. increases retained earnings and increases total stockholders' equity

b. decreases retained earnings but does not change total stockholders' equity

The correct reporting value is a. available for sale at amortized cost b. held to maturity at amortized cost c. held to maturity at fair value d. none of these

b. held to maturity at amortized

To record an asset retirement obligation (ARO), the cost associated with the ARO is... a. expensed b. included in the carrying amount of the related long-lived asset. c. included in a separated account. d. capitalized over the asset's useful life.

b. included in the carrying amount of the related long-lived asset.

When a corporation issues its capital stock in payment for services, the *least* appropriate basis for recording the transaction is the a. market value of the services received b. par value of the shares issued c. market value of the shares issued d. any of these provides an appropriate basis for recording the transaction

b. par value of the shares issued

The cumulative feature of preferred stock a. limits the amount of cumulative dividends to the par value of the preferred stock b. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common stockholders c. means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which time it can be converted into common stock d. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the stock in place of the cash dividends

b. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common stockholders

Which dividends do *not* reduce stockholders' equity? a. cash dividends b. stock dividends c. property dividends d. liquidating dividends

b. stock dividends since stock also effects retained earnings

Which of the following is not true about the discount on short-term notes payable? a. the discount on notes payable account has a debit balance b. the discount on notes payable account should be reported as an asset on the balance sheet c. when there is a discount on a note payable, the effective interest rate is higher than the stated rate d. discount on notes payable is a contra account

b. the discount on notes payable account should be reported as an asset on the balance sheet

Reich, inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issues at a premium, this indicates that a. the market rate of interest exceeded the nominal (stated) rate b. the nominal rate of interest exceeded the market rate c. the market and nominal rates coincided d. no necessary relationship exists between the two rates

b. the nominal rate of interest exceeded the market rate

Gannon Company acquired 10,000 shares of its own common stock at $20 per share on February 5, 2014, and sold 5,000 of these shares at $27 per share on August 9, 2015. The fair value of Gannon's common stock was $24 per share at December 31, 2014, and $25 per share at December 31, 2015. The cost method is used to record treasury stock transactions. What account(s) should Gannon credit in 2015 to record the sale of 5,000 shares? a. treasury stock for $135,000 b. treasury stock for $100,00 and paid-in capital from treasury stock for $35,000 c. treasury stock for $100,00 and retained earnings for $35,000 d. treasury stock for $120,000 and retained earnings for $15,000

b. treasury stock for $100,00 and paid-in capital from treasury stock for $35,000 5000 x 20 = 100,000 5000 x (27-20) = 35,000

In 2014, Hobbs Corp. acquired 12,000 shares of its own $1 par value common stock at $18 per share. In 2015, Hobbs issued 8,000 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 2015 to record the issuance of the 6,000 shares? a. treasury stock: $144,000; retained earnings: $140,000 b. treasury stock: $144,000; apic: $56,000 c. apic: $192,000; common stock: $8,000 d. apic: $136,000; retained earnings: $56,000; common stock: $8,000

b. treasury stock: $144,000; apic: $56,000 18 x 8,000 = $144,000 (25-18) x 8,000 = $56,000 *debit cash $200,000

Hill Corp. had 600,000 shares of common stock outstanding on January 1, issued 900,000 shares on July 1, and had income applicable to common stock of $1,470,000 for the year ending December 31, 2014. Earnings per share of common stock for 2014 would be a. $2.45. b. $1.16. c. $1.40. d. $1.64.

c. $1.40 600,000 x 6/12 = 300,000 (600,000+900,000=1,500,000) 1,500,000 x 6/12 = 750,000 300,000 + 750,000 = 1,050,000 1,470,000/1,050,000=1.40

At December 31, 2014, Emley Company had 1,200,000 shares of common stock outstanding. On October 1, 2015, an additional 400,000 shares of common stock were issued. In addition, Emley had $10,000,000 of 6% convertible bonds outstanding at December 31, 2014, which are convertible into 800,000 shares of common stock. No bonds were converted into common stock in 2015. The net income for the year ended December 31, 2015, was $3,750,000. Assuming the income tax rate was 30%, what should be the diluted earnings per share for the year ended December 31, 2015, rounded to the nearest penny? a. $1.59 b. $2.07 c. $1.99 d. $2.88

c. $1.99 ?????? weighted average shares: (1200000 x 9 /12) + (400000 x 3 / 12) + (800000 x 12 / 12) = 1,800,000 basic: 3,750,000/1,800,000 = 2.08 diluted: ((10,000,000 x 6%) (1-.3)) / 800,000 = .53

On January 2, 2015, Worth Co. issued at par $1,000,000 of 7% convertible bonds. Each $1,000 bond is convertible into 20 shares of common stock. No bonds were converted during 2015. Worth had 200,000 shares of common stock outstanding during 2015. Worth's 2015 net income was $450,000 and the income tax rate was 30%. Worth's diluted earnings per share for 2015 would be (rounded to the nearest penny): a. $2.50. b. $2.27. c. $2.25. d. $2.36.

c. $2.25

In preparing Titan Inc.'s statement of cash flows for the year ended December 31, 2015, the following amounts were available: Collect Note Receivable: $410,000 Issue Bonds Payable: $426,000 Purchase Treasury Stock: $200,000 What amount should be reported on Titan, Inc.'s statement of cash flows for financing activities? a. $16,000 b. $836,000 c. $226,000 d. $210,000

c. $226,000 $426,000 - $200,000 = $226,000

December 31, 2014, Hancock Company had 500,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 100,000 of which were issued on October 1, 2014. Net income for the year ended December 31, 2014, was $1,360,000. What should be Hancock's 2014 earnings per common share, rounded to the nearest penny? a. $2.69 b. $3.40 c. $3.20 d. $3.03

c. $3.20 400,000 x 9/12 = 300,00 500,000 x 3/12 = 125,000 weighted average= 425,000 3,200,000/425,000 = 3.20

An investor has an investment in stocks. Identify the proper recognition of regular cash dividends received by the investor under the fair market value method and equity method. a. FMV method: income; equity method: income b. FMV method: reduction of the investment; equity method: reduction of the investment c. FMV method: income; equity method: reduction of the investment d. FMV method: reduction of the investment; Equity method: income

c. FMV method: income; equity method: reduction of the investment

Which of the following is a current liability? a. preferred dividends in arrears b. a dividend payable in the form of additional shares of stock c. a cash dividend payable to preferred stockholders d. all of these answers

c. a cash dividend payable to preferred stockholders

Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes a. a debit to Held-to-Maturity Securities at $300,000. b. a credit to Premium on Investments of $15,000. c. a debit to Held-to-Maturity Securities at $315,000. d. None of these answers are correct.

c. a debit to Held-to-Maturity Securities at $315,000. the company paid $315,000 to acquire the securities

Compensation expense resulting from a compensatory stock option plan is generally a. recognized in the period of exercise b. recognized in the period of grant. c. allocated to the periods benefited by the employee's required service d. allocated over the periods of the employee's service life to retirement

c. allocated to the periods benefited by the employee's required service

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following if added to net income to compute cash provided by/used by operating activities? a. increase in account receivable b. gain on sale of land c. amortization of patent d. all of these are added to net income to arrive at cash flow from operating activities

c. amortization of patent a and b would both decrease

Debt securities acquired by a corporation are reported at fair value by recognizing unrealized holding gains or losses that are included in other comprehensive income and as a separate component of stockholders' equity are a. held-to-maturity debt securities b. trading debt securities c. available-for-sale debt securities d. never-sell debt securities

c. available-for-sale debt securities

If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a a. debit to interest payable b. credit to interest receivable c. credit to interest expense d. debit to unearned interest

c. credit to interest expense

What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively? a. decrease and no effect b. increase and no effect c. decrease and increase d. increase and decrease

c. decrease and increase

Equipment which cost $213,000 and had depreciation of $114,000 was sold for $111,000. This transaction should be shown on the statement of cash flows (indirect method) as a(n): a. addition to net income of $12,000 and a $111,000 cash inflow from financing activities. b. deduction from net income of $12,000 and $99,000 cash inflow from investing activities c. deduction from net income of $12,000 and a $111,000 cash inflow from investing activities d. addition to net income of $12,000 and a $99,000 cash inflow from financing activities

c. deduction from net income of $12,000 and a $111,000 cash inflow from investing activities

Which of the following best describes the accrual method of accounting for warranty costs? a. expensed when paid b. expensed when warranty claims are certain c. expensed based on estimate in year of sale d. expensed when incurred

c. expensed based on estimate in year of sale

Investments in debt securities should be recorded on the date of acquisition at a. lower of cost or market b. market value c. market value plus brokerage fees and other costs incident to purchase d. face value plus brokerage fees and other costs incident to the purchase

c. market value plus brokerage fees and other costs incident to purchase

With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure? a. common stock, preferred stock, and convertible securities outstanding in lots of even thousands b. earnings derived from one primary line of business c. ownership interest consisting solely of common stock d. none of these

c. ownership interest consisting solely of common stock

Which of the following is shown on a statement of cash flows? a. a stock dividend b. a stock split c. purchase of treasury stock d. none of these

c. purchase of treasury stock

Xanthe Corporation had the following transactions occur in the current year: 1. Cash sale of merchandise inventory. 2. Sale of delivery truck at book value. 3. Sale of Xanthe common stock for cash. 4. Issuance of a note payable to a bank for cash. 5. Sale of a security held as an available-for-sale investment. 6. Collection of loan receivable. How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year? a. Five items. b. Four items. c. Three items. d. Two items.

c. three items

On October 1, 2014 Macklin Corporation issued 5%, 10-year bonds with a face value of $4,000,000 at 104. Interest is paid on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis. The entry to record the issuance of the bonds would include a *credit* of a. $160,000 to Interest expense b. $160,000 to bonds payable c. $3,840,000 to bonds payable d. $160,000 to premium on bonds payable

d. $160,000 to premium on bonds payable

Richman Company purchased $900,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2014, with interest payable on July 1 and January 1. The bonds sold for $937,422 at an effective interest rate of 7%. Using the effective interest method, Richman Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2014 and December 31, 2014 by the amortized premiums of $3,186 and $3,294, respectively. At December 31, 2014, the fair value of the Carlin, Inc. bonds was $954,000. What should Richman Company report as other comprehensive income and as a separate component of stockholders' equity? A. $0 B. $6,480 C. $16,578 D. $23,058

d. $23,058

Slack borrowed $320,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31? a. $0 b. $38,400 c. $25,600 d. $28,800

d. $28,800 $320,000 x .12 x 9/12 = 28,800

Kramer Company's trading securities portfolio which is appropriately included in current assets is as follows. The fair market value adjustment - trading account has a $5,000 debit balance from 2013. Fair Unrealized Cost Value Gain (Loss) Catlett Corp. $260,000 $205,000 $(55,000) Lyman, Inc. 245,000 265,000 20,000 $505,000 $470,000 $(35,000) Ignoring income taxes, what should be reported in net income in Kramer's 2014 income statement? a. $0 b. $40,000 gain c. $35,000 loss d. $40,000 loss

d. $40,000 loss

During 2014 Logic Company purchased 8,000 shares of Midi, Inc. for $30 per share. The investment was classified as a trading security. During the year Logic Company sold 2,000 shares of Midi, Inc. for $35 per share. At December 31, 2014 the market price of Midi, Inc.'s stock was $28 per share. What is the total amount of gain/(loss) that Logic Company will report in its income statement for the year ended December 31, 2014 related to its investment in Midi, Inc. stock? a. ($16,000) b. $10,000 c. ($6,000) d. ($2,000)

d. ($2,000) unrealized loss: 6,000 x ($30-$28) = 12,000 gain on sale: 2,000 x ($35-$30) = 10,000

Which of the following would not be included in the Lease Receivable account? a. Guaranteed residual value b. Unguaranteed residual value c. A bargain purchase option d. All would be included

d. All would be included

Which of the following is an advantage of captive leasing companies over the other players in the leasing market? a. They have access to low-cost funds allowing them to purchase assets at lower cost. b. They are good at developing innovative contracts that help avoid accounting problems. c. They provide leasing arrangements for a wider range of products than the parent company's product line. d. They have the point-of-sale advantage in finding leasing customers.

d. They have the point-of-sale advantage in finding leasing customers.

The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as a. an adjustment to the cost basis of the asset obtained by the debt issue. b. an amount that should be considered a cash adjustment to the cost of any other debt issued over the remaining life of the old debt instrument. c. an amount received or paid to obtain a new debt instrument and, as such, should be amortized over the life of the new debt d. a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption

d. a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption

An early extinguishment of bonds payable, which were originally issued at a premium, is made by purchase of the bonds between interest dates. At the time of reaquisition a. any costs of issuing the bonds must be amortized up to the purchase date b. the premium must be amortized up to the purchase date c. interest must be accrued from the last interest date to the purchase date d. all of these

d. all of these

A corporation issues bonds with detachable warrants. The amount to be recorded as paid-in capital is preferably a. zero b. calculated by the excess of the proceeds over the face amount of the bonds. c. equal to the market value of the warrants d. based on the relative market value of the two securities

d. based on the relative market value of the two securities

*A company buys an oil rig for $3,000,000 on January 1, 2014. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $600,000 (present value at 10% is $231,330). 10% is an appropriate interest rate for this company. What expense should be recorded for 2014 as a result of these events? a. depreciation expense of $360,000 b. depreciation expense of $300,000 and interest expense of $23,133 c. depreciation expense of $300,000 and interest expense of $60,000 d. depreciation expense of $323,133 and interest expense of $23,133

d. depreciation expense of $323,133 and interest expense of $23,133 ($3,000,000+$231,330)/10 = $323,133 $231,330 x 10% = $23,133

Which of these is not included in an employer's payroll tax expense? a. FICA (social security) taxes b. federal unemployment taxes c. state unemployment taxes d. federal income tax

d. federal income tax

When the interest payment dates on a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be a. decreased by accrued interest from June 1 to November 1. b. decreased by accrued interest from May 1 to June 1. c. increased by accrued interest from June 1 to November 1. d. increased by accrued interest from May 1 to June 1.

d. increased by accrued interest from May 1 to June 1.

Liabilities are a. any account having credit balances after closing entries are made b. obligations that are not probable but can be estimated c. obligations to transfer ownership shares to the other entities in the future d. obligations arising from past transactions that are payable in assets or services in the future

d. obligations arising from past transactions that are payable in assets or services in the future

The assumed conversion (or exercise) of antidilutive securities a. should be included in the computation of diluted earnings per share but not basic earnings per share b. are those whose inclusion in earnings per share computations would cause basic earnings per share to exceed diluted earnings per share c. include stock options and warrants whose exercise price is less than the average market price of common stock d. should be ignored in all earnings per share calculations

d. should be ignored in all earnings per share calculations

A bond may only be issued on an interest payment date. (t/f)

false

When a bond is sold at a premium, the interest expense recorded at each payment date is greater than the cash payment (t/f).

false