Far 3 Exam #2
The net cash provided (used) by financing activities was a. $ -0-. b. $(20,000). c. $(40,000). d. $60,000.
c. $(40,000).
On December 1, 2018, Abel Corporation exchanged 50,000 shares of its $10 par value common stock held in treasury for a used machine. The treasury shares were acquired by Abel at a cost of $40 per share, and are accounted for under the cost method. On the date of the exchange, the common stock had a fair value of $55 per share (the shares were originally issued at $30 per share). As a result of this exchange, Abel's total stockholders' equity will increase by Select one: a. $2,000,000 b. $ 500,000 c. $2,750,000 d. $2,250,000
c. $2,750,000
The balance sheet data of Kohler Company at the end of 2011 and 2010 follow: 2011 2010 Cash $ 50,000 $ 70,000 Accounts receivable (net) 120,000 90,000 Merchandise inventory 140,000 90,000 Prepaid expenses 20,000 50,000 Buildings and equipment 180,000 150,000 Accumulated depreciation—buildings and equipment (36,000) (16,000) Land 180,000 80,000 Totals $654,000 $514,000 Accounts payable $136,000 $110,000 Accrued expenses 24,000 36,000 Notes payable—bank, long-term 80,000 Mortgage payable 60,000 Common stock, $10 par 418,000 318,000 Retained earnings (deficit) 16,000 (30,000) $654,000 $514,000 Land was acquired for $100,000 in exchange for common stock, par $100,000, during the year; all equipment purchased was for cash. Equipment costing $10,000 was sold for $4,000; book value of the equipment was $8,000 and the loss was reported as an ordinary item in net income. Cash dividends of $20,000 were charged to retained earnings and paid during the year; the transfer of net income to retained earnings was the only other entry in the Retained Earnings account. In the statement of cash flows for the year ended December 31, 2011, for Naley Company: _____ 7. (53) The net cash provided by operating activities was a. $52,000. b. $66,000. c. $56,000. d. $48,000.
c. $56,000.
When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities? a. Increase in accounts receivable. b. Gain on sale of land. c. Amortization of patent. d. All of the above are added to net income to arrive at cash flow from operating activities.
c. Amortization of patent.
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
The primary purpose of the statement of cash flows is to provide information a. about the operating, investing, and financing activities of an entity during a period. b. that is useful in assessing cash flow prospects. c. about the cash receipts and cash payments of an entity during a period. d. about the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.
c. about the cash receipts and cash payments of an entity during a period.
n computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is the Select one: a. preferred dividends in arrears times (one minus the income tax rate) b. annual preferred dividend times (one minus the income tax rate). c. annual preferred dividend d. preferred dividends in arrears
c. annual preferred dividend
n applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants Select one: a. are not used to calculate the number of common shared repurchased at the average market price, when computing diluted earnings per share b. are disregarded in the computation of earnings per share if the exercise price of the options and warrants is less than the ending market price of common stock. c. are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share d. are added, net of tax, to the numerator of the calculation for diluted earnings per share
c. are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share
Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders Select one: a. are entitled to a dividend every year in which the business earns a profit b. have the rights to specific assets of the business c. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership d. can negotiate individual contracts on behalf of the enterprise
c. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership
The major difference between convertible debt and stock warrants is that upon exercise of the warrants Select one: a. no paid-in capital in excess of par can be a part of the transaction b. the stock involved is restricted and can only be sold by the recipient after a set period of time c. the holder has to pay a certain amount of cash to obtain the shares d. the stock is held by the company for a defined period of time before they are issued to the warrant holder
c. the holder has to pay a certain amount of cash to obtain the shares
Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2017. During 2018, no additional common stock was issued. On January 1, 2018, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2018, Fultz declared and paid $180,000 cash dividends on the common stock and $150,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2018, was $960,000. What should be Fultz's 2018 earnings per common share, rounded to the nearest penny? Select one: a. $ 1.15 b. $ 2.10 c. $3.20 d. $ 2.70
d. $ 2.70
The net cash provided (used) by investing activities was a. $26,000. b. $(40,000). c. $(136,000). d. $(36,000).
d. $(36,000).
Norton Company issues 4,000 shares of its $5 par value common stock having a fair value of $25 per share and 6,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $205,000. What amount of the proceeds should be allocated to the preferred stock? Select one: a. $167,727 b. $93,181 c. $128,125 d. $111,818
d. $111,818
Chang Corporation issued $6,000,000 of 9%, ten-year convertible bonds on July 1, 2017 at 96.1 plus accrued interest. The bonds were dated April 1, 2017 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2018, $1,200,000 of these bonds were converted into 500 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion. What should be the amount of the unamortized bond discount on April 1, 2018 relating to the bonds converted? Select one: a. $23,400 b. $44,400 c. $46,800 d. $43,200
d. $43,200
On July 1, 2018, an interest payment date, $150,000 of Parks Co. bonds were converted into 3,000 shares of Parks Co. common stock each having a par value of $45 and a market value of $54. There is $6,000 unamortized discount on the bonds. Using the book value method, Parks would record Select one: a. a $12,000 increase in paid-in capital in excess of par b. no change in paid-in capital in excess of par c. a $18,000 increase in paid-in capital in excess of par d. a $9,000 increase in paid-in capital in excess of par
d. a $9,000 increase in paid-in capital in excess of par
Total stockholders' equity represents Select one: a. a claim to specific assets contributed by the owners b. only the amount of earnings that have been retained in the business c. the maximum amount that can be borrowed by a company d. a claim against a portion of the total assets of a company
d. a claim against a portion of the total assets of a company
Porter Corp. purchased its own par value stock on January 1, 2017 for $20,000 and debited the treasury stock 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 Select one: a. retained earnings b. net income c. additional paid-in capital without regard as to whether or not there have been previous net "gains" from sales of the same class of stock included therein. d. additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings
d. additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein; otherwise, from retained earnings
An executive pays no taxes at the time of exercise in a(an) Select one: a. stock appreciation rights plan b. Taxes would be paid in all of these c. nonqualified stock option plan d. incentive stock option plan
d. incentive stock option plan
Cash dividends are paid on the basis of the number of shares Select one: a. outstanding less the number of treasury shares b. issued c. authorized d. outstanding
d. outstanding
When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the Select one: a. market value of the services received b. The market value of the services received or the market value of the share issues c. market value of the shares issued d. par value of the shares issued
d. par value of the shares issued
The preemptive right of a common stockholder is the right to Select one: a. exclude preferred stockholders from voting rights b. share proportionately in corporate assets upon liquidation c. receive cash dividends before they are distributed to preferred stockholders d. share proportionately in any new issues of stock of the same class
D. Share proportionately in any new issues of stock of the same class
Farmer Corp. owned 20,000 shares of Eaton Corp. purchased in 2014 for $550,000. On December 15, 2017, Farmer declared a property dividend of all of its Eaton Corp. shares on the basis of one share of Eaton for every 10 shares of Farmer common stock held by its stockholders. The property dividend was distributed on January 15, 2018. On the declaration date, the aggregate market price of the Eaton shares held by Farmer was $900,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of Select one: a. $900,000 b. $0 c. $350,000 d. $550,000
a. $900,000
Compensation expense resulting from a compensatory stock option plan is generally Select one: a. allocated to the periods benefited by the employee's required service b. recognized in the period of the grant. c. allocated over the periods of the employee's service life to retirement d. recognized in the period of exercise
a. allocated to the periods benefited by the employee's required service
In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are Select one: a. considered outstanding at the beginning of the earliest year reported b. weighted by the number of months outstanding c. considered outstanding at the beginning of the year. d. weighted by the number of days outstandingweighted by the number of days outstanding
a. considered outstanding at the beginning of the earliest year reported
In January 2017, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2017, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares Select one: a. decreased total stockholders' equity b. decreased the number of issued shares c. increased total stockholders' equity d. did not change total stockholders' equity
a. decreased total stockholders' equity
) In reporting extraordinary transactions on a statement of cash flows (indirect method), the a. gross amount of an extraordinary gain should be deducted from net income. b. net of tax amount of an extraordinary gain should be added to net income. c. net of tax amount of an extraordinary gain should be deducted from net income. d. gross amount of an extraordinary gain should be added to net income.
a. gross amount of an extraordinary gain should be deducted from net income.
Proceeds from an issue of debt securities having stock warrants should not be allocated between debt and equity features when Select one: a. the warrants issued with the debt securities are nondetachable b. the allocation would result in a discount on the debt security c. the market value of the warrants is not readily available d. exercise of the warrants within the next few fiscal periods seems remote
a. the warrants issued with the debt securities are nondetachable
n order to retain certain key executives, Smiley Corporation granted them incentive stock options on December 31, 2017. 150,000 options were granted at an option price of $35per share. Market prices of the stock were as follows: December 31, 2018 $46 per share December 31, 2019 51 per share The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2018. The Black-Scholes option pricing model determines total compensation expense to be $1,500,000. What amount of compensation expense should Smiley recognize as a result of this plan for the year ended December 31, 2018 under the fair value method? Select one: a. $1,500,000 b. $ 750,000 c. $2,625,000 d. $1,650,000
b. $ 750,000
On March 1, 2018, Ruiz Corporation issued $2,000,000 of 8% nonconvertible bonds at 104, which are due on February 28, 2038. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase for $50 one share of Ruiz common stock, par value $25. The bonds without the warrants would normally sell at 95. On March 1, 2018, the fair value of Ruiz's common stock was $40 per share and the fair value of the warrants was $2.00. What amount should Ruiz record on March 1, 2018 as paid-in capital from stock warrants? Select one: a. $73,600 b. $104,000 c. $100,000 d. $85,200
b. $104,000
Anders, Inc., has 15,000 shares of 4%, $100 par value, cumulative preferred stock and 60,000 shares of $1 par value common stock outstanding at December 31, 2018. There were no dividends declared in 2016. The board of directors declares and pays a $110,000 dividend in 2017 and in 2018. What is the amount of dividends received by the common stockholders in 2018? Select one: a. $60,000 b. $40,000 c. $0 d. $110,000
b. $40,000
Stine Inc. had 1,000,000 shares of common stock issued and outstanding at December 31, 2017. On July 1, 2018 an additional 1,000,000 shares were issued for cash. Stine also had stock options outstanding at the beginning and end of 2018 which allow the holders to purchase 300,000 shares of common stock at $28 per share. The average market price of Stine's common stock was $35 during 2018. The number of shares to be used in computing diluted earnings per share for 2018 is Select one: a. 1,740,000 b. 1,560,000 c. 2,240,000 d. 2,060,000
b. 1,560,000
The following information is available for Barone Corporation: January 1, 2018 Shares outstanding 4,000,000 April 1, 2018 Shares issued 640,000 July 1, 2018 Treasury shares purchased 240,000 October 1, 2018 Shares issued in a 100% stock dividend 4,400,000 The number of shares to be used in computing earnings per common share for 2018 is Select one: a. 8,760,000 b. 8,720,000 c. 5,460,000 d. 9,041,600
b. 8,720,000
When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities? a. A change in interest payable b. A change in dividends payable c. A change in income taxes payable d. All of these are adjustments.
b. A change in dividends payable
Which dividends do not reduce stockholders' equity? Select one: a. Liquidating dividends b. Stock dividends c. Property dividends d. Cash dividends
b. Stock dividends
When computing diluted earnings per share, convertible bonds are Select one: a. assumed converted whether they are dilutive or antidilutive b. assumed converted only if they are dilutive c. ignored d. assumed converted only if they are antidilutive
b. assumed converted only if they are dilutive
Stockholders' equity is generally classified into two major categories: Select one: a. appropriated capital and retained earnings b. earned capital and contributed capital c. contributed capital and appropriated capital d. retained earnings and unappropriated capital
b. earned capital and contributed capital
According to the FASB, redeemable preferred stock should be Select one: a. included as a contra item in stockholders' equity b. included as a liability c. included in stockholders' equity d. included with common stock
b. included as a liability
Convertible bonds Select one: a. have priority over other indebtedness b. may be exchanged for equity securities c. are usually secured by a first or second mortgage d. pay interest only in the event earnings are sufficient to cover the interest
b. may be exchanged for equity securities
) A statement of cash flows typically would not disclose the effects of a. capital stock issued at an amount greater than par value. b. stock dividends declared. c. cash dividends paid. d. a purchase and immediate retirement of treasury stock.
b. stock dividends declared.
