Intermediate Accounting exam 1

Treasury Stock is debited upon:

repurchase of stock

The cumulative feature of preferred stock

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

Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from the date of issue. If the bonds were issued at a 99, this indicates that

the effective yield or market rate of interest exceeded the stated (nominal) rate.

On January 1, 2020, Ann Price loaned $187,825 to Joe Kiger. A zero-interest-bearing note (face amount, $250,000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2022. The prevailing rate of interest for a loan of this type is 10%. The present value of $250,000 at 10% for three years is $187,825. What amount of interest expense should Joe Kiger recognize in 2020?

$18,783

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 $2,940,000 for the year ending December 31, 2021. Earnings per share of common stock for 2021 would be

$2.80.

Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having an unknown fair value for a lump sum of $520,000. How much of the proceeds would be allocated to the common stock?

$250,000

On January 2, 2021, Worth Co. issued at par $2,000,000 of 5% convertible bonds. Each $1,000 bond is convertible into 10 shares of common stock. No bonds were converted during 2021. Worth had 200,000 shares of common stock outstanding during 2021. Worth's 2021 net income was $900,000 and the income tax rate was 30%. Worth's diluted earnings per share for 2021 would be (rounded to the nearest penny):

$4.41.

Stock warrants outstanding should be classified as

Paid-in capital-stock warrants

The conversion of preferred stock is recorded by the

book value method.

Kant Corporation retires its $500,000 face value bonds at 102 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $481,250. The entry to record the redemption will include a

credit of $18,750 to Discount on Bonds Payable.

Bond interest paid is equal to the

face amount of the bonds multiplied by the stated interest rate.

Cash dividends are paid on the basis of the number of shares

outstanding.