Acc 423 Exam 2

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This work of ACC 423 Exam 2 comprises: 1) When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to 2) The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be 3) When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be 4) When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the 5) The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities An acceptable method of allocation is the 6) Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? 7) How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions? 8) Treasury shares are 9) When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? 10) When computing diluted earnings per share, convertible bonds are 11) In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding)If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)? 12) Antidilutive securities 13) At its date of incorporation, Wilson, Inc issued 100,000 shares of its $10 par common stock at $11 per share During the current year, Wilson acquired 20,000 shares of its common stock at a price of $16 per share and accounted for them by the cost method Subsequently, these shares were reissued at a price of $12 per share There have been no other issuances or acquisitions of its own common stock What effect does the reissuance of the stock have on the following accounts? Retained Earnings |Additional Paid-in Capital 14) A corporation declared a dividend, a portion of which was liquidatingHow would this distribution affect each of the following? Additional Paid-inCapital | Retained Earnings 15) How would the declaration and subsequent issuance of a 10% stock dividend by the issuer affect each of the following when the market value of the shares exceeds the par value of the stock? 16) A reclassification adjustment is reported in the 17) Which of the following is correct about the effective-interest method of amortization? 18) When investments in debt securities are purchased between interest payment dates, preferably the 19) When an investor's accounting period ends on a date that does NOT coincide with an interest receipt date for bonds held as an investment, the investor must 20) Which of the following is NOT a debt security? 21) Investments in debt securities should be recorded on the date of acquisition at 22) When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? 23) An investor has a long-term investment in stocks Regular cash dividends received by the investor are recorded as 24) BynerCorporation accounts for its investment in the common stock of YountCompany under the equity method Byner Corporation should ordinarily record a cash dividend received from Yount as 25) Use of the effective-interest method in amortizing bond premiums and discounts results in 26) Held-to-maturity securities are reported at 27) Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders' equity are 28) The accounting for fair value hedges records the derivative at its 29) Gains or losses on cash flow hedges are 30) All of the following statements regarding accounting for derivatives are correct EXCEPT that 31) The rationale for interperiod income tax allocation is to 32) Taxable income of a corporation differs from pretax financial income because of Permanent Differences | Temporary Differences 33) Which of the following situations would require interperiod income tax allocation procedures? 34) Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income? 35) At the December 31, 2007 balance sheet date, Garth Brooks Corporation reports an accrued receivable for financial reporting purposes but NOT for tax purposes. When this asset is recovered in 2008, a future taxable amount will occur and 36) Which of the following differences would result in future taxable amounts? 37) In a defined-contribution plan, a formula is used that 38) In accounting for a defined-benefit pension plan 39) In a defined-benefit plan, a formula is used that 40) A corporation has a defined-benefit plan. An accrued pension cost will result at the end of the first year if the 41) In accounting for a pension plan, any difference between the pension cost charged to expense and the payments into the fund should be reported as 42) The interest on the projected benefit obligation component of pension expense 43) Yeager Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Yeager should report a minimum liability at least equal to the 44) On January 1, 2008, Pratt Corp. adopted a defined-benefit pension plan. The plan's service cost of $300,000 was fully funded at the end of 2008. Prior service cost was funded by a contribution of $120,000 in 2008. Amortization of prior service cost was $48,000 for 2008. What is the amount of Pratt

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Business - Accounting E15-13 (a,b) (Stock Split and Stock Dividend) The common stock of Warner Inc. is currently selling at $110 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $70 per share. Five million shares are issued and outstanding. (a) How much is the debit to retained earnings if the board votes a 2-for-1 stock split? (b) Prepare the necessary journal entries if the board votes a 100% stock dividend. P15-1 (Equity Transactions and Statement Preparation) On January 5, 2010, Phelps Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $10 par value common stock. It then completed these transactions. Jan. 11 Issued 20,000 shares of common stock at $16 per share. Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the following assets: machinery with a fair market value of $50,000; a factory building with a fair market value of $160,000; and land with an appraised value of $270,000. July 29 Purchased 1,800 shares of common stock at $17 per share. (Use cost method.) Aug. 10 Sold the 1,800 treasury shares at $14 per share. Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend. Dec. 31 Closed the Income Summary account. There was a $175,700 net income. Instructions (a) Record the journal entries for the transactions listed above. (b) Prepare the stockholders’ equity section of Phelps Corporation’s balance sheet as of December 31, 2010. E16-20 (EPS: Simple Capital Structure) On January 1, 2010, Bailey Industries had stock outstanding as follows. 6% Cumulative preferred stock, $100 par value, issued and outstanding 10,000 shares $1,000,000 Common stock, $10 par value, issued and outstanding 200,000 shares 2,000,000 To acquire the net assets of three smaller companies, Bailey authorized the issuance of an additional 170,000 common shares. The acquisitions took place as shown below. Date of Acquisition Shares Issued Company A April 1, 2010 60,000 Company B July 1, 2010 80,000 Company C October 1, 2010 30,000 On May 14, 2010, Bailey realized a $90,000 (before taxes) insurance gain on the expropriation of investments originally purchased in 2000. On December 31, 2010, Bailey recorded net income of $300,000 before tax and exclusive of the gain. Instructions Assuming a 40% tax rate, compute the earnings per share data that should appear on the financial statements of Bailey Industries as of December 31, 2010. Assume that the expropriation is extraordinary. P16-7 (Computation of Basic and Diluted EPS) Charles Austin of the controller’s office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2011. Austin has compiled the information listed below. 1. The company is authorized to issue 8,000,000 shares of $10 par value common stock. As of December 31, 2010, 2,000,000 shares had been issued and were outstanding. 2. The per share market prices of the common stock on selected dates were as follows. Price per Share July 1, 2010 $20.00 January 1, 2011 21.00 April 1, 2011 25.00 July 1, 2011 11.00 August 1, 2011 10.50 November 1, 2011 9.00 December 31, 2011 10.00 3. A total of 700,000 shares of an authorized 1,200,000 shares of convertible preferred stock had been issued on July 1, 2010. The stock was issued at its par value of $25, and it has a cumulative dividend of $3 per share. The stock is convertible into common stock at the rate of one share of convertible preferred for one share of common. The rate of conversion is to be automatically adjusted for stock splits and stock dividends. Dividends are paid quarterly on September 30, December 31, March 31, and June 30. and so on.. Instructions (a) Determine the number of shares used to compute basic earnings per share for the year ended December 31, 2011. (b) Determine the number of shares used to compute diluted earnings per share for the year ended December 31, 2011. (c) Compute the adjusted net income to be used as the numerator in the basic earnings per share calculation for the year ended December 31, 2011.

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