ACC 423 Final Exam

Rating A

1) 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

	A. [removed] reflected currently in income, but NOT as an extraordinary item.
	B. [removed] treated as an adjustment of additional paid-in capital.
	C. [removed] reflected currently in income as an extraordinary item.
	D. [removed] treated as a prior period adjustment.

2) The conversion of preferred stock may be recorded by the

	A. [removed] incremental method.
	B. [removed] par value method.
	C. [removed] book value method.
	D. [removed] market value method.

3) 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

	A. [removed] reflected currently in income, but NOT as an extraordinary item.
	B. [removed] treated as a direct reduction of retained earnings.
	C. [removed] reflected currently in income as an extraordinary item.
	D. [removed] treated as a prior period adjustment.

4) When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the

	A. [removed] market value of the services received.
	B. [removed] Any of these provides an appropriate basis for recording the transaction.
	C. [removed] par value of the shares issued.
	D. [removed] market value of the shares issued.

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

	A. [removed] pro forma method.
	B. [removed] either the proportional method or the incremental method.
	C. [removed] proportional method.
	D. [removed] incremental method.

ACC 423 Final Exam

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