ACC 304 Final Exam Help

Question 30

What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively?

Increase and decrease

Decrease and no effect

Increase and no effect

Decrease and increase

Question 29

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

a liability account.

retained earnings.

additional paid-in capital from stock warrants.

premium on bonds payable.

Question 28

An executive pays no taxes at the time of exercise in a(an)

incentive stock option plan.

stock appreciation rights plan.

nonqualified stock option plan.

taxes would be paid in all of these.

Question 27

A restricted stock award was granted at the beginning of 2015 calling for 3,000 shares of stock to be awarded to executives at the beginning of 2019. The fair value of one option was $20 at grant date. During 2017, 100 shares were forfeited because an executive left the firm. What amount of compensation expense is recognized for 2017?

$14,500

$13,500

$15,000

$14,000

Question 26

A firm has basic earnings per share (BEPS) of $1.29. If the tax rate is 30%, which of the following securities would be dilutive? 

Ten percent convertible bonds, issued at par, with each $1,000 bond convertible into 20 shares of common stock.

Cumulative 8%, $50 par preferred stock.

Seven percent convertible bonds, issued at par, with each $1,000 bond convertible into 40 shares of common stock.

Six percent, $100 par cumulative convertible preferred stock, issued at par, with each preferred share convertible into four shares of common stock.

Question 25

Crane Company had 201000 shares of common stock, 21000 shares of convertible preferred stock, and $607000 of 9% convertible bonds outstanding during 2018. The preferred stock is convertible into 40000 shares of common stock. During 2018, Crane paid dividends of $1 per share on the common stock and $2 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2018 was $359000 and the income tax rate was 35%. Diluted earnings per share for 2018 is (rounded to the nearest penny)

$1.47.

$1.36.

$1.40.

$1.56.

Question 24

Which dividends do not reduce stockholders' equity?

Cash dividends

Liquidating dividends

Stock dividends

Property dividends

Question 23

At the date of declaration of a small common stock dividend, the entry should not include

a credit to common stock dividend distributable.

a credit to Common Stock.

a credit to Paid-in Capital in Excess of Par.

a debit to Retained Earnings.

Question 22

Which of the following best describes a possible result of treasury stock transactions by a corporation?

May increase net income if the cost method is used.

May decrease but not increase net income.

May decrease but not increase retained earnings.

May increase but not decrease retained earnings.

Question 21

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

issued.

authorized.

outstanding.

outstanding less the number of treasury shares.

Question 20

Younger Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The liquidation value of the preferred is equal to its par value. The book value per share of the common stock is unaffected by

the declaration of a stock dividend on preferred payable in preferred stock when the market price of the preferred is equal to its par value.

the declaration of a stock dividend on common stock payable in common stock when the market price of the common is equal to its par value.

a 2-for-1 split of the common stock.

the payment of a previously declared cash dividend on the common stock.

Question 19

Waterway Industries had the following information in its financial statements for the years ended 2017 and 2018:

Cash dividends for the year 2018	$ 10000
Net income for the year ended 2018	92500
Market price of stock, 12/31/17	9
Market price of stock, 12/31/18	11
Common stockholders’ equity, 12/31/17	1586000
Common stockholders’ equity, 12/31/18	1980000
Outstanding shares, 12/31/18	156000
Preferred dividends for the year ended 2018	15000

What is the book value per share for Waterway Industries for the year ended 2018?

$12.53

$12.69

$10.17

$12.59

Question 18

In the recent year Bonita Industries had net income of $208000, interest expense of $49000, and tax expense of $90000. What was Bonita Industries's times interest earned for the year?

7.1

5.2

6.1

4.2

Question 17

On September 30, World Co. borrowed $1,000,000 on a 9% note payable. World paid the first of four quarterly payments of $264,200 when due on December 30. In its December 31, balance sheet, what amount should World report as note payable? 

$735,800

$825,800

$758,300

$750,000

Question 16

An example of an item which is not a liability is

advances from customers on contracts.

dividends payable in stock.

accrued estimated warranty costs.

the portion of long-term debt due within one year.

Question 15

The debt to assets ratio is computed by dividing

current liabilities by total assets.

long-term liabilities by total assets.

total assets by total liabilities.

total liabilities by total assets.

Question 14

The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the

bond indenture.

registered bond.

bond debenture.

bond coupon.

Question 13

The following information pertains to Camp Corp.'s issuance of bonds on July 1, 2017:

Face amount		$800,000
Term		10 years
Stated interest rate		6%
Interest payment dates		Annually on July 1
Yield		9%
		At 6%		At 9%
Present value of 1 for 10 periods		0.558		0.422
Future value of 1 for 10 periods		1.791		2.367
Present value of ordinary annuity of 1 for 10 periods		7.36		6.418

What should be the issue price for each $1,000 bond?

$864

$700

$807

$1,000

Question 12

An estimated loss from a loss contingency that is probable and for which the amount of the loss can be reasonably estimated should

be accrued by debiting an appropriated retained earnings account and crediting a liability account or an asset account.

be accrued by debiting an expense account and crediting a liability account or an asset account.

be accrued by debiting an expense account and crediting an appropriated retained earnings account.

not be accrued but should be disclosed in the notes to the financial statements.

Question 11

Which of the following is not a factor that is considered when evaluating whether or not to record a liability for pending litigation?

The type of litigation involved.

The probability of an unfavorable outcome.

Time period in which the underlying cause of action occurred.

The ability to make a reasonable estimate of the amount of the loss.

Question 10

The effective interest on a 12-month, zero-interest-bearing note payable of $560000, discounted at the bank at 10% is

21.45%.

11.11%.

10.00%.

9.09%.

Question 9

When is a contingent liability recorded?

When the future events will possibly occur and the amount can be reasonably estimated.

When the future events are probable to occur.

When the amount can be reasonably estimated.

When the future events are probable to occur and the amount can be reasonably estimated.

Question 8

The ratio of current assets to current liabilities is called the

acid-test ratio.

current asset turnover ratio.

current liability turnover ratio.

current ratio.

Question 7

Accrued liabilities are disclosed in financial statements by

a footnote to the statements.

an appropriation of retained earnings.

appropriately classifying them as regular liabilities in the balance sheet.

showing the amount among the liabilities but not extending it to the liability total.

Question 6

The right granted to all authors, painters, musicians, sculptors, and other artists for their creations and expressions is termed as a

copyright

trademark

patent

franchise

Question 5

Which of the following is a contract-related intangible assets?

Trademark

Copyright

Franchise

Patent

Question 4

A company reported $6 million of goodwill in last year's statement of financial position. How should the company account for the reported goodwill in the current year?

Determine whether the fair value of the reporting unit is greater than the carrying amount and report the recovery of any previous impairment in the income statement.

Perform a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value.

Determine whether the fair value of the reporting unit is greater than the carrying amount and report a gain on goodwill in the income statement.

Determine the current year's amortizable amount and report the current-year's amortization expense.

Question 3

Sheridan Corporation purchased a patent for $124500 on September 1, 2016. It had a useful life of 10 years. On January 1, 2018, Sheridan spent $26000 to successfully defend the patent in a lawsuit. Sheridan feels that as of that date, the remaining useful life is 5 years. What amount should be reported for patent amortization expense for 2018?

$26780.

$27610.

$21580.

$25120.

Question 2

Cullumber Company acquired a patent on an oil extraction technique on January 1, 2017 for $8100000. It was expected to have a 10 year life and no residual value. Cullumber uses straight-line amortization for patents. On December 31, 2018, the future cash flows expected from the patent were $1080000 per year for the next 8 years. The present value of these cash flows, discounted at Cullumber’s market interest rate, is $4500000. At what amount should the patent be carried on the December 31, 2018 balance sheet?

$4500000.

$8640000.

$6480000.

$8100000.

Question 1

Oriole Corporation acquired Linebrink Products on January 1, 2018 for $8500000, and recorded goodwill of $2000000 as a result of that purchase. At December 31, 2018, Linebrink Products had a fair value of $6800000. The net identifiable assets of the Linebrink (excluding goodwill) had a fair value of $6100000 at that time. What amount of loss on impairment of goodwill should Oriole record in 2018?

$1700000

$0

$1300000

$300000