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Acc 423 final exam

Acc 423 final exam






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    Acc 423 final exam Acc 423 final exam Document Transcript

    • 1) When convertible debt is retired by the issuer, any material difference between thecash acquisition price and the carrying amount of the debt should be2) The conversion of preferred stock may be recorded by the3) The conversion of preferred stock into common stock requires that any excess of thepar value of the common shares issued over the carrying amount of the preferred beingconverted should be4) When a corporation issues its capital stock in payment for services, the leastappropriate basis for recording the transaction is the5) The accounting problem in a lump sum issuance is the allocation of proceedsbetween the classes of securities. An acceptable method of allocation is the6) Which of the following represents the total number of shares that a corporation mayissue under the terms of its charter?7) Wilson Corp. purchased its own par value stock on January 1, 2007 for $20,000 anddebited the treasury stock account for the purchase price. The stock was subsequentlysold for $12,000. The $8,000 difference between the cost and sales price should berecorded as a deduction from8) How should a "gain" from the sale of treasury stock be reflected when using the costmethod of recording treasury stock transactions?9) In January 2007, Castro Corporation, a newly formed company, issued 10,000shares of its $10 par common stock for $15 per share. On July 1, 2007, Castro
    • Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. Theacquisition of these treasury shares10) In computing earnings per share, the equivalent number of shares of convertiblepreferred stock are added as an adjustment to the denominator (number of sharesoutstanding). If the preferred stock is cumulative, which amount should then be addedas an adjustment the numerator (net earnings)?11) In the diluted earnings per share computation, the treasury stock method is usedfor options and warrants to reflect assumed reacquisition of common stock at theaverage market price during the period. If the exercise price of the options or warrantsexceeds the average market price, the computation would12) When computing diluted earnings per share, convertible bonds are13) Palmer Corp. owned 20,000 shares of Dixon Corp. purchased in 2003 for$240,000. On December 15, 2006, Palmer declared a property dividend of all of itsDixon Corp. shares on the basis of one share of Dixon for every 10 shares of Palmercommon stock held by its stockholders. The property dividend was distributed onJanuary 15, 2007. On the declaration date, the aggregate market price of the Dixonshares held by Palmer was $400,000. The entry to record the declaration of thedividend would include a debit to Retained Earnings of14) On December 31, 2006, the stockholders equity section of Clark, Inc., was asfollows: Common stock, par value $10; authorized 30,000 shares.Issued and outstanding 9,000 shares $ 90,000Additional paid-in capital 116,000Retained earnings 174,000Total stockholders equity $380,000On March 31, 2007, Clark declared a 10% stock dividend, and accordingly 900additional shares were issued, when the fair market value of the stock was $18 pershare. For the three months ended March 31, 2007, Clark sustained a net loss of$32,000. The balance of Clark�s retained earnings as of March 31, 2007, should be
    • 15) A corporation declared a dividend, a portion of which was liquidating. How wouldthis distribution affect each of the following?Additional Paid-in Capital | Retained Earnings16) An unrealized holding gain on a companys available-for-sale securities should bereflected in the current financial statements as17) An unrealized holding loss on a companys available-for-sale securities should bereflected in the current financial statements as18) A reclassification adjustment is reported in the19) Investments in debt securities should be recorded on the date of acquisition at20) Pippen Co. purchased ten-year, 10% bonds that pay interest semiannually. Thebonds are sold to yield 8%. One step in calculating the issue price of the bonds is tomultiply the principal by the table value for21) When an investors accounting period ends on a date that does NOT coincide withan interest receipt date for bonds held as an investment, the investor must22) An investor has a long-term investment in stocks. Regular cash dividends receivedby the investor are recorded asFair Value Method | Equity Method23) Under the equity method of accounting for investments, an investor recognizes itsshare of the earnings in the period in which the24) Byner Corporation accounts for its investment in the common stock of YountCompany under the equity method. Byner Corporation should ordinarily record a cashdividend received from Yount as25) A requirement for a security to be classified as held-to-maturity is
    • 26) Debt securities that are accounted for at amortized cost, NOT fair value, are27) Debt securities acquired by a corporation which are accounted for by recognizingunrealized holding gains or losses and are included as other comprehensive incomeand as a separate component of stockholders equity are28) The accounting for fair value hedges records the derivative at its29) Gains or losses on cash flow hedges are30) All of the following statements regarding accounting for derivatives are correctEXCEPT that