ACC 423 FINAL EXAMSCLICK HERE TO DOWNLOAD1) When convertible debt is retired by the issuer, any material difference between the cashacquisition 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 the par valueof the common shares issued over the carrying amount of the preferred being converted shouldbe4) The accounting problem in a lump sum issuance is the allocation of proceeds between theclasses of securities. An acceptable method of allocation is the5) When a corporation issues its capital stock in payment for services, the least appropriate basisfor recording the transaction is the6) Total stockholders equity represents7) When treasury stock is purchased for more than the par value of the stock and the cost methodis used to account for treasury stock, what account(s) should be debited?8) “Gains" on sales of treasury stock (using the cost method) should be credited to9) Wilson Corp. purchased its own par value stock on January 1, 2007 for $20,000 and debitedthe treasury stock account for the purchase price. The stock was subsequently sold for $12,000.The $8,000 difference between the cost and sales price should be recorded as a deduction from10) When computing diluted earnings per share, convertible bonds are11) In computations of weighted average of shares outstanding, when a stock dividend or stocksplit occurs, the additional shares are12) In the diluted earnings per share computation, the treasury stock method is used for optionsand warrants to reflect assumed reacquisition of common stock at the average market priceduring the period. If the exercise price of the options or warrants exceeds the average marketprice, the computation would13) On December 31, 2006, the stockholders equity section of Clark, Inc., was as follows:Common stock, par value $10; authorized 30,000 shares.
14) At its date of incorporation, Wilson, Inc. issued 100,000 shares of its $10 par common stockat $11 per share. During the current year, Wilson acquired 20,000 shares of its common stock ata price of $16 per share and accounted for them by the cost method. Subsequently, these shareswere reissued at a price of $12 per share. There have been no other issuances or acquisitions ofits own common stock. What effect does the reissuance of the stock have on the followingaccounts?15) Palmer Corp. owned 20,000 shares of Dixon Corp. purchased in 2003 for $240,000. OnDecember 15, 2006, Palmer declared a property dividend of all of its Dixon Corp. shares on thebasis of one share of Dixon for every 10 shares of Palmer common stock held by itsstockholders. The property dividend was distributed on January 15, 2007. On the declarationdate, the aggregate market price of the Dixon shares held by Palmer was $400,000. The entry torecord the declaration of the dividend would include a debit to Retained Earnings of16) An unrealized holding loss on a companys available-for-sale securities should be reflected inthe current financial statements as17) When investments in debt securities are purchased between interest payment dates,preferably the18) A reclassification adjustment is reported in the19) Which of the following is NOT a debt security?20) When an investors accounting period ends on a date that does NOT coincide with an interestreceipt date for bonds held as an investment, the investor must21) Pippen Co. purchased ten-year, 10% bonds that pay interest semiannually. The bonds aresold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principalby the table value for22) Byner Corporation accounts for its investment in the common stock of Yount Companyunder the equity method. Byner Corporation should ordinarily record a cash dividend receivedfrom Yount as23) When a company holds between 20% and 50% of the outstanding stock of an investee,which of the following statements applies?24) Bista Corporation declares and distributes a cash dividend that is a result of current earnings.How will the receipt of those dividends affect the investment account of the investor under eachof the following accounting methods? Fair Value Method | Equity Method25) Held-to-maturity securities are reported at
26) Debt securities acquired by a corporation which are accounted for by recognizing unrealizedholding gains or losses and are included as other comprehensive income and as a separatecomponent of stockholders equity are27) Use of the effective-interest method in amortizing bond premiums and discounts results in28) All of the following are requirements for disclosures related to financial instrumentsEXCEPT29) The accounting for fair value hedges records the derivative at its30) All of the following statements regarding accounting for derivatives are correct EXCEPTthat31) Taxable income of a corporation differs from pre-tax financial income because ofPermanent Differences | Temporary Differences32) Which of the following situations would require interperiod income tax allocationprocedures?33) The rationale for interperiod income tax allocation is to34) A major distinction between temporary and permanent differences is35) Which of the following are temporary differences that are normally classified as expenses orlosses that are deductible after they are recognized in financial income?36) Which of the following is a temporary difference classified as a revenue or gain that istaxable after it is recognized in financial income?37) In a defined-contribution plan, a formula is used that38) Which of the following is NOT a characteristic of a defined-contribution pension plan?39) In a defined-benefit plan, the process of funding refers to40) The relationship between the amount funded and the amount reported for pension expense isas follows:41) The accumulated benefit obligation measures42) A corporation has a defined-benefit plan. An accrued pension cost will result at the end ofthe first year if the
43) On January 1, 2008, Pratt Corp. adopted a defined-benefit pension plan. The plans servicecost of $300,000 was fully funded at the end of 2008. Prior service cost was funded by acontribution of $120,000 in 2008. Amortization of prior service cost was $48,000 for 2008. Whatis the amount of Pratt’s prepaid pension cost at December 31, 2008?44) Yeager Co. maintains a defined-benefit pension plan for its employees. At each balance sheetdate, Yeager should report a minimum liability at least equal to the45) Reser Corp., a company whose stock is publicly traded, provides a non-contributory defined-benefit pension plan for its employees. The companys actuary has provided the followinginformation for the year ended December 31, 2008:46) On January 1, 2005, Foley Corporation acquired machinery at a cost of $250,000. Foleyadopted the double-declining balance method of depreciation for this machinery and had beenrecording depreciation over an estimated useful life of ten years, with no residual value. At thebeginning of 2008, a decision was made to change to the straight-line method of depreciation forthe machinery. The depreciation expense to be recorded for the machinery in 2008 is (round tothe nearest dollar)47) Accrued salaries payable of $51,000 were NOT recorded at December 31, 2007. Officesupplies on hand of $24,000 at December 31, 2008 were erroneously treated as expense insteadof supplies inventory. Neither of these errors was discovered nor corrected. The effect of thesetwo errors would cause48) On January 1, 2005, Lynn Corporation acquired equipment at a cost of $600,000. Lynnadopted the double-declining balance method of depreciation for this equipment and had beenrecording depreciation over an estimated life of eight years, with no residual value. At thebeginning of 2008, a decision was made to change to the straight-line method of depreciation forthis equipment. Assuming a 30% tax rate, the cumulative effect of this accounting change onbeginning retained earnings, net of tax, is49) Equipment was purchased at the beginning of 2005 for $204,000. At the time of its purchase,the equipment was estimated to have a useful life of six years and a salvage value of $24,000.The equipment was depreciated using the straight-line method of depreciation through 2008. Atthe beginning of 2008, the estimate of useful life was revised to a total life of eight years and theexpected salvage value was changed to $15,000. The amount to be recorded for depreciation for2008, reflecting these changes in estimates, is50) Which type of accounting change should always be accounted for in current and futureperiods?51) When a company decides to switch from the double-declining balance method to thestraight-line method, this change should be handled as a