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ACC 423 Final Exam




Question;ACC 423 Final Exam;Question 1;Buttercup Corporation issued 250 shares of $11 par value common stock for;$4,125. Prepare Buttercup' journal entry.;Question 2:Wilco;Corporation has the following account balances at December 31, 2012.;Common stock, $5 par value $511,670;Treasury stock 95,260;Retained earnings 2,400,840;Paid-in capital in excess of par 1,320,150;Prepare Wilco's December 31, 2012, stockholders' equity section;Question 3:Woolford;Inc. declared a cash dividend of $1.38 per share on its 2.22 million;outstanding shares. The dividend was declared on August 1, payable on September;9 to all stockholders of record on August 15. Prepare the journal entries;necessary on those three dates.;Question 4:The;outstanding capital stock of Pennington Corporation consists of 3,100 shares of;$109 par value, 6% preferred, and 5,700 shares of $52 par value common.;Assuming that the company has retained earnings of $83,000, all of which is to;be paid out in dividends, and that preferred dividends were not paid during the;2 years preceding the current year, state how much each class of stock should;receive under each of the following conditions.;Question 5:Martinez;Company's ledger shows the following balances on December 31, 2012.;5% Preferred stock-$10 par value, outstanding 22,480 shares $224,800;Common stock-$100 par value, outstanding 33,720 shares 3,372,000;Retained earnings 708,120;Assuming that the directors decide to declare total dividends in the amount of;$298,984, determine how much each class of stock should receive under each of;the conditions stated below. One year's dividends are in arrears on the;preferred stock.;Question 6:On;January 1, 2012, Barwood Corporation granted 5,040 options to executives. Each;option entitles the holder to purchase one share of Barwood's $5 par value;common stock at $50 per share at any time during the next 5 years. The market;price of the stock is $72 per share on the date of grant. The fair value of the;options at the grant date is $154,000. The period of benefit is 2 years.;Prepare Barwood's journal entries for January 1, 2012, and December 31, 2012;and 2013.;Question 7:Rockland;Corporation earned net income of $340,800 in 2012 and had 100,000 shares of;common stock outstanding throughout the year. Also outstanding all year was;$908,800 of 10% bonds, which are convertible into 18,176 shares of common.;Rockland's tax rate is 40 percent. Compute Rockland's 2012 diluted earnings per;share.;Question 8:DiCenta;Corporation reported net income of $250,000 in 2012 and had 50,000 shares of;common stock outstanding throughout the year. Also outstanding all year were;5,410 shares of cumulative preferred stock, each convertible into 2 shares of;common. The preferred stock pays an annual dividend of $5 per share. DiCenta;tax rate is 40%. Compute DiCenta' 2012 diluted earnings per share.;Question 9:Ferraro;Inc. established a stock appreciation rights (SAR) program on January 1, 2012;which entitles executives to receive cash at the date of exercise for the;difference between the market price of the stock and the pre-established price;of $24 on 5,050 SARs. The required service period is 2 years. The fair value of;the SAR's are determined to be $6 on December 31, 2012, and $13 on December 31;2013.;Question 10;Hillsborough Co. has an available-for-sale investment in the bonds of Schuyler;with a carrying (and fair) value of $88,020. Hillsborough determined that due;to poor economic prospects for Schuyler, the bonds have decreased in value to;$57,020. It is determined that this loss in value is other-than temporary.;Prepare the journal entry, if any, to record the reduction in value.;Question 11;Capriati Corporation made the following cash purchases of securities during;2012, which is the first year in which Arantxa invested in securities.;1. On January 15, purchased 11,700 shares of Gonzalez Company's common stock at;$43.55 per share plus commission $2,574.;2. On April 1, purchased 6,500 shares of Belmont Co.'s common stock at $67.60;per share plus commission $4,381.;3. On September 10, purchased 9,100 shares of Thep Co.'s preferred stock at;$34.45 per share plus commission $6,383.;On May 20, 2012, Capriati sold 3,900 shares of Gonzalez Company's common stock;at a market price of $45.50 per share less brokerage commissions, taxes, and;fees of $3,705. The year-end fair values per share were: Gonzalez $39.00;Belmont $71.50, and Thep $36.40. In addition, the chief accountant of Capriati;told you that Capriati Corporation plans to hold these securities for the long;term but may sell them in order to earn profits from appreciation in prices.;Question;12:(Journal Entries for Fair Value and;Equity Methods);Presented below are two independent situations.;Prepare all necessary journal entries in 2012 for each situation.;Situation 1;Hatcher Cosmetics acquired 10% of the 207,400 shares of common stock of Ramirez;Fashion at a total cost of $15 per share on March 18, 2012. On June 30, Ramirez;declared and paid a $80,200 cash dividend. On December 31, Ramirez reported net;income of $123,500 for the year. At December 31, the market price of Ramirez;Fashion was $18 per share. The securities are classified as available-for-sale.;Situation 2;Holmes, Inc. obtained significant influence over Nadal Corporation by buying;25% of Nadal's 30,800 outstanding shares of common stock at a total cost of $9;per share on January 1, 2012. On June 15, Nadal declared and paid a cash;dividend of $43,800. On December 31, Nadal reported a net income of $90,500 for;the year.;Question 13;(Equity Method) Gator Co. invested $1,380,000 in Demo Co. for 25% of its;outstanding stock. Demo Co. pays out 40% of net income in dividends each year.;Use the information in the following T-account for the investment in Demo to;answer the following questions.;Question 14;(Fair Value and Equity Method Compared). Gregory Inc. acquired 20% of the;outstanding common stock of Handerson Inc. on December 31, 2012. The purchase;price was $1,320,000 for 50,000 shares. Handerson Inc. declared and paid an;$0.87 per share cash dividend on June 30 and on December 31, 2013. Handerson;reported net income of $741,000 for 2013. The fair value of Handerson's stock;was $32 per share at December 31, 2013.;Question 15;(Call Option). On January 2, 2012, Jones Company purchases a call option for;$450 on Merchant common stock. The call option gives Jones the option to buy;1,000 shares of Merchant at a strike price of $50 per share. The market price;of a Merchant share is $50 on January 2, 2012 (the intrinsic value is therefore;$0). On March 31, 2012, the market price for Merchant stock is $60 per share;and the time value of the option is $200.;Question 16;In 2012, Amirante Corporation had pretax financial income of $207,000 and;taxable income of $166,400. The difference is due to the use of different;depreciation methods for tax and accounting purposes. The effective tax rate is;40%. Compute the amount to be reported as income taxes payable at December 31;2012.;Question 17;At December 31, 2012, Fell Corporation had a deferred tax liability of;$732,802, resulting from future taxable amounts of $2,155,300 and an enacted;tax rate of 34%. In May 2013, a new income tax act is signed into law that;raises the tax rate to 42% for 2013 and future years. Prepare the journal entry;for Fell to adjust the deferred tax liability.;Question 18;AMR Corporation (parent company of American Airlines) reported the following;for 2009 (in millions).;Service cost $405;Interest cost on P.B.O 736;Return on plan assets 825;Amortization of service cost 29;Amortization of loss 66;Compute AMR Corporation's 2009 pension expense (in millions).;Question 19;For Warren Corporation, year-end plan assets were $2,094,700. At the beginning of;the year, plan assets were $1,762,400. During the year, contributions to the;pension fund were $120,000, and benefits paid were $200,000. Compute Warren's;actual return on plan assets.;Question 20;For 2010, Campbell Soup Company had pension expense of $48 million and;contributed $296 million to the pension fund. Prepare Campbell Soup Company's;journal entry to record pension expense and funding.;Question 21;Lahey Corp. has three defined-benefit pension plans as follows.;Pension Assets;(at Fair Value) Projected Benefit;Obligation;Plan X $637,500 $504,000;Plan Y 902,200 739,900;Plan Z 584,600 713,200;How will Lahey report these multiple plans in its financial statements?;Question 22;For 2012, Sampsell Inc. computed its annual postretirement expense as $278,680.;Sampsell's contribution to the plan during 2012 was $185,750. Prepare;Sampsell's 2012 entry to record postretirement expense.;Question 23;Wertz Corporation decided at the beginning of 2012 to change from the;completed-contract method to the percentage-of-completion method for financial;reporting purposes. The company will continue to use completed-contract method;for tax purposes. For years prior to 2012, pre-tax income under the two methods;was as follows: percentage-of-completion $143,000, and completed-contract;$65,800. The tax rate is 32%. Prepare Wertz's 2012 journal entry to record the;change in accounting principle.;Question 24;In 2012, Bailey Corporation discovered that equipment purchased on January 1;2010, for $50,000 was expensed at that time. The equipment should have been;depreciated over 5 years, with no salvage value. The effective tax rate is 29%.;Prepare Hiatt's 2012 journal entry to correct the error.;Question 25;At January 1, 2012, Beilder Company reported retained earnings of $2,027,300.;In 2012, Beilder discovered that 2011 depreciation expense was understated by;$442,300. In 2012, net income was $931,270 and dividends declared were;$204,310. The tax rate is 38%. Complete the 2012 retained earnings statement;for Beilder Company.;Question 26;Simmons Corporation owns stock of Armstrong, Inc. Prior to 2012, the investment;was accounted for using the equity method. In early 2012, Simmons sold part of;its investment in Armstrong, and began using the fair value method. In 2012, Armstrong;earned net income of $81,100 and paid dividends of $90,400. Prepare Simmons's;entries related to Armstrong's net income and dividends, assuming Simmons now;owns 11% of Armstrong's stock.;Question 27;Manno Corporation has the following information available concerning its;postretirement benefit plan for 2012.;Service cost $53,750;Interest cost 58,360;Actual return on plan assets 40,190;Compute Manno's 2012 postretirement expense;Question 28;Ravonette Corporation issued 310 shares of $13 par value common stock and 130;shares of $47 par value preferred stock for a lump sum of $17,500. The common;stock has a market price of $22 per share, and the preferred stock has a market;price of $98 per share. Prepare the journal entry to record the issuance;Question 29;Garfield Company purchased, as a held-to-maturity investment, $82,400 of the;9%, 8-year bonds of Chester Corporation for $73,919, which provides an 11%;return. Prepare Garfield's journal entries for (a) the purchase of the;investment and (b) the receipt of annual interest and discount amortization.;Assume effective interest amortization is used.;Question 30;Clydesdale Corporation has a cumulative temporary difference related to;depreciation of $606,600 at December 31, 2012. This difference will reverse as;follows: 2013, $43,100, 2014, $264,300, and 2015, $299,200. Enacted tax rates;are 34% for 2013 and 2014, and 40% for 2015. Compute the amount Clydesdale;should report as a deferred tax liability at December 31, 2012


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