Question;West Coast Corporation had 800,000 shares of common stock outstanding on;January 1, issued 200,000 shares on October 1, and had income applicable to;common stock of $2,865,000 for the year ended December 31, 2013. Rounded to;the nearest penny, earnings per share of common stock for 2013 would be;(Points: 7);$2.86;$3.01;$3.37;$3.58;Question 2.2.Corresponds;to CLO 1(b);On July 1, 2013, an interest payment date, $120,000 of Tally Corporation;bonds were converted into 3,100 shares of Tally Corporation common stock;each having a par value of $35 and a market value of $42. There is $5,700;unamortized discount on the bonds. Using the book value method, Tally would;record (Points: 7);a $5,300 increase;in paid-in capital in excess of par;a $5,800 increase in paid-in capital in excess of par;a $11,500 increase in paid-in capital in excess of par;a $15,900decrease in paid-in capital in excess of par;Question 3.3.Corresponds;to CLO 1(c);A corporation issues bonds with detachable warrants. The amount to be;recorded as paid-in capital is preferably (Points: 7);zero.;calculated by the excess of the proceeds over the face amount of the bonds.;equal to the market value of the warrants.;based on the relative market values of the bonds and warrants.;Question 4.4.Corresponds;to CLO 1(d);On January 1, 2013, Morgan Corporation granted stock options to officers;and key employees for the purchase of 50,000 shares of the company's $10;par common stock at $25 per share as additional compensation for services;to be rendered over the next three years. The market price of common stock;was $31 per share at the date of grant. The options are exercisable during;a five-year period beginning January 1, 2016 by grantees still employed by;Morgan. The Black-Scholes option pricing model determines total compensation;expense to be $360,000. The journal entry to record the compensation;expense related to these options for 2013 would include a credit to the;Paid-in Capital - Stock Options account for (Points: 7);$120,000;$180,000;$300,000;$360,000;Question 5.5.Corresponds;to CLO 2(a);On July 1, 2013, Wilshire Corporation acquired 500, $1,000, 8% bonds at 97;plus accrued interest. The bonds were dated April 1, 2013, and mature on;March 31, 2018, with interest paid each September 30 and March 31. The;bonds will be added to Wilshire's available-for-sale portfolio. The amount;to record as the cost of this debt investment on July 1, 2013 is (Points;7);$485,000;$495,000;$500,000;$540,000;Question 6.6.Corresponds;to CLO 2(b);On January 1, 2013, Capital Corporation acquired for $400,000 of 10% bonds;paying $376,100. The bonds mature January 1, 2024, interest is payable each;July 1 and January 1. The discount of $23,900 provides an effective yield;of 11%. Capital Corporation uses the effective-interest method and plans to;hold these bonds to maturity. On July 1, 2013, Capital Corporation should;increase its Debt Investments account for these bonds by (round to the;nearest dollar): (Points: 7);$4,000;$3,761;$1,195;$686;Question 7.7.Corresponds;to CLO 2(c);Wright Company's trading securities portfolio, which is appropriately;included in current assets, is as follows on December 31, 2013: Holmes;Corporation - cost of $300,000 and fair value of $260,000, Woods;Corporation - cost of $500,000 and fair value of $520,000. Ignoring income;taxes, what amount should be reported as a charge against income in;Wright's 2013 income statement if 2013 is Wright's first year of operation?;(Points: 7);$ -0-;$40,000 Unrealized Loss;$20,000 Unrealized Gain;$20,000 Unrealized Loss;Question 8.8.Corresponds;to CLO 2(d);Canton Corporation owns 3,000 of the 10,000 outstanding shares of Wallis;Corporation. During 2013, Wallis Corporation earns $500,000 and pays cash;dividends of $100,000. What amount should Canton show in the investment;account at December 31, 2013 if the beginning of the year balance in the;account was $600,000? (Points: 7);$600,000;$630,000;$720,000;$750,000;Question 9.9.Corresponds;to CLO 3(a);Which of the following are temporary differences that are normally;classified as expenses or losses that are deductible for tax purposes after they are recognized in financial income?;(Points: 7);Product warranty;liabilities.;Depreciable property.;Fines and expenses resulting from a violation of law.;Advance rental receipts.;Question 10.10.Corresponds;to CLO 3(b);In 2013, its first year of operations, Anderson Appliance Corporation had;Income (per books before income taxes) of $1,100,000. The following items;are included in Anderson's pre-tax income: interest income from municipal;bonds of $25,000, accrued warranty costs, estimated to be paid in 2014, of;$85,000, and installment sales revenue of $70,000, which will be collected;in 2014. In additin, Anderson has on its books prepaid rent expense of;$30,000, which will be used in 2014. Assuming the enacted tax rate in;effect for 2013 and 2014 is 40%, what amount should Anderson record as the;net current deferred tax asset or liability for the year ended December 31;2013? (Points: 7);$6,000 deferred;tax liability;$6,000 deferred tax asset;$15,000 deferred tax liability;$15,000 deferred tax asset;Question 11.11.Corresponds;to CLO 3(c);At December 31, 2013, Edwards Corporation reported a deferred tax liability;of $140,000 which was attributable to a taxable temporary difference of;$400,000. The temporary difference is scheduled to reverse in 2018. During;2014, a new tax law increased the corporate tax rate from 35% to 40%.;Edwards should record this change by debiting (Points: 7);Income Tax;Expense for $14,000;Income Tax Expense for $20,000;Retained Earnings for $14,000;Retained Earnings for $20,000;Question 12.12.Corresponds;to CLO 3(d);Operating income/(loss) and tax rates for Lombard Corporation for 2012;through 2015 were as follows: 2012: $100,000, 30%, 2013: $250,000, 35%;2014: ($500,000), 35%, 2015: $600,000, 40%. Assuming that Lombard opts to;carryback its 2014 NOL, what is the amount of income tax payable at;December 31, 2015? (Points: 7);$40,000;$140,000;$180,000;$240,000;Question 13.13.Corresponds;to CLO 4(a);Granite Oaks Homebuilding, Inc. is a publicly traded corporation that;follows generally accepted accounting principles. Granite Oaks has a;defined benefit pension plan in place for its employees. Which of the;following measures should Granite Oaks use to determine the company's;pension liability? (Points: 7);Vested benefit;obligation;Accumulated benefit obligation;Projected benefit obligation;Granite Oaks may use anyof the above measures.;Question 14.14.Corresponds;to CLO 4(b);Hathaway, Inc. sponsors a defined-benefit pension plan. The following data;relates to the plan for 2013: Contributions to the plan, $350,000, Service;cost, $425,000, Interest on projected benefit obligation, $360,000;Amortization of prior service cost due to increase in benefits, $65,000;Expected return on plan assets, $220,000. What amount should be reported;for pension expense in 2013? (Points: 7);$1,070,000;$630,000;$350,000;$280,000;Question 15.15.Corresponds;to CLO 4(c);Johnson, Inc. sponsors a defined-benefit pension plan. The following;balance sheet data relates to the plan on December 31, 2013: Plan assets;(at fair value), $1,000,000, Accumulated benefit obligation, $1,450,000;Projected benefit obligation, $1,750,000. Contributions of $115,000 were;made to the plan during the year. What amount should Johnson report as its;pension liability on its balance sheet as of December 31, 2013? (Points;7);$635,000;$750,000;$1,450,000;$1,750,000;Question 16.16.Corresponds;to CLO 4(d);Which of the following information about its pension plan would a company;normally be required to disclose in the notes to the financial statements?;(Points: 7);The number of;employees enrolled in the defined-benefit plan.;The annual pension payments made to current retirees.;The amount of prior service cost changed or credited in previous years.;The rates used in measuring the benefit amounts.;Question 17.17.Corresponds;to CLO 5(a);Which of the following should be treated as a change in accounting;principle? (Points: 7);A change from;LIFO to FIFO for inventory valuation.;A change to a different method of depreciation for plant assets.;A change in the estimated useful life of plant assets.;A change from the cash basis of accounting to the accrual basis of;accounting.;Question 18.18.Corresponds;to CLO 5(b);On January 1, 2011, Graham Corporation acquired machinery at a cost of;$450,000. Graham adopted the double-declining balance method of;depreciation for this machinery and had been recording depreciation over an;estimated useful life of 10 years, with no residual value. At the beginning;of 2013, a decision was made to change to the straight-line method of;depreciation for the machinery. The depreciation expense for 2013 should be;(Points: 7);$20,057;$36,000;$45,000;$57,600;Question 19.19.Corresponds;to CLO 5(c);During 2014, a construction company changed from the completed-contract;method to the percentage-of-completion method for accounting purposes but;not for tax purposes. Gross profit figures under both methods for the past;three years follow. Completed-Contract: 2012, $595,000, 2013, $730,000;2014, $810,000. Percentage-of-Completion: 2012, $700,000, 2013, $850,000;2014, $900,000. Assuming an income tax rate of 40% for all years, the;affect of this accounting change on prior periods should be reported by a;credit of (Points: 7);$135,000 on the;2014retained earnings statement;$189,000 on the 2014retained earnings statement;$135,000 on the 2014income statement;$189,000 on the 2014income statement;Question 20.20.Corresponds;to CLO 5(d);On January 10, 2012, Montgomery Corporation purchased machinery that cost;$750,000. The entire cost was recorded as an expense. The machinery has an;estimated useful life of 10 years and a $30,000 salvage value. Montgomery;uses the straight-line method to account for depreciation expense. The;error was discovered on December 29, 2013. Ignore income tax;considerations. Montgomery's income statement for;the year ended December 31, 2013, should show the cumulative effect of this;error in the amount of (Points: 7);$648,000;$576,000;$504,000;$-0-;Question 21.21.Corresponds;to CLO 6(a);Selected information from Trolley Corporation's 2013 accounting records is;as follows: Proceeds from sale of land, $150,000, Proceeds from long-term;borrowings, $325,000, Purchases of plant assets, $70,000, Purchases of;inventories, $300,000, Proceeds from sale of Trolley common stock;$100,000. What is the net cash provided (used) by investing activities for;the year ended December 31, 2013? (Points: 7);$425,000;$205,000;$80,000;$55,000;Question 22.22.Corresponds;to CLO 6(b);Selected information from Maxwell Corporation's 2013 accounting records is;as follows: Proceeds from issuance of common stock, $740,000, Proceeds from;issuance of bonds, $2,400,000, Cash dividends paid on common stock;$200,000, Cash dividends paid on preferred stock paid, $80,000, Purchases;of treasury stock, $200,000.What is the net cash provided (used) by;financing activities for the year ended December 31, 2013? (Points: 7);$3,060,000;$2,940,000;$2,860,000;$2,660,000;Question 23.23.Corresponds;to CLO 6(c);A decrease in accounts receivable during a period would be reported in a;statement of cash flows, using the indirect method, as a(n) (Points: 7);deduction from;net income in arriving at net cash flow from operating activites.;addition to net income in arriving at net cash flow from operating;activities.;cash inflow from investing activities.;cash inflow from financing activities.;Question 24.24.Corresponds;to CLO 6(d);Which of the following formulas would a bank or an investor most likely not;use to evaluate a company's cash flows? (Points: 7);Quick ratio;Free cash flow;Current cash debt coverage ratio;Cash debt coverage ratio;Question 25.25.Corresponds;to CLO 7(a);Which of the following statements best describes the full disclosure;principle? (Points: 7);Companies may use;the cash-basis of accountingin the financial statements, as long as;accrual-basis amounts are disclosed in the notes to the financial statements.;Publicly traded companies should provide a balance sheet, income statement;statement of cash flows, and statement of owners' equity.;Companies provide information that is of sufficient importance to influence;the judgment and decisions of an informed user.;To be recognized in the main body of financial statements, an item should be;measurable with sufficient certainty, and be relevant and reliable.;Question 26.26.Corresponds;to CLO 7(b);The following information pertains to Nolen Corporation and its divisions;for the year ended December 31, 2013: Segments Total Revenue;(Unaffiliated)A $600,000;B $100,000;C $500,000;D $650,000;Nolen has a reportable segment if that segment's revenue exceeds (Points;7);$100,000;$0;$185,000;$65,000;Question 27.27.Corresponds;to CLO 7(c);Under generally accepted accounting principles, (Points: 7);all companies;that issue an annual report should issue interim financial reports.;the same accounting principles used for the annual report should be used for;interim reports.;the discrete view is the most appropriate approach to take in preparing;interim financial reports.;the integral approach is the most appropriate view to take in preparing;interim financial reports.;Question 28.28.Corresponds;to CLO 7(d);Which of the following post-balance-sheet events would require adjustment;of the accounts before issuance of the financial statements? (Points: 7);Issue of a large;amount of capital stock.;Loss on a lawsuit, the outcome of which was deemed uncertain at year end.;Retirement of the company president.;Loss of plant as a result of fire.
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