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Question;1) Proceeds from an issue of debt securities;having stock warrants should NOT be allocated between debt and equity features;when;A. the allocation would result in a discount;on the debt security.;B. the warrants issued with the debt;securities are nondetachable.;C. exercise of the warrants within the next;few fiscal periods seems remote.;D. the market value of the warrants is NOT;readily available.;2) The conversion of preferred stock may be;recorded by the;A. market value method.;B. par value method.;C. book value method.;D. incremental method.;3) The conversion of preferred stock into;common stock requires that any excess of the par value of the common shares;issued over the carrying amount of the preferred being converted should be;A. treated as a prior period adjustment.;B. treated as a direct reduction of retained;earnings.;C. reflected currently in income as an;extraordinary item.;D. reflected currently in income, but NOT as;an extraordinary item.;4) A primary source of stockholders' equity;is;A. contributions by stockholders.;B. both income retained by the corporation;and contributions by stockholders.;C. appropriated retained earnings.;D. income retained by the corporation.;5) Stockholders' equity is generally;classified into two major categories;A. retained earnings and unappropriated;capital.;B. earned capital and contributed capital.;C. appropriated capital and retained;earnings.;D. contributed capital and appropriated;capital.;6) When a corporation issues its capital;stock in payment for services, the least appropriate basis for recording the;transaction is the;A. market value of the shares issued.;B. Any of these provides an appropriate basis;for recording the transaction.;C. par value of the shares issued.;D. market value of the services received.;7) Treasury shares are;A. shares held as an investment by the;treasurer of the corporation.;B. issued but NOT outstanding shares.;C. shares held as an investment of the;corporation.;D. issued and outstanding shares.;8) "Gains" on sales of treasury;stock (using the cost method) should be credited to;A. paid-in capital from treasury stock.;B. other income.;C. capital stock.;D. retained earnings.;9) How should a "gain" from the;sale of treasury stock be reflected when using the cost method of recording;treasury stock transactions?;A. As ordinary earnings shown on the income;statement.;B. As an extraordinary item shown on the;income statement.;C. As paid-in capital from treasury stock;transactions.;D. As an increase in the amount shown for;common stock.;10) In computing earnings per share, the;equivalent number of shares of convertible preferred stock are added as an;adjustment to the denominator (number of shares outstanding). If the preferred;stock is cumulative, which amount should then be added as an adjustment to the;numerator (net earnings)?;A. Annual preferred dividend;B. Annual preferred dividend divided by the;income tax rate;C. Annual preferred dividend times (one minus;the income tax rate);D. Annual preferred dividend times the income;tax rate;11) When computing diluted earnings per;share, convertible bonds are;A. ignored.;B. assumed converted only if they are;dilutive.;C. assumed converted whether they are;dilutive or antidilutive.;D. assumed converted only if they are;antidilutive.;12) What effect will the acquisition of;treasury stock have on stockholders' equity and earnings per share;respectively?;A. Decrease and no effect;B. Increase and decrease;C. Increase and no effect;D. Decrease and increase;13) On May 1, 2007, Kent Corp. declared and;issued a 10% common stock dividend. Prior to this dividend, Kent had 100,000;shares of $1 par value common stock issued and outstanding. The fair value of;Kent 's common stock was $20 per share on May 1, 2007. As a result of this;stock dividend, Kent's total stockholders' equity;A. did NOT change.;B. increased by $200,000.;C. decreased by $10,000.;D. decreased by $200,000.;14) How would the declaration and subsequent;issuance of a 10% stock dividend by the issuer affect each of the following;when the market value of the shares exceeds the par value of the stock?;Additional Common Stock | Paid-in Capital;A. Increase | Increase;B. No effect | No effect;C. Increase | No effect;D. No effect | Increase;15) At its date of incorporation, Wilson;Inc. issued 100,000 shares of its $10 par common stock at $11 per share. During;the current year, Wilson acquired 20,000 shares of its common stock at a price;of $16 per share and accounted for them by the cost method. Subsequently, these;shares were reissued at a price of $12 per share. There have been no other;issuances or acquisitions of its own common stock. What effect does the;reissuance of the stock have on the following accounts? Retained Earnings;Additional Paid-in Capital;A. No effect | No effect;B. Decrease | Decrease;C. Decrease | No effect;D. No effect | Decrease;16) Which of the following is correct about;the effective-interest method of amortization?;A. The effective-interest method produces a;constant rate of return on the book value of the investment from period to;period.;B. The effective interest method applied to;investments in debt securities is different from that applied to bonds payable.;C. Amortization of a premium decreases from;period to period.;D. Amortization of a discount decreases from;period to period.;17) An unrealized holding loss on a company's;available-for-sale securities should be reflected in the current financial;statements as;A. other comprehensive income and deducted in;the equity section of the balance sheet.;B. an extraordinary item shown as a direct;reduction from retained earnings.;C. a note or parenthetical disclosure only.;D. a current loss resulting from holding;securities.;18) An unrealized holding gain on a company's;available-for-sale securities should be reflected in the current financial;statements as;A. other comprehensive income and included in;the equity section of the balance sheet.;B. an extraordinary item shown as a direct;increase to retained earnings.;C. a note or parenthetical disclosure only.;D. a current gain resulting from holding;securities.;19) Investments in debt securities should be;recorded on the date of acquisition at;A. face value plus brokerage fees and other;costs incident to the purchase.;B. lower of cost or market.;C. market value plus brokerage fees and other;costs incident to the purchase.;D. market value.;20) Securities which could be classified as;held-to-maturity are;A. warrants.;B. redeemable preferred stock.;C. municipal bonds.;D. treasury stock.;21) Which of the following is NOT a debt;security?;A. Commercial paper;B. Convertible bonds;C. Loans receivable;D. All of these are debt securities.;22) An investor has a long-term investment in;stocks. Regular cash dividends received by the investor are recorded as Fair;Value Method | Equity Method;A. A reduction of the investment | A;reduction of the investment;B. Income | Income;C. Income | A reduction of the investment;D. A reduction of the investment | Income;23) When a company holds between 20% and 50%;of the outstanding stock of an investee, which of the following statements;applies?;A. The investor should use the equity method;to account for its investment unless circum-stances indicate that it is unable;to exercise "significant influence" over the investee.;B. The investor should always use the equity;method to account for its investment.;C. The investor must use the fair value;method unless it can clearly demonstrate the ability to exercise;significant influence" over the investee.;D. The investor should always use the fair;value method to account for its investment.;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;each of the following accounting methods? Fair Value Method | Equity Method;A. Increase | Decrease;B. No Effect | Decrease;C. No Effect | No Effect;D. Decrease | No Effect;25) Debt securities that are accounted for at;amortized cost, NOT fair value, are;A. trading debt securities.;B. held-to-maturity debt securities.;C. available-for-sale debt securities.;D. never-sell debt securities.;26) Equity securities acquired by a;corporation which are accounted for by recognizing unrealized holding gains or;losses as other comprehensive income and as a separate component of;stockholders' equity are;A. trading securities where a company has;holdings of less than 20%.;B. available-for-sale securities where a;company has holdings of less than 20%.;C. securities where a company has holdings of;between 20% and 50%.;D. securities where a company has holdings of;more than 50%.;27) Use of the effective-interest method in;amortizing bond premiums and discounts results in;A. a smaller amount of interest income over;the life of the bond issue than would result from use of the straight-line;method.;B. a greater amount of interest income over;the life of the bond issue than would result from use of the straight-line;method.;C. a varying amount being recorded as;interest income from period to period.;D. a variable rate of return on the book;value of the investment.;28) All of the following are characteristics;of a derivative financial instrument EXCEPT the instrument A. All of these are;characteristics.;B. has one or more underlyings and an;identified payment provision.;C. requires a large investment at the;inception of the contract.;D. requires or permits net settlement.;29) The accounting for fair value hedges;records the derivative at its;A. historical cost.;B. amortized cost.;C. carrying value.;D. fair value.;30) All of the following statements regarding;accounting for derivatives are correct EXCEPT that;A. gains and losses resulting from hedge;transactions are reported in different ways, depending upon the type of hedge.;B. they should be recognized in the financial;statements as assets and liabilities.;C. they should be reported at fair value.;D. gains and losses resulting from;speculation should be deferred.


Paper#51733 | Written in 18-Jul-2015

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