ACC 423 Final Exam MCQs. 30/30. Get an A++. - 63151

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1) When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be 
2) The conversion of preferred stock may be recorded by the 
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 
4) When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the 
5) The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the 
6) Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? 
7) Wilson Corp. purchased its own par value stock on January 1, 2007 for $20,000 and debited the 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 from 
8) How should a \"gain\" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions? 
9) In January 2007, Castro Corporation, a newly formed company, issued 10,000 shares 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. The acquisition of these treasury shares 
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 the numerator (net earnings)? 
11) In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market price, the computation would 
12) When computing diluted earnings per share, convertible bonds are 
13) 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 its Dixon Corp. shares on the basis of one share of Dixon for every 10 shares of Palmer common stock held by its stockholders. The property dividend was distributed on January 15, 2007. On the declaration date, the aggregate market price of the Dixon shares held by Palmer was $400,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of 
14) On December 31, 2006, the stockholders equity section of Clark, Inc., was as follows: Common stock, par value $10; authorized 30,000 shares. 
Issued and outstanding 9,000 shares $ 90,000 
Additional paid-in capital 116,000 
Retained earnings 174,000 
Total stockholders equity $380,000 
On March 31, 2007, Clark declared a 10% stock dividend, and accordingly 900 additional shares were issued, when the fair market value of the stock was $18 per share. 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 would this distribution affect each of the following? 
Additional Paid-in Capital | Retained Earnings 
16) An unrealized holding gain on a companys available-for-sale securities should be reflected in the current financial statements as 
17) An unrealized holding loss on a companys available-for-sale securities should be reflected in the current financial statements as 
18) A reclassification adjustment is reported in the 
19) Investments in debt securities should be recorded on the date of acquisition at 
20) Pippen Co. purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for 
21) When an investors accounting period ends on a date that does NOT coincide with an interest receipt date for bonds held as an investment, the investor must 
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 
23) Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the 
24) Byner Corporation accounts for its investment in the common stock of Yount Company under the equity method. Byner Corporation should ordinarily record a cash dividend received from Yount as 
25) 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, are 
27) Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders equity are 
28) The accounting for fair value hedges records the derivative at its 
29) Gains or losses on cash flow hedges are 
30) All of the following statements regarding accounting for derivatives are correct EXCEPT that

Solution Description

1) When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be 
2) The conversion of preferred stock may be recorded by the 
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 
4) When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the 
5) The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is the 
6) Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? 
7) Wilson Corp. purchased its own par value stock on January 1, 2007 for $20,000 and debited the 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 from 

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