ACC 423 Final Exam MCQs. 30/30. Get an A++. - 63152

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1) When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par 
2) 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 
3) When convertible debt is retired by the issuer, any material difference between the cash acquisition price 
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) How should a \"gain\" from the sale of treasury stock be reflected when using the cost method of ecording treasury stock transactions? 
8) Treasury shares are 
9) When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? 
10) When computing diluted earnings per share, convertible bonds are 
11) 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 umulative, which amount should then be added as an adjustment to the numerator (net earnings)? 
12) Antidilutive securities 
13) At its date of incorporation, Wilson, Inc. issued 100,000 shares of its $10 par common stock at $11 per hare. During the current year, Wilson acquired 20,000 shares of its common stock at a price of $16 per hare 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? 
14) 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 
15) 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 
16) A reclassification adjustment is reported in the 
17) Which of the following is correct about the effective-interest method of amortization? 
18) When investments in debt securities are purchased between interest payment dates, preferably the 
19) 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 
20) Which of the following is NOT a debt security? 
21) Investments in debt securities should be recorded on the date of acquisition at 
22) When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies? 
23) An investor has a long-term investment in stocks. Regular cash dividends received by the investor are recorded as 
Fair Value Method | Equity Method 
24) Byner Corporation accounts for its investment in the common stock of Yount Company under the quity method. Byner Corporation should ordinarily record a cash dividend received from 
25) Use of the effective-interest method in amortizing bond premiums and discounts results in 
26) Held-to-maturity securities are reported at 
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 
31) The rationale for interperiod income tax allocation is to 
32) Taxable income of a corporation differs from pretax financial income because of 
33) Which of the following situations would require interperiod income tax allocation rocedures? 
34) Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income? 
35) At the December 31, 2007 balance sheet date, Garth Brooks Corporation reports an accrued receivable for financial reporting purposes but NOT for tax purposes. When this asset is recovered in 2008, a future taxable amount will occur and 
36) Which of the following differences would result in future taxable amounts? 
37) In a defined-contribution plan, a formula is used that 
38) In accounting for a defined-benefit pension plan 
39) In a defined-benefit plan, a formula is used that 
40) A corporation has a defined-benefit plan. An accrued pension cost will result at the end of the first year if the 
41) In accounting for a pension plan, any difference between the pension cost charged to expense and the payments into the fund should be reported as 
42) The interest on the projected benefit obligation component of pension expense 
43) Yeager Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Yeager should report a minimum liability at least equal to the 
44) On January 1, 2008, Pratt Corp. adopted a defined-benefit pension plan. The plans service cost of $300,000 was fully funded at the end of 2008. Prior service cost was funded by a contribution of $120,000 in 2008. Amortization of prior service cost was $48,000 for 2008. What is the amount of Pratt?s prepaid pension cost at December 31, 2008? 
45) Interest cost included in the net pension cost recognized for a period by an employer sponsoring a defined-benefit pension plan represents the 
46) On January 1, 2005, Foley Corporation acquired machinery at a cost of $250,000. Foley adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. At the beginning of 2008, a decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense to be recorded for the machinery in 2008 is (round to the nearest dollar) 
47) Accrued salaries payable of $51,000 were NOT recorded at December 31, 2007. Office supplies on hand of $24,000 at December 31, 2008 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause 
48) On January 1, 2005, Lynn Corporation acquired equipment at a cost of $600,000. Lynn adopted the double-declining balance method of depreciation for this equipment and had been recording depreciation over an estimated life of eight years, with no residual value. At the beginning of 2008, a decision was made to change to the straight-line method of depreciation for this equipment. Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings, net of tax, is 
49) The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years. Based on this information, the accountant should 
50) Which type of accounting change should always be accounted for in current and future periods?

Solution Description

1) When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par 
2) 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 
3) When convertible debt is retired by the issuer, any material difference between the cash acquisition price 
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) How should a \"gain\" from the sale of treasury stock be reflected when using the cost method of ecording treasury stock transactions? 
8) Treasury shares are 
9) When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited? 

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