AC 430 FINAL EXAM

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AC 430 FINAL EXAM,

AC 430 FINAL EXAM

 

1. Question: When common stock is issued at an amount greater than par value, the difference between the par value and the proceeds from the sale is recorded by
2. Question: On January 1, 2010, Marvel, Inc., grants a compensatory stock option plan to 10 of its executives. The plan allows each executive to buy 1,000 shares of its $1 par common stock at $30 a share after a three-year service period. The value of each option is estimated to be $8. The company estimates it will have an annual 2% employee turnover rate during the service period. What is the compensation expense for the year ended December 31, 2011?
3. Question: Battleground, Inc. had never had a treasury stock transaction prior to 2010. It experienced the following treasury stock transactions during 2010:
4/1/2010: Reacquired 1,000 shares of its own $5 par common stock, originally sold at $12 a share, for $10 a share. This was the first time that Battleground had reacquired its own stock.
4/8/2010: Reissued 400 shares at $8 a share.
5/2/2010: Reissued 500 shares at $13 a share.
5/10/2010: Retired the remaining 100 shares.
Assuming the cost method is used, the entry to record the reissuance of 400 shares on 4/8/2010 would include a
credit to Treasury Stock for $3,200
debit to Additional Paid-in Capital from Treasury Stock for $800
debit to Retained Earnings for $800
credit to Additional Paid-in Capital on Common Stock for $800

4. Question: When calculating earnings per share, dividends declared on noncumulative preferred stock, but not paid, should be

5. Question: Which of the following items would not be included in a basic earnings per share calculation?
undeclared dividends on noncumulative preferred stock
declared dividends on noncumulative preferred stock
undeclared dividends on cumulative preferred stock
declared dividends on cumulative preferred stock

6. Question: On January 1, a corporation had 10,380 shares of common stock outstanding. On August 1, it sold an additional 6,000 shares. During the year, dividends of $4,800 and $56,000 were declared and paid on the common and preferred stock, respectively. Net income for the year was $240,000. The basic earnings per share for the year was

7. Question: Smock Corporation had 30,000 shares of common stock outstanding during the year. In addition, there were compensatory stock options to purchase 3,000 shares of common stock at $20 a share outstanding the entire year. The average market price for the common stock during the year was $36 a share. The unrecognized compensation cost (net of tax) relating to these options was $4 a share. The denominator to compute the diluted earnings per share is

8. Question: When a company is determining its dividend policy, the company must adhere to legal requirements. The legal requirements are determined by the
Financial Accounting Standards Board (FASB)
state in which the company was incorporated
Securities and Exchange Commission (SEC)
Federal Trade Commission (FTC)

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AC 430 FINAL EXAM A+ GRADE

9. Question: Under the treasury stock method, the number of shares of common stock assumed to be reacquired is determined by using the
ending market price of the stock
average market price of the stock
beginning market price of the stock
par value of the stock

10. Question: On October 1, 2010, Black Company declared a property dividend payable in the form of marketable equity securities classified as “available for sale” for financial accounting purposes. The marketable equity securities will be distributed to the common stockholders on December 1, 2010. The investment in equity securities originally cost Black $410,000 on August 1, 2010. The investment’s fair value on various dates is as follows:
October 1, 2010 $430,000
December 1, 2010 435,000
December 31, 2010 440,000
The amount credited to Realized Gain on Disposal of Investments resulting from this dividend transaction should be
$0
$20,000
$25,000
$30,000

11. Question: Accrual accounting is usually associated with

12. Question: Under the completed-contract method of revenue recognition, the partial billings account is closed out against the
13. Question: In 2010, Alpha Construction began work on a contract with a price of $850,000 and estimated costs of $595,000. Data for each year of the contract are as follows:

2010 2011 2012
Under the percentage-of-completion method of revenue recognition, the balance in Construction in Progress at the end of 2011 would be

14. Question: In 2010, Alpha Construction began work on a contract with a price of $850,000 and estimated costs of $595,000. Data for each year of the contract are as follows:
2010 2011 2012
Under the percentage-of-completion method of revenue recognition, the net amount reported for construction in progress inventory at the end of 2011 would be
15. Question: The percentage-of-completion method does not
recognize profit each period during the life of the contract in proportion to the portion of the contract completed during the period
value the inventory at cost less any partial billings
give precedence to economic substance over legal form
value the inventory at the costs incurred plus the profit recognized to date less any partial billings

16. Question: The Naples Company uses the percentage-of-completion method and the cost-to-cost method for its long-term construction contracts. On one such contract, Naples expects total revenues of $260,000 and total costs of $200,000. During the first year, Naples incurred costs of $50,000 and billed the customer $30,000 under the contract. At what net amount should Naples’ Construction in Progress for this contract be reported at the end of the first year?
$30,000
$35,000
$50,000
$65,000

17. Question: A company may recognize revenue in full at the time of a sale if
the probability of collection is not reasonably assured
there is a very high degree of uncertainty about the collectibility of the sales price
the collection of the sales price is improbable
the collectibility of the sales price is not an issue

18. Question: Which one of the following statements is not true?
The use of the installment method of recognizing revenue is generally unacceptable.
When the installment method of recognizing revenue is in use, operating expenses are not deferred and recognized in the future.
Deferred gross profit should be disclosed as a current liability on the balance sheet.
A company may use the installment method of revenue recognition for a sales transaction that is not an installment sale.

19. Question: On December 31, 2009, Fort Stockton, Inc. had no temporary differences that created deferred income taxes. On January 2, 2010, a new machine was purchased for $30,000. Straight-line depreciation over a four-year life (no residual value) was used for financial accounting. Depreciation expense for tax purposes was $11,000 in 2010, $9,000 in 2011, $6,000 in 2012, and $4,000 in 2013. In each year, the income tax rate was 20% and Fort Stockton had no other items that created differences between pretax financial income and taxable income. Fort Stockton reported the following pretax financial income for 2010 through 2013:
2010 $50,000
2011 40,000
2012 30,000
2013 60,000
The entry to record income taxes on December 31, 2011, would include a

20. Question: Which of the following transactions would typically result in the creation of a deferred tax liability?

21. Question: The Clear Lake Corporation reported the following differences between its taxable income and pretax financial income for the year ended December 31, 2010: $30,000 of additional depreciation for tax purposes, $40,000 of rent collected in advance (taxable when received), and $38,000 of tax-exempt municipal interest revenue. Assuming an income tax rate of 30% for all years and a taxable income of $190,000 for the year ended December 31, 2010, income tax expense for 2010 would be

AC 430 FINAL EXAM