17. On January 1, 2006, Fascom had the following account balances in its shareholders' equity accounts. Required: Without preparing journal entries, prepare the shareholders' equity section of Fascom's balance sheet as of December 31, 2006. Assume net income is $500,000 for 2006. Use of T-accounts very helpful. Be sure to keep track of stock transactions.

Rika Inada########################################### #R#i#k#a# #I#n#a#d#a###P3PW##Q3 2o#r###############################################################C# MT 3 Chapters 17 - 19 Student: ___________________________________________________________________________ Each MC question is worth 3 points each for a toal of 45 points. 1. Scallion Company received the following reports on its defined benefit pension plan for the current calendar year: The long-term expected rate of return on plan assets is 10%. Assuming no other data are relevant, what is the pension expense for the year? A. $197,000. B. $227,000. C. $172,000. D. $202,000. 2. Colombo Enterprises has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $14,000; interest cost, $6,000; benefits paid for the year, $9,000; ending PBO, $89,000; and the expected return on plan assets, $10,000. There were no other pension related costs. The journal entry to record the annual pension costs will include a debit to pension expense for: A. $20,000. B. $15,000. C. $12,000. D. $10,000. 3. Payment of retirement benefits: A. Increases the PBO. B. Increases the ABO. C. Reduces the GBO. D. Reduces the PBO. 4. A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2007. During 2007, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2007 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2007, was: A. $225,000. B. $305,000. C. $331,500. D. None of the above is correct. 5. Castillo Company has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $18,000; interest cost, $5,000; benefits paid for the year, $9,000; ending PBO, $89,000; the expected return on plan assets, $10,000; and cash deposited with pension trustee, $17,000. There were no other pension related costs. The journal entry to record the annual pension costs will include a debit(credit) to the pension asset / liability for: A. $4,000. B. $(4,000). C. $(6,000). D. $2,000. 6. When a property dividend is declared, the reduction in retained earnings is for: A. The book value of the property on the date of declaration. B. The book value of the property on the date of distribution. C. The fair market value of the property on the date of distribution. D. The fair market value of the property on the date of declaration. The 12/31/05 balance sheet of Despot Inc. included the following: 7. In February, 2006, Despot declared cash dividends of $12 million to be paid in April of that year. What effect did the April transaction have on Despot's accounts? A. Decreased assets and liabilities B. Decreased assets and shareholders' equity C. Increased liabilities and decreased shareholders' equity D. None of the above is correct. 8. Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $300,000 dividend will be paid. What are the dividends per share payable to preferred and common, respectively? A. $6; $12. B. $18; $6. C. $6; $6. D. None of the above is correct. 9. The changes in account balances for Elder Company for 2006 are as follows: Assuming the only charges in retained earnings in 2006 were for net income and a $50,000 dividend, what was net income for 2006? A. $40,000. B. $60,000. C. $70,000. D. $90,000. 10. On October 1, 2006, Chief Corporation declared and issued a 10% stock dividend. Prior to this date, Chief had 80,000 shares of $5 par common stock outstanding. The market value of Chief Corporation on the date of declaration was $10 per share. As a result of this dividend, Chief's retained earnings will: A. Decrease by $80,000. B. Not change. C. Decrease by $40,000. D. Increase by $80,000. 11. XYZ paid $10,000 in dividends in January of the current year to its preferred shareholders. The preferred stock is nonconvertible and noncumulative. The dividend: A. Will be added to the denominator of the earnings per share fraction for the current year. B. Will be added to the numerator of the earnings per share fraction for the current year. C. Will be subtracted from the numerator of the earnings per share fraction for the current year. D. May not affect earnings per share depending on the declaration date. 12. All other things equal, what is the effect on earnings per share when a corporation acquires shares of its own stock on the open market? A. Decrease. B. No effect if the shares are held as treasury shares. C. Increase only if the shares are considered to be retired. D. Increase. 13. The calculation of diluted earnings per share assumes that stock options were exercised and that the proceeds were used to: A. Buy common stock as an investment. B. Retire preferred stock. C. Buy treasury stock. D. Increase net income. 14. On December 31, 2005, Albacore Company had 300,000 shares of common stock issued and outstanding. Albacore issued a 10% stock dividend on June 30, 2006. On September 30, 2006, 12,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2006? A. 303,000. B. 342,000. C. 312,000. D. 327,000. 15. Blue Cab Company had 50,000 shares of common stock outstanding on January 1, 2006. On April 1, 2006, the company issued 20,000 shares of common stock. The company had outstanding stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives. The end-of-year market price of common stock was $11 while the average price for the year was $12. The company reported net income in the amount of $269,915 for 2006. What is the diluted earnings per share? A. $3.60. B. $4.10. C. $4.50. D. $3.81. 15 points 16. On December 31, 2005, Brisbane Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $50 par, cumulative preferred stock outstanding. On February 28, 2006, Brisbane purchased 24,000 shares of common stock on the open market as treasury stock paying $40 per share. Brisbane sold 6,000 treasury shares on September 30, 2006, for $45 per share. Net income for 2006 was $180,905. Also outstanding during the year were stock options giving key personnel the option to buy 50,000 common shares at $40. During 2006, the average market price of the common shares was $50 with a closing price of $51 on December 31, 2006. Required: Compute Brisbane's basic and diluted earnings per share for 2006. 25 points 17. On January 1, 2006, Fascom had the following account balances in its shareholders' equity accounts. Required: Without preparing journal entries, prepare the shareholders' equity section of Fascom's balance sheet as of December 31, 2006. Assume net income is $500,000 for 2006. Use of T-accounts very helpful. Be sure to keep track of stock transactions. 15 points 18. Burrito Corporation has a defined benefit pension plan. Burrito received the following information for the current calendar year: The expected long-term return on plan assets is 10%. There were no other relevant data for the year. Required: 1) Determine Burrito's pension expense for the year. 2) Prepare the journal entries to record the pension expense and funding for the year. MT 3 Chapters 17 - 19 Student: ___________________________________________________________________________ Each MC question is worth 3 points each for a toal of 45 points. 1. Scallion Company received the following reports on its defined benefit pension plan for the current calendar year: The long-term expected rate of return on plan assets is 10%. Assuming no other data are relevant, what is the pension expense for the year? A. $197,000. B. $227,000. C. $172,000. D. $202,000. 2. Colombo Enterprises has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $14,000; interest cost, $6,000; benefits paid for the year, $9,000; ending PBO, $89,000; and the expected return on plan assets, $10,000. There were no other pension related costs. The journal entry to record the annual pension costs will include a debit to pension expense for: A. $20,000. B. $15,000. C. $12,000. D. $10,000. 3. Payment of retirement benefits: A. Increases the PBO. B. Increases the ABO. C. Reduces the GBO. D. Reduces the PBO. 4. A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2007. During 2007, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2007 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2007, was: A. $225,000. B. $305,000. C. $331,500. D. None of the above is correct. 5. Castillo Company has a defined benefit pension plan. At the end of the reporting year, the following data were available: beginning PBO, $75,000; service cost, $18,000; interest cost, $5,000; benefits paid for the year, $9,000; ending PBO, $89,000; the expected return on plan assets, $10,000; and cash deposited with pension trustee, $17,000. There were no other pension related costs. The journal entry to record the annual pension costs will include a debit(credit) to the pension asset / liability for: A. $4,000. B. $(4,000). C. $(6,000). D. $2,000. 6. When a property dividend is declared, the reduction in retained earnings is for: A. The book value of the property on the date of declaration. B. The book value of the property on the date of distribution. C. The fair market value of the property on the date of distribution. D. The fair market value of the property on the date of declaration. The 12/31/05 balance sheet of Despot Inc. included the following: 7. In February, 2006, Despot declared cash dividends of $12 million to be paid in April of that year. What effect did the April transaction have on Despot's accounts? A. Decreased assets and liabilities B. Decreased assets and shareholders' equity C. Increased liabilities and decreased shareholders' equity D. None of the above is correct. 8. Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $300,000 dividend will be paid. What are the dividends per share payable to preferred and common, respectively? A. $6; $12. B. $18; $6. C. $6; $6. D. None of the above is correct. 9. The changes in account balances for Elder Company for 2006 are as follows: Assuming the only charges in retained earnings in 2006 were for net income and a $50,000 dividend, what was net income for 2006? A. $40,000. B. $60,000. C. $70,000. D. $90,000. 10. On October 1, 2006, Chief Corporation declared and issued a 10% stock dividend. Prior to this date, Chief had 80,000 shares of $5 par common stock outstanding. The market value of Chief Corporation on the date of declaration was $10 per share. As a result of this dividend, Chief's retained earnings will: A. Decrease by $80,000. B. Not change. C. Decrease by $40,000. D. Increase by $80,000. 11. XYZ paid $10,000 in dividends in January of the current year to its preferred shareholders. The preferred stock is nonconvertible and noncumulative. The dividend: A. Will be added to the denominator of the earnings per share fraction for the current year. B. Will be added to the numerator of the earnings per share fraction for the current year. C. Will be subtracted from the numerator of the earnings per share fraction for the current year. D. May not affect earnings per share depending on the declaration date. 12. All other things equal, what is the effect on earnings per share when a corporation acquires shares of its own stock on the open market? A. Decrease. B. No effect if the shares are held as treasury shares. C. Increase only if the shares are considered to be retired. D. Increase. 13. The calculation of diluted earnings per share assumes that stock options were exercised and that the proceeds were used to: A. Buy common stock as an investment. B. Retire preferred stock. C. Buy treasury stock. D. Increase net income. 14. On December 31, 2005, Albacore Company had 300,000 shares of common stock issued and outstanding. Albacore issued a 10% stock dividend on June 30, 2006. On September 30, 2006, 12,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2006? A. 303,000. B. 342,000. C. 312,000. D. 327,000. 15. Blue Cab Company had 50,000 shares of common stock outstanding on January 1, 2006. On April 1, 2006, the company issued 20,000 shares of common stock. The company had outstanding stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives. The end-of-year market price of common stock was $11 while the average price for the year was $12. The company reported net income in the amount of $269,915 for 2006. What is the diluted earnings per share? A. $3.60. B. $4.10. C. $4.50. D. $3.81. 15 points 16. On December 31, 2005, Brisbane Company had 100,000 shares of common stock outstanding and 30,000 shares of 7%, $50 par, cumulative preferred stock outstanding. On February 28, 2006, Brisbane purchased 24,000 shares of common stock on the open market as treasury stock paying $40 per share. Brisbane sold 6,000 treasury shares on September 30, 2006, for $45 per share. Net income for 2006 was $180,905. Also outstanding during the year were stock options giving key personnel the option to buy 50,000 common shares at $40. During 2006, the average market price of the common shares was $50 with a closing price of $51 on December 31, 2006. Required: Compute Brisbane's basic and diluted earnings per share for 2006. 25 points 17. On January 1, 2006, Fascom had the following account balances in its shareholders' equity accounts. Required: Without preparing journal entries, prepare the shareholders' equity section of Fascom's balance sheet as of December 31, 2006. Assume net income is $500,000 for 2006. Use of T-accounts very helpful. Be sure to keep track of stock transactions. 15 points 18. Burrito Corporation has a defined benefit pension plan. Burrito received the following information for the current calendar year: The expected long-term return on plan assets is 10%. There were no other relevant data for the year. Required: 1) Determine Burrito's pension expense for the year. 2) Prepare the journal entries to record the pension expense and funding for the year