Corresponds to CLO 1(a) Parson Corporation had 500,000 shares of common stock outstanding on January 1, issued 100,000 shares on October 1, and had income applicable to common stock of $730,000 for the year ended December 31, 2013. Rounded to the nearest penny, earnings per share of common stock for 2013 would be $1.67 $1.46 $1.39 $1.22 10 points QUESTION 2 Corresponds to CLO 1(b) The following information is available for Packard Corporation: January 1, 2013 Shares outstanding 1,500,000 April 1, 2013 Treasury shares purchased 100,000 October 1, 2013 Shares issued in a 100% stock dividend 1,400,000 The weighted-average number of shares to be used in computing earnings per common share for 2013 is 1,033,333 2,800,000 2,850,000 3,000,000 10 points QUESTION 3 Corresponds to CLO 1(c) On January 2, 2013, Interval Co. issued at par $1,000,000 of 7% convertible bonds. Each $1,000 bond is convertible into 20 shares of common stock. No bonds were converted during 2013. Interval had 200,000 shares of common stock outstanding during 2013. Interval's 2013 net income was $300,000 and the income tax rate was 30%. Interval's diluted earnings per share for 2013 would be (rounded to the nearest penny): $1.74 $1.59 $1.50 $1.68 10 points QUESTION 4 Corresponds to CLO 1(d) On January 1, 2013, Lakewood Corporation granted stock options to officers and key employees for the purchase of 50,000 shares of the company's $20 par common stock at $40 per share as additional compensation for services to be rendered over the next three years. The market price of common stock was $49 per share at the date of grant. The options are exercisable during a five-year period beginning January 1, 2016 by grantees still employed by Lakewood. The Black-Scholes option pricing model determines total compensation expense to be $600,000. The 2013 income statement will include compensation expense related to these stock options in the amount of: $600,000 $450,000 $200,000 $120,000 10 points QUESTION 5 Corresponds to CLO 2(a) On July 1, 2103, Atlas Corporation acquired 500, $1,000, 7% bonds at 97 plus accrued interest. The bonds were dated April 1, 2013, and mature on March 31, 2018, with interest paid each September 30 and March 31. The bonds will be added to Atlas's available-for-sale portfolio. The journal entry to record the purchase of this investment will include a debit to Bond discount for $15,000. a credit to Investments for $500,000. a debit to Cash for $500,000. a credit to Cash for $485,000. 10 points QUESTION 6 Corresponds to CLO 2(b) On January 1, 2013, King Corporation paid $470,124 to acquire 10% bonds with a face value of $500,000. The discount of $29,876 provides an effective yeld of 11%. King Corporation uses the effective-interest method and plans to hold these bonds to maturity. On July 1, 2013, King Corporation should increase the carrying value of these bonds by (round to the nearest dollar): $4,701 $857 $2,500 $1,494 10 points QUESTION 7 Corresponds to CLO 2(c) Hollister Company's trading securities portfolio, which is appropriately included in current assets, is as follows on December 31, 2013: Meyer Corporation - cost of $400,000 and fair value of $325,000; Fischer Corporation - cost of $500,000 and fair value of $535,000. Ignoring income taxes, what amount should be reported as a charge against income in Hollister's 2013 income statement if 2013 is Hollister's first year of operation? $40,000 Unrealized Loss $35,000 Unrealized Gain $75,000 Unrealized Loss $ -0- 10 points QUESTION 8 Corresponds to CLO 2(d) Patton Corporation owns 3,000 of the 10,000 outstanding shares of Forman Corporation. During 2013, Forman Corporation earns $1,500,000 and pays cash dividends of $120,000. What amount should Patton show in the Forman investment account at December 31, 2013 if the beginning of the year balance in the account was $800,000? $1,286,000 $1,250,000 $1,214,000 $800,000 10 points QUESTION 9 Corresponds to CLO 3(a) Tax rates other than the current tax rate may be used to calculate the deferred income tax amounts on the balance sheet if it is probable that a future tax rate change will occur. it appears likely that a future tax rate will be greater than the current tax rate. the future tax rates have been enacted into law. it appears likely that a future tax rate will be less than the current tax rate. 10 points QUESTION 10 Corresponds to CLO 3(b) In 2013, its first year of operations, Highland Corporation had Income (per books before income taxes) of $1,100,000. The following items are included in Highland's pre-tax accounting income: accrued warranty costs, estimated to be paid in 2014, of $40,000; and installment sales revenue of $60,000, which will be collected in 2014. Assuming the enacted tax rate in effect for 2013 and 2014 is 40%, what amount should Highland record as a net current deferred tax asset or liability for the year ended December 31, 2013? $20,000 deferred tax asset $20,000 deferred tax liability $8,000 deferred tax asset $8,000 deferred tax liability 10 points QUESTION 11 Corresponds to CLO 3(c) At December 31, 2013, Winding Corporation reported a deferred tax liability of $131,250 which was attributable to a taxable temporary difference of $375,000. The temporary difference is scheduled to reverse in 2018. During 2014, a new tax law increased the corporate tax rate from 35% to 40%. Winding should record this change by debiting Income Tax Expense for $6,563 Income Tax Expense for $18,750 Retained Earnings for $6,563 Retained Earnings for $18,750 10 points QUESTION 12 Corresponds to CLO 3(d) Operating income/(loss) and tax rates for Lorraine Corporation for 2012 through 2015 were as follows: 2012: $100,000, 30%; 2013: $250,000, 35%; 2014: ($500,000), 35%; 2015: $800,000, 40%. Assuming that Lorraine opts to carryback its 2014 NOL, what is the amount of income tax payable at December 31, 2015? $320,000 $260,000 $220,000 $120,000 10 points QUESTION 13 Corresponds to CLO 4(a) Oakmont, Inc. is a publicly traded corporation which has a defined benefit pension plan in place for its employees. Under generally accepted accounting principles, as a measure of the company's pension liability, Oakmont should not use The projected benefit obligation. The accumulated benefit obligation. The vested benefit obligation. Either the vested benefit obligation or accumulated benefit obligation. 10 points QUESTION 14 Corresponds to CLO 4(b) Barton, Inc. sponsors a defined-benefit pension plan. The following data relates to the plan for 2013: Contributions to the plan, $450,000; Service cost, $600,000; Interest on projected benefit obligation, $450,000; Amortization of prior service cost due to increase in benefits, $85,000; Expected return on plan assets, $300,000. What amount should be reported for pension expense in 2013? $385,000 $450,000 $835,000 $1,435,000 10 points QUESTION 15 Corresponds to CLO 4(c) Olsen, Inc. sponsors a defined-benefit pension plan. The following balance sheet data relates to the plan on December 31, 2013: Plan assets (at fair value), $950,000; Accumulated benefit obligation, $1,200,000; Projected benefit obligation, $1,400,000. What amount should Olsen report as its pension liability on its balance sheet as of December 31, 2013? $1,400,000 $1,200,000 $450,000 $355,000 10 points QUESTION 16 Corresponds to CLO 4(d) The postretirement benefit obligation is the future value of the estimated benefits during retirement. present value of the estimated benefits during retirement. fair value of the extimated benefits during retirement. actual value of estimated benefits during retirement. 10 points QUESTION 17 Corresponds to CLO 5(a) Allen Corporation has decided to switch from LIFO to FIFO for inventory valuation. Allen should treat this as a Correction of an error. Prior period adjustment. Change in accounting principle. Change in accounting estimate. 10 points QUESTION 18 Corresponds to CLO 5(b) On January 1, 2011, Gazelle Corporation acquired machinery at a cost of $700,000. Gazelle adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of 10 years, with no residual value. At the beginning of 2013, a decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense for 2013 should be $112,000 $89,600 $56,000 $31,200 10 points QUESTION 19 Corresponds to CLO 5(c) On January 1, 2013, Playtime Corporation changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $900,000 increase in the January 1, 2013 inventory. Assume that the income tax rate for all years is 40%. The cumulative effect of the accounting change should be reported by Playtime in its 2013 income statement as a $900,000 cumulative effect of accounting change. retained earnings statement as a $900,000 addition to the beginning balance. income statement as a $540,000 cumulative effect of accounting change. retained earnings statement as a $540,000 addition to the beginning balance. 10 points QUESTION 20 Corresponds to CLO 5(d) On January 10, 2012, Nevada Trucking Corporation purchased machinery that cost $700,000. The entire cost was recorded as an expense. The machinery has an estimated useful life of 10 years and a $30,000 salvage value. Nevada uses the straight-line method to account for depreciation expense. The error was discovered on December 29, 2013. Ignore income tax considerations. Nevada's income statement for the year ended December 31, 2013, should show the cumulative effect of this error in the amount of $603,000 $536,000 $469,000 $-0- 10 points QUESTION 21 Corresponds to CLO 6(a) Selected information from Core Corporation's 2013 accounting records is as follows: Proceeds from sale of land, $180,000; Proceeds from long-term borrowings, $325,000; Purchases of plant assets, $75,000; Purchases of inventories, $295,000; Proceeds from sale of Core common stock, $100,000. What is the net cash provided (used) by investing activities for the year ended December 31, 2013? $425,000 $235,000 $105,000 $55,000 10 points QUESTION 22 Corresponds to CLO 6(b) Selected information from Marin Corporation's 2013 accounting records is as follows: Proceeds from issuance of common stock, $1,000,000; Proceeds from issuance of bonds, $2,200,000; Cash dividends paid on common stock, $400,000; Cash dividends paid on preferred stock, $100,000; Purchases of treasury stock, $300,000. What is the net cash provided (used) by financing activities for the year ended December 31, 2013? $3,000,000 $2,900,000 $2,700,000 $2,400,000 10 points QUESTION 23 Corresponds to CLO 6(c) During 2013, Warner Company earned net income of $750,000 which included depreciation expense of $90,000. In addition, the company experienced the following changes in account balances: Increase in accounts payable, $55,000; Increase in inventory, $75,000; Decrease in accounts receivable, $30,000. Based upon this information, what amount will be shown for net cash provided by operating activities for 2013? $1,000,000 $850,000 $790,000 $740,000 10 points QUESTION 24 Corresponds to CLO 6(d) Which of the following is true regarding the statement of cash flows? The FASB requires companies using the direct method of reporting net cash flow to provide a separate schedule reconciling net income to net cash flow from operating activities. The direct method starts with net income and converts it to net cash flow from operating activities. Net cash provided by operating activities varies depending on whether the direct or indirect method is used. The net increase or decrease in cash reported during the period should reconcile the beginning and ending cash balances as reported in the bank statements for the year. 10 points QUESTION 25 Corresponds to CLO 7(a) Which of the following statements best describes the full disclosure principle? The increasing complexity of business operations magnifies the difficulty of distilling economic events into summarized reports. Publicly traded companies should provide a balance sheet, income statement, statement of cash flows, and statement of owners' equity. To be recognized in the main body of financial statements, an item should be measurable with sufficient certainty, and be relevant and reliable. Companies should provide information that is of sufficient importance to influence the judgment and decisions of an informed user. 10 points QUESTION 26 Corresponds to CLO 7(b) The following information pertains to Bridgewater Corporation and its divisions for the year ended December 31, 2013: Segments Total Revenue (Unaffiliated) A $ 500,000 B 2,300,000 C 1,450,000 D 1,950,000 Bridgewater has a reportable segment if that segment's revenue exceeds $626,500 $620,000 $613,500 $500,000 10 points QUESTION 27 Corresponds to CLO 7(c) On January 8, 2013, Indenture Corporation paid property taxes on its factory building for the calendar year 2013 in the amount of $450,000. Indenture estimates that total depreciation expense for the year ending December 31, 2013 will amount to $800,000, and that 2013 year-end bonuses to employees will total $250,000. In Indenture's interim income statement for the six months ended June 30, 2013, what is the total amount of expense relating to these three items that should be reported? $1,500,000 $975,000 $850,000 $750,000 10 points QUESTION 28 Corresponds to CLO 7(d) Which of the following would be discolsed in the summary of significant accounting policies disclosure note? Related-party transactions. Depreciation method. Retirement of the company president. Loss on an uncollectible account receivable resulting from a customer's major flood that occurred after the balance sheet date