Corresponds to CLO 1(a) West Coast Corporation had 800,000 shares of common stock outstanding on January 1, issued 200,000 shares on October 1, and had income applicable to common stock of $2,865,000 for the year ended December 31, 2013. Rounded to the nearest penny, earnings per share of common stock for 2013 would be $2.86 $3.01 $3.37 $3.58 7 points Saved QUESTION 2 Corresponds to CLO 1(b) On July 1, 2013, an interest payment date, $60,000 of Tally Corporation bonds were converted into 1,400 shares of Tally Corporation common stock, each having a par value of $35 and a market value of $45. There is $5,700 unamortized discount on the bonds. Using the book value method, Tally would record a $5,300 increase in paid-in capital in excess of par a $5,800 increase in paid-in capital in excess of par a $8,700 decrease in paid-in capital in excess of par a $11,00 increase in paid-in capital in excess of par 7 points Saved QUESTION 3 Corresponds to CLO 1(c) Proceeds from an issue of debt securities having stock warrants should not be allocated between debt and equity features when the market value of the warrants is not readily available. the warrants issued with the debt securities are nondetachable. the allocation would result in a discount on the debt security. exercise of the warrants within the next few fiscal periods seems remote. 7 points Saved QUESTION 4 Corresponds to CLO 1(d) On January 1, 2013, Morgan 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 the grant. The options are exercisable during a five-year period beginning January 1, 2016 by grantees still employed by Morgan. The Black-Scholes option pricing model determines total compensation expense to be $540,000. The journal entry to record the compensation expense related to these options for 2013 would include a credit to the Paid-in Capital - Stock Options account for $540,000 $450,000 $270,000 $180,000 7 points Saved QUESTION 5 Corresponds to CLO 2(a) On July 1, 2013, Wilshire Corporation acquired 500, $1,000, 8% 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 Wilshire's available-for-sale portfolio. The amount to record as the cost of this debt investment on July 1, 2013 is $485,000 $495,000 $500,000 $540,000 7 points Saved QUESTION 6 Corresponds to CLO 2(b) On January 1, 2013, Capital Corporation acquired for $400,000 of 10% bonds, paying $376,100. The bonds mature January 1, 2024; interest is payable each July 1 and January 1. The discount of $23,900 provides an effective yield of 11%. Capital Corporation uses the effective-interest method and plans to hold these bonds to maturity. On July 1, 2013, Capital Corporation should increase its Debt Investments account for these bonds by (round to the nearest dollar): $4,000 $3,761 $1,195 $686 7 points Saved QUESTION 7 Corresponds to CLO 2(c) Wright Company's trading securities portfolio, which is appropriately included in current assets, is as follows on December 31, 2013: Holmes Corporation - cost of $300,000 and fair value of $240,000; Woods Corporation - cost of $500,000 and fair value of $530,000. Ignoring income taxes, what amount should be reported as a charge against income in Wright's 2013 income statement if 2013 is Wright's first year of operation? $30,000 Unrealized Loss $30,000 Unrealized Gain $60,000 Unrealized Gain $ -0- 7 points Saved QUESTION 8 Corresponds to CLO 2(d) Canton Corporation owns 3,000 of the 10,000 outstanding shares of Wallis Corporation. During 2013, Wallis Corporation earns $500,000 and pays cash dividends of $100,000. What amount should Canton show in the investment account at December 31, 2013 if the beginning of the year balance in the account was $600,000? $600,000 $630,000 $720,000 $750,000 7 points Saved QUESTION 9 Corresponds to CLO 3(a) Which of the following are temporary differences that are normally classified as expenses or losses that are deductible for tax purposes after they are recognized in financial income? Product warranty liabilities. Depreciable property. Fines and expenses resulting from a violation of law. Advance rental receipts. 7 points Saved QUESTION 10 Corresponds to CLO 3(b) Anderson Appliance Company reported the following results for the year ended December 31, 2014, its first year of operations: 2014 Income (per books before income taxes) $1,500,000 Taxable income $2,000,000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2015. What should Anderson record as a net deferred tax asset or liability for the year ended December 31, 2014, assuming that the enacted tax rates in effect are 40% in 2014 and 35% in 2015? $175,000 deferred tax liability $200,000 deferred tax liability $175,000 deferred tax asset $200,000 deferred tax asset 7 points Saved QUESTION 11 Corresponds to CLO 3(c) At December 31, 2013, Edwards Corporation reported a deferred tax liability of $140,000 which was attributable to a taxable temporary difference of $400,000. The temporary difference is scheduled to reverse in 2018. During 2014, a new tax law increased the corporate tax rate from 35% to 40%. Edwards should record this change by debiting Income Tax Expense for $14,000 Income Tax Expense for $20,000 Retained Earnings for $14,000 Retained Earnings for $20,000 7 points Save Answer QUESTION 12 Corresponds to CLO 3(d) Operating income/(loss) and tax rates for Lombard Corporation for 2012 through 2015 were as follows: 2012: $100,000, 30%; 2013: $250,000, 35%; 2014: ($500,000), 35%; 2015: $600,000, 40%. Assuming that Lombard opts to carryback its 2014 NOL, what is the amount of income tax payable at December 31, 2015? $40,000 $140,000 $180,000 $240,000 7 points Saved QUESTION 13 Corresponds to CLO 4(a) Granite Oaks Homebuilding, 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, Granite Oaks should not use The projected benefit obligation. The accumulated benefit obligation. The vested benefit obligation. Either the vested benefit obligation or accumulated benefit obligation. 7 points Saved QUESTION 14 Corresponds to CLO 4(b) Hathaway, Inc. sponsors a defined-benefit pension plan. The following data relates to the plan for 2013: Contributions to the plan, $350,000; Service cost, $425,000; Interest on projected benefit obligation, $360,000; Amortization of prior service cost due to increase in benefits, $65,000; Expected return on plan assets, $220,000. What amount should be reported for pension expense in 2013? $1,070,000 $630,000 $350,000 $280,000 7 points Save Answer QUESTION 15 Corresponds to CLO 4(c) Johnson, 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), $1,000,000; Accumulated benefit obligation, $1,450,000; Projected benefit obligation, $1,750,000. Contributions of $115,000 were made to the plan during the year. What amount should Johnson report as its pension liability on its balance sheet as of December 31, 2013? $635,000 $750,000 $1,450,000 $1,750,000 7 points Save Answer QUESTION 16 Corresponds to CLO 4(d) Which of the following information about its pension plan would a company normally be required to disclose in the notes to the financial statements? The number of employees enrolled in the defined-benefit plan. The annual pension payments made to current retirees. The amount of prior service cost changed or credited in previous years. The rates used in measuring the benefit amounts. 7 points Save Answer QUESTION 17 Corresponds to CLO 5(a) Which of the following should be treated as a change in accounting principle? A change from LIFO to FIFO for inventory valuation. A change to a different method of depreciation for plant assets. A change in the estimated useful life of plant assets. A change from the cash basis of accounting to the accrual basis of accounting. 7 points Saved QUESTION 18 Corresponds to CLO 5(b) On January 1, 2011, Graham Corporation acquired machinery at a cost of $450,000. Graham 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 $20,057 $36,000 $45,000 $57,600 7 points Save Answer QUESTION 19 Corresponds to CLO 5(c) During 2014, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years follow. Completed-Contract: 2012, $595,000; 2013, $730,000; 2014, $810,000. Percentage-of-Completion: 2012, $700,000; 2013, $850,000; 2014, $900,000. Assuming an income tax rate of 40% for all years, the affect of this accounting change on prior periods should be reported by a credit of $135,000 on the 2014retained earnings statement $189,000 on the 2014retained earnings statement $135,000 on the 2014income statement $189,000 on the 2014income statement 7 points Save Answer QUESTION 20 Corresponds to CLO 5(d) On January 10, 2012, Montgomery Corporation purchased machinery that cost $750,000. The entire cost was recorded as an expense. The machinery has an estimated useful life of 10 years and a $30,000 salvage value. Montgomery uses the straight-line method to account for depreciation expense. The error was discovered on December 29, 2013. Ignore income tax considerations. Montgomery's income statement for the year ended December 31, 2013, should show the cumulative effect of this error in the amount of $648,000 $576,000 $504,000 $-0- 7 points Save Answer QUESTION 21 Corresponds to CLO 6(a) Selected information from Trolley Corporation's 2013 accounting records is as follows: Proceeds from sale of land, $150,000; Proceeds from long-term borrowings, $325,000; Purchases of plant assets, $70,000; Purchases of inventories, $300,000; Proceeds from sale of Trolley common stock, $100,000. What is the net cash provided (used) by investing activities for the year ended December 31, 2013? $425,000 $205,000 $80,000 $55,000 7 points Save Answer QUESTION 22 Corresponds to CLO 6(b) Selected information from Maxwell Corporation's 2013 accounting records is as follows: Proceeds from issuance of common stock, $740,000; Proceeds from issuance of bonds, $2,400,000; Cash dividends paid on common stock, $200,000; Cash dividends paid on preferred stock paid, $80,000; Purchases of treasury stock, $200,000.What is the net cash provided (used) by financing activities for the year ended December 31, 2013? $3,060,000 $2,940,000 $2,860,000 $2,660,000 7 points Save Answer QUESTION 23 Corresponds to CLO 6(c) An increase in inventory balance would be reported in a statement of cash flows, using the indirect method, as a(n) addition to net income in arriving at net cash flow from operating activities. deduction from net income in arriving at net cash flow from operating activities. cash outflow from investing activities. cash outflow from financing activites. 7 points Save Answer QUESTION 24 Corresponds to CLO 6(d) Which of the following formulas would a bank or an investor most likely not use to evaluate a company's cash flows? Quick ratio Free cash flow Current cash debt coverage ratio Cash debt coverage ratio 7 points Save Answer QUESTION 25 Corresponds to CLO 7(a) Which of the following statements best describes the full disclosure principle? Companies may use the cash-basis of accountingin the financial statements, as long as accrual-basis amounts are disclosed in the notes to the financial statements. Publicly traded companies should provide a balance sheet, income statement, statement of cash flows, and statement of owners' equity. Companies provide information that is of sufficient importance to influence the judgment and decisions of an informed user. To be recognized in the main body of financial statements, an item should be measurable with sufficient certainty, and be relevant and reliable. 7 points Save Answer QUESTION 26 Corresponds to CLO 7(b) The following information pertains to Nolen Corporation and its divisions for the year ended December 31, 2013: Segments Total Revenue (Unaffiliated) A $600,000 B $100,000 C $500,000 D $650,000 Nolen has a reportable segment if that segment's revenue exceeds $100,000 $0 $185,000 $65,000 7 points Save Answer QUESTION 27 Corresponds to CLO 7(c) Companies preparing interim financial reports should use the discrete approach. should use the integral approach. should use the same accounting principles used for the annual reports. are required by GAAP to issue an interim income statement, balance sheet, and statement of cash flows, with appropriate notes. 7 points Save Answer QUESTION 28 Corresponds to CLO 7(d) Which of the following post-balance-sheet events would require adjustment of the accounts before issuance of the financial statements? Issue of a large amount of capital stock. Loss on a lawsuit, the outcome of which was deemed uncertain at year end. Retirement of the company president. Loss of plant as a result of fire. 7 points Save Answer QUESTION 29 Corresponds to CLO 1(e) Jen Co. had 200,000 shares of common stock and 20,000 shares of 10%, $100 par value cumulative preferred stock. No dividends on common stock were declared during the year. Net income was $2,000,000. What was Jens basic earnings per share? $9.00 $9.09 $10.00 $11.11 2 points Save Answer QUESTION 30 Corresponds to CLO 1(f) Information concerning the capital structure of the Petrock Corporation is as follows: December 31, Year 1 Year 2 Common stock (CS) 90,000 shares 90,000 shares Convertible preferred stock 10,000 shares 10,000 shares During year 2, Petrock paid dividends of $1.00 per share on its common stock and $2.40 per share on its preferred stock. The preferred stock is convertible into 20,000 shares of common stock. The net income for the year ended December 31, year 2, was $285,000. Assume that the income tax rate was 30%. What should be the diluted earnings per share for the year ended December 31, year 2, rounded to the nearest penny? $2.53 $2.59 $2.90 $2.61 2 points Save Answer QUESTION 31 Corresponds to CLO 1(g) On January 1, year 2, Karva Company granted James Dean, the president, an option to purchase 1,000 shares of Karvas $30 par value common stock at $40 per share. The option becomes exercisable on January 1, year 4, after Dean has completed 2 years of service. Assume that the fair value at the grant date of Karvas options with similar terms and conditions is $15. As a result of the option granted to Dean, Karva should recognize compensation expense in year 2 of $0 $5,000 $7,500 $15,000 2 points Save Answer QUESTION 32 Corresponds to CLO 2(e) When the fair value of an investment in debt securities exceeds its carrying amount, how should each of the following assets be reported at the end of the year? Held-to-maturity securities Available-for-sale securities Fair value Carrying amount Held-to-maturity securities Available-for-sale securities Carrying amount Fair value Held-to-maturity securities Available-for-sale securities Carrying amount Carrying amount Held-to-maturity securities Available-for-sale securities Fair value Fair value 2 points Save Answer QUESTION 33 Corresponds to CLO 2(f) On December 31, 2005, Ott Co. had investments in marketable equity securities as follows: Cost Market value Lower of cost or market Man Co. $10,000 $ 8,000 $ 8,000 Kemo, Inc. 9,000 11,000 9,000 Fenn Corp. 11,000 9,000 9,000 $30,000 $28,000 $26,000 ====== ====== ====== Ott's December 31, 2005 Balance Sheet should report the marketable equity securities as: $26,000 $28,000 $29,000 $30,000 2 points Save Answer QUESTION 34 Corresponds to CLO 2(g) In the absence of other relevant factors, what minimum level of voting ownership is considered to give an investor significant influence over an investee? 10% 20% 50% 100% 2 points Save Answer QUESTION 35 Corresponds to CLO 3(e) On its December 31, 2005 balance sheet, Shin Co. has income tax payable of $13,000 and a current deferred tax asset of $20,000, before determining the need for a valuation account. Shin had reported a current deferred tax asset of $15,000 at December 31, 2004. No estimated tax payments are made during 2005. At December 31, 2005, Shin determines that it is more likely than not that 10% of the deferred tax asset would not be realized. In its 2005 income statement, what amount should Shin report as total income tax expense? $8,000 $8,500 $10,000 $13,000 2 points Save Answer QUESTION 36 Corresponds to CLO 3(f) For the year ended December 31, 2004, Mont Co.'s books showed income of $600,000 before provision for income tax expense. To compute taxable income for federal income tax purposes, the following items should be noted: Income from exempt municipal bonds $60,000 Depreciation deducted for tax purposes in excess of depreciation recorded on the books $120,000 Proceeds received from life insurance on death of officer $100,000 Estimated tax payments 0 Enacted corporate tax rate 30% Ignoring the alternative minimum tax provisions, what amount should Mont report at December 31, 2004 as its current federal income tax liability? $96,000 $114,000 $150,000 $162,000 2 points Save Answer QUESTION 37 Corresponds to CLO 3(g) When accounting for income taxes, a temporary difference occurs in which of the following scenarios? An item is included in the calculation of net income, but is neither taxable nor deductible. An item is included in the calculation of net income in one year and in taxable income in a different year. An item is included in the calculation of net income in one year and in taxable income in a different year. The accrual method of accounting is used. 2 points Save Answer QUESTION 38 Corresponds to CLO 4(e) Data for a defined benefit pension plan for the current year are as follows: PBO, January 1, $200mn Assets, January 1, $160mn Pension expense, $60mn Funding contribution, $50mn PBO gain (year-end), $14mn Amortization of PSC for year, $4mn The ending pension liability balance is $36mn $46mn $32mn $50mn 2 points Save Answer QUESTION 39 Corresponds to CLO 4(f) The following information pertains to the 2004 activity of Ral Corp.'s defined benefit pension plan: Service cost $300,000 Return on plan assets $80,000 Interest cost on pension benefit obligation $164,000 Amortization of actuarial loss $30,000 Amortization of unrecognized net obligation $70,000 Ral's 2004 pension cost was $316,000 $484,000 $574,000 $644,000 2 points Save Answer QUESTION 40 Corresponds to CLO 4(g) A defined benefit plan's projected benefit obligation totaled $20mn at the end of the current year. Plan assets at market value totaled $23mn. Choose the correct statement concerning balance sheet reporting for this plan. $3mn pension asset. $3mn pension liability. A pension asset of $23mn, and a $20mn pension liability. no pension-related value is reported in the balance sheet; all relevant amounts are reported in the footnotes. 2 points Save Answer QUESTION 41 Correponds to CLO 5(e) Cuthbert Industrials, Inc. prepares three-year comparative financial statements. In year 3, Cuthbert discovered an error in the previously issued financial statements for year 1. The error affects the financial statements that were issued in years 1 and 2. How should the company report the error? The financial statements for years 1 and 2 should be restated; an offsetting adjustment to the cumulative effect of the error should be made to the comprehensive income in the year 3 financial statements. The financial statements for years 1 and 2 should not be restated; the cumulative effect of the error on years 1 and 2 should be reflected in the carrying amounts of assets and liabilities as of the beginning of year 3. The financial statements for years 1 and 2 should not be restated; financial statements for year 3 should disclose the fact that the error was made in prior years. The financial statements for years 1 and 2 should be restated; the cumulative effect of the error on years 1 and 2 should be reflected in the carrying amounts of assets and liabilities as of the beginning of year 3. 2 points Save Answer QUESTION 42 Corresponds to CLO 5(f) In which of the following situations should a company report a Prior period adjustment? A change in the estimated useful lives of fixed assets purchased in prior years. The correction of a mathematical error in the calculation of prior years' depreciation. A switch from the straight-line to double-declining-balance method of depreciation. The scrapping of an asset prior to the end of its expected useful life. 2 points Save Answer QUESTION 43 Corresponds to CLO 5(g) How should the effect of a change in accounting estimate be accounted for? By restating amounts reported in financial statements of prior periods. By reporting pro forma amounts for prior periods. As a Prior period adjustment to beginning retained earnings. In the period of change and future periods if the change affects both. 2 points Save Answer QUESTION 44 Corresponds to CLO 6(e) How should the amortization of bond discount on long-term debt be reported in a statement of cash flows prepared using the indirect method? As a financing activities inflow. As financing activities outflow. In operating activities as a deduction from income. In operating activities as an addition to income. 2 points Save Answer QUESTION 45 Corresponds to CLO 6(f) A companys accounts receivable decreased from the beginning to the end of the year. In the companys statement of cash flows (operating activities shown using direct approach), the cash collected from customers would be Sales revenues plus accounts receivable at the beginning of the year. Sales revenues plus the decrease in accounts receivable from the beginning to the end of the year. Sales revenues less the decrease in accounts receivable from the beginning to the end of the year. The same as sales revenues. 2 points Save Answer QUESTION 46 Corresponds to CLO 6(g) Green Co. had the following equity transactions at December 31: Cash proceeds from sale of investment in Blue Co. (carrying value$60,000) $75,000 Dividends received on Grey Co. stock 10,500 Common stock purchased from Brown Co. 38,000 What amount should Green recognize as net cash from investing activities in its statement of cash flows at December 31? $37,000 $47,500 $75,000 $85,500 2 points Save Answer QUESTION 47 Corresponds to CLO 7(e) Which of the following must be included in the notes to the financial statements in a company's summary of significant accounting policies? Description of current year equity transactions. Summary of long-term debt outstanding. Schedule of fixed assets. Revenue recognition policies. 2 points Save Answer QUESTION 48 Corresponds to CLO 7(f) During the last quarter of 20x4, a firm violated U.S. securities laws, and 20x4 revenues were overestimated as a result. Although no lawsuit was brought against the firm before the 20x4 financial statements were released, management knows that in all likelihood the firm will be sued by shareholder groups and a range of possible loss amounts is estimated. Therefore, The firm has no recognized liability for 20x4. The firm should recognize the estimated loss and liability. The firm should only footnote the potential loss. The firm should wait until being sued before considering any kind of disclosure. 2 points Save Answer QUESTION 49 Corresponds to CLO 7(g) The following information pertains to Klein Corp. and its operating segments for the year ended December 31, year 1: Combined profit of segments reporting profit $600,000 Combined loss of segments reporting loss (400,000) Combined profit and loss of all segments 200,000 Klein has a reportable segment if that segments operating profit or loss is $25,000 profit. $60,000 profit. $55,000 loss. $55,000 profit.