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Question 1 William Corp. issued 10,000 shares of its $1 par value common stock for a building. The building was listed for sale at $500,000. William's common stock is currently selling for $45 per share. William Corp. should record the building at $10,00 0 $440,0 00 $450,0 00 $500,0 00 Question 2 On March 1, 2004, Leo Corp. was formed by issuing 100,000 shares of $1 par value common stock at $5 per share and 20,000 shares of $100 par value preferred stock at $101 per share. If Leo earned $35,000 in its first year of operations, total stockholders' equity at year end would be $335,000 $735,000. $2,135,000. $2,555,000 Question 3 If a company reissued at $20 per share 100 shares of treasury stock that it had previously acquired for $28 per share and there wasn't any Paid-in Capital from Treasury Stock, it would debit Loss on Sale of Treasury Stock for $800 Paid-in Capital from Common Stock for $800 Retained Earnings for $800 Treasury Stock for $800 Question 4 B Corp. issued 200,000 shares of common stock when it began operations in 2004 and issued an additional 100,000 shares in 2005. B also issued preferred stock convertible into 100,000 shares of common stock. In 2006, B purchased 75,000 shares of its common stock and held it in the treasury. At December 31, 2006, how many shares of B's common stock were outstanding? 400,0 00 325,0 00 300,0 00 225,0 00 Question 5 At December 31, 2005 and 2006, C Corp. had outstanding 4,000 shares of $100 par value, 6 percent cumulative preferred stock and 20,000 shares of $10 par value common stock. At December 31, 2005, dividends in arrears on the preferred stock were $12,000. Cash dividends declared in 2006 totaled $44,000. Of the $44,000, what amounts were payable on each class of stock? Preferred Common Stock Stock $44,000 $ 0 36,000 8,000 32,000 12,000 24,000 20,000 Question 6 Coe Corp. issued 20,000 shares of $5 par common stock at $10 per share. On December 31, 2005, Coe's retained earnings were $300,000. In March 2006, Coe reacquired 5,000 shares of its common stock at $20 per share. In June 2006, Coe sold 1,000 of these shares to its corporate officers for $25 per share. Coe uses the cost method to account for its treasury stock. Net income for the year ended December 31, 2006, was $60,000. At December 31, 2006, what amount should Coe report as retained earnings? $360,000 $365,000 $375,000 $380,000 Question 7 During 2005, Bob Co. issued 5,000 shares of $100 par convertible preferred stock for $110 per share. One share of preferred stock can be converted into three shares of Bob's $25 par common stock at the option of the preferred shareholder. On December 31, 2006, when the market value of the common stock was $40 per share, all of the preferred stock was converted. What amount should Bob credit to Common Stock and to Additional Paid-in Capital as a result of the conversion? Common Stock Additional Paid-in Capital $375,000 $175,000 375,000 225,000 500,000 50,000 600,000 0 Question 8 A liability for a cash dividend exists at the end of each year date of declaration date of record date of payment Question 9 Assume that Grandzol Company believes that $120,000 of a $600,000 deduction will not be utilized in future periods and that the tax rate is 40 percent for all periods. What is the amount of the valuation allowance? $48,000 $120,000 $192,000 $240,000 Question 10 On December 31, 2010, Albacore Company had 300,000 shares of common stock issued and outstanding. Albacore issued a 10% stock dividend on June 30, 2011. On September 30, 2011, 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 2011? 303,0 00 342,0 00 312,0 00 327,0 00 Question 11 On December 31, 2010, the CPA Company had 100,000 shares of common stock issued and outstanding. On July 1, 2011, the company sold 20,000 additional shares for cash. CPA's net income for the year ended December 31, 2011 was $650,000. During 2011, CPA declared and paid $89,000 in cash dividends on its nonconvertible preferred stock. What is the 2011 basic earnings per share? 5.91 5.61 5.10 None of the bove Question 12 If the market interest rate of a bond is the same as the face interest rate, then the bond is selling at a premium a discount at face value none of the above Question 13 Assume that on January 1, 2005, W Company issues bonds with a face value of $100,000 that pay 10 percent interest, semiannually (5 percent per period) and mature in five years. Assume that the market interest rate at the date of issuance is 8 percent (4 percent per semiannual period). What is the issue price of the bond? $100,000 $108,111 $121,880 $126,948 Question 14 Bonds that can be retired by the issuer at a specified price before the maturity date are called convertible bond serial bond callable bond none of the above Question 15 Which organization lists transparency as one of its principles of social responsibilities? the iSO the GRI the SASB none of the above Question 16 If you were interested in reviewing J & J Products' sustainability report, which organization's website would you most likely go to? the ISO the GRI the SASB the IDMB Question 17 A deferred tax account should be established in order to allocate income tax differences reflecting the tax impact of permanent differences temporary differences both temporary and permanent difference none of the above Question 18 The Moore Company has sales of $500,000 that are recorded for book purposes in 2014. For tax purposes, the company uses the installment sales method, resulting in revenue of $150,000 in 2014 and $350,000 in 2015. A temporary difference of $350,000 originates in 2014 and reverses in 2015. Assume that the enacted tax rate for 2014 is 30 percent and that the enacted tax rate for 2015 is 40 percent and is known at the time the Deferred Tax account is established. The deferred tax for the year 2014 results in a Deferred Tax Asset debit entry of $105,000 Liability credit entry of $105,000 Asset debit entry of $140,000 Liability credit entry of $140,000. Question 19 Assume the following facts for Moore Company in 2015: Book income before tax: $800,000. The following items were included in income: Interest income of $80,000 was received from an investment in municipal bonds. This income is exempt for tax purposes. Rent income of $20,000 was collected in 2014 and included for tax purposes. For book purposes, it was reported as earned in 2015. The following items were deducted from income: An asset was purchased during 2015, and depreciation for book purposes was $40,000. There was $100,000 deducted for tax purposes. Warranty expense of $20,000 was recognized for book purposes, while $5,000 was recognized for tax purposes. (Assume a one-year warranty contract.) The balance of the Deferred Tax Asset account (debit) at January 1, 2015, was $8,000 as a result of the rent income temporary difference. The tax rate for all years was 40 percent. What is the amount of taxable income for tax purposes? 655,0 00 625,0 00 735,0 00 755,0 00 Question 20 Moore Company had book income before tax of $800,000 in 2015. The following items were included in book income before tax: Tax-exempt municipal bond interest income of $80,000. Rent income of $20,000 that was collected and included in income for tax purposes in 2014 but reported for book purposes as earned in 2015. Tax depreciation in excess of book depreciation of $60,000. Warranty expense of $20,000 was recognized for book purposes, while $5,000 was recognized for tax purposes. (Assume a one-year warranty contract.) The balance of the Deferred Tax Asset account (debit) at January 1, 2015, was $8,000 as a result of the rent income temporary difference. The tax rate for all years was 40 percent. What is the balance of the Deferred Tax Liability account at the end of 2015? 24,0 00 18,0 00 8,00 0 6,00 0 Question 21 Assume that on January 1, 2015, Walt Company issues bonds with a face value of $300,000 that pay 6 percent interest, semiannually (3 percent per period) and mature in 10 years. Assume that the market interest rate at the date of issuance is 10 percent (5 percent per semiannual period). What is the issue price of the bond? 300,00 0 226,265 225,227 210,111 Question 22 Assume that a bond is issued with the following characteristics: Date of bonds: January 1, 2015; maturity date: January 1, 2020; face value: $200,000; face interest rate: 10 percent paid semiannually (5 percent per period); market interest rate: 8 percent (4 percent per semiannual period); issue price: $216,222; bond premium is amortized using the straight-line method of amortization. What is the amount of bond premium amortization for the June 30, 2015, adjusting entry? 811 8,111 16,222 1,622 Question 23 Which of the following sustainability reporting qualities is the least important when evaluating sustainability efforts by a company? Balance Timeline ss Accurac y Clarity Question 24 Which of the following entities/organizations is the latest to enter the sustainability standards arena? the ISO The GRI The SAS B The AICP A Question 25 Bond carrying value is the total amount due on the bond future value of the bond same as the face value of the bond present value of the bond Answer 1 Correct Answer Calculation 450000 450,000 2 2555000 100000 400000 2000000 20000 35000 2555000 3 225000 200000 100000 -75000 225000 4 Preferrence Dividend - 36000 Common Dividend - 8000 44000 12000 24000 36000 8000 5 Common Stock - 375000 Additional Paid in Capital in excess of par - 175000 expense items and deductions being recorded for 6 book purposes before tax purposes 7 120000 8 Debit to Deferred Tax Liability of $12000 400000 100000 300000 40% 120000 9 GRI 10 At Face Value 11 108111 67556 405545 473101 10% 5 Semi Annualy 8% 4% 100000 4% 10 5000 12 Discounts On Bonds Explanation Share Issued to acquire Building 10000 Market Price of each share $45 10000 45 Common Stock (100000 x $1) Paid in capital in excess of par - common stock (100000 x $4) Preferred Stock (20000 x $100) Paid in capital in excess of par - preferred stock (20000 x $1) Retained earning ($35000) Issued Common Stock in 2004 Additional Common Stock Issued in 2005 Less Treasury Share (Shares Purchased Back) B Corp's Outstanding Common Stock Preference Stock holders has got preferrence to get dividend over common sock holders Total Cash Dividend 2006 Preferrence dividend in arrears for 2005 Preferrence dividend for 2006 (400000 x 6%) Total Preferrence dividend Balance will be for Common Stockholders 1 Preferrence Stock = 3 Common Stock 5000 Preferrence Stock = 15000 Common Stock Accounts Preferred Stock (5000 x 100) Additional Paid in Capital - Preferred Stock (5000 x 10) Common Stock (15000 x 25) Additional paid in Capital -Common Stock ( Balancing Figure) Debit 500000 50000 Total Revenue Shown in 2004 Shown as will received in 2005 & 2006 Tax Rate Deferred Tax Amount at the end of 2004 (400000 - 100000) x 40% Book Purpose Year 2005 Value of Assets 200000 2006 2007 2008 150000 100000 50000 Journal Entry Deferred Tax Liability Deferred Tax Liability Deferred Tax Assets Deferred Tax Assets Debit 12000 4000 Global Reporting Initiative (GRI) is the best-known framework for voluntary reporting of environmental and social performance by business worldwide Suppose issued a 8% $100,000 bond when the market interest rate was also 8%. Since the bond's stated interest rate of 8% is same as the market interest rate of 8%, the bond should have sold for $100,000 Present Value of Redemption Value = Face Value (1+i)^n (1-(1+i)^-n) i Present Value of Bond = PV of int Payment + PV of Redemption Valu Present Value of interest Payment = Coupon Rate Yield to Maturity (in Years) Coupon Payment Market Rate of Return Market Interest Rate for Semiannual period (i) Face Value (i) (n) =5 x 2 Interest payment (100000 x 10%) / 2 A discount equals the excess of the face value over the issue price. The issue price will be less than the face value when the market interest rate is higher than the face interest rate Credit 375000 175000 Book Purpose Depreciation 50000 IT purpose Value of Assets Depreciation Difference 200000 80000 30000 50000 50000 50000 120000 60000 20000 60000 40000 20000 Credit 4000 12000 100000 (1+4%)^10 (1-(1+4%)^-10) x 5000 4% x Interest Payment t Payment + PV of Redemption Value 0 $0.00 $0.06722 10000 -10000 -30000 Tax @ 40% 12000 4000 -4000 -12000