Hello There, we meet again. I am needing help with four multiple choice exams in Intermediate accounting!

Student ID: 22039100 Exam: 061513NR - Additional Financial Reporting Issues When you have completed your exam and reviewed your answers, click Submit Exam. Answers will not be recorded until you hit Submit Exam. If you need to exit before completing the exam, click Cancel Exam. Questions 1 to 25: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer. 1. Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $20 million as of December 31, 2011. Prewitt has a tax rate of 30%. Prewitt's retained earnings as of December 31, 2011, would be A. overstated by $14 million. B. understated by $14 million. C. overstated by $6 million. D. understated by $6 million. 2. During 2011, Falwell Inc. had 500,000 shares of common stock and 50,000 shares of 6% cumulative preferred stock outstanding. The preferred stock has a par value of $100 per share. Falwell did not declare or pay any dividends during 2011. Falwell's net income for the year ended December 31, 2011, was $2.5 million. The income tax rate is 40%. Falwell granted 10,000 stock options to its executives on January 1 of this year. Each option gives its holder the right to buy 20 shares of common stock at an exercise price of $29 per share. The options vest after one year. The market price of the common stock averaged $30 per share during 2011. What is Falwell's diluted earnings per share for 2011, rounded to the nearest cent? A. $3.14 B. The answer can't be determined from the information given. C. $4.90 D. $4.34 3. Which of the following would not be accounted for using the retrospective approach? A. A change from the full cost method in the oil industry B. A change from the completed contract method to the percent-of-completion method for long-term construction contracts C. A change in depreciation methods D. A change from LIFO to FIFO inventory costing 4. Sneed Corporation reported balances in the following accounts for the current year: Beginning Ending Income tax payable $50 $30 Deferred tax liability 80 140 Income tax expense was $230 for the year. What was the amount paid for taxes? A. $280 B. $220 C. $210 D. $190 5.In its 2011 income statement, WME reported $440,000 for the cost of goods sold. WME paid inventory suppliers $380,000 in 2011, and its inventory balance decreased by $41,000 during the year. In its reconciliation schedule, WME should show a A. $19,000 negative adjustment to net income under the indirect method for the increase in accounts payable. B.$19,000 positive adjustment to net income under the indirect method for the increase in accounts payable. C. $19,000 positive adjustment to net income under the indirect method for the decrease in accounts payable. D. $19,000 negative adjustment to net income under the indirect method for the decrease in accounts payable. 6.During 2011, P Company discovered that the ending inventories reported on its financial statements were incorrect by the following amounts: 2009 $120,000 understated 2010 $150,000 overstated P uses the periodic inventory system to ascertain year-end quantities that are converted to dollar amounts using the FIFO cost method. Prior to any adjustments for these errors and ignoring income taxes, P's retained earnings at January 1, 2011 would be A. $30,000 overstated. B. $150,000 understated. C. $150,000 overstated. D.correct. 7.During 2011, Falwell Inc. had 500,000 shares of common stock and 50,000 shares of 6% cumulative preferred stock outstanding. The preferred stock has a par value of $100 per share. Falwell did not declare or pay any dividends during 2011. Falwell's net income for the year ended December 31, 2011, was $2.5 million. The income tax rate is 40%. Falwell granted 10,000 stock options to its executives on January 1 of this year. Each option gives its holder the right to buy 20 shares of common stock at an exercise price of $29 per share. The options vest after one year. The market price of the common stock averaged $30 per share during 2011. What is Falwell's basic earnings per share for 2011, rounded to the nearest cent? A. $4.40 B. The correct answer isn't given. C. $5.00 D. $3.14 8. Morrison Corporation had the following common stock record during the current calendar year: OutstandingJanuary 1 2,000,000 Additional shares issued 3/31 Distributed a 10% stock dividend on 6/30 Additional shares issued 9/30 100,000 100,000 What is the number of shares to be used in computing basic EPS? A. 2,310,000 B. 2,307,500 C. 2,200,000 D. 2,000,000 9.On January 1, 2011, G Corp. granted stock options to key employees for the purchase of 80,000 shares of the company's common stock at $25 per share. The options are intended to compensate employees for the next two years. The options are exercisable within a four-year period beginning January 1, 2013, by the grantees still in the employ of the company. No options were terminated during 2011, but the company does have an experience of 4% forfeitures over the life of the stock options. The market price of the common stock was $31 per share at the date of the grant. G Corp. used the binomial pricing model and estimated the fair value of each of the options at $10. What amount should G charge to compensation expense for the year ended December 31, 2011? A. $400,000 B. $320,000 C. $307,200 D. $384,000 10. When a transfer is made between cash and cash equivalents with no gain or loss, how is the transaction treated in the statement of cash flows? A. It's included as an operating activity. B. It'sincluded as an investing activity. C. It's not reported. D. It'sincluded as a noncash financing activity. 11. Which of the following statements is true regarding correcting errors in previously issued financial statements prepared in accordance with International Financial Reporting Standards? A. The error can be reported in the current period if it's not considered practicable to report it retrospectively. B. The error can be reported in the current period if it's not considered practicable to report it prospectively. C. Retrospective application is required with no exception. D. The error can be reported prospectively if it's not considered practicable to report it retrospectively. 2. Which of the following is not a change in reporting entity? A. Presenting consolidated financial statements for the first time B. Changing the companies that comprise a consolidated group C. All are changes in reporting entity D. Reporting using comparative financial statements for the first time 13. During the current year, High Corporation had 3 million shares of common stock outstanding. Five thousand, $1,000, 6% convertible bonds were issued at face amount at the beginning of the year. High reported income before tax of $4 million and net income of $2.4 million for the year. Each bond is convertible into ten shares of common. What is diluted EPS (rounded)? A. $.85 B. $.80 C. $.79 D. $.86 14. On December 31, 2010, Albacore Company had 300,000 shares of common stock issued and outstanding. Albacore issued a 10% stock dividend on June 30, 2011. On September 30, 2011, 12,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2011? A. 312,000 B. 327,000 C. 342,000 D. 303,000 5. Under IFRS, a deferred tax asset for stock options A. is the portion of the options' intrinsic value earned to date times the tax rate. B. is the tax rate times the amount of compensation. C. isn't created if the award is "in the money;" that is, it has intrinsic value. D. is created for the cumulative amount of the fair value of the options the company has recorded for compensation expense. 16. Selected information from Large Corporation's accounting records and financial statements for 2011 is as follows ($ in millions): Cash paid to acquire a patent Treasury stock purchased for cash Proceeds from sale of land and buildings Gain from the sale of land and buildings Investment revenue received Cash paid to acquire office equipment $28 25 45 26 5 40 Large prepares its financial statements in accordance with IFRS. In its statement of cash flows, Large most likely reports net cash outflows from investing activities of A. $28 million. B. $38 million. C. $68 million. D. $18 million. 17. After issuing its financial statements, a company discovered that its beginning inventory was overstated by $100,000. Its tax rate is 30%. As a result of this error, net income was A. overstated by $70,000. B. overstated by $30,000. C. understated by $30,000. D. understated by $70,000. 18. If bond interest expense is $800,000, bond interest payable increased by $8,000 and bond discount decreased by $2,000, cash paid for bond interest is A. $910,000. B. $784,000. C. $806,000. D. $790,000. 19. Getaway Travel Company reported net income for 2011 in the amount of $50,000. During 2011, Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred stock. Getaway also paid $10,000 cash dividends on its common stock. Getaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on July 1, 2011. A 2-for-1 stock split was granted on July 5, 2011. What is the 2011 basic earnings per share? A. $.56 B. $.47 C. $.53 D. $.42 0. Bowers Corporation reported the following ($ in 000s) for the year: Sales on account were $1,900, and bad debt expense was $18 for the year. How much cash was collected from customers on account? A. $1,627 B. $1,642 C. $1,638 D. $2,142 21. Red Corp. constructed a machine at a total cost of $70 million. Construction was completed at the end of 2007 and the machine was placed in service at the beginning of 2008. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $4 million. At the beginning of 2011, Red decided to change to the sum-of-the-years'-digits method. The residual value remains at $4 million. Ignoring income taxes, what will be Red's depreciation expense for 2011? A. $4.8 million B. $11.55 million C. $6.6 million D. $5.4 million 2. Freeman Company's accounting records include the following information: Payments to suppliers Collections on accounts receivable Cash sales Income taxes paid Equipment purchased $50,000 90,000 20,000 5,000 15,000 What is the amount of net cash provided by operating activities indicated by these transactions? A. $55,000 B. $45,000 C. $40,000 D. $60,000 23. Like U.S. GAAP, international standards also require a statement of cash flows. Consistent with U.S GAAP, cash flows are classified as operating, investing, or financing activities. However, with regard to interest and dividend inflows and outflows, the international standard for cash flow statements A. allows companies to report cash inflows from interest and dividends as either operating or investing cash flows. B. designates cash outflows for interest payments and cash inflows from interest and dividends received as operating cash flows. C. allows companies to report cash outflows from interest payments as either operating or investing cash flows. D. allows companies to report dividends paid as either investing or operating cash flows. 24. In its 2011 income statement, WME reported $695,000 for service revenue earned from membership fees. WME received $681,000 cash in advance from members during 2011. In its reconciliation schedule, WME should show a A. $14,000 positive adjustment to net income under the indirect method for the increase in unearned revenue. B. $14,000 negative adjustment to net income under the indirect method for the decrease in unearned revenue. C. $14,000 positive adjustment to net income under the indirect method for the decrease in unearned revenue. D. $14,000 negative adjustment to net income under the indirect method for the increase in unearned revenue. 25. Which of the accounting changes listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards? A. Change in reporting entity B. Change in accounting estimate C. Change to the LIFO method from the FIFO method D. Change in depreciation methods End of exam Student ID: 22039100 Exam: 061510NR - Instruments and Liabilities, Part 1 When you have completed your exam and reviewed your answers, click Submit Exam. Answers will not be recorded until you hit Submit Exam. If you need to exit before completing the exam, click Cancel Exam. Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer. 1. Bloomfield Bakers accounts for its investment in Clor Confectionary under the equity method. Bloomfield carried the Clor investment at $150,000 and $165,000 at December 31 of 2010 and 2011, respectively. During 2011 Clor recognized $80,000 of net income and paid dividends of $30,000. Assuming that Bloomfield owned the same percentage of Clor throughout 2011, their percentage ownership must have been A. 50%. B. 30% C. 18.75%. D. 5%. 2. On January 1, 2011, Green Corporation purchased 20% of the outstanding voting common stock of Gold Company for $300,000. The book value of the acquired shares was $275,000. The excess of cost over book value is attributable to an intangible asset on Gold's books that was undervalued and had a remaining useful life of five years. For the year ended December 31, 2011, Gold reported net income of $125,000 and paid cash dividends of $25,000. What is the carrying value of Green's investment in Gold at December 31, 2011? A. $320,000 B. $300,000 C. $295,000 D. $315,000 3. Classifying liabilities as either current or long-term helps creditors assess A. profitability. B. the degree of a firm's liabilities. C. the amount of a firm's liabilities. D. the relative risk of a firm's liabilities. 4. On January 1, 2011, G Corporation agreed to grant its employees two weeks vacation each year, with the stipulation that vacations earned each year can be taken the following year. For the year ended December 31, 2011, G's employees each earned an average of $800 per week. 500 vacation weeks earned in 2011 were not taken during 2011. Wage rates for employees rose by an average of 5 percent by the time vacations actually were taken in 2012. What is the amount of G's 2012 wages expense related to 2011 vacation time? A. $420,000 B. $20,000 C. $400,000 D. $0 5. On July 1, 2011, Tremen Corporation acquired 40% of the shares of Delany Company. Tremen paid $3,000,000 for the investment, and that amount is exactly equal to 40% of the fair value of identifiable net assets on Delany's balance sheet. Delany recognized net income of $1,000,000 for 2011, and paid $150,000 quarterly dividends to its shareholders. After all closing entries are made, Tremen's "Investment in Delany Company" account would have a balance of A. $3,200,000. B. $3,000,000. C. $3,160,000. D. $3,080,000. 6.Which of the following situations would not require that long-term liabilities be reported as current liabilities on a classified balance sheet? A. All of these situations require the current classification. B. The long-term debt is callable by the creditor. C. The long-term debt matures within the upcoming year. D.The creditor has the right to demand payment due to a contractual violation. 7. Under IAS No. 39, which is not a category for accounting for investments? A. Fair value through other comprehensive income B.Available-for-sale C. Fair value through profit and loss D. Held-to-maturity 8.General Product, Inc., shipped 100 million coupons in products it sold in 2011. The coupons are redeemable for thirty cents each. General anticipates that 70% of the coupons will be redeemed. The coupons expire on December 31, 2012. There were 45 million coupons redeemed in 2011, and 30 million redeemed in 2012. What was General's coupon liability as of December 31, 2011? A. $16.5 million B. $7.5 million C. $21.0 million D.$13.5 million 9.In 2009, Osgood Corporation purchased $4 million in ten-year municipal bonds at face value. On December 31, 2011, the bonds had a market value of $3,600,000 and Osgood reclassified the bonds from held to maturity to trading securities. Osgood's December 31, 2011, balance sheet and the 2011 income statement would show the following: A. Option d B. Option a C. Option b D.Option c 10. If Ziggy Company concluded that an investment originally classified as held to maturity would now more appropriately be classified as available for sale, Ziggy would A. reclassify the investment as available for sale and immediately recognize in net income any unrealized gain or loss on the reclassification date. B. need to restate earnings, as the original classification was in error. C. reclassify the investment as available for sale and immediately recognize in accumulated other comprehensive income any unrealized gain or loss on the reclassification date. D. not reclassify the investment, as original classifications are irrevocable. 11. Beresford, Inc., purchased several investment securities during 2008, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values aren't considered permanent. What would be the balance in Beresford's accumulated other comprehensive income with respect to these investments in its 12/31/11 balance sheet (ignore taxes)? A. $55,100 B. $50,200 C. $26,500 D. $10,400 12. What is the effective interest rate (rounded) on a 3-month, noninterest-bearing note with a stated rate of 12% and a maturity value of $200,000? A. 12.0 % B. 11.5% C. 12.4% D. 3.0% 13. Liabilities payable within the coming year are classified as long-term liabilities if refinancing is completed before date of issuance of the financial statements under A. US GAAP. B. IFRS. C. IRS. D. Neither U.S. GAAP nor IFRS. 14. Goofy, Inc., bought 15,000 shares of Crazy Co.'s stock for $150,000 on May 5, 2010, and classified the stock as available for sale. The market value of the stock declined to $118,000 by December 31, 2010. Goofy reclassified this investment as trading securities in December of 2011 when the market value had risen to $125,000. What effect on 2011 income should be reported by Goofy for the Crazy Co. shares? A. $32,000 net loss B. $25,000 net loss C. $0 D. $7,000 net gain 15. Beresford, Inc., purchased several investment securities during 2008, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values aren't considered permanent. What total unrealized holding gain would Beresford report in its 2011 income statement relative to its investment securities? A. $80,900 B. $36,000 C. $48,200 D. $55,900 6. During 2011, Deluxe Leather Goods sold 800,000 reversible belts under a new sales promotional program. Each belt carried one coupon, which entitles the customer to a $5.00 cash rebate. Deluxe estimates that 70% of the coupons will be redeemed, even though only 350,000 coupons had been processed during 2011. At December 31, 2011, Deluxe should report a liability for unredeemed coupons of A. $560,000. B. $1,750,000. C. $1,050,000. D. $1,225,000. 17. Assume that, on 1/1/11, Sosa Enterprises paid $5,100,000 for its investment in 36,000 shares of Orioles Co. Further, assume that Orioles has 120,000 total shares of stock issued and estimates an 8 year remaining useful life and straight-line depreciation with no residual value for its depreciable assets. At 1/1/11, the book value of Orioles' identifiable net assets was $7,000,000, and the fair value of Orioles was $10,000,000. The difference between Orioles' fair value and the book value of its identifiable net assets is attributable to $1,800,000 of land and the remainder to depreciable assets. Goodwill was not part of this transaction. The following information pertains to Orioles during 2011: Net income $600,000 Dividends declared and paid $360,000 Market price of common stock on 12/31/11 $80/share What amount would Sosa Enterprises report in its year-end 2011 balance sheet for its investment in Orioles Co.? A. $3,200,000 B. $3,180,000 C. $3,027,000 D. $3,135,000 18. Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1, 2011. Jack can significantly influence Jill. On December 10, 2011, Jill declared and paid $1 million in dividends. Jill reported a net loss of $6 million for the year. What amount of loss should Jack report in its income statement for 2011 relative to its investment in Jill? A. $1,500,000 B. $1,400,000 C. $1 000,000 D. $1,200,000 19. When cash is received from customers in the form of a refundable deposit, the cash account is increased with a corresponding increase in A. shareholders' equity. B. a current liability. C. revenue. D. paid-in capital. 0. On December 31, 2011, L, Inc., had a $1,500,000 note payable outstanding, due July 31, 2012. L borrowed the money to finance construction of a new plant. L planned to refinance the note by issuing long-term bonds. Because L temporarily had excess cash, it prepaid $500,000 of the note on January 23, 2012. In February 2012, L completed a $3,000,000 bond offering. L will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during 2012. On March 13, 2012, L issued its 2011 financial statements. What amount of the note payable should L include in the current liabilities section of its December 31, 2011, balance sheet? A. $0 B. $1,000,000 C. $500,000 D. $1,500,000 End of exam Student ID: 22039100 Exam: 061511NR - Instruments and Liabilities, Part 2 When you have completed your exam and reviewed your answers, click Submit Exam. Answers will not be recorded until you hit Submit Exam. If you need to exit before completing the exam, click Cancel Exam. Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer. 1. Prescott Corporation issued ten thousand $1,000 bonds on January 1, 2011. They have a ten-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. What would be the total interest expense recognized for the bond issue over its full term? A. $8,000,000 B. $11,487,747 C. $6,512,253 D. $11,256,109 2. On June 30, 2011, Hardy Corporation issued $10 million of its 8% bonds for $9.2 million. The bonds were priced to yield 10%. The bonds are dated June 30, 2011, and mature on June 30, 2018. Interest is payable semiannually on December 31 and July 1. If the effective interest method is used, by how much should the bond discount be reduced for the 6 months ended December 31, 2011? A. $60,000 B. $32,000 C. $46,000 D. $40,000 3. On December 31, 2010, Reagan, Inc., signed a lease for some equipment having a 9-year useful life with Silver Leasing Co. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2016. There's no bargain purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease. Reagan's lease amortization schedule appears below: What is the effective annual interest rate charged to Reagan on this lease? A. 4%. B. 8%. C. 17%. D. 6%. 4.C Corp. has a rate of return on assets of 10%. Not including any indirect effects on earnings, the rate of return on assets is immediately increased when C records A Capital Lease An Operating Lease a. yes yes b. no no c. yes no d. no yes A. Option d B. Option a C. Option b D. Option c 5.Prescott Corporation issued ten thousand $1,000 bonds on January 1, 2011. They have a ten-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. What is the stated annual rate of interest on the bonds? A. 4% B. 8% C. 3% D. 6% 6. If the lessor retains title to leased property under the terms of the lease, A. the amount to be recovered through periodic lease payments is reduced by the present value of the residual amount. B. the amount to be recovered through periodic lease payments is increased by the present value of the residual amount. C. the amount to be recovered will be the same as if there were no residual value. D. the lessor will record a greater amount of depreciation due to the residual value. 7.Discount-Mart issued ten thousand $1,000 bonds on January 1, 2011. They have a ten-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. Payment Cash Effective Interest Decrease in Balance Outstanding Balance $8,640,967 1 300,000 345,639 345,639 8,686,606 2 300,000 347,464 347,464 8,734,070 3 300,000 349,363 349,363 8,783,433 4 300,000 What is the carrying value of the bonds as of December 31, 2012? A. $8,734,070 B. $8,834,770 C. $8,783,433 D. $8,686,606 8.On September 1, 2011, Custom Shirts, Inc., entered into a lease agreement appropriately classified as an operating lease. The lease term is 3 years. The annual payments are (a) $20,000 for year 1, (b) $24,000 for year 2, and (c) $28,000 for year 3. How much rent expense will Custom Shirts recognize for 2011? A. $24,000 B. $8,000 C. $20,000 D. $6,667 9.Pierce Company issued 11% bonds, dated January 1, with a face amount of $800,000 on January 1, 2011. The bonds sold for $739,816 and mature in 2030 (20 years). For bonds of similar risk and maturity the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Pierce determines interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2011, the fair value of the bonds was $730,000. Pierce's earnings for the year will include a A. loss from change in the fair value of debt of $10,204. B. gain from change in the fair value of debt of $10,204. C. loss from change in the fair value of debt of $10,617. D. gain from change in the fair value of debt of $10,617. 0. Red Corp. has a rate of return on assets of 10% and a debt/equity ratio of 2 to 1. Not including any indirect effects on earnings, the immediate impact of retiring debt on these ratios is Return on Assets Debt/Equity Ratio a. increase increase b. decrease decrease c. increase decrease d. decrease increase A. Option c B. Option d C. Option a D. Option b 11. On December 31, 2011, B Corp. sold a machine to Royal and simultaneously leased it back for one year. Pertinent information at this date follows: Sales price $720,000 Carrying amount 660,000 Present value of lease rentals 68,200 ($6,000 for 12 months at 12% Estimated remaining useful life 12 years In B's December 31, 2011, balance sheet, the deferred revenue from the sale of this machine should be A. $68,200. B. $0. C. $8,200. D. $60,000. 12. On December 31, 2010, Reagan, Inc., signed a lease for some equipment having a 9-year useful life with Silver Leasing Co. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2016. There's no bargain purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease. Reagan's lease amortization schedule appears below: At what amount would Reagan record the leased asset at inception of the agreement? A. $519,115 B. $540,000 C. $576,000 D. $429,115 13. Prescott Corporation issued ten thousand $1,000 bonds on January 1, 2011. They have a ten-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. What is the interest expense on the bonds in 2012? A. $680,759 B. $342,961 C. $800,000 D. $119,241 14. If the residual value of a leased asset turns out to be more than the amount guaranteed by the lessee, the A. lessor isn't obligated to compensate the lessee for the excess. B. lessee must pay the lessor the amount of the excess. C. lessee will reduce the last year's depreciation. D. lessor must compensate the lessee for the excess. 15. MSG Corporation has $100,000 of 10-year, 6% bonds outstanding on December 31, 2010. The bonds have 3 years remaining to maturity. The unamortized premium remaining on these bonds was $6,000. MSG uses straight-line amortization. On May 1, 2011, $10,000 of the bonds were retired at 112. How much, and what type of gain or loss, most likely results from this retirement? A. $667 extraordinary gain B. $667 extraordinary loss C. $667 ordinary gain D. $667 ordinary loss 16. Discount-Mart issued ten thousand $1,000 bonds on January 1, 2011. They have a ten-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. Payment Cash Effective Interest Decrease in Balance Outstanding Balance $8,640,967 1 300,000 345,639 345,639 8,686,606 2 300,000 347,464 347,464 8,734,070 3 300,000 349,363 349,363 8,783,433 4 300,000 What is the effective annual rate of interest on the bonds? A. 8% B. 4% C. 6% D. 3% 17. On December 31, 2010, Reagan, Inc., signed a lease for some equipment having a 9-year useful life with Silver Leasing Co. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2016. There's no bargain purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease. Reagan's lease amortization schedule appears below: What is the amount of residual value guaranteed by Reagan to the lessor? A. $36,000 B. The answer can't be determined from the given information. C. $34,615 D. $1,385 18. Technoid, Inc., sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2011. The manufacturing cost of the computers was $12 million. This non-cancelable lease had the following terms: * Lease payments: $2,466,754 semiannually; first payment at January 1, 2011; remaining payments at June 30 and December 31 each year through June 30, 2015. * Lease term: 5 years (10 semiannual payments) * No residual value; no bargain purchase option * Economic life of equipment: 5 years * Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually * Fair value of the computers at January 1, 2011: $20 million Collectibility of the rental payments is reasonably assured, and there are no lessor costs yet to be incurred. What is the net carrying value of the lease liability in Lone Star's June 30, 2011 balance sheet? Round your answer to the nearest dollar. A. $2,466,754 B. $15,943,154 C. $17,533,246 D. $21,000,000 19. Discount-Mart issued ten thousand $1,000 bonds on January 1, 2011. They have a ten-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds. Payment Cash Effective Interest Decrease in Balance Outstanding Balance $8,640,967 1 300,000 345,639 345,639 8,686,606 2 300,000 347,464 347,464 8,734,070 3 300,000 349,363 349,363 8,783,433 4 300,000 What is the interest expense on the bonds in 2012? A. $700,700 B. $600,000 C. $100,700 D. $351,337 20. Nickel, Inc., owns $100,000 of 10-year, 6% bonds as an investment on December 31, 2010. The bonds have 3 years remaining to maturity. The unamortized premium remaining on these bonds was $6,000. Nickel uses straight-line amortization. On May 1, 2011, $10,000 of the bonds were redeemed at 110. How much, and what type of gain or loss, most likely results from this redemption? A. $467 extraordinary loss B. $467 ordinary loss C. $467 extraordinary gain D. $467 ordinary gain End of exam Student ID: 22039100 Exam: 061512NR - Instruments and Liabilities, Part 3 When you have completed your exam and reviewed your answers, click Submit Exam. Answers will not be recorded until you hit Submit Exam. If you need to exit before completing the exam, click Cancel Exam. Questions 1 to 25: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer. 1. Louie Company has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $8,000. The discount rate applied by the actuary was 8%. What was the service cost for the year? A. $2,000 B. $18,000 C. $12,000 D. $92,000 2. At the end of the current year, Newsmax Inc. has $400,000 of subscriptions received in advance included in its balance sheet. A footnote reveals that the entire $400,000 will be earned in the next year. In the absence of other temporary differences, in the balance sheet one would also expect to find a A. Current deferred tax liability B. Noncurrent deferred tax asset C. Current deferred tax asset D. Noncurrent deferred tax liability 3. The following information is related to the defined benefit pension plan of Dreamworld Company for the year: Service cost Contributions to pension plan Benefits paid to retirees Plan assets (fair value), January 1 Plan assets (fair value), December 31 Actual return on plan assets PBO, January 1 PBO, December 31 Discount rate Long-term expected return on plan assets $60,000 110,000 150,000 640,000 750,000 150,000 900,000 960,000 10% 9% Assuming no other relevant data exist, what is the pension expense for the year? A. $190,000 B. $92,400 C. $60,000 D. $170,000 4.JL Health Services reported a net loss-AOCI in last year's balance sheet. This year, the company revised its estimate of future salary levels causing its PBO estimate to decline by $24. Also, the $48 million actual return on plan assets was less than the $54 million expected return. As a result, A. the statement of comprehensive income will report a $6 million gain and a $24 million loss. B.the net pension liability will increase by $18 million. C. the net pension liability will decrease by $24 million. D. accumulated other comprehensive income will increase by $18 million. 5. The following partial information is taken from the comparative balance sheet of Levi Corporation: What was the average price (rounded to the nearest dollar) of the additional shares issued by Levi in 2011? A. $39 per share B. $26 per share C. The answer can't be determined from the information given. D.$5 per share 6.The following incomplete (columns have missing amounts) pension spreadsheet is for the current year for First Republic Corporation (FRC). What was the net pension asset/liability reported in the balance sheet at the end of the year? A. Net pension liability of $50. B. Net pension liability of $24. C. Net pension asset of $50. D.Net pension asset of $24. 7.ABC declared a property dividend. The dividend consisted of 10,000 common shares of its investment in XYZ Company. The shares had originally been purchased at $4 per share and had a $1 par value. The value of the shares on the declaration date is $7 per share. What is the first entry that should be recorded related to this dividend? a. Retained earnings Property dividends payable b. Retained earnings Property dividends payable Gain c. Investment in XYZ Retained earnings; d. Investment in XYZ Gain 70,000 70,000 70,000 40,000 30,000 30,000 30,000 30,000 30,000 A. Option b B. Option c C. Option a D. Option d 8. Black Enterprises reported the following ($ in 000s) as of December 31, 2011. All accounts have normal balances. Deficit Common stock Paid-in capital-stock options Treasury stock at cost Paid-in capital-excess of par 3,000 2,000 1,000 400 30,000 During 2012 ($ in 000s), net income was $9,000; 25% of the treasury stock was resold for $450; cash dividends declared were $600; cash dividends paid were $500; and all of the stock options expired. What ($ in 000s) was shareholders' equity as of December 31, 2012? A. $38,350 B. $38,100 C. $37,450 D. $38,450 9. Montgomery & Co., a well established law firm, provided 500 hours of its time to Fink Corporation in exchange for 1,000 shares of Fink's $5 par common stock. Mitchell's usual billing rate is $700 per hour, and Fink's stock has a book value of $250 per share. By what amount will Fink's Paid-in capital - excess of par increase for this transaction? A. $300,000 B. $345,000 C. $295,000 D. $350,000 10. The EPBO for a particular employee on January 1, 2011, was $30,000. The APBO at the beginning of the year was $6,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of twenty-five years with five of those years already served as of January 1, 2011. What is the APBO at December 31, 2011? A. $6,300 B. $7,200 C. $7,560 D. $7,500 11. Roberto Corporation was organized on January 1, 2011. The firm was authorized to issue 100,000 shares of $5 par common stock. During 2011, Roberto had the following transactions relating to shareholders' equity: Issued 10,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8). What is total shareholders' equity at the end of 2011? A. $270,000 B. $300,000 C. $200,000 D. $250,000 12. Giada Foods reported $940 million in income before income taxes for 2011, its first year of operations. Tax depreciation exceeded depreciation for financial reporting purposes by $100 million. The company also had non-tax-deductible expenses of $80 million relating to permanent differences. The income tax rate for 2011 was 35%, but the enacted rate for years after 2011 is 40%. The balance in the deferred tax liability in the December 31, 2011, balance sheet is A. $56 million. B. $40 million. C. $16 million. D. $35 million. 13. The following incomplete (columns have missing amounts) pension spreadsheet is for the current year for First Republic Corporation (FRC). What was FRC's pension expense for the year? A. $49. B. $47. C. $44. D. $107. 14. Information for Hobson International Corp. for the current year ($ in millions): Income from continuing operations before tax Extraordinary loss (pretax) Temporary differences (all related to operating income): $150 30 Accrued warranty expense in excess of writeoffs included in operating income Depreciation deducted on tax return in excess of depreciated expense 10 25 Permanent differences (all related to operating income): Nondeductible portion of travel & entertainment expense The applicable enacted tax rate for all periods is 40%. 5 How much tax on income from continuing operations would be reported in Hobson's income statement? A. $50 million B. $62 million C. $56 million D. $60 million 5. Information for Hobson International Corp. for the current year ($ in millions): Income from continuing operations before tax Extraordinary loss (pretax) Temporary differences (all related to operating income): Accrued warranty expense in excess of write-offs included in operating income Depreciation deducted on tax return in excess of depreciated expense Permanent differences (all related to operating income): Nondeductible portion of travel & entertainment expense The applicable enacted tax rate for all periods is 40%. $150 30 10 25 5 What should Hobson International report as net income? A. $72 million B. $70 million C. $88 million D. $75 million 6. The following information pertains to Havana Corporation's defined benefit pension plan: ($ in 000s) Projected benefit obligation Plan assets Prior service cost--AOCI Net loss--AOCI 2011 Beginning balances ($6,000) 5,760 600 720 2012 Beginning balances ($6,504) 6,336 552 786 At the end of 2011, Havana contributed $696 thousand to the pension fund and benefit payments of $624 thousand were made to retirees. The expected rate of return on plan assets was 10%, and the actuary's discount rate is 8%. There were no changes in actuarial estimates and assumptions regarding the PBO. What is the 2011 pension expense for Havana's plan? A. $594 thousand B. $702 thousand C. $606 thousand D. $678 thousand 17. The following refers to the pension spreadsheet (columns have missing amounts) for the current year for Pancho Villa Enterprises (PVE). What was PVE's pension expense for the year? A. $68 B. $50 C. $62 D. $260 18. At December 31, 2011, Moonlight Bay Resorts had the following deferred income tax items: Deferred tax asset of $54 million related to a current liability Deferred tax asset of $36 million related to a noncurrent liability Deferred tax liability of $120 million related to a noncurrent asset Deferred tax liability of $72 million related to a current asset Moonlight Bay should report in the current section of its December 31, 2011, balance sheet a A. Noncurrent liability of $30,000. B. Noncurrent asset of $90,000 and a non-current liability of $192,000. C. Noncurrent asset of $84,000 and a non-current liability of $45,000. D. Current tax liability of $18,000. 19. Woody Corp. had taxable income of $8,000 in the current year. The amount of MACRS depreciation was $3,000 while the amount of depreciation reported in the income statement was $1,000. Assuming no other differences between tax and accounting income, Woody's pretax accounting income was A. $5,000. B. $11,000. C. $10,000. D. $6,000. 0. The EPBO for a particular employee on January 1, 2011, was $150,000. The APBO at the beginning of the year was $30,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of twenty-five years, with five of those years already served as of January 1, 2011. What is the APBO at December 31, 2011? A. $30,000. B. $31,500. C. $42,800. D. $37,800. 1. 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 haven't 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; $6 B. $12; $0 C. $18; $6 D. $6; $12 22. For the current year ($ in millions), Centipede Corp. had $80 in pretax accounting income. This included bad debt expense of $6 based on the allowance method, and $20 in depreciation expense. Two million in receivables were written off as uncollectible, and MACRS depreciation amounted to $35. In the absence of other temporary or permanent differences, what was Centipede's income tax payable currently, assuming a tax rate of 40%? A. 29.2 million B. 19.6 million C. 25.2 million D. 27.6 million 3. The following information pertains to Havana Corporation's defined benefit pension plan: ($ in 000s) 2011 2012 Beginning Beginning balances balances Projected benefit obligation ($6,000) ($6,504) Plan assets 5,760 6,336 Prior service cost--AOCI 600 552 Net loss--AOCI 720 786 At the end of 2011, Havana contributed $696 thousand to the pension fund and benefit payments of $624 thousand were made to retirees. The expected rate of return on plan assets was 10%, and the actuary's discount rate is 8%. There were no changes in actuarial estimates and assumptions regarding the PBO. What is Havana's 2011 actual return on plan assets? A. $1,128 thousand B. $6,336 thousand C. $504 thousand D. $618 thousand 24. At the beginning of 2009, Emily Corporation issued 10,000 shares of $100 par, 5%, cumulative, preferred stock for $110 per share. No dividends have been paid to preferred shareholders. What amount of dividends will a shareholder owning 100 shares receive in 2011 if Emily pays $1,000,000 in dividends? A. $1,650 B. $10,000 C. $1,500 D. $500 25. Pug Corporation has 10,000 shares of $10 par common stock outstanding and 20,000 shares of $100 par, 6% noncumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $150,000 dividend will be paid. What are the dividends per share for preferred and common, respectively? A. $7.50; $0. B. $7.50; $1.50. C. $6; $3. D. $6; $1.50. End of exam Student ID: 22039100 Exam: 061513NR - Additional Financial Reporting Issues When you have completed your exam and reviewed your answers, click Submit Exam. Answers will not be recorded until you hit Submit Exam. If you need to exit before completing the exam, click Cancel Exam. Questions 1 to 25: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer. 1. Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $20 million as of December 31, 2011. Prewitt has a tax rate of 30%. Prewitt's retained earnings as of December 31, 2011, would be A. overstated by $14 million. B.understated by $14 million. C. overstated by $6 million. D. understated by $6 million. 2. During 2011, Falwell Inc. had 500,000 shares of common stock and 50,000 shares of 6% cumulative preferred stock outstanding. The preferred stock has a par value of $100 per share. Falwell did not declare or pay any dividends during 2011. Falwell's net income for the year ended December 31, 2011, was $2.5 million. The income tax rate is 40%. Falwell granted 10,000 stock options to its executives on January 1 of this year. Each option gives its holder the right to buy 20 shares of common stock at an exercise price of $29 per share. The options vest after one year. The market price of the common stock averaged $30 per share during 2011. What is Falwell's diluted earnings per share for 2011, rounded to the nearest cent? A. $3.14 B. The answer can't be determined from the information given. C. $4.90 D. $4.34 3. Which of the following would not be accounted for using the retrospective approach? A. A change from the full cost method in the oil industry B. A change from the completed contract method to the percent-of-completion method for long-term construction contracts C. A change in depreciation methods D. A change from LIFO to FIFO inventory costing 4. Sneed Corporation reported balances in the following accounts for the current year: Beginning Ending Income tax payable $50 $30 Deferred tax liability 80 140 Income tax expense was $230 for the year. What was the amount paid for taxes? A. $280 B. $220 C. $210 D. $190 5.In its 2011 income statement, WME reported $440,000 for the cost of goods sold. WME paid inventory suppliers $380,000 in 2011, and its inventory balance decreased by $41,000 during the year. In its reconciliation schedule, WME should show a A. $19,000 negative adjustment to net income under the indirect method for the increase in accounts payable. B. $19,000 positive adjustment to net income under the indirect method for the increase in accounts payable. C. $19,000 positive adjustment to net income under the indirect method for the decrease in accounts payable. D. $19,000 negative adjustment to net income under the indirect method for the decrease in accounts payable. 6.During 2011, P Company discovered that the ending inventories reported on its financial statements were incorrect by the following amounts: 2009 $120,000 understated 2010 $150,000 overstated P uses the periodic inventory system to ascertain year-end quantities that are converted to dollar amounts using the FIFO cost method. Prior to any adjustments for these errors and ignoring income taxes, P's retained earnings at January 1, 2011 would be A. $30,000 overstated. B. $150,000 understated. C. $150,000 overstated. D. correct. 7.During 2011, Falwell Inc. had 500,000 shares of common stock and 50,000 shares of 6% cumulative preferred stock outstanding. The preferred stock has a par value of $100 per share. Falwell did not declare or pay any dividends during 2011. Falwell's net income for the year ended December 31, 2011, was $2.5 million. The income tax rate is 40%. Falwell granted 10,000 stock options to its executives on January 1 of this year. Each option gives its holder the right to buy 20 shares of common stock at an exercise price of $29 per share. The options vest after one year. The market price of the common stock averaged $30 per share during 2011. What is Falwell's basic earnings per share for 2011, rounded to the nearest cent? A. $4.40 B. The correct answer isn't given. C. $5.00 D. $3.14 8. Morrison Corporation had the following common stock record during the current calendar year: OutstandingJanuary 1 Additional shares issued 3/31 Distributed a 10% stock dividend on 6/30 Additional shares issued 9/30 2,000,000 100,000 100,000 What is the number of shares to be used in computing basic EPS? A. 2,310,000 B. 2,307,500 C. 2,200,000 D. 2,000,000 9.On January 1, 2011, G Corp. granted stock options to key employees for the purchase of 80,000 shares of the company's common stock at $25 per share. The options are intended to compensate employees for the next two years. The options are exercisable within a four-year period beginning January 1, 2013, by the grantees still in the employ of the company. No options were terminated during 2011, but the company does have an experience of 4% forfeitures over the life of the stock options. The market price of the common stock was $31 per share at the date of the grant. G Corp. used the binomial pricing model and estimated the fair value of each of the options at $10. What amount should G charge to compensation expense for the year ended December 31, 2011? A. $400,000 B. $320,000 C. $307,200 D. $384,000 10. When a transfer is made between cash and cash equivalents with no gain or loss, how is the transaction treated in the statement of cash flows? A. It's included as an operating activity. B. It'sincluded as an investing activity. C. It's not reported. D. It'sincluded as a noncash financing activity. 11. Which of the following statements is true regarding correcting errors in previously issued financial statements prepared in accordance with International Financial Reporting Standards? A. The error can be reported in the current period if it's not considered practicable to report it retrospectively. B. The error can be reported in the current period if it's not considered practicable to report it prospectively. C. Retrospective application is required with no exception. D. The error can be reported prospectively if it's not considered practicable to report it retrospectively. 12. Which of the following is not a change in reporting entity? A. Presenting consolidated financial statements for the first time B. Changing the companies that comprise a consolidated group C. All are changes in reporting entity D. Reporting using comparative financial statements for the first time 13. During the current year, High Corporation had 3 million shares of common stock outstanding. Five thousand, $1,000, 6% convertible bonds were issued at face amount at the beginning of the year. High reported income before tax of $4 million and net income of $2.4 million for the year. Each bond is convertible into ten shares of common. What is diluted EPS (rounded)? A. $.85 B. $.80 C. $.79 D. $.86 14. On December 31, 2010, Albacore Company had 300,000 shares of common stock issued and outstanding. Albacore issued a 10% stock dividend on June 30, 2011. On September 30, 2011, 12,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2011? A. 312,000 B. 327,000 C. 342,000 D. 303,000 15. Under IFRS, a deferred tax asset for stock options A. is the portion of the options' intrinsic value earned to date times the tax rate. B. is the tax rate times the amount of compensation. C. isn't created if the award is "in the money;" that is, it has intrinsic value. D. is created for the cumulative amount of the fair value of the options the company has recorded for compensation expense. 16. Selected information from Large Corporation's accounting records and financial statements for 2011 is as follows ($ in millions): Cash paid to acquire a patent Treasury stock purchased for cash Proceeds from sale of land and buildings Gain from the sale of land and buildings Investment revenue received Cash paid to acquire office equipment $28 25 45 26 5 40 Large prepares its financial statements in accordance with IFRS. In its statement of cash flows, Large most likely reports net cash outflows from investing activities of A. $28 million. B. $38 million. C. $68 million. D.$18 million. 17. After issuing its financial statements, a company discovered that its beginning inventory was overstated by $100,000. Its tax rate is 30%. As a result of this error, net income was A. overstated by $70,000. B. overstated by $30,000. C. understated by $30,000. D.understated by $70,000. 18. If bond interest expense is $800,000, bond interest payable increased by $8,000 and bond discount decreased by $2,000, cash paid for bond interest is A. $910,000. B. $784,000. C. $806,000. D. $790,000. 19. Getaway Travel Company reported net income for 2011 in the amount of $50,000. During 2011, Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred stock. Getaway also paid $10,000 cash dividends on its common stock. Getaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on July 1, 2011. A 2-for-1 stock split was granted on July 5, 2011. What is the 2011 basic earnings per share? A. $.56 B. $.47 C. $.53 D. $.42 20. Bowers Corporation reported the following ($ in 000s) for the year: Sales on account were $1,900, and bad debt expense was $18 for the year. How much cash was collected from customers on account? A. $1,627 B. $1,642 C. $1,638 D. $2,142 21. Red Corp. constructed a machine at a total cost of $70 million. Construction was completed at the end of 2007 and the machine was placed in service at the beginning of 2008. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $4 million. At the beginning of 2011, Red decided to change to the sum-of-the-years'-digits method. The residual value remains at $4 million. Ignoring income taxes, what will be Red's depreciation expense for 2011? A. $4.8 million B. $11.55 million C. $6.6 million D. $5.4 million 22. Freeman Company's accounting records include the following information: Payments to suppliers Collections on accounts receivable Cash sales Income taxes paid Equipment purchased $50,000 90,000 20,000 5,000 15,000 What is the amount of net cash provided by operating activities indicated by these transactions? A. $55,000 B. $45,000 C. $40,000 D. $60,000 23. Like U.S. GAAP, international standards also require a statement of cash flows. Consistent with U.S GAAP, cash flows are classified as operating, investing, or financing activities. However, with regard to interest and dividend inflows and outflows, the international standard for cash flow statements A. allows companies to report cash inflows from interest and dividends as either operating or investing cash flows. B. designates cash outflows for interest payments and cash inflows from interest and dividends received as operating cash flows. C. allows companies to report cash outflows from interest payments as either operating or investing cash flows. D. allows companies to report dividends paid as either investing or operating cash flows. 24. In its 2011 income statement, WME reported $695,000 for service revenue earned from membership fees. WME received $681,000 cash in advance from members during 2011. In its reconciliation schedule, WME should show a A. $14,000 positive adjustment to net income under the indirect method for the increase in unearned revenue. B.$14,000 negative adjustment to net income under the indirect method for the decrease in unearned revenue. C. $14,000 positive adjustment to net income under the indirect method for the decrease in unearned revenue. D. $14,000 negative adjustment to net income under the indirect method for the increase in unearned revenue. 25. Which of the accounting changes listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards? A. Change in reporting entity B. Change in accounting estimate C. Change to the LIFO method from the FIFO method D. Change in depreciation methods End of exam Student ID: 22039100 Exam: 061510NR - Instruments and Liabilities, Part 1 When you have completed your exam and reviewed your answers, click Submit Exam. Answers will not be recorded until you hit Submit Exam. If you need to exit before completing the exam, click Cancel Exam. Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer. 1. Bloomfield Bakers accounts for its investment in Clor Confectionary under the equity method. Bloomfield carried the Clor investment at $150,000 and $165,000 at December 31 of 2010 and 2011, respectively. During 2011 Clor recognized $80,000 of net income and paid dividends of $30,000. Assuming that Bloomfield owned the same percentage of Clor throughout 2011, their percentage ownership must have been A. 50%. B. 30% C. 18.75%. D. 5%. 2. On January 1, 2011, Green Corporation purchased 20% of the outstanding voting common stock of Gold Company for $300,000. The book value of the acquired shares was $275,000. The excess of cost over book value is attributable to an intangible asset on Gold's books that was undervalued and had a remaining useful life of five years. For the year ended December 31, 2011, Gold reported net income of $125,000 and paid cash dividends of $25,000. What is the carrying value of Green's investment in Gold at December 31, 2011? A. $320,000 B. $300,000 C. $295,000 D. $315,000 3. Classifying liabilities as either current or long-term helps creditors assess A. profitability. B. the degree of a firm's liabilities. C. the amount of a firm's liabilities. D. the relative risk of a firm's liabilities. 4. On January 1, 2011, G Corporation agreed to grant its employees two weeks vacation each year, with the stipulation that vacations earned each year can be taken the following year. For the year ended December 31, 2011, G's employees each earned an average of $800 per week. 500 vacation weeks earned in 2011 were not taken during 2011. Wage rates for employees rose by an average of 5 percent by the time vacations actually were taken in 2012. What is the amount of G's 2012 wages expense related to 2011 vacation time? A. $420,000 B. $20,000 C. $400,000 D. $0 5. On July 1, 2011, Tremen Corporation acquired 40% of the shares of Delany Company. Tremen paid $3,000,000 for the investment, and that amount is exactly equal to 40% of the fair value of identifiable net assets on Delany's balance sheet. Delany recognized net income of $1,000,000 for 2011, and paid $150,000 quarterly dividends to its shareholders. After all closing entries are made, Tremen's "Investment in Delany Company" account would have a balance of A. $3,200,000. B. $3,000,000. C. $3,160,000. D. $3,080,000. 6.Which of the following situations would not require that long-term liabilities be reported as current liabilities on a classified balance sheet? A. All of these situations require the current classification. B. The long-term debt is callable by the creditor. C. The long-term debt matures within the upcoming year. D. The creditor has the right to demand payment due to a contractual violation. 7. Under IAS No. 39, which is not a category for accounting for investments? A. Fair value through other comprehensive income B. Available-for-sale C. Fair value through profit and loss D. Held-to-maturity 8.General Product, Inc., shipped 100 million coupons in products it sold in 2011. The coupons are redeemable for thirty cents each. General anticipates that 70% of the coupons will be redeemed. The coupons expire on December 31, 2012. There were 45 million coupons redeemed in 2011, and 30 million redeemed in 2012. What was General's coupon liability as of December 31, 2011? A. $16.5 million B. $7.5 million C. $21.0 million D. $13.5 million 9.In 2009, Osgood Corporation purchased $4 million in ten-year municipal bonds at face value. On December 31, 2011, the bonds had a market value of $3,600,000 and Osgood reclassified the bonds from held to maturity to trading securities. Osgood's December 31, 2011, balance sheet and the 2011 income statement would show the following: A. Option d B. Option a C. Option b D. Option c 10. If Ziggy Company concluded that an investment originally classified as held to maturity would now more appropriately be classified as available for sale, Ziggy would A. reclassify the investment as available for sale and immediately recognize in net income any unrealized gain or loss on the reclassification date. B. need to restate earnings, as the original classification was in error. C. reclassify the investment as available for sale and immediately recognize in accumulated other comprehensive income any unrealized gain or loss on the reclassification date. D. not reclassify the investment, as original classifications are irrevocable. 11. Beresford, Inc., purchased several investment securities during 2008, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values aren't considered permanent. What would be the balance in Beresford's accumulated other comprehensive income with respect to these investments in its 12/31/11 balance sheet (ignore taxes)? A. $55,100 B. $50,200 C. $26,500 D. $10,400 12. What is the effective interest rate (rounded) on a 3-month, noninterest-bearing note with a stated rate of 12% and a maturity value of $200,000? A. 12.0 % B. 11.5% C. 12.4% D. 3.0% 13. Liabilities payable within the coming year are classified as long-term liabilities if refinancing is completed before date of issuance of the financial statements under A. US GAAP. B. IFRS. C. IRS. D. Neither U.S. GAAP nor IFRS. 14. Goofy, Inc., bought 15,000 shares of Crazy Co.'s stock for $150,000 on May 5, 2010, and classified the stock as available for sale. The market value of the stock declined to $118,000 by December 31, 2010. Goofy reclassified this investment as trading securities in December of 2011 when the market value had risen to $125,000. What effect on 2011 income should be reported by Goofy for the Crazy Co. shares? A. $32,000 net loss B. $25,000 net loss C. $0 D. $7,000 net gain 15. Beresford, Inc., purchased several investment securities during 2008, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values aren't considered permanent. What total unrealized holding gain would Beresford report in its 2011 income statement relative to its investment securities? A. $80,900 B. $36,000 C. $48,200 D. $55,900 16. During 2011, Deluxe Leather Goods sold 800,000 reversible belts under a new sales promotional program. Each belt carried one coupon, which entitles the customer to a $5.00 cash rebate. Deluxe estimates that 70% of the coupons will be redeemed, even though only 350,000 coupons had been processed during 2011. At December 31, 2011, Deluxe should report a liability for unredeemed coupons of A. $560,000. B. $1,750,000. C. $1,050,000. D. $1,225,000. 17. Assume that, on 1/1/11, Sosa Enterprises paid $5,100,000 for its investment in 36,000 shares of Orioles Co. Further, assume that Orioles has 120,000 total shares of stock issued and estimates an 8 year remaining useful life and straight-line depreciation with no residual value for its depreciable assets. At 1/1/11, the book value of Orioles' identifiable net assets was $7,000,000, and the fair value of Orioles was $10,000,000. The difference between Orioles' fair value and the book value of its identifiable net assets is attributable to $1,800,000 of land and the remainder to depreciable assets. Goodwill was not part of this transaction. The following information pertains to Orioles during 2011: Net income $600,000 Dividends declared and paid $360,000 Market price of common stock on 12/31/11 $80/share What amount would Sosa Enterprises report in its year-end 2011 balance sheet for its investment in Orioles Co.? A. $3,200,000 B. $3,180,000 C. $3,027,000 D. $3,135,000 18. Jack Corporation purchased a 20% interest in Jill Corporation for $1,500,000 on January 1, 2011. Jack can significantly influence Jill. On December 10, 2011, Jill declared and paid $1 million in dividends. Jill reported a net loss of $6 million for the year. What amount of loss should Jack report in its income statement for 2011 relative to