Need help with these 11 multiple choice questions for FAR (Financial Accounting and Reporting CPA Review class) Need to score 100%! Thank you
QUESTION 2 On January 1, 2005, N Inc. purchased 10year bonds issued by B Company. The bonds have a face value of $500,000 and pay interest annually at 8 percent on each December 31. N purchased the bonds for $550,000. N's accounting year ends on December 31. N's management has chosen to treat the bonds purchased as an availableforsale security. There are no other securities in the availableforsale portfolio. Assume that on December 31, 2005, the fair market value of the bonds was $510,000. The company uses the straightline method of amortization. What is the amount of interest income to be reported on the 2005 income statement? a. $35,000 b. $40,000 c. $44,000 d. $45,000 QUESTION 3 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 Stock Common Stock a. $44,000 $0 b. $36,000 $8,000 c. $32,000 $12,000 d. $24,000 $20,000 QUESTION 8 The Company purchases an asset on January 1, 2005, for $200,000. The straightline method of depreciation is used for book purposes, resulting in depreciation of $50,000 per year. An accelerated method is used for tax purposes, resulting in depreciation of $80,000, $60,000, $40,000, and $20,000 for the years 2005, 2006, 2007, and 2008, respectively. Assume that the tax rate is 40 percent for all years and that depreciation is the only temporary difference between book and tax purposes. The 2005 journal entry would include a a. debit to Deferred Tax Liability of $12,000 b. debit to Deferred Tax Liability of $4,000 c. credit to Deferred Tax Asset of $4,000 d. credit to Deferred Tax Liability of $12,000 At December 31, 2004, Silly reported an unrealized holding loss from availableforsale securities of $1,500 on the statement of stockholders' equity. Assuming the application of SFAS No. 115, \"Accounting for Certain Investments in Debt and Equity Securities,\" what amount should Silly report on its December 31, 2005, balance sheet as an unrealized holding loss? a. $26,000 b. $22,000 c. $20,500 d. $0 QUESTION 13 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 a. $335,000 b. $735,000 c. $2,135,000. d. $2,555,000 QUESTION 14 Interest received from availableforsale debt securities should be reported as a. an unrealized holding gainincome b. an unrealized holding gainequity c. other revenue on the income statement d. a reclassification adjustment on the statement of comprehensive income QUESTION 15 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 Paidin Capital as a result of the conversion? Common Stock Additional PaidinCapital a. $375,000 $175,000 b. $375,000 $225,000 c. $500,000 $50,000 d. $600,000 $0 QUESTION 17 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? a. 400,000 b. 325,000 c. 300,000 d. 225,000 QUESTION 19 Rent income received in advance that is included for tax purposes when received, but recorded for book purposes when earned results in a. expense items and deductions being taken for tax purposes before book purposes b. expense items and deductions being recorded for book purposes before tax purposes c. purposes income being included for tax purposes before book d. income being recorded for book purposes before tax purposes. QUESTION 20 Debt securities that are classified as availableforsale securities are reported on the balance sheet at a. fair value b. historical cost c. amortized cost d. lower of amortized cost or fair value QUESTION 23 Other comprehensive income includes changes in the fair value of a. heldtomaturity securities b. trading securities c. availableforsale securities d. investments accounted for under the equity method Information regarding Silly Co.'s portfolio of availableforsale securities is as follows: Aggregate cost as of 12/31/05 $170,000 Unrealized gains as of 12/31/05 4,000 Unrealized losses as of 12/31/05 26,000 Net realized gains during 2005 30,000 At December 31, 2004, Silly reported an unrealized holding loss from available forsale securities of $1,500 on the statement of stockholders' equity. Assuming the application of SFAS No. 115, \"Accounting for Certain Investments in Debt and Equity Securities,\" what amount should Silly report on its December 31, 2005, balance sheet as an unrealized holding loss? a. b. c. d. $26,000 $22,000 $20,500 $0 Information regarding Silly Co.'s portfolio of availableforsale securities is as follows: Aggregate cost as of 12/31/05 $170,000 Unrealized gains as of 12/31/05 4,000 Unrealized losses as of 12/31/05 26,000 Net realized gains during 2005 30,000 At December 31, 2004, Silly reported an unrealized holding loss from available forsale securities of $1,500 on the statement of stockholders' equity. Assuming the application of SFAS No. 115, \"Accounting for Certain Investments in Debt and Equity Securities,\" what amount should Silly report on its December 31, 2005, balance sheet as an unrealized holding loss? a. b. c. d. $26,000 $22,000 $20,500 $0
