QUESTION 1

Assume that Bad Company makes sales of $200,000 during 2004 and reports the amount as sales revenue on its income statement. Also assume that the company wishes to delay the reporting of a portion of that amount for tax purposes and uses the installment sales method for tax purposes. Assume that $60,000 of collections occurred during 2004 and the remainder will occur in 2005. What is the amount of the temporary difference at the end of the year 2004?

		$200,000
		$140,000
		$60,000
		$0

4 points

QUESTION 2

Which of the following is not an equity security?

		Common stock
		Warrants
		Call options
		Redeemable preferred stock with a mandatory redemption period

4 points

QUESTION 3

Which of the following has no effect on comprehensive income?

		Unrealized gains and losses on held-to-maturity investments
		Unrealized gains and losses on available-for-sale investments
		Unrealized gains and losses on trading securities
		Realized gains and losses on available-for-sale securities that were held in previous periods

4 points

QUESTION 4

If a company reissued at $20 per share 100 shares of treasury stock that it had previously acquired for $28 per share and there wasnt 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

4 points

QUESTION 5

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

4 points

QUESTION 6

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. Williams common stock is currently selling for $45 per share. William Corp. should record the building at

		$10,000
		$440,000
		$450,000
		$500,000

4 points

QUESTION 7

Dividends are a(n)

		expense
		distribution to owners
		asset
		increase in equity

4 points

QUESTION 8

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?

		400,000
		325,000
		300,000
		225,000

4 points

QUESTION 9

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

4 points

QUESTION 10

Debt securities that are classified as available-for-sale securities are reported on the balance sheet at

		fair value
		historical cost
		amortized cost
		lower of amortized cost or fair value

4 points

QUESTION 11

The Company purchases an asset on January 1, 2005, for $200,000. The straight-line 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

		debit to Deferred Tax Liability of $12,000
		debit to Deferred Tax Liability of $4,000
		credit to Deferred Tax Asset of $4,000
		credit to Deferred Tax Liability of $12,000

4 points

QUESTION 12

Assume that S Company makes sales of $400,000 during 2004 and reports the amount as sales revenue on its income statement. Also assume that the company wishes to delay the reporting of a portion of that amount for tax purposes and uses the installment sales method for tax purposes. Assume that $100,000 of collections occurred during 2004, $150,000 occurred in 2005, and the remainder will occur in 2006. Assuming a tax rate of 40 percent, what is the amount of the entry into the Deferred Tax account at the end of the year 2004?

		$40,000
		$60,000
		$120,000
		$160,000

4 points

QUESTION 13

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

4 points

QUESTION 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?

		303,000
		342,000
		312,000
		327,000

4 points

QUESTION 15

Treasury stock is a(n)

		asset account
		contra-asset account
		equity account
		contra-equity account

4 points

QUESTION 16

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 above

4 points

QUESTION 17

A liability for a cash dividend exists at the

		end of each year
		date of declaration
		date of record
		date of payment

4 points

QUESTION 18

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

$44,000

$ 0

36,000

8,000

32,000

12,000

24,000

20,000

4 points

QUESTION 19

Other comprehensive income includes changes in the fair value of

		held-to-maturity securities
		trading securities
		available-for-sale securities
		investments accounted for under the equity method

4 points

QUESTION 20

On January 1, 2005, N Inc. purchased 10-year 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. Ns accounting year ends on December 31. Ns management has chosen to treat the bonds purchased as an available-for-sale security. There are no other securities in the available-for-sale portfolio. Assume that on December 31, 2005, the fair market value of the bonds was $510,000. The company uses the straight-line method of amortization. What is the amount of interest income to be reported on the 2005 income statement?

		$35,000
		$40,000
		$44,000
		$45,000

4 points

QUESTION 21

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

4 points

QUESTION 22

Rent income received in advance that is included for tax purposes when received, but recorded for book purposes when earned results in

		expense items and deductions being taken for tax purposes before book purposes
		expense items and deductions being recorded for book purposes before tax purposes
		purposes income being included for tax purposes before book
		income being recorded for book purposes before tax purposes.

4 points

QUESTION 23

Which of the following does not use the Adjustment and Unrealized Holding Gain (Loss) accounts?

		Held-to-maturity securities
		Trading securities
		Available-for-sale securities
		Both held-to-maturity and trading securities

4 points

QUESTION 24

Interest received from available-for-sale debt securities should be reported as

		an unrealized holding gainincome
		an unrealized holding gainequity
		other revenue on the income statement
		a reclassification adjustment on the statement of comprehensive income

4 points

QUESTION 25

Information regarding Silly Co.s portfolio of available-for-sale 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-for-sale 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?

		$26,000
		$22,000
		$20,500
		$0