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QUESTION 1

1. Wall Drugs offered an incentive stock option plan to its employees. On January 1, 2018, options were granted for 66,000 $1 par common shares. The exercise price equals the $5 market price of the common stock on the grant date. The options cannot be exercised before January 1, 2021, and expire December 31, 2022. Each option has a fair value of $1 based on an option pricing model.
3. What is the total compensation cost for this plan?
4. $330,000.$66,000.$0.$396,000.

2.5 points

QUESTION 2

1. At the end of the current year, a company overstated prepaid insurance by $66,000 and understated supplies expense by $108,000. Its effective tax rate is 40%. As a result of this error, net income is:
2. Overstated by $104,400.Understated by $25,200.Overstated by $25,200.Understated by $104,400.

2.5 points

QUESTION 3

1. FX Services granted 17.0 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. The common shares have a market price of $6 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?(Round your answer to 1 decimal place.)
2. $ 17.0 million.$ 25.5 million.$ 102.0 million.$ 0 million.

2.5 points

QUESTION 4

1. In the previous year, a firm failed to record premium amortization of $41,400 and $29,500, respectively, on its bonds payable and held to maturity bond investments. These errors affect both income before tax and taxable income. The firm's tax rate is 40%. As a result of this error, net income was:
2. Understated by $34,260.Understated by $7140.Overstated by $7140.Overstated by $34,260.

2.5 points

QUESTION 5

1. A company failed to record unrealized gains of $24.00 million on its debt investments classified as trading securities. Its tax rate is 30%. As a result of this error, total shareholders' equity would be(Round million answer to 2 decimal places.):
2. Understated by $24.00 million.Understated by $16.80 million.Understated by $7.20 million.Unaffected.

2.5 points

QUESTION 6

1. After issuing its financial statements, a company discovered that its beginning inventory was overstated by $220,000. Its tax rate is 35%. As a result of this error, net income was:
2. Overstated by $77,000.Understated by $143,000.Overstated by $143,000.Understated by $77,000.

2.5 points

QUESTION 7

1. In 2018, internal auditors discovered that Fay, Inc., had debited an expense account for the $3,900,000 cost of a machine purchased on January 1, 2015. The machine's useful life was expected to be 20 years with no residual value. Straight-line depreciation is used by Fay. The journal entry to correct the error will include a credit to accumulated depreciation of:
2. $3,900,000.$585,000.$195,000.$390,000.

2.5 points

QUESTION 8

1. On January 1, 2018, Hage Corporation granted incentive stock options to purchase 26,500 of its common shares at $8 each. The options are exercisable after one year. The market price of common averaged $10 per share during the quarter ending on March 31, 2018. There was no change in the 225,000 shares of outstanding common stock during the quarter ended March 31, 2018. Net income for the quarter was $9118. The number of shares to be used in computing diluted earnings per share for the quarter is:(Round your final answer to whole number.)
2. 225,000.230,300.251,500.246,200.

2.5 points

QUESTION 9

1. At the end of the current year, a company failed to accrue interest of $600,000 on its investments in municipal bonds. Its tax rate is 30%. As a result of this error, net income is:
2. Unaffected.Understated by $600,000.Understated by $180,000.Understated by $420,000.

2.5 points

QUESTION 10

1. Alpha Company had the following account balances for 2018:
3. Dec. 31Jan. 1Accounts receivable$41,000$32,000Accounts payable52,00057,000Alpha reported net income of $210,000 for 2018. Assuming no other changes in current account balances, what is the amount of net cash provided by operating activities for 2018 reported in the statement of cash flows?
4. $224,000.$196,000.$206,000.$214,000.

2.5 points

QUESTION 11

1. Lite Travel Company's accounting records include the following information:
3. Payments to suppliers$51,000Collections on accounts receivable85,000Cash sales48,000What is the amount of net cash provided by operating activities indicated by the amounts provided?
4. $ 99,000.$ 136,000.$ 51,000.$ 82,000.

2.5 points

QUESTION 12

1. Hepburn Company bought a copyright for $156,000 on January 1, 2015, at which time the copyright had an estimated useful life of 20 years. On January 5, 2018, the company determined that the copyright would expire at the end of 2021. How much should Hepburn record as amortization expense for this copyright for 2018?(Do not round your intermediate calculation and round your answer to the nearest dollar amount.)
2. $520.$33,150.$1560.$7800.

2.5 points

QUESTION 13

1. On January 1, 2018, D Corp. granted an employee an option to purchase 9000 shares of D's $3 par common stock at $19 per share. The options became exercisable on December 31, 2019, after the employee completed two years of service. The option was exercised on January 10, 2020. The market prices of D's stock were as follows: January 1, 2018, $36; December 31, 2019, $51; and January 10, 2020, $44. An option pricing model estimated the value of the options at $8 each on the grant date. For 2018, D should recognize compensation expense of:
2. $ 0.$162,000.$27,000.$36,000.

2.5 points

QUESTION 14

1. A company overstated its liability for warranties by $220,000. Its tax rate is 30%. As a result of this error, income tax expense is:
2. Unaffected.Understated by $154,000.Understated by $66,000.Overstated by $66,000.

2.5 points

QUESTION 15

1. On December 31, 2017, Beta Company had 340,000 shares of common stock issued and outstanding. Beta issued a 6% stock dividend on June 30, 2018. On September 30, 2018, 35,000 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 2018?
2. 397,500.351,650.369,150.360,400.

2.5 points

QUESTION 16

1. B Company switched from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2018. The change affects machinery purchased at the beginning of 2016 at a cost of $82,500. The machinery has an estimated life of five years and an estimated residual value of $4125. What is B's 2018 depreciation expense?
2. $10,450.$20,900.$15,675.$22,000.

2.5 points

QUESTION 17

1. Dublin Inc. had the following common stock record during the current calendar year:
3. Outstanding-beginning of year2,700,000Additional shares issued 6/30260,000Additional shares issued 9/30260,000A 10% stock dividend was paid on December 1. What is the number of shares to be used in computing basic EPS?
4. 3,184,500.3,256,000.3,113,000.2,895,000.

2.5 points

QUESTION 18

1. A firm reported ($ in millions) net cash inflows (outflows) as follows: operating $64, investing ($207), and financing $360. The beginning cash balance was $257. What was the ending cash balance?
2. $143.$40.$888.$474.

2.5 points

QUESTION 19

1. Pastore Inc. granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $27 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $8.00 per option.
3. If the options have a vesting period of five years, what would be the balance in "Paid-in CapitalStock Options" three years after the grant date?
4. A debit of $13.3 million.A credit of $4.8 million.A debit of $4.8 million.A credit of $13.3 million.

2.5 points

QUESTION 20

1. During 2018, T Company engaged in the following activities:
3. Distribution of cash dividends declared in 2017$29Fair value of shares issued in a stock dividend130Payment to retire bonds267Proceeds from the sale of treasury stock (cost: $31)36In T's statement of cash flows, what were net cash outflows from financing activities for 2018?
4. $433.$332.$260.$231.

2.5 points

QUESTION 21

1. Wall Drugs offered an incentive stock option plan to its employees. On January 1, 2018, options were granted for sixty-nine thousand $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The options cannot be exercised before January 1, 2021, and expire December 31, 2022. Each option has a fair value of $1 based on an option pricing model.
3. Which is the correct entry to record compensation expense for the year 2018?
5. Compensation expense23,000Paid-in capital - stock options23,000
6. Compensation expense23,000Common stock23,000
7. Compensation expense13,800Paid-in capital-stock options13,800
8. Compensation expense92,000Paid-in capital - stock options92,000

2.5 points

QUESTION 22

1. On January 1, 2018, Black Inc. issued stock options for 260,000 shares to a division manager. The options have an estimated fair value of $5 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 4% in four years. Black initially estimates that it is probable the goal will be achieved. In 2019, after one year, Black estimates that it isnotprobable that divisional revenue will increase by 4% in four years. Ignoring taxes, what is the effect on earnings in 2019?
2. $325,000 increase.$325,000 decrease.$162,500 increase.No effect.

2.5 points

QUESTION 23

1. Moonland Company's income statement contained the following errors:
2. Ending inventory, December 31, 2018, understated by $12,500
3. Depreciation expense for 2018 overstated by $1600
4. What is the effect of the errors on 2018 net income before taxes?
5. Understated by $10,900.Understated by $14,100.Overstated by $10,900.Overstated by $14,100.

2.5 points

QUESTION 24

1. Sneed Corporation reported balances in the following accounts for the current year:
3. BeginningEndingIncome tax payable$58$38Deferred tax liability77147Income tax expense was $235 for the year. What was the amount paid for taxes?
4. $215.$185.$197.$293.

2.5 points

QUESTION 25

1. A company failed to record unrealized gains of $25.00 million on its available for sale debt security investments. Its tax rate is 35%. As a result of this error, comprehensive income would be(Round million answer to 2 decimal places.):
2. Understated by $16.25 million.Understated by $25.00 million.Understated by $8.75 million.Unaffected.

2.5 points

QUESTION 26

1. Dooling Corporation reported balances in the following accounts for the current year:
3. BeginningEndingInventories$660$360Accounts payable340540Cost of goods sold was $7300. What was the amount of cash paid to suppliers?
4. $6800.$7000.$7300.$7100.

2.5 points

QUESTION 27

1. On December 31, 2018, Wellstone Company reported net income of $71,000 and sales of $214,000. The company also reported beginning and ending accounts receivable at $15,000 and $26,000, respectively. Wellstone will report cash collected from customers in its 2018 statement of cash flows (direct method) in the amount of:
2. $225,000.$128,000.$203,000.$240,000.

2.5 points

QUESTION 28

1. In preparing its cash flow statement for the year ended December 31, 2018, Red Co. gathered the following data:
3. Gain on sale of land$12,400Proceeds from sale of land21,500Purchase of Blue, Inc., bonds (face value $210,000)360,000Amortization of bond discount4400Cash dividends declared92,000Cash dividends paid73,000Proceeds from sales of Red Co. common stock158,000In its December 31, 2018, statement of cash flows, what amount should Red report as net cash outflows from investing activities?
4. $188,500.$381,500.$338,500.$326,100.

2.5 points

QUESTION 29

1. Under its executive stock option plan, N Corporation granted options on January 1, 2018, that permit executives to purchase 14.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $16 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives?(Round your answer to 1 decimal place.)
2. $70.0 million.$ 0$105.0 million.$23.3 million.

2.5 points

QUESTION 30

1. Melanie Corporation declared cash dividends of $11,700 during the current year. The beginning and ending balances in dividends payable were $270 and $450, respectively. What was the amount of cash paid for dividends?
2. $11,250.$10,980.$11,520.$11,880.

2.5 points

QUESTION 31

1. If bond interest expense is $830,000, bond interest payable increased by $9000 and bond discount decreased by $1600, cash paid for bond interest is:
2. $822,600.$837,400.$840,600.$819,400.

2.5 points

QUESTION 32

1. To encourage employee ownership of the company's common shares, KL Corp. permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 9% discount. During May, employees purchased 10,000 shares at a time when the market price of the shares on the New York Stock Exchange was $11 per share. KL will record compensation expense associated with the May purchases of:
2. $ 110,000.$ 9900.$ 10,800.$ 0.

2.5 points

QUESTION 33

1. Selected information from Peridot Corporation's accounting records and financial statements for 2018 is as follows ($ in millions):
3. Cash paid to acquire machinery$32Reacquired Peridot common stock58Proceeds from sale of land92Gain from the sale of land54Investment revenue received68Cash paid to acquire office equipment85In its statement of cash flows, Peridot should report net cash outflows from investing activities of:
4. $28 million.$25 million.$97 million.$78 million.

2.5 points

QUESTION 34

1. In preparing its cash flow statement for the year ended December 31, 2018, Green Co. gathered the following data:
3. Gain on sale of land$12,800Proceeds from sale of land21,800Purchase of Black, Inc., bonds (face value $235,000)362,000Amortization of bond discount4700Cash dividends declared100,000Cash dividends paid79,000Proceeds from sales of Green Co. common stock156,000In its December 31, 2018, statement of cash flows, what amount should Green report as net cash from financing activities?
4. $21,000.$56,000.$77,000.$127,000.

2.5 points

QUESTION 35

1. On January 1, 2018, M Company granted 97,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2020, and expire on January 1, 2024. Each option can be exercised to acquire one share of $1 par common stock for $9. An option-pricing model estimates the fair value of the options to be $5 on the date of grant.
3. If unexpected turnover in 2019 caused the company to estimate that 20% of the options would be forfeited, what amount should M recognize as compensation expense for 2019?(Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)
4. $161,667$97,000$48,500$32,333

2.5 points

QUESTION 36

1. Selected information from Large Corporation's accounting records and financial statements for 2018 is as follows ($ in millions):
3. Cash paid to acquire a patent$48Treasury stock purchased for cash45Proceeds from sale of land and buildings75Gain from the sale of land and buildings46Investment revenue received15Cash paid to acquire office equipment70Large 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:
4. $58 million.$118 million.$48 million.$28 million.

2.5 points

QUESTION 37

1. Powell Company had the following errors over the last two years:
3. 2016: Ending inventory was overstated by $55,500 while depreciation expense was overstated by $24,000.
4. 2017: Ending inventory was understated by $12,000 while depreciation expense was understated by $6400.
6. By how much should retained earnings be adjusted on January 1, 2018? (Ignore taxes)
7. Increase by $29,600.Decrease by $29,600.Decrease by $31,900.Increase by $43,500.

2.5 points

QUESTION 38

1. A company switched from the cash basis to the accrual basis for recognizing warranty expense. The unrecorded liability for warranties was $2.9 million at the beginning of the year. Its tax rate is 35%. The company booked a year-end warranty liability of $3.9 million. As a result of this change, the firm would:
2. Report a prior period adjustment decreasing retained earnings by $1,015,000.Report a prior period adjustment decreasing retained earnings by $1,885,000.Report a current period charge decreasing net income by $1,015,000.Report a current period charge decreasing net income by $1,885,000.

2.5 points

QUESTION 39

1. Hemmer Company reported net income for 2018 in the amount of $42,000. The company's financial statements also included the following:
3. Decrease in accounts receivable$6400Increase in inventory1700Depreciation expense3500What is net cash provided by operating activities?
4. $45,500.$37,300.$50,200.$40,200.

2.5 points

QUESTION 40

1. Pastore Inc. granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $36.0 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $8.50 per option.
3. What would be the total compensation indicated by these options?
4. $27.5 million.$8.5 million.$63.5 million.$36.0 million.

1. At the end of the current year, a company overstated prepaid insurance by $66,000 and understated supplies expense by $108,000. Its effective tax rate is 40%. As a result of this error, net income is:
2. Overstated by $104,400.Understated by $25,200.Overstated by $25,200.Understated by $104,400.

2.5 points

QUESTION 3

1. FX Services granted 17.0 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. The common shares have a market price of $6 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?(Round your answer to 1 decimal place.)
2. $ 17.0 million.$ 25.5 million.$ 102.0 million.$ 0 million.

QUESTION 4

1. In the previous year, a firm failed to record premium amortization of $41,400 and $29,500, respectively, on its bonds payable and held to maturity bond investments. These errors affect both income before tax and taxable income. The firm's tax rate is 40%. As a result of this error, net income was:
2. Understated by $34,260.Understated by $7140.Overstated by $7140.Overstated by $34,260.

2.5 points

QUESTION 5

1. A company failed to record unrealized gains of $24.00 million on its debt investments classified as trading securities. Its tax rate is 30%. As a result of this error, total shareholders' equity would be(Round million answer to 2 decimal places.):
2. Understated by $24.00 million.Understated by $16.80 million.Understated by $7.20 million.Unaffected.