SHOW WORK PLEASE. THERE ARE 35 QUESTIONS LISTED. PLEASE SEE ATTACHMENT

Fall 2013 Select the best answer for each question and type the answer in capital letters on the answer sheet that follows the questions. SHOW WORK Use the information below to answer questions 1-6. Crump Inc. issued $1,500,000 of face value convertible bonds on March 31, 2016 for $1,439,000. Starting on March 31, 2021, holders on Crump bonds can convert each $1,000 bond into 30 shares of Crump's $5 par value common stock. Crump estimated that, if the bonds were not convertible, the amount received would have been $1,385,000. On June 1, 2021, holders of 375 bonds converted them into common stock when the market value of the common was $42 per share. For questions 1-5, assume Crump uses U.S. GAAP. 1. Which of the following statements is correct? A. Crump should record a discount on bonds of $115,000 on March 31, 2016. B. Crump should not allocate any of the proceeds from the issuance of the convertible bonds to equity. C. A and B. D. Neither A nor B. 2. Which of the following statements is correct? A. Crump's nonconvertible debt is subordinated to its convertible debt. B. Regardless of whether the market value of Trump's common stock increases or decreases after March 31, 2016, the market value of the convertible bonds will be based primarily on the current market rate of interest. C. A and B. D. Neither A nor B. 3. Which of the following statements is correct if the unamortized discount on Crump's convertible bonds amounted to $33,000 on June 1, 2021? A. Under the book value method, the journal entry to record the conversion should credit \"paid in capital\" for $305,100. B. Under the market value method, the journal entry to record the conversion should credit \"paid in capital\" for $416,250. C. A and B. D. Neither A nor B. 4. Using the information provided in the previous question, which of the following statements is correct on June 1, 2021? 1 A. Under both the book and market value methods, the amount debited to \"discount on bonds\" is $8,250. B. Under the market value method, the \"loss from bond conversion\" is $105,750. C. A and B. D. Neither A nor B. 5. Which of the following statements is correct if Crump induced the conversion of the 375 bonds on June 1, 2021 by increasing the conversion ratio from 30 common shares per bond to 33 common shares per bond? Assume Crump uses the book value method. A. B. C. D. Debt conversion expense should be charged for $47,250. Paid in capital should be credited for $40,265. A and B. Neither A nor B. 6. Which of the following statements is correct, assuming Crump uses IFRS? A. Crump should record an increase in equity of $54,000 on March 31, 2016. B. The amount received from the issuance of the convertible bonds on March 31, 2016 must be bifurcated into debt and equity amounts. C. A and B. D. Neither A nor B. 7. Which of the following statements is correct? A. The book value method used to account for conversions of convertible bonds assumes that the issuance of convertible bonds and the act of conversion are two distinctly separate events. B. The market value method applied to the conversion of convertible bonds usually results in lower net income. C. A and B. D. Neither A nor B. 8. Which of the following statements is correct? A. Separating the amount received from the issuance of bonds with detachable warrants into debt and equity components usually results in a premium on bonds. B. The use of the proportional method for allocating the amount received from the issuance of bonds with detachable warrants requires knowledge of the fair value of the bonds without the warrants and the fair value of the warrants. C. A and B. D. Neither A nor B. 9. Which of the following statements is correct? A. There is no journal entry to record the issuance of preemptive stock rights because the rights are issued to existing stockholders for no consideration. 2 B. Under U.S. GAAP, the proceeds of debt issued with nondetachable warrants are bifurcated into debt and equity components. C. A and B. D. Neither A nor B. Use the information below to answer questions 15-18. Klinton Inc. issued $1,500,000 of bonds with detachable warrants for $1,520,000 on March 31, 2016. On the day of issuance, the market value of the bonds without the warrants was $1,386,000, and the market value of one warrant was $12. Each $1,000 bond contained 3 detachable warrants that expire on March 31, 2020. Each warrant can be used to acquire one share of Klinton's $2 par value common stock at $64 per share. 10. How much should Klinton record for \"paid in capital-detachable warrants\" as a result of the issuance of bonds and detachable warrants? A. B. C. D. $54,000. $134,000. $57,000. $37,000. 11. Assume 1,350 warrants are exercised in 2020. What is the increase in Klinton's stockholders' equity as a result of the exercise of the warrants? A. B. C. D. $94,500. $77,400. $103,500. $86,400. 12. Using the information provided in the previous question, which of the following statements is correct about the journal entry to record the exercise of the warrants? A. B. C. D. Paid in capital-detachable warrants should be charged for $17,100. Paid in capital-excess over par should be credited for $83,700. A and B. Neither A nor B. 13. Assume Klinton did not know the market value of the warrants on March 31, 2016. In the journal entry to record the issuance of the debt with detachable warrants, discount on bonds would be recorded at A. B. C. D. $37,000. $114,000. $134,000. $57,000. 3 14. Which of the following statements is correct? A. For employees to receive favorable income tax treatment for their stock options, the exercise price and the market price of the common stock must be equal on the exercisable date. B. The Black-Scholes option pricing model was designed specifically to value employee stock options. C. A and B. D. Neither A nor B. 15. Which of the following statements is correct? A. Stock options have voting rights during the vesting period. B. An executive who receives restricted stock can elect to pay income tax either on the value of the restricted stock on the grant date or on the value of the restricted stock on the date the restricted stock vests. C. A and B. D. Neither A nor B. 16. When vested qualified stock options are \"in the money,\" it means that A. The options are trading in the market place for an amount larger than the option amount estimated on the grant date using the binomial options pricing model. B. The market price of the common stock is higher than it was on the date the options were granted. C. A and B. D. Neither A nor B. 17. Which of the following statements is correct? A. When the intrinsic value method was used to value qualified stock options, it resulted in reporting zero compensation expense during the vesting period. B. In 2004, the FASB finally passed a standard that recommended the fair value method for valuing qualified stock options granted to employees. C. A and B. D. Neither A nor B. 18. Which of the following statements is correct? A. The fair value of an employee qualified stock option is greater than its intrinsic value on the grant date. 4 B. Qualified cash dividends received on restricted stock awards after vesting are taxed preferentially. C. A and B. D. Neither A nor B. Use the information below to answer questions 24-29. On January 1, 2016, Manders Inc. granted 250,000 qualified stock options to acquire 250,000 shares of Manders $4 par value common stock at $38 per share. The options vest on December 31, 2018, and expire on December 31, 2022. Using the Black Scholes option pricing model, the estimated value of a single option on the grant date was $1.80. In early 2017, employees who were granted 60,000 options left Manders to work for Kruz Inc. During 2020, employees exercised 140,000 options when the market price of Manders common stock was $43 per share. At December 31, 2022, the remaining options expired because they were underwater. 19. Which of the following statements is correct? A. On the grant date, no journal entry is made for the stock options because neither the employees nor Manders executed the contract. B. On the grant date, Manders total compensation expense is estimated to be $450,000. C. A and B. D. Neither A nor B. 20. Which of the following statements is correct? A. In the adjusting journal entry made on December 31, 2016, \"paid in capital-stock options\" should be credited for $150,000. B. In the entry to record the forfeiture of the stock options in 2017, \"paid in capitalexpired stock options\" should be debited for $36,000. C. A and B. D. Neither A nor B. 21. For the year ended December 31, 2017, the net compensation expense related to Manders stock options was A. B. C. D. $78,000. $114,000. $150,000. $87,000. 5 22. Which of the following statements is correct? A. Compensation expense for 2018 is $114,000. B. At December 31, 2018, the balance in the account \"paid in capital-stock options' is $342,000. C. A and B. D. Neither A nor B. 23. As a result of the exercise of the 140,000 options in 2020, A. B. C. D. Paid in capital-stock options should be debited for $290,000. Paid in capitalexcess over par should be credited for $5,012,000. A and B. Neither A nor B. 24. As a result of the expiration of the remaining stock options in 2022, A. B. C. D. Paid in capital-stock options should be debited for $90,000. Compensation expense should be credited for $72,000. Paid in capital-expired stock options should be credited for $18,000. A, B, and C. 25. Which of the following statements is correct? A. The accounting scandals of the 2000's were the catalyst that caused House of Representatives member John Dingell to call for an investigation of the accounting for stock options. B. Employees who exercise in the money qualified stock options must pay income taxes on their capital gains in the year in which the options are exercised. C. A and B. D. Neither A nor B. 26. Paid in capital-stock options is charged when A. B. C. D. E. Employees exercise their stock options. Employees forfeit their stock options. The stock options expire. A and B. A, B, and C. 27. Which of the following statements is correct? A. Stock options and restricted stock awards both have vesting periods. B. The objective of employee stock purchase plans (ESPPs) is to make employees more loyal and motivated to work hard. C. A and B. D. Neither A nor B. 6 28. Siden Inc. has a stock bonus plan that awards common stock to its key executives based on various levels of performance. The agreement with Mary Smart, CEO of Siden, provides that she will receive 10,000 shares of Siden common stock if earnings per share in 2016 is 15% higher than that of 2015, and 15,000 shares of Siden common stock if earnings per share is more than 15% higher than that of 2015. Earnings per share for 2015 was $1.71 per common share. In January, 2017, the audited income statement of Siden reported earnings per share of $1.99. Siden's $3 par value common stock had a closing market value on December 31, 2016 of $27 per share. Based on the information above, which of the following statements is correct on December 31, 2016? A. B. C. D. Siden's compensation expense for 2016 will increase $405,000. Common stock will increase $45,000. Paid in capital-excess over par will increase $360,000. A, B, and C. Use the information below to answer questions 34-37. On January 1, 2016, Manders Inc. granted 250,000 shares of restricted common stock to its key executives. Manders $4 par value common stock had a $38.40 per share market value on the grant date. The restricted stock vests on December 31, 2019. In early 2017, executives who were granted 60,000 shares left Manders to work for Kruz Inc. Executives who received the remaining 190,000 restricted shares completed the vesting period. 29. Which of the following statements is correct on the grant date? A. Paid in capital-excess over par should be credited for $8,600,000. B. There is no effect on total stockholders' equity as a result of recording the restricted stock award. C. A and B. D. Neither A nor B. 30. Which of the following statements is correct? A. The balance in unearned compensation at December 31, 2016 is $7,200,000. B. As a result of the forfeiture in 2017, unearned compensation should be credited for $1,743,000. C. A and B. 7 D. Neither A nor B. 31. Which of the following statements is correct? A. For 2017, net compensation expense related to the restricted stock award is $1,428,000. B. The balance in unearned compensation at December 31, 2017 is $3,648,000. C. A and B. D. Neither A nor B. 32. Which of the following statements is correct? A. Compensation expense for 2018 is $1,824,000. B. For the period 2016-2019, the total compensation expense related to the restricted stock award is $8,064,000. C. A and B. D. Neither A nor B. 33. In a restricted stock award, unearned compensation is credited when A. B. C. D. E. Work is completed during the vesting period. Employees forfeit their restricted stock The restricted stock award expires. A and B. A, B, and C 34. Which of the following statements is correct? A. Restricted stock awards can be underwater. B. From the historical perspective, restricted stock awards originated in the same decade that saw the origination of employee stock options. C. A and B. D. Neither A nor B. 35. Which of the following statements is correct? A. Under IFRS, compensation expense is reported for the amount of the discount employees receive when purchasing the common stock of the employer under an employee stock purchase plan (ESPP). B. Under U.S. GAAP, compensation expense is not reported for the amount of the discount employees receive when purchasing the common stock of the employer as long as the discount is not larger than 10%. C. A and B. D. Neither A nor B 8 9