ACC 423 Exam 2

This work of ACC 423 Exam 2 comprises:

1) When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to

2) The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be

3) When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be

4) When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the

5) The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities An acceptable method of allocation is the

6) Which of the following represents the total number of shares that a corporation may issue under the terms of its charter?

7) How should a “gain” from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?

8) Treasury shares are

9) When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?

10) When computing diluted earnings per share, convertible bonds are

11) In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding)If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)?

12) Antidilutive securities

13) At its date of incorporation, Wilson, Inc issued 100,000 shares of its $10 par common stock at $11 per share During the current year, Wilson acquired 20,000 shares of its common stock at a price of $16 per share and accounted for them by the cost method Subsequently, these shares were reissued at a price of $12 per share There have been no other issuances or acquisitions of its own common stock What effect does the reissuance of the stock have on the following accounts?

Retained Earnings |Additional Paid-in Capital

14) A corporation declared a dividend, a portion of which was liquidatingHow would this distribution affect each of the following?

Additional Paid-inCapital | Retained Earnings

15) How would the declaration and subsequent issuance of a 10% stock dividend by the issuer affect each of the following when the market value of the shares exceeds the par value of the stock?

16) A reclassification adjustment is reported in the

17) Which of the following is correct about the effective-interest method of amortization?

18) When investments in debt securities are purchased between interest payment dates, preferably the

19) When an investor’s accounting period ends on a date that does NOT coincide with an interest receipt date for bonds held as an investment, the investor must

20) Which of the following is NOT a debt security?

21) Investments in debt securities should be recorded on the date of acquisition at

22) When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies?

23) An investor has a long-term investment in stocks Regular cash dividends received by the investor are recorded as

24) BynerCorporation accounts for its investment in the common stock of YountCompany under the equity method Byner Corporation should ordinarily record a cash dividend received from Yount as

25) Use of the effective-interest method in amortizing bond premiums and discounts results in

26) Held-to-maturity securities are reported at

27) Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders’ equity are

28) The accounting for fair value hedges records the derivative at its

29) Gains or losses on cash flow hedges are

30) All of the following statements regarding accounting for derivatives are correct EXCEPT that

31) The rationale for interperiod income tax allocation is to

32) Taxable income of a corporation differs from pretax financial income because of

Permanent Differences | Temporary Differences

33) Which of the following situations would require interperiod income tax allocation procedures?

34) Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income?

35) At the December 31, 2007 balance sheet date, Garth Brooks Corporation reports an accrued receivable for financial reporting purposes but NOT for tax purposes. When this asset is recovered in 2008, a future taxable amount will occur and

36) Which of the following differences would result in future taxable amounts?

37) In a defined-contribution plan, a formula is used that

38) In accounting for a defined-benefit pension plan

39) In a defined-benefit plan, a formula is used that

40) A corporation has a defined-benefit plan. An accrued pension cost will result at the end of the first year if the

41) In accounting for a pension plan, any difference between the pension cost charged to expense and the payments into the fund should be reported as

42) The interest on the projected benefit obligation component of pension expense

43) Yeager Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Yeager should report a minimum liability at least equal to the

44) On January 1, 2008, Pratt Corp. adopted a defined-benefit pension plan. The plan’s service cost of $300,000 was fully funded at the end of 2008. Prior service cost was funded by a contribution of $120,000 in 2008. Amortization of prior service cost was $48,000 for 2008. What is the amount of Pratt

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