Solved by verified expert :ACC 423 Final Exam
Question 1
Buttercup Corporation issued 330
shares of $10 par value common stock for $4,950. Prepare Buttercup journal
entry.( List multiple debit credit from largest to smallest amount e.g. 10,5,2)
Question 2
Wilco Corporation has the following account balances at
December 31, 2012
Common Stock $5 par value
$551,530
Treasury Stock
99,710
Retained Earnings
2,377,200
Paid
in capital in excess of par
1,346,570
Prepare Wilco’s December 31,2012, stockholders equity section
Question 3
Woolford Inc. declared a cash
dividend of $1.37 par share on its 2.49 million outstanding shares. The
dividend was declared on August 1, payable on September 9 to all stockholders
of record on August 15. Prepare the journal entries necessary on those three
dates. ( If no entry is required , enter no entry as the description and 0 as
the amount)
Question 4 (Preferred Dividends)
The outstanding capital stock of
Pennington Corporation consists of 2200 shares of $101 par value , 6 % preferred,
and, 8400 shares of $56 par value common.
Assuming that the company has
retained earnings of $82,000, all of which is to be paid out in dividends, and
that preferred dividends was not paid during the 2 years preceding the current
year, state how much each class of stock should receive under each of the following condition:
(a) The
preferred stock is noncumulative and nonparticipating
(b) red
stock is cumulative and nonparticipating
(c)The preferred stock is
cumulative and Participating (Round rate of participation is 4 decimal places,
e.g. 5.1234. Round final answer to 0 decimal places , e.g. 25,320)
Question 5(Preferred Dividends)
Martinez Company’s ledger shows
the following balances on December31, 2012.
5% preferred stock- $10 par value
, outstanding 22,720 shares
$227,220
Common stock- $100 par value,
outstanding 34,080 shares 3408,000
Retained Earnings
715,680
Assuming that the directors
decides to declare total dividend in the amount of $302,176, determine how much
each class of stock should receive under each of the conditions stated below . One years
dividends are in arrears on the
preferred stock.
(a)
The preferred stock is cumulative and fully
participating
(b)
The preferred stock is noncumulative and nonparticipating
(c) The
preferred stock is noncumulative and is participating in distributions in
excess of a 7% dividend rate on the common stocks (NOTE: Do not round rate of
participation. Round final answers to zero decimal places,e.g. 12,310)
Question 6
On January1,2012, Barwood
corporation granted 5,430 options to executives. Each option entitles the
holder to purchase one share of
Barewood’s $5 par value common stock at $50 per share at any time during
next 5 years. The market price of the stock is $68 per share on the date of the
grant. The fair value of the options at the grant date is $150,900. The period
of benefits is 2 years. Prepare Barewood’s journal entries for January 1, 2012,
and December 31,2012 and 2013.( If no entry is required, enter no Entry as the
description and 0 as the moment)
Question 7
Rockland corporation earned net income of $417,900 in 2012
and had 100000 shares of common stock outstanding throughout the year. Also
outstanding all year was $1,114,400 of 10% bonds, which are convertible into
22,288 shares of common . Rockland’s tax
rate is 40 percent. Compute Rockland’s 2012 diluted earnings per share.(Round answer to 2 decimal
places, e.g. 2.13)
Question-8
DiCenta corporation reported net
income of $2,57,000 in 2012 and had 50,000 shares of common stock outstanding
throughout the year. Also outstanding all year were 6,330 shares of cumulative
preferred stock , each convertible into
2 shares of common . The preferred stock pays an annual dividend of
$5 per share. DiCenta’s tax rate is 40%. Compute DiCenta’s 2012 diluted
earnings per share. (Round answer to 2 decimal places, e.g. 5.23.)
Question-9
Ferraro Inc. established a stock
appreciation rights (SAR) program on January 1,2012, which entitles executives
to receive cash at the exercise for the difference between market price of the
stock and the pre-established price of $25 on 5,130 SARs. The required service
period is 2 years. The fair value of SAR’s are determined to be $7
on December 31,2012 and $14 on December31,2013.
Compute Parkin’s compensations for 2012.
Compute Parkin’s compensations for 2013.
Question 10
Hillsborough company has an available-for-sale investment in the bonds
of Schuyler with a carrying (and fair)
value of $77,030. Hillsborough determined
that due topoor economic prospects for Schuyler, the bonds have decreased in value to $55,870. It is determined that this loss in value is other than
temporary . Prepare the journal entry, if any,to record the reduction in value.
Question 11
Capital Corporation made the
following cash purchases of securities during 2012,which is the first year in
which Arantxa invested in securities,
On January 15,purchased 11,700 shares of Gonzalez
Company’s common stock at $43.55 per share plus commission $2,574On April 1,purchased 6500 shares of Belmont Co’s
common stock at $67.60 per share plus commission $4,381.On September 10, purchased 9,100 shares of Thep Co’s preferred stock
at $34.45 per share plus commission $6,383
On May 20,2012, capriati sold
3,900 shares of Gonzalez company’s
common stock at a market price $45.50 per share less brokerage commissions,
taxes, and fees of $3,705. The year-end fair values per share were : Gonzalez
$39.00,Belmont $71.50 and Thep $36.50. In addition, the chief accountant of Capriati told you that Capriati plans to
hold these securities for the long term
but may sell them in order to earn profits from appreciation in prices.
(a) Prepare the journal entries
to record the above three security purchases.
(b) Prepare the journal entry for the security sale on May
20.( List multiple debit/credit entries from largest to smallest amount, e.g.
10,5,2)
(a)
Compute unrealized gains or losses and prepare the
adjusting entries for Capriati on December 31,2012.
Unrealized gain or loss ( For negative numbers use either a
negative sign preceding the number, e.g. -45or parenthesis (45)
Question-12(Journal
entries for fair value and equity methods)
Presented below are two independent situations.
Prepare all necessary journal entries in 2012 for each
situation
Situation 1
Hatcher Cosmetics
acquired 10% of the 206,800 shares of common stock of Ramirez Fasion at a total
cost of $15 per share on March 18,2012. On June 30, Ramirez declared and paid a
$77,100 cash dividend. On December 31, Ramirez reported net income of $1,29,000
for the year. At December 31,the market price of the Ramirez Fasion was $18 per
share. The securities are classified as available for sale
Situation 2
Holmes Inc. obtained significant
influence over Nadal corporation by buying 25% of Nadal’s 33,300 outstanding
shares of common stock at total cost of $12 per share on January 1,2012 . On
June 15,Nadal declared and paid a cash dividend of $45,000. On December 31,
Nadal reported a net income of $85,400
for the year.
Question 13 (Equity Method)
Gator Co.invested $1,080,000 in
Demo co.for 25% of its outstanding stock. Demo co. pays out 40% of net income
in dividends each year.
Use the information in the
following T-account for the investment in Demo to answer the following answer.
Question 14 (Fair value and equity method compared)
Gregory Inc. acquired 20% of the
outstanding common stock of Handerson Inc. on December 31,2012. The purchase
price was $1,220,000 for 50,000 shares. Handerson Inc declared and paid an
$0.89 per share cash dividend on June 30
and on December 31,2013.
(a) Prepare the journal entries
for Gregory Inc. for 2012 and 2013,assuming that Gragory cannot exercise significant influence over Handerson. The
securities should be classified as available for sale.
(b) Prepare the journal entries for Gregory Inc. for 2012
and 2013, assuming that Gragory can
exercise significant influence over Handerson.
(c) At what amount is the investment in securities reported
on the balance sheet under each of these methods at December 31,2013?What is
the net income reported in 2013 under each of these methods?(If answer is
zero,please enter a 0, do not leave any fields blank)
Question 15 (Call Option)
On January2, 2012 , Jones Company
purchases a call option for $450 on Merchant common stock. The call option
gives Jones the option to buy 1000 shares of Merchant at a strike price of $50
per share. The market price of a merchant share is $50 on January 2,2012( the
intrinsic value is therefore $0). On March 31,2012, the market price of
Merchant stock is $61 per share, and the time value of the option is $200.
(a) Prepare the journal entry to
record the purchase of the call option on January 2,2012.
(b) Prepare the journal entry(ies) to recognize the change
in the fair value of the call option as of March 31,2012
(c)What was the effect of net
income on entering into the derivative transaction for the period January 2 to
March 31,2012?
Question 16
In 2012 , Amirante Corporation
had pretax financial income of $148,900 and taxable income of $107,900. The
difference is due to the use of different depreciation method for tax and accounting purposes. The
effective tax rate is 40%. Compute the amount to be reported as income taxes
payable at December 31,2012.
Question 17
At December 31,2012, Fell
corporation had a deferred tax liability of $708,356, resulting from future
taxable amounts of $2,083,400 and an enacted tax rate of 34%. In May 2013, a
new income tax act is signed into law that raises the tax rate to 41% for 2013
and future years. Prepare the journal entry for Fell to adjust the deferred tax
liability.
Question 18
AMR Corporation( parent company
of American Airlines) reported the following for 2009 ( in millions)
Service cost $451
Interest cost onP.B.O 695
Return on Plan Asset 789
Amortization of service cost 34
Amortization of loss 67
Compute AMR
Corporation’s 2009 pensions expense( in millions)
Question 19
For Warren
corporation ,year end planned assets were $2,159,200. At the beginning of the
year , plan assets were $1,735,600. During the year, contributions to the
pension fund were $1,20,000, and benefits paid were $200,000. Compute Warren’s
actual return on plan assets.
Question 20
For 2010, Campbell
Soup Company had pension expense of $37million and contributed $266 million to
the pension fund . Prepare Campbell Soup Company’s journal entry to record
pension expense and funding.
Question 21
Lahey Corp has three
defined –benefit pension plans as follows
Pension
Assets
Projrcted Benefit
(At
fair value)
Obligation
Plan X $603,000
$546,500
Plan Y 926,100
728,600
Plan Z 577,200 736,900
How will Lahey report these
multiple plans in its financial statements?
Question 22
For 2012,Sampsell Inc. computed
its annual postretirement expense as $255,860. Sampsell’s contribution to the
plan during 2012 was $199,210. Prepare Sampsell’s 2012 entry to record
postretirement expense ( List multiple debit /credit entries from largest to smallest amount, e.g. 10,5,2
Question 23
Wertz Corporation decided at the
beginning of 2012 to change from the completed- contract method to the
percentage-of-completion method for financial reporting purposes. The company
will continue to use completed-contract method for tax purposes. For years
prior to 2012 ,pre-tax under income under the two methods was as follows:
percentage-of-completion $1,48,600 and completed-contract $63,400. The tax rate is 31%. Prepare Wertz 2012 journal entry
to record the change in accounting
principle. (For multiple debit/credit entries, list amounts from largest to
smallest,e.g. 10,,5,3,2)
Question 24
In 2012, Bailey Corporation
discovered that equipment purchased on January 1, 2010, for $52,500 was
expensed at that time . The equipment should have been depreciated over 5 years, with no salvage value. The
effective rate is 32%. Prepare Hiatt’s 2012 journal entry to correct the error.
(For multiple debit/credit entries, list amounts from largest to smallest,e.g.
10,,5,3,2)
Question 25
At January 1,2012, Beilder
Company reported retained earnings of $2,002,000. In 2012 Beilder discovered
that 2011 depriciation expense was
understated by $355,000. In 2012 net income was $910,660 and dividends declared
were $266,820.The tax rate is 36%. Complete the 2012 retained earnings
statement for Beilder Company. (List
amounts from largest to smallest eg 10,5,3,2
Question 26
Simmon Corporation owns stock of Armstrong, Inc. Prior to 2012 , the investment was accounted
for using the equity method. In early 2012,Simmons sold part of its investment
in Armstrong , and began using the fair market value method. In 2012,
Armstrong earned the net income of
$89,900 and paid dividends of $96,500. Prepare Simmons entries related to
Armstrong’s net income and dividend’s assuming Simmons now own 11% 0f
Armstrong’s stock. (For multiple debit/credit entries, list amounts from
largest to
smallest,e.g. 10,,5,3,2)
Question 27
Manno corporation has the
following information available concerning its postretirement benefit plan for
2012.
Service cost
$54,800
Interest cost 60,270
Actual Return on plan asset 40,740
Compute Manno Corporation’s 2012 postretirement expense
Question 28
Ravonette Corporation issued 310
shares of $13 par value common stock and 150 shares of $48 par value preferred stock for a lum sum of $17,400. The common stock has a market
price of $23 per share and the preferred
stock has a market price of $98 per share. Prepare the journal entry to record the issuance . (List multiple
debit/credit antries from largest to smallest
amount,e.g. 10,5,2.Round answers to zero decimal places , e.g.16,210)
Question 29
Garfield Company purchased , as a
held to maturity investment,$81,700 of the 9%, 12 years bonds of Chester Corporation for $66,518, which
provides an 12% return. Prepare Garfield’s journal entries for (a) the purchase
of the investment (b) the receipt of annual inerest and annual amortization.
Assume effective interest amortization is used( Round answers to zero decimal
places,e.g.25,000. List multiple debit/credit entries from largest to smallest
amount,e.g. 10,5,2)
Question 30
Clydesdale Corporation has a
cumulative temporary difference related to depreciation of $598,300 at December 31,2012 .This difference
will reverse as follows :2013,$47,200;2014, $248,700 and 2015,$302,400.Enacted
tax rates are 34% for 2013 and 2014 and 40% for 2015. Compute the amount
Clydesdale should report as deferred tax liability at December 31, 2012.
