Solved by verified expert :QUESTION 1
Which of the following is not an equity security?
a. Common stock
b.
Warrants
c. Call options
d. Redeemable preferred stock with a mandatory redemption
period
QUESTION 2
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. N’s accounting year ends on December 31. N’s
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?
a.
$35,000
b. $40,000
c. $44,000
d. $45,000
QUESTION 3
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
a. $44,000
$0
b. $36,000
$8,000
c. $32,000
$12,000
d. $24,000
$20,000
QUESTION 4
A liability for a cash dividend exists at
the
a. end of each year
b. date of declaration
c. date of record
d. date of payment
QUESTION 5
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?
a. $360,000
b. $365,000
c.
$375,000
d. $380,000
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.
William’s common stock is currently selling for $45 per share.
William Corp. should record the building
at
a.
$10,000
b. $440,000
c. $450,000
d. $500,000
QUESTION 7
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?
a. $40,000
b.
$60,000
c.
$120,000
d. $160,000
QUESTION 8
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
a. debit to Deferred Tax Liability of
$12,000
b. debit to Deferred Tax Liability of $4,000
c. credit to Deferred Tax Asset of
$4,000
d. credit to Deferred Tax Liability of $12,000
QUESTION 9
Which of the following has no effect on comprehensive
income?
a. Unrealized gains and losses on held-to-maturity
investments
b. Unrealized gains and losses on available-for-sale
investments
c. Unrealized gains and losses on trading
securities
d. Realized gains and losses on available-for-sale securities
that were held in previous periods
QUESTION 10
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?
a.
$48,000
b. $120,000
c. $192,000
d. $240,000
QUESTION 11
Information regarding Silly Co.’s portfolio of
available-for-sale securities is as follows:
a. Aggregate cost as of 12/31/05 $170,000
b. Unrealized gains as of 12/31/05 4,000
c. Unrealized losses as of 12/31/05 26,000
d. 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,â€
what amount should Silly report on its December 31, 2005, balance
sheet as an unrealized holding loss?
a.
$26,000
b. $22,000
c.
$20,500
d. $0
QUESTION 12
Treasury stock is a(n)
a. asset account
b. contra-asset account
c. equity
account
d. contra-equity account
QUESTION 13
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
a. $335,000
b. $735,000
c. $2,135,000.
d. $2,555,000
QUESTION 14
Interest received from available-for-sale debt securities should
be reported
as
a. an unrealized holding
gain—income
b. an unrealized holding gain—equity
c. other revenue on the income statement
d. a reclassification adjustment on the statement of
comprehensive income
QUESTION 15
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
a. $375,000
$175,000
b. $375,000
$225,000
c. $500,000
$50,000
d. $600,000
$0
QUESTION 16
If a company reissued at $20 per share 100 shares of treasury
stock that it had previously acquired for $28 per share and there
wasn’t any Paid-in Capital from Treasury Stock, it would debit
a. Loss on Sale of Treasury Stock for $800
b. Paid-in Capital from Common Stock for $800
c. Retained Earnings for $800
d. Treasury Stock for $800
QUESTION 17
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?
a. 400,000
b.
325,000
c.
300,000
d. 225,000
QUESTION 18
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?
a.
$200,000
b.
$140,000
c.
$60,000
d. $0
QUESTION 19
Rent income received in advance that is included for tax
purposes when received, but recorded for book purposes when earned
results in
a. expense items and deductions being taken for tax purposes
before book
purposes
b. expense items and deductions being recorded for book purposes
before tax purposes
c. purposes income being included for tax purposes before
book
d. income being recorded for book purposes before tax
purposes.
QUESTION 20
Debt securities that are classified as available-for-sale
securities are reported on the balance sheet at
a. fair value
b. historical cost
c. amortized cost
d. lower of amortized cost or fair value
