The Model Business Corporation Act:
a. Uses the words “common” and “preferred” in describing distinguishing
characteristics of stock.
b. Defines legal capital as the amount of net assets not available for distribution to
shareholders.
c. Provides guidance for choosing an appropriate par value for new issues of stock.
d. Has affected the laws of most states.
The conceptual framework’s qualitative characteristic of faithful representation
includes:
a. Predictive value.
b. Neutrality.
c. Confirmatory value.
d. Timeliness.
The legal life of a patent is:
a. 40 years.
b. 20 years.
c. Life of the inventor plus 50 years.
d. Indefinite.
An important argument in support of historical cost information is:
a. Relevance.
b. Predictive quality for future cash flows.
c. Materiality.
d. Verifiability.
Permanent accounts would not include:
a. Interest expense.
b. Salaries and wages payable.
c. Prepaid rent.
d. Deferred revenues.
Kline Company refinanced current debt as long-term debt on January 5, 2017. Kline’s
fiscal year ended on December 31, 2016, and its financial statements will be issued
sometime in early March 2017. Under IFRS, how would Kline classify the debt on its
December 31, 2016, balance sheet?
a. In the “mezzanine” between current and noncurrent liabilities.
b. Kline would not classify the debt as current or noncurrent, but rather would write a
disclosure note explaining the circumstances.
c. As a noncurrent liability.
d. As a current liability.
Beresford Inc. purchased several investment securities during 2015, its first year of
operations. The following information pertains to these securities. The fluctuations in
their fair values are not considered permanent.
What total unrealized holding gain would Beresford report in its 2016 income statement
relative to its investment securities?
a. $55,900.
b. $36,000.
c. $80,900.
d. $48,200.
Carolina Mills purchased $270,000 in supplies this year. The supplies account increased
by $10,000 during the year to an ending balance of $66,000. What was supplies
expense for Carolina Mills during the year?
a. $300,000.
b. $280,000.
c. $260,000.
d. $240,000.
() Prepare the journal entries to record (a) interest for each of the three years and (b)
receipt of payment of the note at maturity.
Current assets include cash and all other assets expected to become cash or be
consumed:
a. Within one year.
b. Within one operating cycle.
c. Within one year or one operating cycle, whichever is shorter.
d. Within one year or one operating cycle, whichever is longer.
On March 31, 2016, M. Belotti purchased the right to remove gravel from an old rock
quarry. The gravel is to be sold as roadbed for highway construction. The cost of the
quarry rights was $164,000, with estimated salable rock of 20,000 tons. During 2016,
Belotti loaded and sold 4,000 tons of rock and estimated that 16,000 tons remained at
December 31, 2016. At January 1, 2017, Belotti estimated that 20,000 tons still
remained. During 2017, Belotti loaded and sold 8,000 tons. Belotti would record
depletion in 2017 of:
a. $54,667.
b. $65,600.
c. $52,480.
d. $55,760.
A company is effectively leveraging when:
a. The return on assets exceeds the return on shareholders’ equity.
b. The return on shareholders’ equity exceeds the return on assets.
c. The return on shareholders’ equity is increasing.
d. The return on assets is increasing.
Lender Company provides postretirement health care benefits to employees who
provide at least 10 years of service and reach the age of 65 while in service. On January
1 of the current calendar year, the following plan-related data were available.
On January 1 of the current year, Lender amends the plan to provide dental benefits.
The actuary determines that the cost of making the amendment increases the APBO by
$20,000,000. Management chooses to amortize this amount on a straight-line basis. The
service cost is $40,000,000. The appropriate interest rate is 10%.
Required:
Calculate the postretirement benefit expense for the current year.
The following is an incomplete pension spreadsheet for the current year for Sparky
Corporation.
Required:
1) Complete the pension spreadsheet.
2) Prepare the journal entries to record pension expense and funding of plan assets for
the year.
3) Prepare the journal entry/ies to record any gains or losses for the year.
On September 15, 2016, the Scottie Company board of directors declared a 10% stock
dividend on common shares. The shares are to be distributed on October 10, 2016, to
shareholders of record on October 1, 2016. The market price per share on the date of
declaration was $24 while the market price on the date of distribution was $26. The
common stock has a par value of $5 per share and there were 1,000,000 shares
outstanding prior to the declaration of the stock dividend.
Required:
Prepare any necessary journal entries to record the above transactions.
Listed below are 10 terms followed by a list of phrases that describe or characterize the
terms. Match each phrase with the number for the correct term.
During 2016, Largent Enterprises purchased stock as follows:
May 17, Purchased 1,000 shares of Nugent common stock for $80 per share.
July 12, Purchased 400 shares of Alfredo common stock at $60 per share, plus a $600
brokerage commission.
Largent accounts for these investments as securities available for sale. At December 31,
2016, the market values of the securities were as follows:
Required:
1) Prepare the journal entries to record the acquisition of the two investments.
2) Prepare any necessary adjusting entries assuming the stocks are both classified as
available for sale securities.
•
On January 1, 2016, Morrow Inc. purchased a spooler at a cost of $40,000. The
equipment is expected to last eight years and have a residual value of $4,000. During its
eight-year life, the equipment is expected to produce 250,000 units of product. In 2016
and 2017, 42,000 and 76,000 units respectively were produced. Required:
Compute depreciation for 2016 and 2017 and the book value of the spooler at
December 31, 2016 and 2017, assuming the units-of-production is used.
In its 2016 annual report to shareholders, Kirby Inc. included the following disclosure
regarding its available for sale investments in securities:
Required:
In 2015, Kirby made two adjustments to its available for sale investments.
Required:
Briefly explain the adjustments and why they occurred.
Weldon Animal Feeds has developed the following data for lower of cost and net
realizable valuation for its products (in thousands):
The costs to sell are 20% of selling price. Required: Determine the reported inventory
value assuming the lower of cost and net realizable value rule is applied to classes of
feeds.
Crystal Company has an unfunded retiree health care plan. Each of the company’s four
employees has been with the organization since its inception at the beginning of 2015.
As of the end of 2016, the actuary estimates the total net cost of providing benefits to
employees during their retirement years to have a present value of $196,000. Each of
the employees will become fully eligible for benefits after 28 more years of service, but
aren’t expected to retire for 30 more years. The interest rate is 8%.
Required:
1) What is the expected postretirement benefit obligation at the end of 2016?
2) What is the accumulated postretirement benefit obligation at the end of 2016?
3) What is the expected postretirement benefit obligation at the end of 2017?
4) What is the accumulated postretirement benefit obligation at the end of 2017?
Mann Inc. offers a restricted stock award plan to its vice presidents. On January 1,
2016, the corporation granted 10 million of its $5 par common shares, subject to
forfeiture if employment is terminated within two years. The common shares have a
market value of $10 per share on the date the award is granted.
Required:
1) Assume that no shares are forfeited. Determine the total compensation cost
pertaining to the restricted shares.
2) Prepare the appropriate journal entries related to the restricted stock through
December 31, 2017.