Restrictions on retained earnings must be disclosed in the body of the balance sheet.
A net pension asset is the excess of the projected benefit obligation over the plan assets.
A bargain purchase option is defined as the option of purchasing leased property at a
price that is equal to the expected fair value of a leased asset.
Purchase returns and purchase discounts are ignored when computing cost-to-retail
ratios for the retail method.
Liquidity refers to the riskiness of a company with regard to the amount of liabilities in
its capital structure.
The compensation of top executives is disclosed in the proxy statement.
When the right of return exists, revenue can be recognized at the point of sale if the
seller can make reliable estimates of future returns.
When one enters a $50,000 credit entry to the Land account in a spreadsheet for the
statement of cash flows, it represents a negative change in that account and probably is
due to selling such assets.
If a licensee benefits from the seller’s activity over the license period with respect to the
licensed intellectual property, revenue should be recognized over time.
Losses on reduction to NRV may be charged to either cost of goods sold or to a line
item among operating expenses.
Discounts on notes receivable are recognized as interest earned over the term of the
related note.
Which of the following describes defined benefit pension plans?
a. The investment risk is borne by the employee.
b. The plans are simple and easy to construct.
c. The investment risk is borne by the employer.
d. Retirement benefits depend on the individual’s account balance.
Which of the following indicates the margin of safety provided to creditors?
a. Rate of return on shareholders’ equity.
b. Times interest earned ratio.
c. Gross margin.
d. Debt to equity ratio.
Which of the following types of subsequent expenditures normally is capitalized?
a. Additions.
b. Improvements.
c. Rearrangements.
d. All of these answer choices are normally capitalized.
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Refer to the following lease amortization schedule. The five payments are made
annually starting with the inception of the lease. A $2,000 bargain purchase option is
exercisable at the end of the five-year lease. The asset has an expected economic life of
eight years.
What would be the amount of interest expense recorded with payment 5?
a. $2,000.
b. $ 893.
c. $7,107.
d. $1,107.
When selling property, plant, and equipment for cash:
a. The seller recognizes a gain or loss for the difference between the cash received and
the fair value of the asset sold.
b. The seller recognizes a gain or loss for the difference between the cash received and
the book value of the asset sold.
c. The seller recognizes losses, but not gains.
d. None of these answer choices are correct.
Bowers Corporation reported the following ($ in 000s) for the year:
Sales on account were $1,900 for the year. How much cash was collected from
customers on account?
a. $1,627.
b. $1,642.
c. $1,638.
d. $2,142.
At January 1, 2016, ICN, Inc., was indebted to First Bank under a $480,000, 10%
unsecured note. The note was signed January 1, 2012, and was due December 31, 2017.
Annual interest was last paid on December 31, 2014. ICN was experiencing severe
financial difficulties and negotiated a restructuring of the terms of the debt agreement.
First Bank agreed to reduce last year’s interest and the remaining two years’ interest
payments to $23,110 each and delay all payments until December 31, 2017, the
maturity date. Required:
Prepare the journal entries by ICN, Inc., necessitated by the restructuring of the debt at
(A) January 1, 2016, (B) December 31, 2016, and (C) December 31, 2017.
Yellow Company is a calendar-year firm with operations in several countries. At
January 1, 2016, the company had issued 40,000 executive stock options permitting
executives to buy 40,000 shares of stock for $30. The vesting schedule is 20% the first
year, 30% the second year, and 50% the third year (graded-vesting). The fair value of
the options is estimated as follows:
Assuming Yellow prepares its financial statements in accordance with International
Financial Reporting Standards (IFRS), what is the compensation expense related to the
options to be recorded in 2017?
a. $ 40,000.
b. $ 60,000.
c. $ 95,000.
d. $130,000.
The following partial balance sheet ($ in thousands) for Paisano Seafood Inc. is shown
below.
The current ratio is (rounded):
a. 1.98.
b. 1.58.
c. 1.17.
d. 0.66.
On January 2, 2016, Tobias Company began using straight-line depreciation for a
certain class of assets. In the past, the company had used double-declining-balance
depreciation for these assets. As of January 2, 2016, the amount of the change in
accumulated depreciation is $40,000. The appropriate tax rate is 40%. The separately
reported change in 2016 earnings is:
a. An increase of $40,000.
b. A decrease of $40,000.
c. An increase of $24,000.
d. None of these answer choices is correct.
The trial balance of Rollins Inc. included the following accounts as of December 31,
2016:
Rollins had 100,000 shares of stock outstanding throughout the year. Income tax
expense has not yet been accrued. The effective tax rate is 40%.
Required: Prepare a 2016 multiple-step income statement for Rollins Inc. with earnings
per share disclosure.
Careful Consulting Company has an unfunded postretirement benefit plan. On
December 31, 2016, the following data were available concerning changes in the plan’s
accumulated postretirement benefit obligation with respect to one of Careful’s
employees:
Required:
1) Over how many years is the expected postretirement benefit obligation being
expensed?
2) What is the expected postretirement benefit obligation at the end of 2016?
3) When was the employee hired?
4) What is the expected postretirement benefit obligation at the beginning of 2016?
The following information is taken from the accounting records of Rapid Runner Inc.
for the year 2016. Missing information has been left blank. Required: Compute the
missing amounts.
What was the average cost per share of the treasury stock purchased by Composition
during 2015 and 2016, respectively?
Bencorp issues a $90,000, 6-month, noninterest-bearing note that the bank discounted
at a 10% discount rate.
Required:
1> Prepare the appropriate journal entry to record the issuance of the note.
2> Determine the effective interest rate.
Listed below are five terms followed by a list of phrases that describe or characterize
each of the terms. Match each phrase with the number for the correct term.