Compared to the ABO, the PBO usually is:
a. Larger.
b. More reliable.
c. Less relevant.
d. More material.
The compensation associated with restricted stock units (RSUs) under a stock award
plan is:
A. The book value of an unrestricted share of the same stock times the number of
shares represented by the RSUs.
B. Allocated to expense over the service period which usually is the vesting period.
C. The estimated fair value of a share of similar stock times the number of shares
represented by the RSUs.
D. The book value of a share of similar stock times the number of shares represented
by the RSUs.
The assumption that in the absence of contrary information a business entity will
continue indefinitely is the:
a. Periodicity assumption.
b. Entity assumption.
c. Going concern assumption.
d. Historical cost assumption.
Cantor Corporation acquired a manufacturing facility on four acres of land for a
lump-sum price of $8,000,000. The building included used but functional equipment.
According to independent appraisals, the fair values were $4,500,000, $3,000,000, and
$2,500,000 for the building, land, and equipment, respectively. The initial values of the
building, land, and equipment would be:
a. $4,500,000 $3,000,000 $2,500,000
b. $4,500,000 $3,000,000 $ 500,000
c. $3,600,000 $2,400,000 $2,000,000
d. None of these answer choices are correct.
Sox Corporation purchased a 40% interest in Hack Corporation for $1,500,000 on
January 1, 2016. On November 1, 2016, Hack declared and paid $1 million in
dividends. On December 31, Hack reported a net loss of $6 million for the year. What
amount of loss should Sox report on its income statement for 2016 relative to its
investment in Hack?
a. $1,100,000.
b. $2,400,000.
c. $1,500,000.
d. $1,600,000.
Reporting comprehensive income according to International Financial Reporting
Standards can be accomplished by each of the following methods except:
a. In the statement of shareholders’ equity.
b. A combined statement of income and comprehensive income.
c. In two separate statements.
d. The entity may choose either a combined statement of income and comprehensive
income or two separate statements.
During the year, cash increased by $300 million. Investing and financing activities
created positive cash flow totaling $500 million. What were net cash flows from
operating activities in the statement of cash flows?
a. Inflow of $300 million.
b. Outflow of $200 million.
c. Outflow of $300 million.
d. Inflow of $600 million.
On June 30, 2016, Gunderson Electronics issued 8% stated rate bonds with a face
amount of $300 million. The bonds mature on June 30, 2036 (20 years). The market
rate of interest for similar bond issues was 10% (5% semiannual rate). Interest is paid
semiannually (4%) on June 30 and December 31, beginning on December 31, 2016.
Required:
a. Determine the price of the bonds on June 30, 2016.
b. Calculate the interest expense Gunderson reports in 2016 for these bonds.
Leasehold improvements usually are classified in a balance sheet as:
a. Property, plant, and equipment.
b. Other long-term assets.
c. Investments.
d. Expenses.
Nichols Enterprises has an investment in 25,000 shares of Elliott Electronics that
Nichols accounts for as a security available for sale. Elliott shares are publicly traded on
the New York Stock Exchange, and The Wall Street Journal quotes a price for those
shares of $10 a share, but Nichols believes the market has not appreciated the full value
of the Elliott shares and that a more accurate price is $12 a share. Nichols should carry
the Elliott investment on its balance sheet at:
a. $300,000.
b. $250,000.
c. Either $250,000 or $300,000, as either are defensible valuations.
d. $275,000, the midpoint of Nichols’ range of reasonably likely valuations of Elliott.
Rick’s Pawn Shop issued 11% bonds, dated January 1, with a face amount of $400,000
on January 1, 2017. The bonds sold for $370,000. For bonds of similar risk and
maturity the market yield was 12%. Interest is paid semiannually on June 30 and
December 31. Rick’s determines interest at the effective rate and elected the option to
report these bonds at their fair value. On December 31, 2017, the fair value of the bonds
was $365,000, with $2,000 of the change due to a change in general interest rates.
Rick’s statement of comprehensive income will include:
a. An unrealized gain from change in the fair value of debt of $5,412.
b. An unrealized loss from change in the fair value of debt of $3,412.
c. An unrealized gain from change in the fair value of debt of $2,000.
d. An unrealized gain from change in the fair value of debt of $3,412.
ï¶
Distinguish between:
(a) Convertible and callable bonds.
(b) Serial and term bonds.
False Value Hardware began 2016 with a credit balance of $32,000 in the allowance for
sales returns account. Sales and cash collections from customers during the year were
$650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be
returned. During 2016, customers returned merchandise for credit of $28,000 to their
accounts.
What is the balance in the allowance for sales returns account at the end of 2016?
a. $11,000.
b. $39,000.
c. $43,000.
d. $21,000.
Which of the following investment securities held by Zoogle Inc. are not reported at
fair value in its balance sheet?
a. Common stock held as available for sale securities.
b. Debt securities held to maturity.
c. Preferred stock held as trading securities.
d. All of these answer choices are reported at fair value.
On January 1, 2016, Rupar Retailers purchased $100,000 of Anand Company bonds at a
discount of $5,000. The Anand bonds pay 6% interest but were purchased when the
market interest rate was 7% for bonds of similar risk and maturity. The bonds pay
interest semiannually on January 1 and July 1 of each year. Rupar accounts for the
bonds as a held-to-maturity investment, and uses the effective interest method. In
Rupar’s December 31, 2016 journal entry to record the second period of interest, Rupar
would record a credit to interest revenue of:
a. $3,336.
b. $3,325.
c. $3,000.
d. $3,500.
In the operating activities section of the statement of cash flows, we start with net
income:
a. In the direct method.
b. In the indirect method.
c. In both the direct and the indirect methods.
d. In neither the direct nor the indirect methods.
Present and future value tables of 1 at 9% are presented below.
Ajax Company purchased a five-year certificate of deposit for its building fund in the
amount of $220,000. How much should the certificate of deposit be worth at the end of
five years if interest is compounded at an annual rate of 9%?
a. $855,723.
b. $142,985.
c. $319,000.
d. $338,496.
Interest may be capitalized:
a. On routinely manufactured goods as well as self-constructed assets.
b. On self-constructed assets from the date an entity formally adopts a plan to build a
discrete project.
c. Whether or not there is specific borrowing for the construction.
d. Whether or not there are actual interest costs incurred.
For classification purposes, a valuation allowance:
a. Is allocated proportionately between deferred tax assets and deferred tax liabilities.
b. Is allocated proportionately between the current and noncurrent portions of the
deferred tax asset.
c. Is allocated proportionately between the current and noncurrent portions of the
deferred tax liability.
d. Is added to the deferred tax asset.
Discount-Mart issued ten thousand $1,000 bonds on January 1, 2016. The bonds have a
10-year term and pay interest semiannually. This is the partial bond amortization
schedule for the bonds.
What is the stated annual rate of interest on the bonds?
a. 3%.
b. 4%.
c. 6%.
d. 8%.
In a recent press release, Foot Locker Inc. reported that its fiscal first-quarter net
income fell 46% due to losses related to discontinued operations, but earnings from
continuing operations jumped 19% amid a modest increase in sales. The specialty
athletic retailer said net income was $20 million for the quarter ended May 4, compared
with net income of $37 million a year earlier. The latest results included a loss of $18
million from discontinued operations. Last year, the company had earnings of $5
million, or four cents a share, from discontinued operations. Foot Locker said earnings
from continuing operations were $38 million, compared with $32 million a year earlier.
Discuss how Foot Locker’s press release relates to its earnings quality.
Identify or define the following terms: periodicity, monetary unit.
From time to time, debt and equity securities must be reclassified when conditions and
circumstances surrounding the investment change.
Required:
Describe the general accounting procedures for reclassifying securities from one
category to another–held to maturity, available for sale, or trading.
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.
() Prepare the appropriate journal entry, if any, to record the accounting change.
When a company’s income statement includes discontinued operations, the company
should report per share information on:
The following table presents a summary of ratio analysis for McDonald’s and averages
for their peer group:
Using the information provided above, use the DuPont framework to briefly summarize
the operating performance of McDonald’s relative to its benchmark competitors.
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.
Cracker Corporation began a special promotion in July 2016 in an attempt to increase
sales. A coupon was included in various print advertisements. Customers could send in
five coupons for a free prize. Each prize cost Cracker Corporation $2.00. Cracker’s
management estimated that 70% of the coupons would be redeemed. For the six months
ended December 31, 2016, the following information is available:
Required:
Record all necessary journal entries for the premium offer for 2016.
An increase in the assumed rate of salary progression increases the projected benefit
obligation. The higher the salary levels are at retirement, the higher the PBO. When the
obligation increases, it is reported as a loss.