When preferred stock carries a redemption privilege, the shareholders may:
a. Purchase new shares as they become available.
b. Exchange their preferred shares for common shares.
c. Surrender the preferred shares for a specified amount of cash.
d. Purchase treasury shares ahead of common shareholders.
Excerpts from Dowling Company’s December 31, 2016 and 2015, financial statements
and key ratios are presented below (all numbers are in millions):
Dowling’s return on equity for 2016 is (rounded):
a. 22%.
b. 24.3%.
c. 17.4%.
d. 9%.
When using the gross profit method to estimate ending inventory, it is not necessary to
know:
a. Beginning inventory.
b. Net purchases.
c. Cost of goods sold.
d. Net sales.
Elements of financial statements do not include:
a. Monetary unit.
b. Investments by owners.
c. Comprehensive income.
d. Losses.
The EPBO for a particular employee on January 1, 2016, was $30,000. The APBO at
the beginning of the year was $6,000. The appropriate discount rate for this
postretirement plan is 5%. The employee is expected to serve the company for a total of
25 years with 5 of those years already served as of January 1, 2016. What is the APBO
at December 31, 2016?
a. $6,300.
b. $7,200.
c. $7,500.
d. $7,560.
Cash equivalents generally would not include short-term investments in:
a. Commercial paper.
b. Certificates of deposit.
c. Held-to-maturity securities.
d. Money market funds.
Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2016.
In October 2016, Rick Co.”s Board of Directors declared and distributed a 1% common
stock dividend when the market value of its common stock was $60 per share. In
recording this transaction, Rick would:
a. Debit retained earnings for $18 million.
b. Credit paid-in capital’”-excess of par for $18 million.
c. Credit common stock for $18 million.
d. None of these answer choices correct.
Which of the following is reported as a deduction from net income when using the
indirect method to determine net cash flows from operating activities?
a. Depreciation expense.
b. Amortization of a patent.
c. Amortization of premium on bonds payable.
d. Dividends declared.
Which of the following is not something that revenue recognition disclosures typically
should help investors to understand?
a. Timing of revenue and cash flows
b. Outstanding performance obligations
c. Significant judgments used to estimate transaction prices
d. Significant fluctuations in long-term debt necessary to increase revenue in the future
An amortization schedule for bonds issued at a premium:
a. Summarizes the amortization of the premium, a contra-asset account with a credit
balance.
b. Is reported in the balance sheet.
c. Is a schedule that reflects the changes in the debt over its term to maturity.
d. All of these answer choices are correct.
Which of the following differences between financial accounting and tax accounting
ordinarily creates a deferred tax liability?
a. Interest income on municipal bonds.
b. Proceeds from life insurance received due to death of an executive.
c. Prepaid utilities.
d. None of these answer choices are correct.
Kerry, Inc., exchanged land and cash of $8,000 for equipment. The land had a book
value of $55,000 and a fair value of $60,000.
Required:
Prepare the journal entry to record the exchange. Assume the exchange has commercial
substance.
What are the possible components of pension expense? Which of these elements would
exist in every defined benefit plan?
Listed below are 10 terms, followed by a list of phrases that describe or characterize
the terms. Match each phrase with the number for the correct term.
The following information, based on the 12/31/16 Annual Report to Shareholders of
Krafty Foods ($ in millions):
Based on the information presented above, prepare the 2016 Income Statement for
Krafty Foods.
Name and briefly describe the three categories of accounting changes.
Instructions:
The following answers point out the key phrases that should appear in students’
answers. They are not intended to be examples of complete student responses. It might
be helpful to provide detailed instructions to students on how brief or in-depth you want
their answers to be.
The accounting records of Unlucky Company provided the data below.
Required:
Prepare a reconciliation of net income to net cash flows from operating activities.
Prepare a time diagram for the future value of an ordinary annuity with three payments
of $300. Be sure to indicate the periods in which interest is added.
In its 2013 annual report to shareholders, Boston Beer Company, Inc. included the
following in a disclosure note: E. Property, Plant and Equipment Property, plant and
equipment for the years ended December 28, 2013, and December 29, 2012, consisted
of the following ($ in thousands):
The Company recorded depreciation related to these assets of $23,565 thousand in the
2013 fiscal year. Also, Boston Beer reported the following information in the annual
report ($ in thousands):
Use a T- account to show the balances and changes during 2013 in Boston Beer’s:
Property, Plant and Equipment account and its Accumulated depreciation’”Property,
Plant & Equipment account.
Cornhusker Can Co. uses the conventional retail method to estimate ending inventories.
The following data has been summarized for year ended December 31, 2016:
Required:
Estimate the cost of ending inventory applying the conventional retail method. Assume
that sales are recorded net of employee discounts.
The note about debt included in the financial statements of Healdsburg Company for
the year ended December 31, 2015 disclosed the following: Debt. The following table
summarizes the long-term debt of the Company at December 31, 2015. All of the notes
were issued at their face (maturity) value.
Required: Assuming that the notes pay interest annually and mature on December 31
of the respective years, compute the following: Suppose that Healdsburg wants to buy
back the 7.75% notes on December 31, 2016, (i.e., five years early) when the going
interest rate is 6%, thereby retiring the $345,154,000 in debt. How much would
Healdsburg have to pay for the notes (principal only)?