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kalpan acc302 Final Exam unit 10

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1. Question: When common stock is issued at an
amount greater than par value, the difference between the par value and the
proceeds from the sale is recorded by
crediting
the common stock account
debiting an additional paid-in
capital account
crediting the retained earnings
account
crediting an additional paid-in
capital account

2. Question: On January 1, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, Marvel, Inc.,
grants a compensatory stock option plan to 10 of its executives. The plan
allows each executive to buy 1,000 shares of its $1 par common stock at $30 a
share after a three-year service period. The value of each option is estimated
to be $8. The company estimates it will have an annual 2% employee turnover
rate during the service period. What is the compensation expense for the year
ended December 31, 2011?
$0
$25,098 $50,197
$75,295

Points Received: 4 of 4
Comments:
3. Question: Battleground, Inc. had never had a
treasury stock transaction prior to 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer. It experienced the following treasury
stock transactions during 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer:
4/1/2010 – Essay Writing Service: Write My Essay by Top-Notch Writer: Reacquired
1,000 shares of its own $5 par common stock, originally sold at $12 a share,
for $10 a share. This was the first time that Battleground had reacquired its
own stock.
4/8/2010 – Essay Writing Service: Write My Essay by Top-Notch Writer: Reissued
400 shares at $8 a share.
5/2/2010 – Essay Writing Service: Write My Essay by Top-Notch Writer: Reissued
500 shares at $13 a share.
5/10/2010 – Essay Writing Service: Write My Essay by Top-Notch Writer: Retired
the remaining 100 shares.
Assuming the cost method is used, the entry to record the
reissuance of 400 shares on 4/8/2010 – Essay Writing Service: Write My Essay by Top-Notch Writer would include a
credit
to Treasury Stock for $3,200 debit
to Additional Paid-in Capital from Treasury Stock for $800
debit to Retained Earnings for
$800
credit to Additional Paid-in
Capital on Common Stock for $800

4. Question: When calculating earnings per share,
dividends declared on noncumulative preferred stock, but not paid, should be
added
to net income in the earnings per share numerator
excluded from the earnings per
share numerator
deducted from net income in the
earnings per share numerator
deferred from the earnings per
share numerator until paid

:
5. Question: Which of the following items would
not be included in a basic earnings per share calculation?
undeclared
dividends on noncumulative preferred stock
declared dividends on
noncumulative preferred stock
undeclared dividends on
cumulative preferred stock
declared dividends on cumulative
preferred stock

6. Question: On January 1, a corporation had
10,380 shares of common stock outstanding. On August 1, it sold an additional
6,000 shares. During the year, dividends of $4,800 and $56,000 were declared
and paid on the common and preferred stock, respectively. Net income for the
year was $240,000. The basic earnings per share for the year was
$10.56
$11.23
$14.29
$18.63

7. Question: Smock Corporation had 30,000 shares
of common stock outstanding during the year. In addition, there were
compensatory stock options to purchase 3,000 shares of common stock at $20 a
share outstanding the entire year. The average market price for the common
stock during the year was $36 a share. The unrecognized compensation cost (net
of tax) relating to these options was $4 a share. The denominator to compute
the diluted earnings per share is
: 31,000
31,333
31,667
33,000

8. Question: When a company is determining its
dividend policy, the company must adhere to legal requirements. The legal
requirements are determined by the
Financial
Accounting Standards Board (FASB)
state in which the company was
incorporated
Securities and Exchange
Commission (SEC)
Federal Trade Commission (FTC)

9. Question: Under the treasury stock method, the
number of shares of common stock assumed to be reacquired is determined by
using the
ending
market price of the stock
average market price of the stock beginning
market price of the stock
par value of the stock

10. Question: On October 1, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, Black Company
declared a property dividend payable in the form of marketable equity
securities classified as “available for sale” for financial
accounting purposes. The marketable equity securities will be distributed to
the common stockholders on December 1, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer. The investment in equity
securities originally cost Black $410,000 on August 1, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer. The investment’s
fair value on various dates is as follows:

October 1, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer
$430,000
December 1, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer
435,000
December 31,
2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 440,000

The amount credited to Realized Gain on Disposal of
Investments resulting from this dividend transaction should be
$0
$20,000 CORRECT
$25,000
$30,000

11. Question: Accrual accounting is usually
associated with
revenue
recognition in the period of sale
revenue recognition prior to the
period of sale
revenue recognition after the
period of sale
revenue recognition delayed until
a future event occurs

12. Question: Under the completed-contract method
of revenue recognition, the partial billings account is closed out against the
construction
in progress account
construction revenue account
income summary account
construction expense account

13. Question: In 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, Alpha Construction began
work on a contract with a price of $850,000 and estimated costs of $595,000.
Data for each year of the contract are as follows:

2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 2011 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap
Costs incurred during the year $238,000 $319,600 $105,000
Estimated costs to complete 357,000 139,400 -0-
Partial billings 260,000 210,000 380,000
Collections 240,000 200,000 410,000

Under the percentage-of-completion method of revenue
recognition, the balance in Construction in Progress at the end of 2011 would
be
Your Answer:
$557,600 INCORRECT
$659,600

$680,000
CORRECT ANSWER
$782,000

14. Question: In 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, Alpha Construction began
work on a contract with a price of $850,000 and estimated costs of $595,000.
Data for each year of the contract are as follows:
2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 2011 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap
Costs incurred during the year $238,000 $319,600 $105,000
Estimated costs to complete 357,000 139,400 -0-
Partial billings 260,000 210,000 380,000
Collections 240,000 200,000 410,000

Under the percentage-of-completion method of revenue
recognition, the net amount reported for construction in progress inventory at
the end of 2011 would be
$87,600
$189,600

$210,000
$312,000

15. Question: The percentage-of-completion method
does not
Your Answer:
recognize
profit each period during the life of the contract in proportion to the portion
of the contract completed during the period
value the inventory at cost less
any partial billings
give precedence to economic
substance over legal form
value the inventory at the costs
incurred plus the profit recognized to date less any partial billings

16. Question: The Naples Company uses the
percentage-of-completion method and the cost-to-cost method for its long-term
construction contracts. On one such contract, Naples expects total revenues of
$260,000 and total costs of $200,000. During the first year, Naples incurred
costs of $50,000 and billed the customer $30,000 under the contract. At what
net amount should Naples’ Construction in Progress for this contract be
reported at the end of the first year?
$30,000
$35,000
$50,000
$65,000

17. Question: A company may recognize revenue in
full at the time of a sale if
Your Answer:
the
probability of collection is not reasonably assured
there is a very high degree of
uncertainty about the collectibility of the sales price
the collection of the sales price
is improbable
the collectibility of the sales
price is not an issue

18. Question: Which one of the following
statements is not true?
Your Answer:
The
use of the installment method of recognizing revenue is generally unacceptable. When
the installment method of recognizing revenue is in use, operating expenses are
not deferred and recognized in the future.
Deferred gross profit should be
disclosed as a current liability on the balance sheet.
A company may use the installment
method of revenue recognition for a sales transaction that is not an
installment sale.

19. Question: On December 31, 2009, Fort Stockton,
Inc. had no temporary differences that created deferred income taxes. On
January 2, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, a new machine was purchased for $30,000. Straight-line
depreciation over a four-year life (no residual value) was used for financial
accounting. Depreciation expense for tax purposes was $11,000 in 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, $9,000
in 2011, $6,000 in 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap, and $4,000 in 2013. In each year, the income tax rate
was 20% and Fort Stockton had no other items that created differences between pretax
financial income and taxable income. Fort Stockton reported the following
pretax financial income for 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer through 2013:
2010 – Essay Writing Service: Write My Essay by Top-Notch Writer $50,000
2011 40,000
2014: 2024 – Essay Writing Service. Custom Essay Services Cheap 30,000
2013 60,000
The entry to record income taxes on December 31, 2011, would
include a
: debit
to Deferred Tax Liability for $300
credit to Income Taxes Payable
for $8,000
debit to Income Tax Expense for
$7,700
credit to Deferred Tax Liability
for $300

:
20. Question: Which of the following transactions
would typically result in the creation of a deferred tax liability?
Rents
received in advance are taxable when received but are not recognized in pretax
financial income until earned.
Gross profit on installment sales
is recognized currently in pretax financial income but is not taxable for
income tax purposes until cash is received.
Losses recognized in pretax
accounting income from an investment in a subsidiary are accounted for by the
equity method but not deductible for income tax purposes until the investment
is sold.
A contingent liability is
recognized as an expense currently in pretax financial income but not
deductible for income tax purposes until paid.

21. Question: The Clear Lake Corporation reported
the following differences between its taxable income and pretax financial
income for the year ended December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer: $30,000 of additional depreciation
for tax purposes, $40,000 of rent collected in advance (taxable when received),
and $38,000 of tax-exempt municipal interest revenue. Assuming an income tax rate
of 30% for all years and a taxable income of $190,000 for the year ended
December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, income tax expense for 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer would be
$54,000
$65,400
$71,400
$78,400

22. Question: Which of the following statements
regarding current and deferred income taxes is not correct?
: The
amount of income tax expense must be allocated to various components of
comprehensive income.
The income tax obligation is
determined by applying the historical tax rates to the taxable income for the
year.
The valuation allowance account
is subtracted from the deferred tax asset account on the balance sheet.
Rent received in advance that
will be earned within the next 12 months results in the creation of a current
deferred tax asset.

23. Question: All of the following involve a
temporary difference for purposes of income tax allocation except
interest
on municipal bonds
gross profit on installment sales
for tax purposes
MACRS depreciation for tax
purposes and straight-line for accounting purposes

product warranty expenses

24. Question: Boerne Company received rent in
advance of $9,000 on December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, which was taxable when received for
income tax purposes. The company’s effective tax rate was 30%, and this was the
only temporary difference. Which of the following should be reported on the
December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer balance sheet?
$9,000
as a current deferred tax liability
$2,700 as a current deferred tax
liability
$2,700
as a current deferred tax asset
$9,000 as a current deferred tax
asset

25. Question: As of December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, the Austin
Company reported a deferred tax asset of $60,000 related to accrued, unpaid
warranty costs. However, since profits have been declining, Austin decides that
it is more likely than not that $24,000 of the deferred tax asset will not be
realized. The entry to record the valuation allowance would include a
debit
to Income Tax Expense for $60,000
credit to Income Tax Expense for
$24,000
debit to Allowance to Reduce
Deferred Tax Asset to Realizable Value for $24,000
credit to Allowance to Reduce
Deferred Tax Asset to Realizable Value for $24,000

26. Question: Which one of the following
statements regarding operating losses is not true?
The
tax benefit of an operating loss carryback is recognized in the period of loss
as a current receivable on the balance sheet.
Temporary differences and
operating loss carryforwards are accounted for similarly.
The journal entry to recognize an
operating loss carryback would include a credit to Income Tax Benefit from
Operating Loss Carryback.
The tax benefit of an operating
loss carryforward is to be recognized in the period of loss as a current
receivable.

27. Question: At the end of its first year of
operations on December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, the Belton Company reported taxable income of
$100,000 and had a pretax financial loss of $60,000. Differences between
taxable income and pretax financial income included interest revenue received
from municipal obligations of $20,000 and warranty expense accruals of
$180,000. Warranty expenses of $90,000 are expected to be paid in 2011 and
$110,000 in 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap. The enacted income tax rates for 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, 2011, and 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap are
30%, 35%, and 40%, respectively. The journal entry to record income tax expense
on December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, would be
Deferred
Tax Asset 75,500
Income Taxes Payable 30,000
Income Tax Benefits from
Operating Loss Carryforward

45,500

Deferred Tax Asset 30,000
Income Taxes Payable 30,000

Income Tax Expense 30,000
Income Taxes Payable 30,000

Deferred Tax Asset
Income Taxes Payable 105,500
30,000
Income Tax Benefit from

Operating Loss Carryforward 75,500

28. Question: Intraperiod tax allocation would be
appropriate for
an
extraordinary gain
a loss from operations of a
discontinued segment
the cumulative effects of changes
in accounting principles
all of these

29. Question: Income taxes for financial
accounting purposes are apportioned to each of the following items except
extraordinary
gains and losses
discontinued operations INCORRECT
other revenues and expenses CORRECT ANSWER
prior period adjustments

30. Question: Disclosures for vested benefits
are
not required
are related to the projected
benefit obligation
are related to the accumulated
benefit obligation
are related to the plan assets

31. Question: Which of the following is not a
component of the net periodic pension expense to be reported on a company’s
income statement?
interest
cost
unrecognized past service cost service
cost
expected return on plan assets

32. Question: If a lease qualifies as a capital
lease, which of the following combinations of payments would be included?
minimum
periodic rental payments plus executory costs
minimum periodic rental payments
plus the payment required for a bargain purchase option
minimum periodic rental payments
minus any payment required for a guarantee of the residual value
minimum periodic rental payments
minus any payments required for failure to renew or extend the lease

33. Question: Which of the following facts would
require a lessee to classify a lease as a capital lease?
Your Answer:
The
lease term is 85% of the estimated economic life of the leased property.
The present value of the minimum
lease payments is 85% of the fair market value of the leased property to the
lessor, less any investment tax credit accruing to the lessor.
The lease contains a purchase
option.
The lease does not transfer
ownership of the leased property.

34. Question: On January 1, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, Victor Company
signed a lease agreement requiring six annual payments of $60,000, beginning
December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer. The lease qualifies as a capital lease. Victor’s incremental
borrowing rate was 9% and the lessor’s implicit rate, known by Victor, was 10%.
The present value factors of an ordinary annuity of $1 for six periods for
interest rates of 9% and 10% are 4.485919 and 4.355261, respectively. The
interest expense for 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer would be (round answers to the nearest dollar)
$21,003
$22,746
$24,225
$26,133

35. Question: For a sales-type lease, cost of
goods sold is valued by the lessor at
the
recorded cost assigned to the inventory less the present value of the
guaranteed residual value of the leased property accruing to the benefit of the
lessor
the recorded cost assigned to the
inventory less the undiscounted value of the unguaranteed residual value of the
leased property accruing to the benefit of the lessor
the recorded cost assigned to the
inventory less the present value of the unguaranteed residual value of the
leased property accruing to the benefit of the lessor

the recorded cost assigned to the
inventory less the undiscounted value of the guaranteed residual value of the
leased property accruing to the benefit of the lessor

36. Question: In a statement of cash flows, the
payment of a cash dividend on common stock outstanding should be classified as
cash outflows for
operating
activities
investing activities
lending activities
financing activities

37. Question: The Robinson Company reported net
income of $90,000 in 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer.
Additional information follows:

Depreciation expense
$18,000
Loss on sale of equipment
10,000
Gain on sale of land
17,000

Given just this information, what was the Robinson Company’s
net cash provided by operating activities in 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer?
$79,000
$100,000

$101,000

$115,000

38. Question: Which of the following events would
not result in a cash inflow?
sale
of preferred stock
common stock issued as a stock
dividend
reissuance of treasury stock
loss of building destroyed by
fire but partially reimbursed by insurance

39. Question: Which statement is not true?
: Salaries
expense + Decrease in salaries payable = Cash payments to employees
Other revenues + Increase in
unearned revenues – Gains on disposal of assets – Equity investment income =
Other operating cash receipts
Sales revenue – Increase in
accounts receivable = Cash collections from customers
Other expenses + Decrease in
prepaid expenses – Depreciation expense + Losses on disposal of assets – Equity
investment loss = Other operating cash payments

40. Question: Which of the following items would
be deducted from net income to determine net cash provided by operating
activities using the indirect method?
loss
on sale of plant assets and amortization of bond payable discount
amortization of bond payable
premium and gain on sale of equipment
amortization expense and gain on
sale of equipment
decrease in income taxes payable
and amortization of goodwill

41. Question: Bertrand, Inc. prepares a statement
of cash flows. In 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, Bertrand had net income of $45,000. In addition, the
following information is available:

Gain on sale of land $16,000
Decrease in inventories 10,000
Amortization of patents 4,000
Increase in prepaid expenses 3,000

What net cash provided by operating activities should
Bertrand report in 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer?
$46,000
$72,000
$40,000
$50,000

42. Question: When preparing a statement of cash
flows under the indirect method, an increase in ending accounts receivable over
beginning accounts receivable will result in an adjustment to net income in the
operating activities section because
cash
was increased since accounts receivable is a current asset
the accounts receivable increase
was a revenue included in net income, but it was not a source of cash
the net increase in accounts
receivable decreases net sales and represents an assumed use of cash
all changes in noncash accounts
must be disclosed on the cash flow statement

43. Question: The accounting changes identified by
current GAAP include all of the following except
correction
of an error
change in accounting principle
change in accounting estimate
change in reporting entity

44. Question: A change in accounting principle
from one that is not generally accepted to one that is generally accepted
should be treated as
an
error and corrected by prior period adjustment
a change in accounting principle
and the cumulative effect included in net income
a change in accounting principle
and prior period financial statements are restated
a change in accounting principle
and adjustments made prospectively

45. Question: Disclosure of a retrospective
adjustment should include
: why
the new principle is preferable
the
net impact on assets of the retrospective adjustment
the retrospective computation of
earnings per share only for the current period
ending balance in Retained
Earnings before and after the retrospective adjustment
INCORRECT

46. Question: Which of the following statements
does not properly state a basic principle for reporting an accounting change?
: retrospectively
apply a change in accounting principle
prospectively account for a
change in accounting estimate
retrospectively adjust for a
change in reporting entity
retrospectively apply a change in
accounting estimate

47. Question: An item that would not be accounted
for under current GAAP as a change in estimate would be
an
increase in the expected life of a piece of manufacturing equipment
a decrease in the estimated
residual value of a delivery van
a change from FIFO to LIFO for a
small subsidiary
an increase in defective items
for the best selling video game

48. Question: A company changes from capitalizing
and amortizing preproduction costs to recording them as an expense when
incurred, because future benefits associated with those costs have become
doubtful. This accounting change should be recognized as a
change
in accounting estimate
change in accounting principle
change in reporting entity
correction of an error

49. Question: Which of the following statements is
not an example of a correction of an error in previously issued financial
statements?
adopting
the allowance method for bad debts when the direct write-off method had been
used because direct write-off was used for tax purposes

recording depreciation on plant
assets that were not depreciated last year because of a computer problem
adopting straight-line
depreciation for newly acquired assets and continuing to use the
double-declining-balance method for existing assets
CORRECT ANSWER
correcting the ending inventory
amount from last year because inventory in transit was missed

50. Question: During a year-end evaluation of the
financial records of the Gretchen Company for the year ended December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer,
the following was discovered:

• Inventory
on January 1, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, was understated by $6,000.
• Inventory
on December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, was understated by $18,000.
• Rent of
$20,000 collected in advance on December 29, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, was included in income for
2010 – Essay Writing Service: Write My Essay by Top-Notch Writer.
• A
probable, reasonably estimated contingent liability of $30,000 was not recorded
as of December 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer.

Net income for 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer (before any of the above items) was
$100,000. The corrected net income, ignoring income taxes, for 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer should be
Your Answer:
$50,000
$58,000
$62,000
$68,000

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