Reference no: EM132455019

Part A -

Q1 - Which characteristic is not possessed by intangible assets?

Physical existence

Short-lived

Result in future benefits

Expensed over current and/or future years

Q2. Which intangible assets are amortized?

	Limited Life	Indefinite Life
a	Yes	Yes
b	Yes	No
c	No	Yes
d	No	No

a

b

c

d

Q3. Which of the following is often reported as an extraordinary item?

Amortization expense

Impairment losses for intangible assets other than goodwill

Impairment losses on goodwill

None of the above

Q4. Which of the following is a current liability?

A long-term debt maturing currently, which is to be paid with cash in a sinking fund

A long-term debt maturing currently, which is to be retired with proceeds from a new debt issue

A long-term debt maturing currently, which is to be converted into common stock

A long-term debt maturing currently, which is to be paid with current assets

Q5. Jeff Beck is a farmer who owns land that borders on the right-of-way of the Northern Railroad. On August 10, 2010, due to the admitted negligence of the railroad, hay on the farm was set on fire and burned. Beck had had a dispute with the railroad for several years concerning the ownership of a small parcel of land. The representative of the railroad has offered to assign any rights the railroad may have in the land to Beck in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Beck appears inclined to accept the railroad's offer. The railroad's 2010 financial statements should include the following related to the incident:

recognition of a loss and creation of a liability for the value of the land.

recognition of a loss only.

creation of a liability only.

disclosure in note form only.

Q6. Which of the following best describes the cash-basis method of accounting for warranty costs?

Expensed based on estimate in year of sale

Expensed when liability is accrued

Expensed when warranty claims are certain

Expensed when incurred

Q7. The term used for bonds that are unsecured regarding principal is

junk bonds.

debenture bonds.

in-debenture bonds.

callable bonds.

Q8. On November 1, Year 1, Dixon Corporation issued $800,000 of its 10-year, 8% term bonds dated October 1, Year 1. The bonds were sold to yield 10%, with total proceeds of $700,000 plus accrued interest. Interest is paid every April 1 and October 1. What amount should Dixon report for interest payable in its December 31, Year 1 balance sheet?

$17,500

$16,000

$11,667

$10,667

Q9. A primary source of stockholders' equity is

income retained by the corporation.

appropriated retained earnings.

contributions by stockholders.

both income retained by the corporation and contributions by stockholders.

Q10. Which of the following statements about property dividends is not true?

A property dividend is usually in the form of securities of other companies.

A property dividend is also called a dividend in kind.

The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.

All of the above

Part B -

Q1. Redstone Company spent $190,000 developing a new process, $45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented. How should these costs be accounted for in the year they are incurred?

Q2. Yates Co. began operations on January 2, 2010. It employs 15 people who work 8-hour days. Each employee earns 10 paid vacation days annually. Vacation days may be taken after January 10 of the year following the year in which they are earned. The average hourly wage rate was $24.00 in 2010 and $25.50 in 2011. The average number of vacation days used by each employee in 2011 was nine. Yates Co. accrues the cost of compensated absences at rates of pay in effect when earned. Instructions:

Prepare journal entries to record the transactions related to paid vacation days during 2010 and 2011.

Q3. Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar.)

The December 31, 2010 balance sheet of Wolfe Co. included the following items:

7.5% bonds payable due December 31, 2018 $1,200,000; and

unamortized discount on bonds payable 48,000.

The bonds were issued on December 31, 2008 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization.)

On April 1, 2011, Wolfe retired $240,000 of these bonds at 101 plus accrued interest.

Q4. Parker Corporation has issued 2,000 shares of common stock and 400 shares of preferred stock for a lump sum of $72,000 cash.

Instructions -

(a) Give the entry for the issuance, assuming the par value of the common was $5 and the market value $30, and the par value of the preferred was $40 and the market value $50. (Each valuation is on a per-share basis and there are ready markets for each stock.)

(b) Give the entry for the issuance assuming the same facts as (a) above except the preferred stock has no ready market value, and the common stock has a market value of $25 per share.

Q5. In each of the following independent cases, it is assumed that the corporation has $400,000 of 6% preferred stock and $1,600,000 of common stock outstanding, each having a par value of $10. No dividends have been declared for 2009 and 2010.

(a) As of 12/31/11, it is desired to distribute $250,000 in dividends. How much will the preferred stockholders receive if their stock is cumulative and nonparticipating?

(b) As of 12/31/11, it is desired to distribute $400,000 in dividends. How much will the preferred stockholders receive if their stock is cumulative and participating up to 11% in total?

(c) On 12/31/11, the preferred stockholders received a $120,000 dividend on their stock, which is cumulative and fully participating. How much money was distributed in total for dividends during 2011?

Q6. On January 2, 2011, Mize Co. issued at par $300,000 of 9% convertible bonds. Each $1,000 bond is convertible into 30 shares. No bonds were converted during 2007. Mize had 50,000 shares of common stock outstanding during 2011. Mize's 2011 net income was $160,000 and the income tax rate was 30%. What would Mize's diluted earnings per share for 2011 be (rounded to the nearest penny)? Please show all computations.

Q7. Agee Corp. acquired a 25% interest in Trent Co. on January 1, 2010, for $500,000. At that time, Trent had 1,000,000 shares of its $1 par common stock issued and outstanding. During 2010, Trent paid cash dividends of $160,000 and thereafter declared and issued a 5% common stock dividend when the market value was $2 per share. Trent's net income for 2010 was $360,000. What is the balance in Agee's investment account at the end of 2010?