Reference no: EM132780216

Questions -

Q1) On November 2, year 3, Finsbury, Inc. issued warrants to its stockholders giving them the right to purchase additional $20 par value common shares at a price of $30. The stockholders exercised all warrants on March 1, year 4. The shares had market prices of $33, $35, and $40 on November 2, year 3, December 31, year 3, and March 1, year 4, respectively. What were the effects of the warrants on Finsbury's additional paid-in capital and net income?

A. Additional paid-in capital: Increased in year 4 Net income: No effect

B. Additional paid-in capital: Increased in year 3 Net income: No effect

C. Additional paid-in capital: Increased in year 4 Net income: Decreased in year 3 and year 4

D. Additional paid-in capital: Increased in year 3 Net income: Decreased in year 3 and year 4

Q2) On January 1, year 1, a company grants 5,000 nonqualified stock options to an employee with a strike price of $3 per option and fair value of $8 per option. All of the options vest at the end of five years from the grant date. At the end of year 1, the company's stock price was $10 per share. What amount of annual stock compensation cost should the company report for year 1?

A. $0

B. $3,000

C. $5,000

D. $8,000

Q3) In connection with a stock option plan for the benefit of key employees, Ward Corp. intends to distribute treasury shares when the options are exercised. These shares were bought in year 10 at $42 per share. On January 1, year 11, Ward granted stock options for 10,000 shares at $38 per share as additional compensation for services to be rendered over the next three years. The options are exercisable during a 4-year period beginning January 1, year 14, by grantees still employed by Ward. Market price of Ward's stock was $47 per share at the grant date. No stock options were terminated during year 11. Ward uses the intrinsic method of accounting for stock option plans. In Ward's December 31, year 11, income statement, what amount should be reported as compensation expense pertaining to the options?

A. $90,000

B. $40,000

C. $30,000

D. $0

Q4) In a compensatory stock option plan for which the grant, measurement, and exercise date are all different, the stock options outstanding account should be reduced at the

A. Date of grant.

B. Measurement date.

C. Beginning of the service period.

D. Exercise date.

Q5) Each of the following is likely to be included in other comprehensive income, except

A. Defined benefit pension plan prior service cost adjustment.

B. Foreign currency transaction gain.

C. Unrealized holding gains and losses of available-for-sale debt securities.

D. Net gain or loss from derivative cash flow hedges

Q6) Mag, Inc.'s December 31, Year 1, unadjusted current assets and stockholders' equity sections are as follows:

Current Assets:

Cash $15,000

Investments in debt securities (including $75,000 of Mag, Inc. common stock) 100,000

Trade accounts receivable 85,000

Inventories 37,000

Total $237,000

Stockholders' Equity:

Common stock $556,000

Retained earnings (deficit) (56,000)

Total $500,000

Mag's stockholders' equity at December 31, Year 1, should be

A. $425,000

B. $481,000

C. $500,000

D. $556,000

Q7) Trey Co.'s trial balance has the following selected accounts:

Accounts receivable, net. $1,650,000

Prepaid taxes 300,000

Accounts payable 120,000

Common stock 500,000

Retained earnings 630,000

Revenues 3,600,000

Expenses 2,600,000

Trey has not yet recorded income tax expense. There were no differences between financial statement income and tax income, and Trey's tax rate is 30%. What amount should Trey report as total retained earnings in its balance sheet?

A. $1,030,000

B. $1,330,000

C. $1,630,000

D. $1,830,000

Q8) A corporation declared a 10% stock dividend on 15,000 shares outstanding of $5 par common stock when the fair value was $10 per share. Which change in the corporation's stockholders' equity accounts is correct?

A. Retained earnings is decreased by $15,000.

B. Additional paid-in capital is increased by $15,000.

C. Common stock is decreased by $7,500.

D. Common stock is increased by $15,000

Q9) A company that uses the accrual method of accounting started the fiscal year with assets of $600,000 and liabilities of $400,000. During the fiscal year, the company recorded credit sales of $250,000, of which $8,000 remained to be collected at year end, and incurred expenses of $90,000, of which $72,000 was paid in cash. A stock dividend valued at $10,000 was declared and issued to stockholders during the year. What is the year-end balance of total equity?

A. $350,000

B. $360,000

C. $370,000

D. $380,000

Q10) A company declared a cash dividend on its common stock on December 15, Year 1, payable on January 12, Year 2. How would this dividend affect stockholders' equity on the following dates?

 

December 15, December 31, January 12

Year 1 Year 2 Year 1

A. Decrease No effect Decrease

B. Decrease No effect No effect

C. No effect Decrease No effect

D. No effect No effect Decrease

Q11) On June 27, Year 2, Brite Co. distributed to its common stockholders 100,000 outstanding common shares of its investment in Quik, Inc., an unrelated party. The carrying amount on Brite's books of Quik's $1 par common stock was $2 per share. Immediately after the distribution, the market price of Quik's stock was $2.50 per share. In its income statement for the year ended June 30, Year 2, what amount should Brite report as gain before income taxes on disposal of the stock?

A. $0

B. $50,000

C. $200,000

D. $250,000

Q12) Baker Co. issued 100,000 shares of common stock in the current year. On October 1, Baker repurchased 20,000 shares of its common stock on the open market for $50 per share. At that date, the stock's par value was $1, and the average issue price was $40 per share. Baker uses the cost method for treasury stock transactions. On December 1, Baker reissued the stock for $60 per share. What amount should Baker report as treasury stock gain at December 31?

A. $0

B. $200,000

C. $400,000

D. $980,000

Q13) On July 1, Alto Co. split its common stock 5-for-1 when the fair value was $100 per share. Prior to the split, Alto had 10,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock:

A. Remained at $10.

B. Was reduced to $8.

C. Was reduced to $5.

D. Was reduced to $2

Q14) On July 1, 20X2, Cove Corp., a closely-held corporation, issued 6% bonds with a maturity value of $60,000, together with 1,000 shares of its $5 par value common stock, for a combined cash amount of $110,000. The market value of Cove's stock cannot be ascertained. If the bonds were issued separately, they would have sold for $40,000 on an 8% yield to maturity basis. What amount should Cove report for additional paid-in capital on the issuance of the stock?

A. $75,000

B. $65,000

C. $55,000

D. $45,000

Q15) Each of the following transactions will cause a decrease in stockholders' equity, except:

A. The sale of treasury stock at less than cost.

B. The declaration of a cash dividend.

C. A loss on the sale of a discontinued segment.

D. A loss from a foreign currency translation adjustment.