Chapter. 1 whole revision Flashcards
(33 cards)
Godart Co. issued $4,500,000 notes payable as a scrip dividend that matured in five years. At maturity, each shareholder of Godart’s three million shares will receive payment of the note principal plus interest. The annual interest rate was 10%. What amount should be paid to the stockholders at the end of the fifth year?
A.
$6,750,000
B. $450,000 C. $4,500,000 D. $2,250,000
take 10% then multiply by 5 yrs so principal 4,500,000 add 22,50,000.
A. Answer
Pugh Co. reported the following in its statement of stockholders’ equity on January 1 of the current year:
Common stock, $5 par value, authorized 200,000 shares, issued 100,000 shares
500,000
Additional paid-in capital
1,500,000
Retained earnings
516,000
2,516,000
Less treasury stock, at cost, 5,000 shares
(40,000)
Total stockholders’ equity
2,476,000
The following events occurred during the current year:
May 1
1,000 shares of treasury stock were sold for $10,000.
July 9
10,000 shares of previously unissued common stock were sold for $12 per share.
October 1
The distribution of a 2-for-1 stock split resulted in the common stock’s per share par value being halved.
Pugh accounts for treasury stock under the cost method. Laws in the state of Pugh’s incorporation protect shares held in treasury from dilution when stock dividends or stock splits are declared.
In Pugh’s December 31 statement of stockholders’ equity, the par value of the issued common stock should be:
A. $275,000 B. $291,000 C. $550,000 D. $518,000
No idea why par is divided by 5 and only no idea how previously issued 10,000 is new stock
Deck Co. had 120,000 shares of common stock outstanding at January 1, Year 2. On July 1, Year 2, it issued 40,000 additional shares of common stock. Outstanding all year were 10,000 shares of nonconvertible cumulative preferred stock. What is the number of shares that Deck should use to calculate Year 2 earnings per share?
A. 170,000 B. 160,000 C. 150,000 D. 140,000
No idea why 40,000 is half and nonvertible cumulative is cumulative so we should include it
At the beginning of the year, Stam Co. had 200,000 shares of common stock issued and outstanding. On March 31, the company issued 40,000 additional shares. On July 1, it declared and distributed a 50 percent stock dividend, and on September 30, it repurchased 10,000 shares as treasury stock. What amount of shares should Stam use to calculate basic earnings per share?
A. 345,000 B. 287,500 C. 342,500 D. 360,000
200000 12/12 - 200000
400009/12 -30000
just shares 200+40 230/2 -115
10000*3/12 =2500
=200,000+30000+115000-2500 = C
U.S. company purchased inventory on account at a cost of 1,000 foreign currency units (FCU) from a non-U.S. company on November 15, to be paid on December 15. The FCU is valued at $0.85 on November 15 and at $0.90 on December 15. The journal entry on December 15 should include which of the following?
A. Debit exchange gains and losses and credit accounts payable for $50. B. Debit accounts payable and credit cash for $850. C. Debit accounts payable and credit exchange gains and losses for $50. D. Debit inventory and credit cash for $850.
Please remember you won’t debit Accounts payable as $50 rather it would be reverse to original $850 hence initial gain recording entry
Gain and loss
AP
According to the FASB conceptual framework, which of the following would cause earnings to differ from comprehensive income?
A. Unrealized holding gain from trading debt securities. B. Realized gain from sale of held-to-maturity debt security. C. Dividends declared but not paid. D. Unrealized holding loss from available-for-sale debt securities.
D - Unrealized holding loss from available-for-sale debt securities.
Because this one isn’t included in NI
Which of the following is false related to the effect of donated (treasury) stock from a shareholder to the company?
A. Donated stock is recorded at fair value. B. The number of shares outstanding declines. C. Total shareholders’ equity is reduced. D. The book value per common share is higher.
DR DSV
CR APIC
NET EFFECT NO CHANGE
A firm repurchases 10 percent of its outstanding common stock. What is the effect of this treasury stock transaction?
A. Treasury stockholders will have the same rights as common stockholders. B. Total stockholders’ equity will remain unchanged, with treasury stock replacing common stock. C. The common stock shares will be permanently retired. D. Its debt-to-total capital ratio will increase.
D is the correct answer
When you reprucahse share CS INCREASES AND CASH goes down
Grid Corp. acquired some of its own common shares at a price greater than both their par value and original issue price but less than their book value. Grid uses the cost method of accounting for treasury stock. What is the impact of this acquisition on total stockholders’ equity and the book value per common share?
Total stockholders’
equity
Book value
per share
A.
Decrease
Increase
B. Decrease
Decrease
C. Increase
Increase
D. Increase
Decrease
Dec-INC
The following trial balance of Trey Co. at December 31, has been adjusted except for income tax expense.
Dr. Cr.
Cash
550,000
Accounts receivable, net
1,650,000
Prepaid taxes
300,000
Accounts payable
$ 120,000
Common stock
500,000
Additional paid-in capital
680,000
Retained earnings
630,000
Foreign currency translation adjustment
430,000
Revenues
3,600,000
Expenses
2,600,000
5,530,000
5,530,000
Additional information
Estimated tax payments of $300,000 were charged to prepaid taxes. Trey has not yet recorded income tax expense. There were no differences between financial statement and income tax income, and Trey’s tax rate is 30%.
Included in accounts receivable is $500,000 due from a customer. Special terms granted to this customer require payment in equal semiannual installments of $125,000 every April 1 and October 1.
In Trey’s December 31 balance sheet, what amount should be reported as total retained earnings?
A. $1,330,000 B. $1,630,000 C. $1,200,000 D. $1,029,000
Take nt after tax always
The following is the stockholders’ equity section of Harbor Co.’s balance sheet at December 31:
Common stock $10 par, 100,000 shares authorized, 50,000 shares issued
of which 5,000 have been reacquired, and are held in treasury
500,000
Additional paid-in capital common stock
1,100,000
Retained earnings
800,000
Subtotal
2,400,000
Less treasury stock
(200,000)
Total stockholders’ equity
2,200,000
Harbor has insignificant amounts of convertible securities, stock warrants, and stock options. What is the book value per share of Harbor’s common stock?
A. $49 B. $31 C. $46 D. $44
Stockholder equity/ Shares outstanding = 2200/45 = $49
Elizabeth Corporation acquired Allen Corporation at the end of Year 1. Under terms of the acquisition agreement, Elizabeth agreed to provide former Allen shareholders 1,000 additional shares of Elizabeth stock for each new retail outlet opened during Year 2. Two new outlets were opened during Year 2:
One on May 1, Year 2
One on September 1, Year 2
What number of shares related to the openings of the new retail outlets should enter into the calculation of Elizabeth’s basic earnings per share as of December 31, Year 2, the end of its fiscal year?
A. 1,000 B. -0- C. 1,250 D. 2,000
Compounds 1000 8/12 +
10004/12 =2000
The following changes in Vel Corp.’s account balances occurred during the current year:
Increase
Assets
89,000
Liabilities
27,000
Capital stock
60,000
Additional paid-in capital
6,000
Except for a $13,000 dividend payment and the year’s earnings, there were no changes in retained earnings for the current year. What was Vel’s current year net income?
A. $4,000 B. $9,000 C. $13,000 D. $17,000
Assets
89
Liabilities
27
Capital stock
60
Additional paid-in capital
6
Retained earnings (squeeze)
(4)
Total liabilities and equity
89
Retained earnings changes
Begin R/E
0
Add net income (squeeze)
9
Less dividends paid
(13)
Ending R/E
(4)
MCQ-01095
On December 1, Line Corp. received a donation of 2,000 shares of its $5 par value common stock from a stockholder. On that date, the stock’s market value was $35 per share. The stock was originally issued for $25 per share. By what amount would this donation cause total stockholders’ equity to decrease?
A. $50,000 B. $70,000 C. $20,000 D. $0
Donated treasury stock DR
Cash CR
Cash DR
APIC DR (SP less than CR like par and issue price)
Donated treasury stock CR (SP>Carrying value)
When computing the weighted average of common shares outstanding for basic earnings per share, convertible securities are:
A. Recognized whether they are dilutive or anti-dilutive. B. Recognized only if they are anti-dilutive. C. Ignored. D. Recognized only if they are dilutive.
Ignored
On October 13, Year 2, Gallant Enterprises purchased goods on credit for 10,000 Swiss francs when the spot rate was $0.18 per franc. On January 13, Year 3, Gallant paid the account off in full, when the spot rate was $0.22 per franc. At December 31, Year 2, the spot rate was $0.23 per franc. Which of the below entries would be found in the books of Gallant Enterprises as a result of this entry?
A. Debit (Dr) Credit (Cr) Accounts payable 500
Foreign exchange gain
500
B. Debit (Dr) Credit (Cr) Accounts payable 500
Foreign exchange loss
500
C. Debit (Dr) Credit (Cr) Purchases 1,800
Accounts payable
1,800
D. Debit (Dr) Credit (Cr) Purchases 2,200
Accounts payable
2,200
They asked initial entry not gain loss, also is a loss
Jones Company purchased 1,000 shares of ABC common stock for $190,000 on January 1, Year 1. At quarter end, the value of the investment had declined to $182,000. Jones should reflect the stock’s decline in value by:
A. Recognizing a realized loss as part of other comprehensive income in its first quarter income statement. B. Recognizing a realized loss of $8,000 as part of income from continuing operations in its first quarter income statement. C. Recognizing an unrealized loss as part of other comprehensive income in its first quarter income statement. D. Recognizing an unrealized loss of $8,000 as part of income from continuing operations in its first quarter income statement.
Not yet realized since its not sold hence we will take unrealized loss of $8000 in continuing operation of IS.
Which of the following financial instruments issued by a public company should be reported on the issuer’s books as a liability on the date of issuance?
A. Common stock that contains an unconditional redemption feature. B. Common stock that is issued at a 5% discount as part of an employee share purchase plan. C. Cumulative preferred stock. D. Preferred stock that is convertible to common stock five years from the issue date.
Rest reports in Equity section but unconditional redemption one is in Liability
When a property dividend is declared and the market value of the property exceeds its book value, the excess
A. Increases additional paid-in-capital. B. Decreases net income for the period. C. Decreases additional paid-in-capital. D. Increases net income for the period.
No affect to is WHEN DITRISBUTED BUT GAIN RECOGNIZED IMMEADIATELY
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 $50.00 per share. At that date, the stock’s par value was $1.00 and the average issue price was $40.00 per share. Baker uses the cost method for treasury stock transactions. On December 1, Baker reissued the stock for $60.00 per share. What amount should Baker report as treasury stock gain at December 31?
A. $200,000 B. $980,000 C. $400,000 D. $0
Corporations are not permitted to report income statement gains and losses from treasury stock transactions. Instead, treasury stock “gains and losses” are reported as direct adjustments to stockholders’ equity. Gains are recorded by crediting APIC - Treasury Stock, while losses are recorded by first reducing any existing APIC - Treasury Stock to $0, and then debiting any additional loss to Retained Earnings.
Ball Corp. had the following foreign currency transactions during Year 1:
Merchandise was purchased from a foreign supplier on January 20, Year 1, for the U.S. dollar equivalent of $90,000. The invoice was paid on March 20, Year 1, at the U.S. dollar equivalent of $96,000.
On July 1, Year 1, Ball borrowed the U.S. dollar equivalent of $500,000 evidenced by a note that was payable in the lender’s local currency on July 1, Year 3. On December 31, Year 1, the U.S. dollar equivalents of the principal amount and accrued interest were $520,000 and $26,000, respectively. Interest on the note is 10% per annum.
In Ball’s Year 1 income statement, what amount should be included as foreign exchange loss?
A. $6,000 B. $21,000 C. $0 D. $27,000
90,000 PAID 96000
LOSS 6K
500K &520K Foreign loss is $20k
Accrued int 500k,10%,2 - 25k and acrrued int 26k
20k+1k =21k and 6k = 27k
Which of the following items is included in accumulated other comprehensive income or loss?
A. Unrealized holding gains or losses on securities classified as trading securities. B. Unrealized gains and losses from a derivative properly designated as a fair value hedge. C. A reduction of shareholders' equity related to employee stock ownership plans. D. Gains and losses from defined benefit pension plan accounting.
Remember pufi menomic
A company is required to file quarterly financial statements with the United States Securities and Exchange Commission on Form 10-Q. The company operates in an industry that is not subject to seasonal fluctuations that could have a significant impact on its financial condition. In addition to the most recent quarter end, for which of the following periods is the company required to present balance sheets on Form 10-Q?
A. The end of preceding fiscal year. B. The end of the corresponding fiscal quarter of the preceding fiscal year. C. The end of the preceding fiscal year and the end of the prior two fiscal years. D. The end of the preceding fiscal year and the end of the corresponding fiscal quarter of the preceding fiscal year.
A
For the last 10 years, Woody Co. has owned cumulative preferred stock issued by Hadley, Inc. During Year 11, Hadley declared and paid both the Year 11 dividend and the Year 10 dividend in arrears. How should Woody report the Year 10 dividend in arrears that was received in Year 11?
A. Include in Year 11 income from continuing operations. B. As a retroactive change of the prior period financial statements. C. Include, net of income taxes, after Year 11 income from continuing operations. D. As a reduction in cumulative preferred dividends receivable.
A
