Question 1The stockholders’ equity section of Sliver Corporation’s balance sheet at December 31, 2014, was as follows:Common stock ($10 par value, authorized 1,000,000shares, issued and outstanding 900,000 shares) … $ 9,000,000Paid-In capital in excess of par ………………. 2,700,000Retained earnings ……………………………. 1,300,000Total stockholders’ equity ……………………. $13,000,000On January 2, 2015, Sliver purchased and retired 100,000 shares of its stock for $1,800,000. Sliver records treasury stock using the par value method. Immediately after retirement of these 100,000 shares, the balances in the additional paid-in capital and retained earnings accounts should bePaid-In Capital Retainedin Excess of Par Earnings$900,000 $1,300,000$1,400,000 $800,000$1,900,000 $1,300,000$2,400,000 $800,0000.6 pointsQuestion 2To compute the price to pay for a bond, you useonly the present value of $1 concept.only the present value of an annuity of $1 concept.both of these.neither of these.0.6 pointsQuestion 3For a liability to exist,the identity of the party owed must be known.the exact amount must be known.a past transaction or event must have occurred.an obligation to pay cash in the future must exist.0.6 pointsQuestion 4Bonds usually sell at a premiumwhen the market rate of interest is greater than the stated rate of interest on the bonds.when the stated rate of interest on the bonds is greater than the market rate of interest.when the price of the bonds is greater than their maturity value.in none of these cases.0.6 pointsQuestion 5On July 31, 2013, Rangers Corporation purchased 500,000 shares of Tigers Corporation. On December 31, 2014, Rangers distributed 250,000 shares of Tigers stock as a dividend to Rangers’ stockholders. This is an example of aliquidating dividend.investment dividend.property dividend.stock dividend.0.6 pointsQuestion 6A company declared a cash dividend on its common stock in December 2013, payable in January 2014. Retained Earnings wouldincrease on the date of declaration.not be affected on the date of declaration.not be affected on the date of payment.decrease on the date of payment.0.6 pointsQuestion 7Craig Corporation issued a $100,000, 10-year, 10 percent bond on January 1, 2013, for $112,000. Craig uses the straight-line method of amortization. On April 1, 2016, Craig reacquired the bonds for retirement when they were selling at 102 on the open market. How much gain or loss should Craig recognize on the retirement of the bonds?$2,000 loss$3,900 gain$6,100 gain$8,200 loss0.6 pointsQuestion 8If a $1,000, 9 percent, 10-year bond was issued at 96 plus accrued interest one month after the authorization date, how much cash was received by the issuer?$967.50$960.00$1,007.50$992.500.6 pointsQuestion 9Which of the following represents a liability?The obligation to pay for goods that a company expects to order from suppliers next year.The obligation to provide goods that customers have ordered and paid for during the current year.The obligation to pay interest on a five-year note payable that was issued the last day of the current year.The obligation to distribute shares of a company’s own common stock next year as a result of a stock dividend declared near the end of the current year.0.6 pointsQuestion 10Which of the following does NOT meet the FASB’s definition of a liability?The signing of a three-year employment contract at a fixed annual salaryAn obligation to provide goods or services in the futureA note payable with no specified maturity dateAn obligation that is estimated in amount0.6 pointsQuestion 11Which of the following is most likely to be found in state laws regarding payment of dividends?Dividends may be paid from legal capital.Retained earnings are available for dividends unless restricted by contract or by statute.Unrealized capital is available for any type of dividend.Capital from donated assets is available for dividends.0.6 pointsQuestion 12Which of the following is true of accrued interest on bonds that are sold between interest dates?It is computed at the effective market rate.It will be paid to the seller when the bonds mature.It is extra income to the buyer.None of these is true.0.6 pointsQuestion 13Adam Corporation owns 1,000 shares of common stock of Rosen, Inc., a large publicly traded company listed on a major stock exchange. If Rosen issues a 20 percent stock dividend when the par value is $10 per share and the market value is $70 per share, how much and what type of income should Adam report?$0$2,000 ordinary income$14,000 ordinary income$2,000 ordinary income and $12,000 extraordinary incomeQuestion 14On June 1, Continental Company issued 8,000 shares of its $10 par common stock to Divide for a tract of land. The stock had a fair market value of $18 per share on this date. On Divide’s last property tax bill, the land was assessed at $96,000. Continental should record an increase in Additional Paid-In Capital of$96,000.$64,000.$40,000.$16,000.0.6 pointsQuestion 15At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of thedeclaration of a stock split.purchase of treasury stock.declaration of a stock dividend.payment in full of subscribed stock.0.6 pointsQuestion 16Accrued interest on bonds that are sold between interest datesis ignored by both the seller and the buyer.increases the amount a buyer must pay to acquire the bonds.is recorded as a loss on the sale of the bonds.decreases the amount a buyer must pay to acquire the bonds.0.6 pointsQuestion 17The issuance price of a bond does notdepend on theface value of the bond.riskiness of the bond.method used to amortize the bond discount or premium.effective interest rate.0.6 pointsQuestion 18Select the statement that is incorrectconcerning the appropriations of retained earnings.Appropriations of retained earnings reflect funds set aside for a designated purpose, such as plant expansion.Appropriations of retained earnings do not change the total amount of stockholders’ equity.Appropriations of retained earnings can be made as a result of contractual requirements.Appropriations of retained earnings can be made at the discretion of the board of directors.0.6 pointsQuestion 19The net amount of a bond liability that appears on the balance sheet is thecall price of the bond plus bond discount or minus bond premium.face value of the bond plus related premium or minus related discount.face value of the bond plus related discount or minus related premium.maturity value of the bond plus related discount or minus related premium.0.6 pointsQuestion 20Which of the following is NOTa component of comprehensive income?Asset revaluation reserveNet incomeForeign currency translation adjustmentMinimum pension liability adjustment0.6 pointsQuestion 21Assuming the straight-line method of amortization is used, the average yearly interest expense on a $250,000, 11 percent, 20-year bond issued at 94 would be$26,750.$27,500.$28,250.$29,500.0.6 pointsQuestion 22How would a stock split affect each of the following?TotalStockholders’ AdditionalAssets Equity Paid-In CapitalIncrease Increase No effectNo effect No effect No effectNo effect No effect IncreaseDecrease Decrease Decrease0.6 pointsQuestion 23Which of the following presentation formats is permitted by Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”?I.A single statement of income and comprehensive income.II.Two statements of income, a traditional income statement ending with net income, and a second statement beginning with net income, all the elements of comprehensive income, and a total of comprehensive income.III.Within the statement of changes in stockholders’ equity.Only II and IIII and III, II, and III0.6 pointsQuestion 24Romer Corporation, a calendar-year firm, is authorized to issue $200,000 of 10 percent, 20-year bonds dated January 1, 2014, with interest payable on January 1 and July 1 of each year.If the bonds were issued on April 1, 2014, the amount of accrued interest on the date of sale is$20,000.$10,000.$2,500.$5,000.0.6 pointsQuestion 25Any gains or losses from the early extinguishment of debt should berecognized in income of the period of extinguishment.treated as an increase or decrease in Paid-In Capital.allocated between a portion that is an increase (decrease) in Paid-In Capital and a portion that is recognized in current income.amortized over the remaining original life of the extinguished debt.
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