ACC 232 FINAL EXAM QUESTIONS AND ANSWER SOLUTION DOCS LATEST 2020

ACC 232 FINAL EXAM QUESTIONS AND ANSWER SOLUTION DOCS LATEST 2020 1. The residual interest in a corporation belongs to the 2. The pre-emptive right of a common stockholder is the right to 3. The pre-emptive ...

ACC 232 FINAL EXAM QUESTIONS AND ANSWER SOLUTION DOCS LATEST 2020 1. The residual interest in a corporation belongs to the 2. The pre-emptive right of a common stockholder is the right to 3. The pre-emptive right enables a stockholder to 4. In a corporate form of business organization, legal capital is best defined as 5. Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders 6. Total stockholders' equity represents 7. A primary source of stockholders' equity is 8. Stockholders' equity is generally classified into two major categories: 9. The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is 30. When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the 32. A "secret reserve" will be created if 33. Which of the following represents the total number of shares that a corporation may issue under the terms of its charter? 34. Stock that has a fixed per-share amount printed on each stock certificate is called 37. Treasury shares are 39. “Gains" on sales of treasury stock (using the cost method) should be credited to 43. Which of the following features of preferred stock makes the security more like debt than an equity instrument? 46. Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as 47. At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the 48. An entry is not made on the 49. Cash dividends are paid on the basis of the number of shares 54. If management wishes to "capitalize" part of the earnings, it may issue a 55. Which dividends do not reduce stockholders' equity? 61. A feature common to both stock splits and stock dividends is 64. The rate of return on common stock equity is calculated by dividing 65. The payout ratio can be calculated by dividing 67. Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called 70. How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position? 21. Convertible bonds 22. The conversion of bonds is most commonly recorded by the 23. When a bond issuer offers some form of additional consideration (a “sweetener”) to induce conversion, the sweetener is accounted for as a(n) S24. Corporations issue convertible debt for two main reasons. One is the desire to raise equity capital that, assuming conversion, will arise when the original debt is converted. The other is S25. When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be S26. The conversion of preferred stock into common requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be 27. The conversion of preferred stock may be recorded by the 28. When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to 29. Proceeds from an issue of debt securities having stock warrants should not be allocated between debt and equity features when 30. Stock warrants outstanding should be classified as 33. The major difference between convertible debt and stock warrants is that upon exercise of the warrants 35. The date on which to measure the compensation element in a stock option granted to a corporate employee ordinarily is the date on which the employee 84. In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are 85. What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively? 88. When computing diluted earnings per share, convertible bonds are 89. Dilutive convertible securities must be used in the computation of 93. When applying the treasury stock method for diluted earnings per share, the market price of the common stock used for the repurchase is the 94. Antidilutive securities *95. Assume there are two dilutive convertible securities. The one that should be used first to recalculate earnings per share is the security with the 21. Which of the following is not a debt security? 22. A correct valuation is 23. Securities which could be classified as held-to-maturity are 24. Unrealized holding gains or losses which are recognized in income are from securities classified as S27. Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholders' equity are S28. Use of the effective-interest method in amortizing bond premiums and discounts results in 30. A requirement for a security to be classified as held-to-maturity is 31. Held-to-maturity securities are reported at 35. Investments in debt securities are generally recorded at 37. Investments in debt securities should be recorded on the date of acquisition at 47. If the parent company owns 90% of the subsidiary company's outstanding common stock, the company should generally account for the income of the subsidiary under the 49. Under the equity method of accounting for investments, an investor recognizes its share of the earnings in the period in which the 52. The fair value option allows a company to 53. Impairments are CHAPTER 18 21. The revenue recognition principle provides that revenue is recognized when 22. When goods or services are exchanged for cash or claims to cash (receivables), revenues are 23. When the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues, revenues are 24. Which of the following is not an accurate representation concerning revenue recognition? P25. The process of formally recording or incorporating an item in the financial statements of an entity is 27. Which of the following is not a reason why revenue is recognized at time of sale? 28. An alternative available when the seller is exposed to continued risks of ownership through return of the product is 29. A sale should not be recognized as revenue by the seller at the time of sale if 31. In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be 33. When work to be done and costs to be incurred on a long-term contract can be estimated dependably, which of the following methods of revenue recognition is preferable? 36. How should earned but unbilled revenues at the balance sheet date on a long-term construction contract be disclosed if the percentage-of-completion method of revenue recognition is used? 37. The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it 38. One of the more popular input measures used to determine the progress toward completion in the percentage-of-completion method is S39. The principal advantage of the completed-contract method is that 40. Under the completed-contract method 41. Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract. In this case, the entire expected loss should be 43. The criteria for recognition of revenue at the completion of production of precious metals and farm products include *58. Types of franchising arrangements include all of the following except *59. In consignment sales, the consignee *60. Some of the initial franchise fee may be allocated to 61. Continuing franchise fees should be recorded by the franchisor *64. Revenue is recognized by the consignor when the CHAPTER 19 21. Taxable income of a corporation . S28. A major distinction between temporary and permanent differences is 31. Which of the following differences would result in future taxable amounts? 33. An example of a permanent difference is 34. Which of the following will not result in a temporary difference? 40. Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if 41. Recognition of tax benefits in the loss year due to a loss carryforward requires 42. Recognizing a valuation allowance for a deferred tax asset requires that a company 44. With regard to uncertain tax positions, the FASB requires that companies recognize a tax benefit when 45. Major reasons for disclosure of deferred income tax information is (are) 46. Accounting for income taxes can result in the reporting of deferred taxes as any of the following except 47. Deferred taxes should be presented on the balance sheet 48. Deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent based on S50. A deferred tax liability is classified on the balance sheet as either a current or a noncurrent liability. The current amount of a deferred tax liability should generally be 51. All of the following are procedures for the computation of deferred income taxes except to CHAPTER 20 21. In determining the present value of the projected benefit obligation, the following are considered by the actuary: 23. In all pension plans, the accounting problems include all the following except 24. In a defined-contribution plan, a formula is used that 25. In a defined-benefit plan, a formula is used that 26. Which of the following is not a characteristic of a defined-contribution pension plan? 27. In accounting for a defined-benefit pension plan 28. Alternative methods exist for the measurement of the pension obligation (liability). Which measure requires the use of future salaries in its computation? 29. The accumulated benefit obligation measures 30. The projected benefit obligation is the measure of pension obligation that 31. Differing measures of the pension obligation can be based on 32. Vested benefits 33. The relationship between the amount funded and the amount reported for pension expense is as follows: 34. The computation of pension expense includes all the following except 36. The interest on the projected benefit obligation component of pension expense 37. One component of pension expense is expected return on plan assets. Plan assets include 38. The actual return on plan assets 39. In accounting for a pension plan, any difference between the pension cost charged to expense and the payments into the fund should be reported as 41. A corporation has a defined-benefit plan. A pension liability will result at the end of the year if the 42. When a company adopts a pension plan, prior service costs should be charged to 44. Prior service cost is amortized on a 45. Whenever a defined-benefit plan is amended and credit is given to employees for years of service provided before the date of amendment 46. The actuarial gains or losses that result from changes in the projected benefit obligation are called 47. Gains and losses that relate to the computation of pension expense should be 49. A pension fund gain or loss that is caused by a plant closing should be 50. A pension liability is reported when 51. A pension asset is reported when 54. Which of the following disclosures of pension plan information would not normally be required? 56. Which of the following statements is true about postretirement health care benefits? *57. Which of the following disclosures of postretirement benefits would not be required by professional pronouncements? 62. Which of the following statements about the recognition of a prior service cost related to a postretirement obligation is correct? 63. Which of the following is recognized in the accounts and in the financial statements? CHAPTER 21 21. Major reasons why a company may become involved in leasing to other companies is (are) 22. Which of the following is an advantage of captive leasing companies over the other players in the leasing market? 23. Which of the following best describes current practice in accounting for leases? 24. While only certain leases are currently accounted for as a sale or purchase, there is theoretic justification for considering all leases to be sales or purchases. The principal reason that supports this idea is that 25. An essential element of a lease is that the 26. What impact does a bargain purchase option have on the present value of the minimum lease payments computed by the lessee? 27. The amount to be recorded as the cost of an asset under capital lease is equal to the 28. The methods of accounting for a lease by the lessee are 29. Which of the following is a correct statement of one of the capitalization criteria? 30. Minimum lease payments may include 31. Executory costs include 32. In computing the present value of the minimum lease payments, the lessee should 33. In computing depreciation of a leased asset, the lessee should subtract 34. In the earlier years of a lease, from the lessee's perspective, the use of the 35. A lessee with a capital lease containing a bargain purchase option should depreciate the leased asset over the 37. Which of the following would not be included in the Lease Receivable account? 38. In a lease that is appropriately recorded as a direct-financing lease by the lessor, unearned income 39. In order to properly record a direct-financing lease, the lessor needs to know how to calculate the lease receivable. The lease receivable in a direct-financing lease is best defined as 40. If the residual value of a leased asset is guaranteed by a third party 41. When lessors account for residual values related to leased assets, they 42. The initial direct costs of leasing 43. The primary difference between a direct-financing lease and a sales-type lease is the 44. A lessor with a sales-type lease involving an unguaranteed residual value available to the lessor at the end of the lease term will report sales revenue in the period of inception of the lease at which of the following amounts? 45. For a sales-type lease, 46. Which of the following statements is correct? 47. The Lease Liability account should be disclosed as 48. To avoid leased asset capitalization, companies can devise lease agreements that fail to satisfy any of the four leasing criteria. Which of the following is not one of the ways to accomplish this goal? 50. In a sale-leaseback transaction where none of the four leasing criteria are satisfied, which of the following is false? 51. When a company sells property and then leases it back, any gain on the sale should usually be CHAPTER 22 21. Accounting changes are often made and the monetary impact is reflected in the financial statements of a company even though, in theory, this may be a violation of the accounting concept of 22. Which of the following is not treated as a change in accounting principle? 23. Which of the following is not a retrospective-type accounting change? 24. Which of the following is accounted for as a change in accounting principle? 26. Which of the following disclosures is required for a change from sum-of-the-years-digits to straight-line? 28. Which of the following disclosures is required for a change from LIFO to FIFO? 29. Stone Company changed its method of pricing inventories from FIFO to LIFO. What type of accounting change does this represent? 30. Which type of accounting change should always be accounted for in current and future periods? 31. Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate? 32. When a company decides to switch from the double-declining balance method to the straight-line method, this change should be handled as a 33. The estimated life of a building that has been depreciated 30 years of an originally estimated life of 50 years has been revised to a remaining life of 10 years. Based on this information, the accountant should 34. Which of the following statements is correct? 35. Which of the following describes a change in reporting entity? 36. Presenting consolidated financial statements this year when statements of individual companies were presented last year is 37. An example of a correction of an error in previously issued financial statements is a change 38. Counterbalancing errors do not include 40. If, at the end of a period, a company erroneously excluded some goods from its ending inventory and also erroneously did not record the purchase of these goods in its accounting records, these errors would cause CHAPTER 23 21. An objective of the statement of cash flows is to 22 . The primary purpose of the statement of cash flows is to provide information 23. Of the following questions, which one would not be answered by the statement of cash flows? 24. The first step in the preparation of the statement of cash flows requires the use of information included in which comparative financial statements? 25. Cash equivalents are 26. A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash flows (indirect method), this event would be reflected as a(n) 28. Which of the following would be classified as a financing activity on a statement of cash flows? 29. The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n) In a statement of cash flows, the cash flows from investing activities section should report When preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because When preparing a statement of cash flows, a decrease in accounts receivable during a period would cause which one of the following adjustments in determining cash flow from operating activities? Direct Method Indirect Method 35. The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n) 37. When preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because 39. In determining net cash flow from operating activities, a decrease in accounts payable during a period 40. When preparing a statement of cash flows, an increase in accounts payable during a period would require which of the following adjustments in determining cash flows from operating activities? 41. When preparing a statement of cash flows, a decrease in prepaid insurance during a period would require which of the following adjustments in determining cash flows from operating activities? 43. Which of the following statements is correct? 44. When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities? 45. When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is deducted from net income to compute cash provided by/used by operating activities? 46. Which of the following is false concerning the statement of cash flows? 48. In reporting extraordinary transactions on a statement of cash flows (indirect method), the 49. Which of the following is shown on a statement of cash flows?