In January 2012, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share.

In January 2012, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2012, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury sharesa.decreased total stockholders' equity.b.increased total stockholders' equity.c.did not change total stockholders' equity.d.decreased the number of issued shares.2. Which dividends do not reduce stockholders' equity?a.Cash dividendsb.Stock dividendsc.Property dividendsd.Liquidating dividendsIn computing earnings per share for a simple capital structure, if the preferred stock is cumulative, the amount that should be deducted as an adjustment to the numerator (earnings) is thea.preferred dividends in arrears.b.preferred dividends in arrears times (one minus the income tax rate).c.annual preferred dividend times (one minus the income tax rate).d.none of these.Dilutive convertible securities must be used in the computation ofa.basic earnings per share only.b.diluted earnings per share only.c.diluted and basic earnings per share.d.none of these.Milo Co. had 800,000 shares of common stock outstanding on January 1, issued 126,000 shares on May 1, purchased 63,000 shares of treasury stock on September 1, and issued 54,000 shares on November 1. The weighted average shares outstanding for the year isa.851,000.b.872,000.c.893,000.d.914,000.At December 31, 2012, Emley Company had 1,200,000 shares of common stock outstanding. On September 1, 2013, an additional 400,000 shares of common stock were issued. In addition, Emley had $8,000,000 of 6% convertible bonds outstanding at December 31, 2012, which are convertible into 800,000 shares of common stock. No bonds were converted into common stock in 2013. The net income for the year ended December 31, 2013, was $3,000,000. Assuming the income tax rate was 30%, what should be the diluted earnings per share for the year ended December 31, 2013, rounded to the nearest penny?a.$1.41b.$2.25c.$1.56d.$1.63On January 2, 2010, Lake Mining Co.’s board of directors declared a cash dividend of $400,000 to stockholders of record on January 18, 2010, payable on February 10, 2010. The dividend is permissible under law in Lake’s state of incorporation. Selected data from Lake’s December 2009 balance sheet are as follows:Accumulated depletion$100,000Capital stock 500,000Additional paid-in capital 150,000Retained earnings 300,000The $400,000 dividend includes a liquidating dividend of a.$0b.$100,000c.$150,000d.$300,0008. Ole Corp. declared and paid a liquidating dividend of $100,000. This distribution resulted in a decrease in Ole’sPaid-in capitalRetained EarningsNoNoYesYesNoYesYesNo9. How would total stockholder’s equity be affected by the declaration of each of the following?Stock dividendStock splitNo effect Increaseb. Decrease Decreasec. Decrease No effectd. No effect No effect10. On January 31, 2010, Pack, Inc. split its common stock 2 for 1, and Young, Inc. issued a 5% stock dividend. Both companies issued their December 31, 2009 financial statements on March 1, 2010. Should Pack’s 2009, basic earnings per share (BEPS) take into consideration the stock split, and should Young’s 2009 BPS take into consideration the stock dividend?Pack’s 2009 BEPSYoung’s 2009 BEPSa.YesNob.NoNoc.YesYesd.NoYes11. Cox Corporation had 1,200,000 shares of common stock outstanding on January 1 and December 31, 2010. In connection with the acquisition of a subsidiary company in June 2009, Cox is required to issue 50,000 additional shares of its common stock on July 1, 2011, to the former owners of the subsidiary. Cox paid $200,000 in preferred stock dividends in 2010, and reported net income of $3,400,000 for the year. Cox’s diluted earnings per share for 2010 should bea.$2.83b.$2.72c.$2.67d.$2.5612. Which of the following results in increasing basic earnings per share? a. Paying more than carrying value to retire outstanding bonds.b. Issuing cumulative preferred stock.c. Purchasing treasury stock.d. All of these increase basic earnings per share.13. During 2011, Angel Corporation had 900,000 shares of common stock and 50,000 shares of 6% preferred stock outstanding. The preferred stock does not have cumulative or convertible features. Angel declared and paid cash dividends of $300,000 and $150,000 to common and preferred shareholders, respectively, during 2011.On January 1, 2010, Angel issued $2,000,000 of convertible 5% bonds at face value. Each $1,000 bond is convertible into 5 common shares.Angel's net income for the year ended December 31, 2011, was $6 million. The income tax rate is 20%. What is Angel's basic earnings per share for 2011, rounded to the nearest cent? a. $5.29b. $5.57c $6.50d. None of these is correct.14. On December 31, 2010, Albacore Company had 300,000 shares of common stock issued and outstanding. Albacore issued a 10% stock dividend on June 30, 2011. On September 30, 2011, 12,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2011? a. 303,000.b. 342,000.c. 312,000.d. 327,000.15. The changes in account balances for Elder Company for 2011 are as follows:Assets$480,000 debitCommon stock 250,000 creditLiabilities 160,000 credit30,000 creditAssuming the only changes in retained earnings in 2011 were for net income and a $50,000 dividend, what was net income for 2011? a. $40,000.b. $60,000.c. $70,000.d. $90,000.16. Montgomery & Co., a well established law firm, provided 500 hours of its time to Fink Corporation in exchange for 1,000 shares of Fink's $5 par common stock. Mitchell's usual billing rate is $700 per hour, and Fink's stock has a book value of $250 per share. By what amount will Fink's Paid-in capital - excess of par increase for this transaction? a. $345,000.b. $295,000.c. $350,000.d. $300,000.17. Coy, Inc. initially issued 200,000 shares of $1 par value stock for $1,000,000 in 2009. In 2010, the company repurchased 20,000 shares for $200,000. In 2011, 10,000 of the repurchased shares were resold for $160,000. In its balance sheet dated December 31, 2011, Coy, Inc.'s treasury stock account shows a balance of: a. $0.b. $40,000.c. $100,000.d. $200,000.18. Lease M does note contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. Lease P does not transfer ownership of the property to the lessee at the end of the lease term, but the lease term is equal to 75% of the estimated economic life of the leased property. How should the lessee classify these leases?Lease Pa.Capital leaseOperating leaseb.Capital leaseCapital leasec.Operating leaseCapital leased.Operating leaseOperating lease19. On December 31, 2010, Day Co. leased a new machine from Parr with the following pertinent information:Lease term6 yearsAnnual rental payable at beginning of Each year$50,000Useful life of machine8 years15%12%Present value of annuity of 1 in advance for 6 periods at 4.614.35The lease is not renewable, and the machine reverts to Parr at the termination of the lease. The cost of the machine on Parr’s accounting records is $375,500. At the beginning of the lease term, Day should record a lease liability ofa.$375,500b.$230,500c.$217,500d.$020. N Corp. entered into a nine-year capital lease on a warehouse on December 31, 2011. Lease payments of $26,000, which includes real estate taxes of $1,000, are due annually, beginning on December 31, 2012, and every December 31 thereafter. Neal does not know the interest rate implicit in the lease; N's incremental borrowing rate is 9%. The rounded present value of an ordinary annuity for nine years at 9% is 6.0. What amount should N report as capitalized lease liability at December 31, 2011? a. $150,000.b. $156,000.c. $225,000.d. $234,000.21. Which of the following circumstances creates a future taxable amount? a. Service fees collected in advance from customers: taxable when received, recognized for financial reporting when earned.b. Accrued compensation costs for future payments.c. Straight-line depreciation for financial reporting and accelerated depreciation for tax reporting.d. Investment expenses incurred to obtain tax-exempt income (not tax deductible).22. Which of the following causes a permanent difference between taxable income and pretax accounting income? a. Advance collections of revenues.b. MACRS depreciation method used for equipment.c. The installment method used for sales of merchandise.d. Interest earned on municipal securities. 23. Bumble Bee Co. had taxable income of $7,000, MACRS depreciation of $5,000, book depreciation of $2,000, and accrued warranty expense of $400 on the books although no warranty work was performed. What is Bumble Bee's pretax accounting income? a. $4,400.b. $3,600.c. $9,600.d. $2,600.24. In its first four years of operations Peridot Jewelers reported the following operating income (loss) amounts:2008 $150,000100,0002010 (425,000)450,000There were no other deferred income taxes in any year. In 2010, Peridot elected to carry back its operating loss. The enacted income tax rate was 40%. In its 2011 income statement, what amount should Peridot report as current income tax payable? a. $80,000b. $110,000c. $170,000d. $180,00025. For reporting purposes, current deferred tax assets and current deferred tax liabilities are: a. Netted against one another in the balance sheet.b. Reported separately in the balance sheet.c. Reflected only in the footnotes.d. Combined respectively with noncurrent deferred tax assets and noncurrent deferred tax liabilities in the balance sheet.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)a.addition adjustment to net income in the cash flows from operating activities section.b.cash outflow from investing activities.c.cash inflow from investing activities.d.cash inflow from financing activities.27.An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n)a.addition to net income in arriving at net cash flow from operating activities.b.deduction from net income in arriving at net cash flow from operating activities.c.cash outflow from investing activities.d.cash outflow from financing activities.28. 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)a.addition to net income.b.deduction from net income.c. investing activity.d.financing activity.29.How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?a.They should be incorporated in the statement of cash flows in a section labeled, "Significant Noncash Transactions."b.Such transactions should be incorporated in the section (operating, financing, or investing) that is most representative of the major component of the transaction.c.These noncash transactions are not to be incorporated in the statement of cash flows. They may be summarized in a separate schedule at the bottom of the statement or appear in a separate supplementary schedule to the financials.d.They should be handled in a manner consistent with the transactions that affect cash flows.30.Equipment which cost $213,000 and had accumulated depreciation of $114,000 was sold for $121,000. This transaction should be shown on the statement of cash flows (indirect method) as a(n)a.addition to net income of $22,000 and a $121,000 cash inflow from financing activities.b.deduction from net income of $22,000 and a $99,000 cash inflow from investing activities.c.deduction from net income of $22,000 and a $121,000 cash inflow from investing activities.d.addition to net income of $22,000 and a $99,000 cash inflow from financing activities.31.Lindsay Corporation had net income for 2013 of $2,000,000. Additional information is as follows:Depreciation of plant assets$1,200,000Amortization of intangibles240,000Increase in accounts receivable420,000Increase in accounts payable540,000Lindsay's net cash provided by operating activities for 2013 wasa.$3,560,000.b.$3,440,000.c.$3,320,000.d.$1,680,000.32.In preparing Titan Inc.’s statement of cash flows for the year ended December 31, 2013, the following amounts were available:Collect note receivable$370,000Issue bonds payable 426,000Purchase treasury stock 210,000What amount should be reported on Titan, Inc’s statement of cash flows for financing activities?a.$ 56,000b.$796,000c.$216,000d.$160,00033. Hoven Corporation issued common stock with a par value of $600,000 and a fair value of $800,000 to acquire all the outstanding shares of Lead Company in a business combination. The Hoven Corporation reported assets of $2,000,000 and liabilities of $542,000 immediately before the business combination. Lead Company's assets and liabilities had book values of $460,000 and $187,000, respectively. The fair values of Lead's assets and liabilities were $600,000 and $188,000, respectively. What amount should be reported as total assets of the combined entity immediately following the business combination? a. $2,460,000b. $2,600,000c. $2,800,000d. $2,988,000 34. Assume that One Company owns 70 percent of the common stock of Another Company, with the investment originally purchased for $230,000, which was the book value of the shares acquired. For the current year, the parent reports separate operating income of $300,000, and the subsidiary reports net income of $160,000; each company declares dividends of $50,000.What will be the amount of consolidated net income reported in the consolidated income statement for the year? a. $460,000.b. $412,000.c. $377,000.d. $327,000.35. Parent Company acquires 100 percent of the outstanding voting stock of Subsidiary Company in a business combination treated as a purchase. Acquisition cost exceeded the book value of Subsidiary's net assets. The excess is attributable to equipment with a remaining life of five years. Parent uses the equity method of accounting for its investment, and there have been no intercompany transactions. Consolidated retained earnings at the end of the first year following acquisition should equal a. Parent's retained earnings.b. Parent's retained earnings plus Subsidiary's retained earnings.c. Parent's retained earnings minus Subsidiary's retained earnings.d. Parent's retained earnings minus differential amortization.36. The amount to be recognized as goodwill in the consolidated balance sheet prepared following a purchase acquisition is the excess of cost over a. the book value of the subsidiary's net assets.b. the parent's interest in the book value of the subsidiary's net assets.c. the fair value of the subsidiary's net assets.d. the parent's interest in the fair value of the subsidiary's net assets. A Delaware corporation acquired a machine from a company located in Japan on November 1, 2008. The cost of the machine was 5,000,000 yen, which were payable on January 30, 2009, the settlement date for the transaction. On the transaction date, the spot rate for yen was 1 yen = $.0075. In order to manage its exposed liability position, the Delaware company entered into a forward exchange contract on November 1, 2008. The contract stipulated the Delaware company could purchase 5,000,000 yen on January 30, 2009, at the forward exchange rate of 1 yen = $.0077. Spot and forward exchange rates on December 31, 2008, and January 31, 2009, follow:Spot RateForward Exchange($/1 yen)Rate ($/ 1 yen)December 31, 2008$.0076$.0079 (30-day)January 31, 2009$.0078 37. Refer to the above information. On the balance sheet date, December 31, 2008, the payable denominated in yen should be reported at which of the following amounts? a. $37,500.b. $38,000.c. $39,000.d. $39,500.38. Refer to the above information. The contract price on the forward exchange contract at November 1, 2008, indicates that the contract was acquired: a. at a premium.b. at a discount.c. as a firm purchase commitment.d. at a notional amount for the machine. 39. Refer to the above information. For the year ended December 31, 2009, what is the amount of the foreign currency transaction gain (loss) associated with the payable denominated in yen? a. $500.b. $(500).c. $1,000.d. $(1,000).40. When the local currency of the foreign subsidiary is the functional currency, a foreign subsidiary's inventory carried at cost would be converted to U.S. dollars by: a. translation using historical exchange rates.b. remeasurement using historical exchange rates.c. remeasurement using the current exchange rate.d. translation using the current exchange rate.