ACC423
Final Exam
Question 1
Buttercup Corporation issued 310 shares of $13 par value common
stock for $6,045. Prepare Buttercup' journal entry. (List multiple debit/credit
entries from largest to smallest amount, e.g. 10, 5, 2.)
Question
2
Wilco Corporation has
the following account balances at December 31, 2012.
Common stock, $5 par value
|
$547,790
|
Treasury stock
|
92,420
|
Retained earnings
|
2,358,180
|
Paid-in capital in excess of par
|
1,330,540
|
Prepare Wilco's December
31, 2012, stockholders' equity section.
Question
3
Woolford Inc. declared a
cash dividend of $1.44 per share on its 2.31 million outstanding shares. The
dividend was declared on August 1, payable on September 9 to all stockholders
of record on August 15. Prepare the journal entries necessary on those three
dates. (If no entry is required, enter No
Entry as the Description and 0 as the amount.)
Question
4(preferred
dividend)
The
outstanding stock of
Pennington corporation consists of 2,100 shares of $107 par value, 6%
preferred, and 5,400 shares of $55 par value common.
Assuming
that the company has retained earnings of $87,000 all of which is to be paid
out in dividends, and that preferred dividends were not paid during the 2 years
preceding the current year, state how much each class of stock should receive
under each of the following conditions.
The
preferred stock is noncumulative and noparticipating/
The
preferred stock is cumulative and nonparticipating
(c) The preferred stock is cumulative and
participating. (Round
rate of participation to 4 decimal places, e.g. 5.1234. Round final answer to 0
decimal places, e.g. 25,320.)
Question
5 (Preferred Dividends)
Martinez Company's
ledger shows the following balances on December 31, 2012.
5% Preferred stock-$10 par value, outstanding 24,860 shares
|
$248,600
|
Common stock-$100 par value, outstanding 37,290 shares
|
3,729,000
|
Retained earnings
|
783,090
|
Assuming that the
directors decide to declare total dividends in the amount of $330,638,
determine how much each class of stock should receive under each of the
conditions stated below. One year's dividends are in arrears on the preferred
stock.
(a) The preferred stock is cumulative and fully
participating.
(b) The preferred stock is noncumulative and
nonparticipating.
(c) The preferred stock is noncumulative and is
participating in distributions in excess of a 7% dividend rate on the common
stock. (Note: Do not round rate of
participation. Round final answers to zero decimal places, e.g. 12,310.)
Question
6
On January 1, 2012,
Barwood Corporation granted 5,450 options to executives. Each option entitles
the holder to purchase one share of Barwood's $5 par value common stock at $50
per share at any time during the next 5 years. The market price of the stock is
$72 per share on the date of grant. The fair value of the options at the grant
date is $146,100. The period of benefit is 2 years. Prepare Barwood's journal
entries for January 1, 2012, and December 31, 2012 and 2013. (If no entry is required, enter No Entry as the
description and 0 as the amount.)
Question 7
Rockland Corporation
earned net income of $375,300 in 2012 and had 100,000 shares of common stock
outstanding throughout the year. Also outstanding all year was $1,000,800 of
10% bonds, which are convertible into 20,016 shares of common. Rockland's tax
rate is 40 percent. Compute Rockland's 2012 diluted earnings per share. (Round answer to 2 decimal places, e.g.
2.13.)
Question 8
DiCenta Corporation
reported net income of $282,000 in 2012 and had 50,000 shares of common stock
outstanding throughout the year. Also outstanding all year were 5,710 shares of
cumulative preferred stock, each convertible into 2 shares of common. The
preferred stock pays an annual dividend of $5 per share. DiCenta' tax rate is
40%. Compute DiCenta' 2012 diluted earnings per share. (Round answer to 2 decimal places, e.g. 5.23.)
Question 9
Ferraro, Inc.
established a stock appreciation rights (SAR) program on January 1, 2012, which
entitles executives to receive cash at the date of exercise for the difference
between the market price of the stock and the pre-established price of $22 on
5,050 SARs. The required service period is 2 years. The fair value of the SAR's
are determined to be $4 on December 31, 2012, and $11 on December 31, 2013.
Compute Perkins' compensation expense for 2012.
|
Compute Perkins' compensation expense for 2013.
|
Question 10
Hillsborough Co. has an
available-for-sale investment in the bonds of Schuyler with a carrying (and
fair) value of $85,460. Hillsborough determined that due to poor economic
prospects for Schuyler, the bonds have decreased in value to $58,350. It is
determined that this loss in value is other-than temporary. Prepare the journal
entry, if any, to record the reduction in value.
Question
11
(Equity Securities Entries)
Capriati Corporation made the following cash purchases of
securities during 2012, which is the first year in which Arantxa invested in
securities.
On January 15, purchased 9,900 shares of Gonzalez Company's common
stock at $36.85 per share plus commission $2,178.
On April 1, purchased 5,500 shares of Belmont Co.'s common stock
at $57.20 per share plus commission $3,707.
On September 10, purchased 7,700 shares of Thep Co.'s preferred
stock at $29.15 per share plus commission $5,401.
On May 20, 2012, Capriati sold 3,300 shares of Gonzalez Company's
common stock at a market price of $38.50 per share less brokerage commissions,
taxes, and fees of $3,135. The year-end fair values per share were: Gonzalez
$33.00, Belmont $60.50, and Thep $30.80. In addition, the chief accountant of
Capriati told you that Capriati Corporation plans to hold these securities for
the long term but may sell them in order to earn profits from appreciation in
prices.
(a) Prepare the journal entries to record the above
three security purchases.
(b) Prepare the journal entry for the security sale
on May 20. (List
multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
(c) Compute the unrealized gains or losses and
prepare the adjusting entries for Capriati on December 31, 2012.
Unrealized gain or loss (For negative numbers use either a negative sign
preceding the number, e.g. -45 or parenthesis, e.g. (45).)
Question
12
(Journal Entries for Fair Value and Equity Methods)
Presented below are two independent situations.
Prepare all necessary journal entries in 2012 for each situation.
Situation 1
Hatcher Cosmetics acquired 10% of the 201,100 shares of common
stock of Ramirez Fashion at a total cost of $15 per share on March 18, 2012. On
June 30, Ramirez declared and paid a $84,000 cash dividend. On December 31,
Ramirez reported net income of $131,000 for the year. At December 31, the
market price of Ramirez Fashion was $17 per share. The securities are
classified as available-for-sale.
Holmes, Inc. obtained
significant influence over Nadal Corporation by buying 25% of Nadal's 34,700
outstanding shares of common stock at a total cost of $11 per share on January
1, 2012. On June 15, Nadal declared and paid a cash dividend of $39,000. On
December 31, Nadal reported a net income of $89,600 for the year.
Question
13
(Equity Method)
Gator Co. invested
$1,020,000 in Demo Co. for 25% of its outstanding stock. Demo Co. pays out 40%
of net income in dividends each year.
Use the information in
the following T-account for the investment in Demo to answer the following
questions.
Investment in Demo Co.
|
||
1,020,000
|
||
195,000
|
||
78,000
|
||
(a)
|
How much was Gator Co.'s share of Demo Co.'s net income for the
year?
|
(b)
|
How much was Gator Co.'s share of Demo Co.'s dividends for the
year?
|
(c)
|
What was Demo Co.'s total net income for the year?
|
(d)
|
What was Demo Co.'s total dividends for the year?
|
Question 14 (Fair Value and Equity Method Compared)
Gregory Inc. acquired
20% of the outstanding common stock of Handerson Inc. on December 31, 2012. The
purchase price was $1,210,000 for 50,000 shares. Handerson Inc. declared and
paid an $0.86 per share cash dividend on June 30 and on December 31, 2013.
Handerson reported net income of $735,000 for 2013. The fair value of
Handerson's stock was $31 per share at December 31, 2013.
(a) Prepare the journal entries for Gregory Inc. for
2012 and 2013, assuming that Gregory cannot exercise significant influence over
Handerson. The securities should be classified as available-for-sale.
(b) Prepare the journal entries for Gregory Inc. for
2012 and 2013, assuming that Gregory can exercise significant influence over
Handerson.
(c) At what amount is the investment in securities
reported on the balance sheet under each of these methods at December 31, 2013?
What is the total net income reported in 2013 under each of these methods? (If answer is zero, please enter a 0 do not leave
any fields blank.)
Question
15 (Call Option)
On January 2, 2012,
Jones Company purchases a call option for $380 on Merchant common stock. The
call option gives Jones the option to buy 1,000 shares of Merchant at a strike
price of $50 per share. The market price of a Merchant share is $50 on January
2, 2012 (the intrinsic value is therefore $0). On March 31, 2012, the market
price for Merchant stock is $75 per share, and the time value of the option is
$200.
(b) Prepare the journal entry(ies) to recognize the
change in the fair value of the call option as of March 31, 2012.
(c) What was the effect on net income of entering
into the derivative transaction for the period January 2 to March 31, 2012?
Unrealized Holding Gain:
$
Question
16
In 2012, Amirante
Corporation had pretax financial income of $169,400 and taxable income of
$125,500. The difference is due to the use of different depreciation methods
for tax and accounting purposes. The effective tax rate is 40%. Compute the
amount to be reported as income taxes payable at December 31, 2012.
Question
17
At December 31, 2012,
Fell Corporation had a deferred tax liability of $726,682, resulting from
future taxable amounts of $2,137,300 and an enacted tax rate of 34%. In May
2013, a new income tax act is signed into law that raises the tax rate to 39%
for 2013 and future years. Prepare the journal entry for Fell to adjust the
deferred tax liability.
Question
18
AMR
Corporation (parent company of American Airlines)
reported the following for 2009 (in millions).
Service cost
|
$418
|
Interest cost on P.B.O
|
760
|
Return on plan assets
|
750
|
Amortization of service cost
|
19
|
Amortization of loss
|
66
|
Compute AMR Corporation's
2009 pension expense (in millions).
Question
19
For Warren Corporation,
year-end plan assets were $2,122,300. At the beginning of the year, plan assets
were $1,691,900. During the year, contributions to the pension fund were
$120,000, and benefits paid were $200,000. Compute Warren's actual return on
plan assets.
Question
20
For 2010, Campbell Soup Company
had pension expense of $41 million and contributed $297 million to the pension
fund. Prepare Campbell Soup Company's journal entry to record pension expense
and funding.
Question
21
Lahey
corp. has three defined-benefit pension plans as follows.
Pension Assets(at Fair
Value)
|
obligation
|
|
Plan X
|
$639,000
|
$525,200
|
Plan Y
|
934,200
|
743,700
|
Plan Z
|
586,100
|
736,900
|
How
will Lahey report these multiple plans in its financial statements?
Pension
asset $
Pension
liability $
Question
22
For
2012, Sampsell Inc. computed its annual postretirement expense as $242,610.
Sampsell’s contrinution to the plan during 2012 was $181,070. Prepare
Sampsell’s 2012 entry to record postretirement expense. (List multiple
debit/credit entries from largest to smallest amunt, e.g. 10,5,2.)
Question
23
Wertz
Corporation decided at the beginning of 2012 to change from the
completed-contract method to the percentage-of-completion method for financial
reporting purposes. The company will continue to use completed-contract method
for tax purposes. For years prior to 2012, pre-tax income under the two methods
was as follows: percentage-of-completion $122,200, and completed-contract
$59,100. The tax rate is 33%. Prepare Wertz's 2012 journal entry to record the
change in accounting principle. (For
multiple debit/credit entries, list amounts from largest to smallest eg 10, 5,
3, 2.)
Question
24
In
2012, Bailey Corporation discovered that equipment purchased on January 1,
2010, for $110,000 was expensed at that time. The equipment should have been
depreciated over 5 years, with no salvage value. The effective tax rate is 31%.
Prepare Hiatt's 2012 journal entry to correct the error. (For multiple debit/credit entries, list
amounts from largest to smallest eg 10, 5, 3, 2.)
Question
25
At
January 1, 2012, Beilder Company reported retained earnings of $2,041,400. In
2012, Beilder discovered that 2011 depreciation expense was understated by
$409,200. In 2012, net income was $929,480 and dividends declared were
$221,200. The tax rate is 36%. Complete the 2012 retained earnings statement
for Beilder Company. (List amounts
from largest to smallest eg 10, 5, 3, 2.)
Question
26
Simmons Corporation owns
stock of Armstrong, Inc. Prior to 2012, the investment was accounted for using
the equity method. In early 2012, Simmons sold part of its investment in
Armstrong, and began using the fair value method. In 2012, Armstrong earned net
income of $86,200 and paid dividends of $99,800. Prepare Simmons's entries
related to Armstrong's net income and dividends, assuming Simmons now owns 11%
of Armstrong's stock. (For
multiple debit/credit entries, list amounts from largest to smallest eg 10, 5,
3, 2.)
Question
27
Manno Corporation has
the following information available concerning its postretirement benefit plan
for 2012.
Service cost
|
$41,510
|
Interest cost
|
46,760
|
Actual return on plan assets
|
30,750
|
Compute Manno's 2012
postretirement expense.
Question
28
Ravonette Corporation
issued 310 shares of $13 par value common stock and 140 shares of $47 par value
preferred stock for a lump sum of $17,600. The common stock has a market price
of $23 per share, and the preferred stock has a market price of $97 per share.
Prepare the journal entry to record the issuance. (List multiple debit/credit entries from largest to
smallest amount, e.g. 10, 5, 2. Round answers to zero decimal places, e.g.
16,210.)
Question
29
Garfield Company
purchased, as a held-to-maturity investment, $81,000 of the 9%, 12-year bonds
of Chester Corporation for $70,482, which provides an 11% return. Prepare
Garfield's journal entries for (a) the purchase of the investment and (b) the
receipt of annual interest and discount amortization. Assume effective interest
amortization is used. (Round
answers to zero decimal places, e.g. 25,000. List multiple debit/credit entries
from largest to smallest amount, e.g. 10, 5, 2.)
Question
30
Clydesdale Corporation
has a cumulative temporary difference related to depreciation of $597,100 at
December 31, 2012. This difference will reverse as follows: 2013, $46,300;
2014, $257,900; and 2015, $292,900. Enacted tax rates are 34% for 2013 and 2014,
and 40% for 2015. Compute the amount Clydesdale should report as a deferred tax
liability at December 31, 2012.
TUTORIAL
PREVIEW
Question
11
(a) The total purchase price of these
investments is:
Gonzalez: (9,900 X $36.85) + $1,980 = $366,795
Belmont: (5,500 X $57.20) + $3,707 = $318,307
Thep: (7,700 X $29.15) + $5,401 = $229,856
File name: ACC423 Final Exam.doc File type: doc PRICE: $50
