Reference no: EM131139106

Intermediate Accounting

1. Callable bonds
a. can be redeemed by the issuer at some time at a pre-specified price.
b. can be converted to stock.
c. mature in a series of payments.
d. None of these is correct.

2. The net amount of a bond liability that appears on the balance sheet is the
a. call price of the bond plus bond discount or minus bond premium.
b. face value of the bond plus related premium or minus related discount.
c. face value of the bond plus related discount or minus related premium.
d. maturity value of the bond plus related discount or minus related premium.

3. Which of the following shareholder rights is most commonly enhanced in an issue of preferred stock?
a. The right to vote for the board of directors
b. The right to maintain one's proportional interest in the corporation
c. The right to receive a full cash dividend before dividends are paid to other classes of Stock
d. The right to vote on major corporate issues

4. How would the declaration of a 10 percent stock dividend by a corporation affect each of the following on its books?
Retained Total Stock-
Earnings holders' Equity
a. Decrease No effect
b. Decrease Decrease
c. No effect Decrease
d. No effect No effect

5. Which of the following taxes is not included in the payroll tax expense of the employer?
a. State unemployment taxes
b. Federal unemployment taxes
c. FICA taxes
d. Federal income taxes

6. Which of the following payroll taxes are paid by the employer?
a. FICA taxes
b. Federal unemployment taxes
c. State unemployment taxes
d. All of these

7. Which of the following statements characterizes an operating lease?
a. The lessee records depreciation and interest.
b. The lessee records the lease obligation related to the leased asset.
c. The lessor transfers title of the leased property to the lessee for the duration of the lease term.
d. The lessor records depreciation and lease revenue.

8. One of the four general criteria for a capital lease is that the present value at the beginning of the lease term of the minimum lease payments equals or exceeds
a. the property's fair market value.
b. 90 percent of the property's fair market value.
c. 75 percent of the property's fair market value.
d. 50 percent of the property's fair market value.

9. One of the four general criteria for a capital lease specifies that the lease term be equal to or greater than
a. the estimated economic life of the property.
b. 90 percent of the estimated economic life of the property.
c. 75 percent of the estimated economic life of the property.
d. 50 percent of the estimated economic life of the property.

10. On December 1, 2011, Blue Inc. signed an operating lease for a warehouse for ten years at $24,000 per year. Upon execution of the lease, Blue paid $48,000 covering rent for the first two years. How much should be shown in Blue's income statement for the year ended December 31, 2011, as rent expense?
a. $0
b. $2,000
c. $24,000
d. $48,000

11. In a lease that is recorded as an operating lease by the lessee, the equal monthly rental payments should be
a. allocated between interest expense and depreciation expense.
b. allocated between a reduction of the liability for leased assets and interest expense.
c. recorded as a reduction in the liability for leased assets.
d. recorded as a rental expense.

12. In calculating diluted earnings per share, which of the following should not be considered?
a. The weighted average number of common shares outstanding
b. The amount of dividends declared on cumulative preferred shares
c. The amount of cash dividends declared on common shares
d. The number of common shares resulting from the assumed conversion of debentures outstanding

13. The main purpose of reporting diluted earnings per share is to
a. provide a comparison figure for debt holders.
b. indicate earnings shareholders will receive in future periods.
c. distinguish between companies with a complex capital structure and companies with a simple capital structure.
d. show the maximum possible dilution of earnings.

14. In determining earnings per share, interest expense, net of applicable income taxes, on\convertible debt which is dilutive should be
a. ignored for diluted earnings per share.
b. added back to net income for diluted earnings per share.
c. deducted from net income for diluted earnings per share.
d. none of these.

15. When computing diluted EPS for a company with a complex capital structure, what is the denominator in the computation?
a. Number of common shares outstanding at year-end
b. Weighted-average number of common shares outstanding
c. Weighted-average number of common shares outstanding plus all other potentially antidilutive securities
d. Weighted-average number of common shares outstanding plus all other potentially dilutive securities

16. When an investor uses the equity method to account for investments in common stock, cash dividends received by the investor from the investee should be recorded as
a. an increase in the investment account.
b. a deduction from the investment account.
c. dividend revenue.
d. a deduction from the investor's share of the investee's profits.

17. The Bee Corporation reported a $66,000 operating loss in 2011. In the preceding three years, Bee reported the following income before taxes and paid the indicated income taxes:

Year	Income	Taxes	Tax Rate
2008	$36,000	$10,800	30%
2009	24,000	8,400	35%
2010	48,000	16,800	35%

The amount of tax refund generated in 2011 arising from the tax carry back provisions of the current tax code would be
a. $23,100.
b. $22,500.
c. $21,300.
d. $19,200.

18. Noncash investing and financing activities, if material, are
a. reported in the statement of cash flows under the "all-financial-resources concept."
b. reported in the statement of cash flows only if the indirect method is used.
c. disclosed in a note or separate schedule accompanying the statement of cash flows.
d. not reported or disclosed because they have no impact on cash.

19. Which of the following is a noncash transaction that should be disclosed in a schedule accompanying the statement of cash flows?
a. Sale of an investment for cash
b. Purchase of a machine for cash
c. Issuance of common stock in exchange for land
d. Declaration and payment of a cash dividend on common stock

20. The amortization of a bond premium can correctly be presented in the statement of cash flows in which of the following ways?
a. A positive adjustment to net income in determining cash flows from operating activities
b. A use of cash in determining cash flows from investing activities
c. A source of cash in determining cash flows from financing activities
d. A negative adjustment to net income in determining cash flows from operating activities

21. Which of the following is an appropriate presentation of treasury stock?
a. As a marketable security
b. As a deduction at cost from total stockholders' equity
c. As a deduction at cost from total contingent liabilities
d. As a deduction at par from total stockholders' equity

22. Pending litigation would generally be considered a(n)
a. nonmonetary liability.
b. contingent liability.
c. estimated liability.
d. current liability.

23. A contingent liability should be recorded when
a. any lawsuit is actually filed against a company.
b. it is certain that funds are available to pay the amount of the claim.
c. it is probable that a liability has been incurred even though the amount of the loss cannot be reasonably estimated.
d. the amount of the loss can be reasonably estimated and it is probable prior to issuance of financial statements that a liability has been incurred.

24. If the percentage-of-completion method is used, what is the basis for determining the gross profit to be recognized in the second year of a three-year contract?
a. Cumulative actual costs incurred only
b. Incremental cost for the second year only
c. Cumulative actual costs and estimated costs to complete
d. No gross profit would be recognized in year 2

25. On January 1, 2015, Able Company leased a warehouse to Zachary under an operating lease for ten years at $80,000 per year, payable the first day of each lease year. Able paid $36,000 to a real estate broker as a finder's fee. The warehouse is depreciated at $20,000 per year. During 2015, Able incurred insurance and property tax expense totaling $15,000. Able's net rental income for 2015 should be?
a. $9,000
b. $41,400
c. $44,000
d. $45,000.