Part 1:
1. A publicly traded corporation has a defined benefit pension plan in place for its employees. Under generally accepted accounting principles, as a measure of the company's pension liability, the company should not use what type of benefit obligation?
2. What information about its pension plan would a company normally be required to disclose in the notes to the financial statements?
Part 2:
3. When a company decides to switch from LIFO to FIFO for inventory valuation, this change should be treated as what?
Part 3:
4. Which formula would a bank or an investor most likely use when evaluating a company's cash flows?
Part 4:
5. Companies following the full disclosure principle should report what?
6. Which of the following post-balance-sheet events would require adjustment of the accounts before issuance of the financial statements?
Part 5:
7. Problem - Know how to calculate earnings per share on common stock.
8. Problem - On an interest payment date, a company has bonds that were converted into shares of the company's common stock, each having a certain par value and a market value. There is an unamortized discount on the bonds. Using the book value method, the company would record what increase in paid-in capital in excess of par?
9. Problem -Company A issued bonds due in ten years. One detachable stock warrant entitling the holder to purchase shares of Company B's common stock was attached to each bond. At the date of issuance, the market value of the bonds, without the stock warrants, was quoted at a certain amount. The market value of each detachable warrant was quoted at a certain amount. What amount should record as paid-in capital from stock warrants?
10. Problem -A company granted stock options to officers and key employees for the purchase shares of the company's par common stock at a certain amount per share as additional compensation for services to be rendered over the next three years. The market price of common stock was a certain amount per share at the date of grant. The options are exercisable during a five-year period by grantees still employed by Morgan. The Black-Scholes option pricing model determines total compensation expense to be a certain amount. The journal entry to record the compensation expense related to these options for would include a credit to the Paid-in Capital - Stock Options account for what amount?
Part 6:
11. Problem -A company acquired bonds at a certain amount plus accrued interest. Interest is paid each twice a year. The bonds will be added to the company's available-for-sale portfolio. What is the amount to record as the cost of this debt investment?
12. Problem - A company acquired bonds. The bonds mature at a future date and interest is payable twice a year. There is a discount with an effective yield. The company uses the effective-interest method and plans to hold these bonds to maturity. How much should the company increase its Debt Investments account for these bonds?
13. Problem - A Company's trading securities portfolio, which is appropriately included in current assets, 2 companies with cost and fair value amounts. Ignoring income taxes, what amount should be reported as a charge against income in the income statement if the company is in the first year of operations?
14. Problem - Company A owns outstanding shares of company B. During the year, company B earns a certain amount and pays cash dividends of a certain amount. What amount should company A show in the investment account at December 31, if the beginning of the year balance in the account was a certain amount?
Part 7:
15. Problem - In its first year of operations, a company had Income (per books before income taxes) of a certain amount and Taxable income of a certain amount. The disparity between book income and taxable income is attributable to a temporary difference which will reverse. Assuming the enacted tax rates in effect, what should the company record as a net deferred tax asset or liability for the year?
16. Problem - In its first year of operations, a company had Income (per books before income taxes) of a certain amount. The following items are included in the pre-tax income: interest income from municipal bonds; accrued warranty costs; installment sales revenue; and prepaid rent expense. Assuming the enacted tax rate is in effect, what amount should the company record as a net current deferred tax asset or liability for the year?
17. Problem - A company reported a deferred tax liability of a certain amount which was attributable to a taxable temporary difference of a certain amount. The temporary difference is scheduled to reverse. During the year, a new tax law increased the corporate tax rate. Edwards should record this change by debiting what account and for what amount?
18. Problem - Operating income/(loss) and tax rates for a company are given. Assuming that the company opts to carry-back its NOL, what is the amount of income tax payable?
Part 8:
19. Problem - A company sponsors a defined-benefit pension plan. The following data relating to the plan is provided: Contributions to the plan, Service cost, Interest on projected benefit obligation, Amortization of prior service cost due to increase in benefits, Expected return on plan assets. What amount should be reported for pension expense?
20. Problem - A company sponsors a defined-benefit pension plan. Balance sheet data is provided: Plan assets (at fair value), Accumulated benefit obligation, Projected benefit obligation. Contributions were made to the plan during the year. What amount should the company report as its pension liability on its balance sheet?
Part 9:
21. Problem - A company acquired machinery at a certain cost. The company adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of a certain number of years, with no residual value. A decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense should be what amount?
22. Problem - A construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years are provided. Assuming a certain income tax rate for all years, the affect of this accounting change on prior periods should be reported by a credit of what amount and on what report?
23. Problem - A company purchased machinery. The entire cost was recorded as an expense. The machinery has an estimated useful life of a certain number of years and a certain salvage value. The company uses the straight-line method to account for depreciation expense. An error was discovered. Ignore income tax considerations. The company's income statement for the year ended December 31, should show the cumulative effect of this error in the amount of what?
Part 10:
24. Problem - Selected information from a company's accounting records is as follows: Proceeds from sale of land, Proceeds from long-term borrowings, Purchases of plant assets, Purchases of inventories, Proceeds from sale of common stock. What is the net cash provided (used) by investing activities?
25. Problem - Selected information from a company's accounting records is as follows: Proceeds from issuance of common stock, Proceeds from issuance of bonds, Cash dividends paid on common stock, Cash dividends paid on preferred stock paid, Purchases of treasury stock. What is the net cash provided (used) by financing activities for the year?
26. Problem - A company earned a certain amount of net income which included depreciation expense. In addition, the company experienced the following changes in account balances: Increase in accounts payable, Increase in inventory, Decrease in accounts receivable, Decrease in prepaid insurance. Based upon this information, what amount will be shown for net cash provided by operating activities?
Part 11:
27. Problem - The following information pertains to a company and its divisions for the year ended December 3: Sales to unaffiliated customers, Intersegment sales of products similar to those sold to unaffiliated customers, Interest earned on loans to other operating segments. The company and all of its divisions are engaged solely in manufacturing operations. The company has a reportable segment if that segment's revenue exceeds what amount?
28. Problem - A company paid property taxes on its factory building for the calendar year for a certain amount. The company estimates that total depreciation expense for the year will amount to a certain amount, and that 2013 year-end bonuses to employees will total a certain amount. In Bakers' interim income statement for the six months ended June 30, what is the total amount of expense relating to these three items that should be reported?