finance mcq homework-West Coast Corporation had 800,000 shares of common stock

1. Corresponds to CLO 1(a)
West Coast Corporation had 800,000 shares of common stock outstanding on
January 1, issued 200,000 shares on October 1, and had income applicable to
common stock of $2,865,000 for the year ended December 31, 2013. Rounded to the
nearest penny, earnings per share of common stock for 2013 would be
$2.86
$3.01
$3.37
$3.58

2. Corresponds to CLO 1(b)
On July 1, 2013, an interest payment date, $120,000 of Tally Corporation bonds
were converted into 3,100 shares of Tally Corporation common stock, each having
a par value of $35 and a market value of $42. There is $5,700 unamortized
discount on the bonds. Using the book value method, Tally would record
a $5,300 increase in paid-in capital in excess of par
a $5,800 increase in paid-in capital in excess of par
a $11,500 increase in paid-in capital in excess of par
a $15,900decrease in paid-in capital in excess of par

3. Corresponds to CLO 1(c)
Proceeds from an issue of debt securities having stock warrants should not be
allocated between debt and equity features when (Points : 1)
the market value of the warrants is not readily available.
the warrants issued with the debt securities are nondetachable.
the allocation would result in a discount on the debt security.
exercise of the warrants within the next few fiscal periods seems remote.

4. Corresponds to CLO 1(d)
On January 1, 2013, Morgan Corporation granted stock options to officers and
key employees for the purchase of 50,000 shares of the company’s $10 par common
stock at $25 per share as additional compensation for services to be rendered
over the next three years. The market price of common stock was $31 per share
at the date of grant. The options are exercisable during a five-year period
beginning January 1, 2016 by grantees still employed by Morgan. The
Black-Scholes option pricing model determines total compensation expense to be
$360,000. The journal entry to record the compensation expense related to these
options for 2013 would include a credit to the Paid-in Capital – Stock Options
account for (Points : 3)
$120,000
$180,000
$300,000
$360,000

5. Corresponds to CLO 2(a)
On July 1, 2013, Wilshire Corporation acquired 500, $1,000, 8% bonds at 96 plus
accrued interest. The bonds were dated April 1, 2013, and mature on March 31,
2018, with interest paid each September 30 and March 31. The bonds will be
added to Wilshire’s available-for-sale portfolio. The amount to record as the
cost of this debt investment on July 1, 2013 is (Points : 1)
$490,000
$485,000
$480,000
$540,000

6. Corresponds to CLO 2(b)
On January 1, 2013, Capital Corporation acquired for $400,000 of 10% bonds,
paying $376,100. The bonds mature January 1, 2024; interest is payable each
July 1 and January 1. The discount of $23,900 provides an effective yield of
11%. Capital Corporation uses the effective-interest method and plans to hold
these bonds to maturity. On July 1, 2013, Capital Corporation should increase
its Debt Investments account for these bonds by (round to the nearest dollar):
(Points : 1)
$4,000
$3,761
$1,195
$686

7. Corresponds to CLO 2(c)
Wright Company’s trading securities portfolio, which is appropriately included
in current assets, is as follows on December 31, 2013: Holmes Corporation –
cost of $300,000 and fair value of $240,000; Woods Corporation – cost of
$500,000 and fair value of $530,000. Ignoring income taxes, what amount should
be reported as a charge against income in Wright’s 2013 income statement if
2013 is Wright’s first year of operation?
$30,000 Unrealized Loss
$30,000 Unrealized Gain
$60,000 Unrealized Gain
$ -0-

8. Corresponds to CLO 2(d)
Canton Corporation owns 3,000 of the 10,000 outstanding shares of Wallis
Corporation. During 2013, Wallis Corporation earns $500,000 and pays cash
dividends of $100,000. What amount should Canton show in the investment account
at December 31, 2013 if the beginning of the year balance in the account was
$600,000? (Points : 3)
$600,000
$630,000
$720,000
$750,000

9. Corresponds to CLO 3(a)
Which of the following is a temporary difference classified as a revenue or
gain that is taxable after it is recognized in financial income? (Points : 2)
Subscriptions received in advance.
Interest received on a municipal obligation.
Prepaid rent received in advance.
Sales accounted for on the accrual basis for financial reporting purposes and
on the cash basis for tax purposes.

10. Corresponds to CLO 3(b)
In 2013, its first year of operations, Anderson Appliance Corporation had
Income (per books before income taxes) of $1,100,000. The following items are
included in Anderson’s pre-tax income: interest income from municipal bonds of
$50,000; accrued warranty costs, estimated to be paid in 2014, of $65,000; and
installment sales revenue of $60,000, which will be collected in 2014. In
addition, Anderson has on its books prepaid rent expense of $30,000, which will
be used in 2014. Assuming the enacted tax rate in effect for 2013 and 2014 is
40%, what amount should Anderson record as the net current deferred tax asset
or liability for the year ended December 31, 2013? (Points : 3)
$25,000 deferred tax asset
$25,000 deferred tax liability
$10,000 deferred tax asset
$10,000 deferred tax liability

11. Corresponds to CLO 3(c)
At December 31, 2013, Edwards Corporation reported a deferred tax liability of
$140,000 which was attributable to a taxable temporary difference of $400,000.
The temporary difference is scheduled to reverse in 2018. During 2014, a new
tax law increased the corporate tax rate from 35% to 40%. Edwards should record
this change by debiting (Points : 1)
Income Tax Expense for $14,000
Income Tax Expense for $20,000
Retained Earnings for $14,000
Retained Earnings for $20,000

12. Corresponds to CLO 3(d)
Operating income/(loss) and tax rates for Lombard Corporation for 2012 through
2015 were as follows: 2012: $150,000, 30%; 2013: $250,000, 35%; 2014:
($500,000), 35%; 2015: $700,000, 40%. Assuming that Lombard opts to carryback
its 2014 NOL, what is the amount of income tax payable at December 31, 2015?
(Points : 1)
$280,000
$240,000
$180,000
$80,000

13. Corresponds to CLO 4(a)
Granite Oaks Homebuilding, Inc. is a publicly traded corporation which 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,
Granite Oaks should not use
The projected benefit obligation.
The accumulated benefit obligation.
The vested benefit obligation.
Either the vested benefit obligation or accumulated benefit obligation.

14. Corresponds to CLO 4(b)
Hathaway, Inc. sponsors a defined-benefit pension plan. The following data
relates to the plan for 2013: Contributions to the plan, $450,000; Service
cost, $500,000; Interest on projected benefit obligation, $445,000;
Amortization of prior service cost due to increase in benefits, $85,000;
Expected return on plan assets, $280,000. What amount should be reported for
pension expense in 2013?
$300,000
$450,000
$750,000
$1,310,000

15. Corresponds to CLO 4(c)
Johnson, Inc. sponsors a defined-benefit pension plan. The following balance
sheet data relates to the plan on December 31, 2013: Plan assets (at fair
value), $1,000,000; Accumulated benefit obligation, $1,450,000; Projected
benefit obligation, $1,750,000. Contributions of $115,000 were made to the plan
during the year. What amount should Johnson report as its pension liability on
its balance sheet as of December 31, 2013?
$635,000
$750,000
$1,450,000
$1,750,000

18. Corresponds to CLO 5(b)
On January 1, 2011, Graham Corporation acquired machinery at a cost of
$600,000. Graham adopted the double-declining balance method of depreciation
for this machinery and had been recording depreciation over an estimated useful
life of 10 years, with no residual value. At the beginning of 2013, a decision
was made to change to the straight-line method of depreciation for the
machinery. The depreciation expense for 2013 should be
$76,800
$60,000
$48,000
$26,743

19. Corresponds to CLO 5(c)
During 2014, 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
follow. Completed-Contract: 2012, $595,000; 2013, $730,000; 2014, $810,000.
Percentage-of-Completion: 2012, $700,000; 2013, $850,000; 2014, $900,000.
Assuming an income tax rate of 40% for all years, the affect of this accounting
change on prior periods should be reported by a credit of
$135,000 on the 2014retained earnings statement
$189,000 on the 2014retained earnings statement
$135,000 on the 2014income statement
$189,000 on the 2014income statement

20. Corresponds to CLO 5(d)
On January 10, 2012, Montgomery Corporation purchased machinery that cost
$750,000. The entire cost was recorded as an expense. The machinery has an
estimated useful life of 10 years and a $30,000 salvage value. Montgomery uses
the straight-line method to account for depreciation expense. The error was
discovered on December 29, 2013. Ignore income tax considerations. Montgomery’s
income statement for the year ended December 31, 2013, should show the
cumulative effect of this error in the amount of
$648,000
$576,000
$504,000
$-0-

21. Corresponds to CLO 6(a)
Selected information from Trolley Corporation’s 2013 accounting records is as
follows: Proceeds from sale of land, $125,000; Proceeds from long-term
borrowings, $250,000; Purchases of plant assets, $60,000; Purchases of
inventories, $375,000; Proceeds from sale of Trolley common stock, $200,000.
What is the net cash provided (used) by investing activities for the year ended
December 31, 2013?
$15,000
$65,000
$140,000
$450,000

22. Corresponds to CLO 6(b)
Selected information from Maxwell Corporation’s 2013 accounting records is as
follows: Proceeds from issuance of common stock, $740,000; Proceeds from
issuance of bonds, $2,400,000; Cash dividends paid on common stock, $200,000;
Cash dividends paid on preferred stock paid, $80,000; Purchases of treasury
stock, $200,000.What is the net cash provided (used) by financing activities
for the year ended December 31, 2013?
$3,060,000
$2,940,000
$2,860,000
$2,660,000

23. Corresponds to CLO 6(c)
An increase in inventory balance would be reported in a statement of cash
flows, using the indirect method, as a(n)
addition to net income in arriving at net cash flow from operating activities.
deduction from net income in arriving at net cash flow from operating
activities.
cash outflow from investing activities.
cash outflow from financing activites.

24. Corresponds to CLO 6(d)
Which of the following formulas would a bank or an investormost likely use when
evaluating a company’s cash flows? (Points : 7)
Debt to equity ratio
Quick ratio
Current ratio
Cash debt coverage ratio

25. Corresponds to CLO 7(a)
Companies following the full disclosure principle (Points : 7)
Should report all information related to the entity’s business and operating
objectives.
Should report financial facts of sufficient importance to influence the
judgment and decisions of an informed user.
Should provide information about each account balance in the notes to the
financial statements.
May use the cash-basis of accounting in the financial statements, as long as
accrual-basis amounts are disclosed in the notes to the financial statements.

26. Corresponds to CLO 7(b)
The following information pertains to Nolen Corporation and its divisions for
the year ended December 31, 2013:

Segments Total Revenue (Unaffiliated)
A $600,000
B $100,000
C $500,000
D $650,000

Nolen has a reportable segment if that segment’s revenue exceeds (Points : 7)
$100,000
$0
$185,000
$65,000

27. Corresponds to CLO 7(c)
Under generally accepted accounting principles, (Points : 7)
all companies that issue an annual report should issue interim financial
reports.
the same accounting principles used for the annual report should be used for
interim reports.
the discrete view is the most appropriate approach to take in preparing interim
financial reports.
the integral approach is the most appropriate view to take in preparing interim
financial reports.