Hardest Banking Exam Quiz: MCQ!

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1. Bonds for which the owners' names are not registered with the issuing corporation are called

Explanation

Bearer bonds are bonds for which the owners' names are not registered with the issuing corporation. This means that the physical bond certificate itself is the proof of ownership, and whoever possesses the bond certificate is considered the owner. Bearer bonds are typically unsecured and can be easily transferred from one person to another, making them more anonymous and potentially more susceptible to theft or fraud.

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Hardest Banking Exam Quiz: MCQ! - Quiz

Tackle the Hardest Banking Exam Quiz with multiple-choice questions focused on finance and accounting principles. Dive into bond terminologies, bond types, and liability distinctions to enhance your financial acumen and prepare for professional certifications.

2. The conversion of bonds is most commonly recorded by the

Explanation

The conversion of bonds is most commonly recorded by the book value method. This method involves recording the conversion of bonds based on their original book value, which is the value at which the bonds were initially issued. This method ensures that the conversion does not affect the overall financial position of the company, as it does not consider any changes in the market value of the bonds. Instead, it focuses on the original cost of the bonds and adjusts the corresponding accounts accordingly.

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3. When the effective-interest method is used to amortize bond premium or discount, the periodic amortization will

Explanation

The effective-interest method is used to allocate bond premium or discount over the life of the bond. When bonds are issued at a discount, the periodic amortization will increase because the discount is being allocated over a longer period. Similarly, when bonds are issued at a premium, the periodic amortization will also increase because the premium is being allocated over a longer period. Therefore, the periodic amortization will increase if the bonds were issued at either a discount or a premium.

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4. If a company chooses the fair value option, a decrease in the fair value of the liability is recorded by crediting

Explanation

When a company chooses the fair value option, any decrease in the fair value of the liability is recorded by crediting Unrealized Holding Gain/Loss-Income. This is because the fair value option allows companies to report certain financial instruments at their fair value, with changes in fair value being recognized in the income statement. Therefore, when the fair value of a liability decreases, it is recorded as an unrealized holding loss in the income statement.

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5. Which of the following represents the total number of shares that a corporation may issue under the terms of its charter?

Explanation

Authorized shares refer to the maximum number of shares that a corporation is legally allowed to issue according to its charter. This number is specified in the company's articles of incorporation and represents the total pool of shares that can be issued to shareholders. Issued shares are the shares that have already been issued to shareholders, while unissued shares are the authorized shares that have not yet been issued. Outstanding shares are the total number of shares that are currently held by shareholders, including both issued and unissued shares.

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6. If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be

Explanation

If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be greater than if the straight-line method were used. This is because the effective-interest method allocates the total bond premium over the life of the bond based on the effective interest rate, which is higher in the earlier years. As a result, a larger portion of the premium is amortized in the earlier years, leading to higher interest expense compared to the straight-line method, where the same amount of premium is amortized each year.

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7. The interest rate written in the terms of the bond indenture is known as the

Explanation

The interest rate written in the terms of the bond indenture is referred to as the coupon rate, nominal rate, or stated rate. These terms are used interchangeably to describe the fixed interest rate that the bond issuer promises to pay to bondholders over the life of the bond. The coupon rate is typically expressed as a percentage of the bond's face value and is used to calculate the periodic interest payments that bondholders will receive.

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8. Fox Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%.One step in calculating the issue price of the bonds is to multiply the principal by the table value for

Explanation

To calculate the issue price of the bonds, the present value of the future cash flows needs to be determined. Since the bonds pay interest semiannually, there will be 20 periods (10 years * 2 periods per year). The yield is 8%, so the interest rate to be used in the present value calculation is 4% (8% / 2). Therefore, the correct answer is 20 periods and 4% from the present value of 1 table.

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9. Early extinguishment of bonds payable, which were originally issued at a premium, is made by purchase of the bonds between interest dates. At the time of reacquisition

Explanation

The given answer is correct because when a company extinguishes bonds payable before their maturity date, any costs of issuing the bonds must be amortized up to the purchase date. Additionally, the premium, which was originally paid to purchase the bonds at a higher price than their face value, must also be amortized up to the purchase date. Lastly, interest must be accrued from the last interest date to the purchase date. Therefore, all of the given answers are correct.

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10. A primary source of stockholders' equity is

Explanation

Both income retained by the corporation and contributions by stockholders are primary sources of stockholders' equity. Income retained by the corporation refers to the profits that the company has earned but not distributed to the shareholders as dividends. These retained earnings increase the stockholders' equity. On the other hand, contributions by stockholders refer to the additional capital invested by shareholders into the company, such as purchasing additional shares or making direct investments. These contributions also increase the stockholders' equity. Therefore, both retained earnings and contributions by stockholders contribute to the overall stockholders' equity of a corporation.

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11. Which of the following is not a characteristic of a noncompensatory stock purchase plan?

Explanation

The correct answer is "All of these are characteristics." This means that all the options mentioned in the question are characteristics of a noncompensatory stock purchase plan. The plan is open to almost all full-time employees, it offers a small discount from market price, and it does not have any substantive option feature.

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12. Dilutive convertible securities must be used in the computation of

Explanation

Dilutive convertible securities are financial instruments that have the potential to increase the number of shares outstanding if they are converted into common stock. These securities can dilute the ownership of existing shareholders and impact the earnings per share (EPS) calculation. Therefore, they should be considered only in the computation of diluted earnings per share. Basic earnings per share does not take into account the potential dilution from convertible securities.

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13. The debt to assets ratio is computed by dividing

Explanation

The debt to assets ratio is a financial metric that measures the proportion of a company's total liabilities to its total assets. It indicates the percentage of a company's assets that are funded by debt. By dividing total liabilities by total assets, we can determine the extent to which a company relies on borrowed funds to finance its operations and investments. A higher debt to assets ratio suggests a higher level of financial risk, as it indicates a larger proportion of debt relative to assets. Conversely, a lower ratio indicates a stronger financial position with a higher proportion of assets funded by equity.

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14. Which one of the following disclosures should be made in the equity section of the balance sheet, rather than in the notes to the financial statements?

Explanation

Liquidation preferences should be made in the equity section of the balance sheet because they represent the priority of claims that equity shareholders have in the event of liquidation. This information is important for users of the financial statements to understand the rights and preferences of different classes of equity shareholders. By including this disclosure in the equity section, it provides a clear and concise overview of the liquidation preferences without the need to refer to the notes to the financial statements.

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15. Theoretically, the costs of issuing bonds could be

Explanation

The costs of issuing bonds can be expensed when incurred, reported as a reduction of the bond liability, or debited to a deferred charge account and amortized over the life of the bonds. All of these options are valid methods for accounting for the costs of issuing bonds, depending on the company's accounting policies and preferences.

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16. An example of an item which is not a liability is

Explanation

Dividends payable in stock are not considered a liability because they represent a distribution of profits to shareholders rather than an obligation to pay a debt or fulfill a contractual obligation. Dividends payable in stock are typically recorded as a reduction in retained earnings and an increase in common stock or additional paid-in capital accounts. This means that they do not create a future financial obligation for the company and therefore are not classified as a liability.

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17. Treasury shares are shares

Explanation

Treasury shares refer to shares that have been issued by a corporation but are not currently held by any shareholders. These shares are typically repurchased by the corporation and held as an investment. Therefore, the correct answer is "issued but not outstanding."

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18. Which of the following features of preferred stock makes it more like a debt than an equity instrument?

Explanation

Redeemable refers to the feature of preferred stock that allows the issuer to repurchase the stock from the shareholder at a predetermined price. This feature makes preferred stock more like a debt instrument because it provides the shareholder with a fixed return of capital, similar to the repayment of a loan. In contrast, equity instruments typically do not have a fixed repayment feature and do not guarantee the return of the initial investment. Therefore, the redeemable feature aligns preferred stock more closely with debt instruments rather than equity instruments.

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19. At the date of the financial statements, common stock shares issued would exceed common stock shares outstanding as a result of the

Explanation

When a company purchases its own shares of stock on the open market, those shares are considered treasury stock. This reduces the number of outstanding shares because the purchased shares are no longer held by shareholders. As a result, the number of issued shares (including both outstanding and treasury stock) will be greater than the number of outstanding shares. Therefore, the correct answer is the purchase of treasury stock.

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20. In the diluted earnings per share computation, the treasury stock method is used for options and warrants to reflect assumed reacquisition of common stock at the average market price during the period. If the exercise price of the options or warrants exceeds the average market prIn applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants a. are used to calculate the number of common shares repurchased at the average market price, when computing diluted earnings per share. ice, the computation would

Explanation

The treasury stock method is used to calculate the dilutive effect of stock options and warrants on diluted earnings per share. If the exercise price of the options or warrants exceeds the average market price, it means that the options or warrants are out of the money and would not be exercised by the holders. In this case, including these options or warrants in the computation would not result in any dilution of earnings per share. Therefore, the correct answer is that the computation would be antidilutive.

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21. Common stockholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders

Explanation

Common stockholders of a business enterprise are considered the residual owners because they bear the ultimate risks and uncertainties associated with the business. This means that they are the ones who are responsible for any losses or liabilities the business may incur. However, they also have the potential to receive the benefits of enterprise ownership, such as dividends and capital appreciation, if the business performs well. This makes them the true owners of the enterprise, with the ability to reap the rewards or suffer the consequences of its operations.

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22. How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?

Explanation

When using the cost method of recording treasury stock transactions, a "gain" from the sale of treasury stock should be reflected as paid-in capital from treasury stock transactions. This is because the cost method records treasury stock at its cost, and any gain from the sale of treasury stock represents an increase in the amount of paid-in capital. Therefore, it is appropriate to reflect the gain in the paid-in capital account rather than as ordinary earnings or an increase in the amount shown for common stock.

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23. An entry is not made on the

Explanation

On the date of record, an entry is made to record the shareholders who are eligible to receive the declared dividend. This date is set by the company and shareholders who are listed on this date will receive the dividend payment. The date of record is important for determining the ownership of shares and ensuring that only eligible shareholders receive the dividend.

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24. Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?

Explanation

When a company issues a stock dividend, it means that additional shares of stock are being distributed to the shareholders. In this case, Quirk Corporation issued a 100% stock dividend, which means that the shareholders received additional shares equal to the number of shares they already owned. The par value of the stock is the nominal value assigned to each share, which in this case is $10. Since the question asks about the amount at which retained earnings should be capitalized for the additional shares issued, the correct answer is the par value. This means that the retained earnings should be increased by the par value of the additional shares issued.

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25. The rate of return on common stock equity is calculated by dividing

Explanation

The rate of return on common stock equity is calculated by dividing net income less preferred dividends by average common stockholders' equity. This calculation takes into account the net income earned by the company after deducting any preferred dividends paid out to shareholders, and compares it to the average common stockholders' equity over a specific period of time. This ratio helps to measure the profitability and efficiency of the company in generating returns for its common shareholders.

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26. Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a premium, this indicates that

Explanation

If the bonds were issued at a premium, it indicates that the nominal rate of interest exceeded the market rate. This means that the bonds were sold at a price higher than their face value, indicating that investors were willing to pay more for the bonds due to the higher interest rate offered. The premium reflects the difference between the higher nominal rate and the lower market rate, showing that the nominal rate of interest exceeded the market rate.

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27. Convertible bonds

Explanation

Convertible bonds are a type of bond that allows the bondholder to convert the bond into a specified number of equity securities, such as common stock, at a predetermined price. This feature provides the bondholder with the potential to benefit from any appreciation in the value of the underlying equity securities. Unlike other types of bonds, convertible bonds give the bondholder the option to convert their investment into equity, providing them with the opportunity for potential capital gains.

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28. If a company offers additional considerations to convertible bondholders in order to encourage conversion, it is called a(an

Explanation

When a company offers additional considerations to convertible bondholders in order to encourage conversion, it is referred to as a "sweetener." This term is commonly used in finance to describe incentives or benefits provided to bondholders to entice them to convert their bonds into equity shares. The sweetener can come in various forms, such as a higher conversion ratio, a lower conversion price, or additional financial incentives. By providing these sweeteners, the company aims to incentivize bondholders to convert their bonds, which can be beneficial for the company in terms of reducing debt and increasing equity.

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29. Corporations issue convertible debt for two main reasons. One is the desire to raise equity capital that, assuming conversion, will arise when the original debt is converted. The other is

Explanation

Many corporations can obtain debt financing at lower rates. This is a reason why corporations issue convertible debt. By issuing convertible debt, corporations can take advantage of the lower interest rates on debt financing compared to equity financing. This allows them to save on interest expenses and potentially reduce their overall cost of capital. Additionally, issuing convertible debt provides flexibility as it can be converted into equity if desired, providing the opportunity to raise equity capital in the future.

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30. The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be

Explanation

When preferred stock is converted into common stock, any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be treated as a direct reduction of retained earnings. This means that the amount should be deducted directly from the company's retained earnings account on the balance sheet. It should not be reflected as income or as an extraordinary item, and it should not be treated as a prior period adjustment.

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31. When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be

Explanation

When a bond issue is sold on June 1 with interest payment dates of May 1 and November 1, the issuer will receive cash that includes the accrued interest from the last interest payment date (May 1) to the date of sale (June 1). Therefore, the amount of cash received by the issuer will be increased by accrued interest from May 1 to June 1.

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32. "In-substance defeasance" is a term used to refer to an arrangement whereby

Explanation

"In-substance defeasance" refers to a situation where a company ensures the future repayment of its long-term debt by placing purchased securities in an irrevocable trust. This arrangement allows the company to set aside funds to fulfill its debt obligations, providing a sense of security to the lender. By placing the securities in a trust, the company legally commits to using those assets for debt repayment, effectively removing the debt from its balance sheet. This method allows the company to extinguish the debt before its due date and reduces the risk associated with defaulting on the debt.

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33. A debt instrument with no ready market is exchanged for property whose fair value is currently indeterminable. When such a transaction takes place

Explanation

When a debt instrument with no ready market is exchanged for property whose fair value is currently indeterminable, the present value of the debt instrument must be approximated using an imputed interest rate. This is because the fair value of the property is not known, so the value of the debt instrument needs to be estimated based on an assumed interest rate. This approximation allows for the recording of the transaction on the books of the parties involved, even though the fair value of the property is not yet evident.

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34. Note disclosures for long-term debt generally include all of the following except

Explanation

The correct answer is "names of specific creditors." In the note disclosures for long-term debt, information about assets pledged as security, call provisions and conversion privileges, and restrictions imposed by the creditor are typically provided. However, the names of specific creditors are usually not disclosed in these note disclosures.

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35. Total stockholders' equity represents

Explanation

Total stockholders' equity represents a claim against a portion of the total assets of a company. This means that the owners or stockholders have a right to a portion of the company's assets after all liabilities have been settled. It is the residual interest in the assets of the company after deducting liabilities. Stockholders' equity includes contributions made by the owners as well as retained earnings. It does not represent the maximum amount that can be borrowed by a company or only the amount of earnings retained in the business.

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36. Stock that has a fixed per-share amount printed on each stock certificate is called

Explanation

Par value stock is a type of stock that has a fixed per-share amount printed on each stock certificate. This value is determined by the company and represents the minimum price at which the stock can be issued. It is used for accounting and legal purposes, but it does not necessarily reflect the actual market value of the stock. Par value stock allows investors to know the minimum value of their shares and provides a basis for calculating dividends and voting rights.

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37. Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as

Explanation

Cumulative preferred dividends in arrears should be shown in a corporation's balance sheet as a footnote. This is because cumulative preferred dividends in arrears represent a liability to the corporation, but they do not directly impact the current liabilities or stockholders' equity. Instead, they are disclosed in a footnote to provide transparency and inform the users of the financial statements about the existence and amount of these unpaid dividends.

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38. In computations of weighted average of shares outstanding, when a stock dividend or stock split occurs, the additional shares are

Explanation

When computing the weighted average of shares outstanding, the additional shares resulting from a stock dividend or stock split are considered outstanding at the beginning of the earliest year reported. This means that the additional shares are included in the calculation from the start of the earliest year for which data is being analyzed. This ensures that the impact of the stock dividend or split is properly accounted for in the weighted average calculation.

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39. Which of the following must be disclosed relative to long-term debt maturities and sinking fund requirements?

Explanation

The amount of future payments for sinking fund requirements and long-term debt maturities during each of the next five years must be disclosed because it provides information about the cash outflows that the company will need to make in the future to satisfy its debt obligations. This information is important for investors and creditors to assess the company's ability to meet its financial obligations and manage its debt. The present value of future payments and scheduled interest payments are also relevant, but they do not encompass the full extent of the company's debt obligations like the amount of future payments does.

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40. What effect does the issuance of a 2-for-1 stock split have on each of the following?                  Par Value per Share              Retained Earnings

Explanation

A 2-for-1 stock split does not have any effect on the par value per share. The par value per share is a nominal value assigned to each share of stock and is determined by the company at the time of issuance. The stock split does not change the par value per share.

However, a 2-for-1 stock split does not have any effect on retained earnings either. Retained earnings are the accumulated profits of a company that have not been distributed to shareholders as dividends. A stock split does not impact the company's earnings or its ability to retain earnings, so the retained earnings remain unaffected.

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41. The accounting problem in a lump sum issuance is the allocation of proceeds between the classes of securities. An acceptable method of allocation is

Explanation

In a lump sum issuance, the accounting problem arises when determining how to allocate the proceeds between the different classes of securities. The pro forma method, which involves estimating the fair value of each class of securities, is one acceptable approach. The proportional method, on the other hand, allocates the proceeds based on the relative fair values of each class of securities. The incremental method, another acceptable approach, allocates the proceeds based on the incremental fair value of each class of securities compared to the total fair value of all classes combined. Therefore, either the proportional method or the incremental method can be used to address the allocation issue in a lump sum issuance.

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42. The cumulative feature of preferred stock

Explanation

The correct answer states that the cumulative feature of preferred stock requires that dividends not paid in any year must be made up in a later year before dividends are distributed to common shareholders. This means that if a company is unable to pay dividends to preferred stockholders in a particular year, it is obligated to make up for those unpaid dividends in the future before distributing dividends to common shareholders. This feature ensures that preferred stockholders receive their entitled dividends, even if there are temporary financial difficulties.

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43. A dividend which is a return to stockholders of a portion of their original investments is a

Explanation

A liquidating dividend is a return to stockholders of a portion of their original investments when a company is winding up its operations and distributing its assets. This type of dividend is typically paid out when a company is liquidating or selling off its assets to pay off its debts and obligations. It is different from regular dividends, which are usually paid out of a company's profits. A liquidating dividend signifies the end of a company's existence and the return of capital to its shareholders.

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44. When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be

Explanation

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be reflected currently in income, but not as an extraordinary item. This means that the difference should be recognized as a regular item in the income statement, rather than being classified as an extraordinary event. Extraordinary items are reserved for rare and unusual events that are not expected to recur in the normal course of business. Therefore, the correct answer states that the difference should be reflected in income, but not as an extraordinary item.

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45. If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will

Explanation

If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will exceed what it would have been had the effective-interest method of amortization been used. This is because the straight-line method of amortization allocates the same amount of bond discount to each period, resulting in higher interest expense in the earlier years. On the other hand, the effective-interest method of amortization allocates a higher amount of bond discount to the earlier periods, resulting in lower interest expense in those years. Therefore, interest expense will be higher with the straight-line method compared to the effective-interest method in the earlier years.

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46. If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a

Explanation

When bonds are issued between interest dates, the issuing corporation needs to account for the interest expense that will accrue between the date of issuance and the next interest payment date. This is done by crediting the Interest Expense account. The corporation will later debit the Interest Expense account and credit the Interest Payable account when the interest payment is made. Therefore, the correct answer is credit to Interest Expense.

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47. Proceeds from an issue of debt securities having stock warrants should not be allocated between debt and equity features when

Explanation

When the warrants issued with the debt securities are nondetachable, the proceeds from the issue should not be allocated between debt and equity features. This means that the warrants cannot be separated from the debt securities and traded independently. Therefore, it would not be appropriate to allocate the proceeds between debt and equity features in this case.

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48. Stock warrants outstanding should be classified as

Explanation

Stock warrants outstanding should not be classified as liabilities, reductions of capital contributed in excess of par value, or assets. Stock warrants are financial instruments that give the holder the right to purchase a specific number of shares at a predetermined price within a specified time period. They are considered equity instruments and are typically classified as either equity or additional paid-in capital on the balance sheet. Therefore, the correct answer is "None of these are correct."

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49. A corporation issues bonds with detachable warrants. The amount to be recorded as paid-in capital is preferably

Explanation

The amount to be recorded as paid-in capital is based on the relative market values of the two securities involved. This means that the amount will depend on the market value of both the bonds and the detachable warrants. The excess of the proceeds over the face amount of the bonds may not accurately reflect the true value of the securities, and recording zero or equal to the market value of the warrants may not be appropriate without considering the relative market values. Therefore, the best approach is to base the amount on the relative market values of the two securities involved.

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50. The date on which to measure the compensation element in a stock option granted to a corporate employee ordinarily is the date on which the employee

Explanation

The correct answer is "is granted the option." The compensation element in a stock option is typically measured on the date the employee is granted the option. This means that the value of the option is determined at the time it is given to the employee, rather than any other point in time such as when the employee exercises the option or fulfills all conditions. The date of grant is important because it establishes the starting point for calculating the compensation element and determining the employee's potential gain from the stock option.

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51. Which of the following is an advantage of a restricted-stock plan?

Explanation

A restricted-stock plan is a type of compensation plan where employees are granted company stock that is subject to certain restrictions or conditions. This plan can be advantageous as it can incentivize employees to stay with the company and contribute to its success, thereby creating new job opportunities. By granting employees stock, they have a vested interest in the company's performance and are more likely to work towards its growth and profitability. This can lead to the company expanding and creating new positions to accommodate its growth.

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52. In 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 the

Explanation

not-available-via-ai

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53. When computing diluted earnings per share, convertible bonds are

Explanation

Convertible bonds are assumed to be converted into common stock only if they are dilutive. Dilutive convertible bonds are those that, when converted, would decrease earnings per share. If the conversion of the bonds would increase earnings per share, they are considered antidilutive and are not assumed to be converted. Therefore, when computing diluted earnings per share, only the dilutive convertible bonds are taken into account.

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54. The times interest earned ratio is computed by dividing

Explanation

The correct answer is income before income taxes and interest expense by interest expense. This ratio helps determine a company's ability to cover its interest obligations with its earnings. By dividing income before income taxes and interest expense by interest expense, we can assess how many times a company's earnings can cover its interest payments. A higher ratio indicates a greater ability to meet interest obligations, while a lower ratio may suggest financial difficulties.

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55. The term used for bonds that are unsecured as to principal is

Explanation

Debenture bonds are a type of bond that is unsecured as to principal. This means that there is no specific asset or property pledged as collateral for the bond. Instead, debenture bonds rely on the general creditworthiness and reputation of the issuer to repay the principal amount. Unlike mortgage bonds, which are secured by specific properties, debenture bonds do not have any specific assets backing them. Indebenture bonds and registered bonds are not commonly used terms in finance and do not accurately describe the concept of unsecured bonds.

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56. The residual interest in a corporation belongs to the

Explanation

The residual interest in a corporation refers to the remaining assets after all debts and obligations have been paid off. Common stockholders are the owners of a corporation and have a claim on these residual assets. Therefore, the correct answer is common stockholders.

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57. Bonds that pay no interest unless the issuing company is profitable are called

Explanation

Income bonds are a type of bond that pay no interest unless the issuing company is profitable. This means that if the company is not making a profit, the bondholders will not receive any interest payments. However, if the company is profitable, the bondholders will receive interest payments based on the company's earnings. This type of bond is often used by companies that have a higher risk of not being profitable, as it provides some protection to bondholders in case of financial difficulties.

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58. Gains on sales of treasury stock (using the cost method) should be credited to

Explanation

When a company sells treasury stock at a price higher than its cost, it generates a gain. This gain represents the excess amount received from the sale compared to the cost of the treasury stock. Since treasury stock is considered a contra-equity account, gains on its sale should be credited to paid-in capital from treasury stock. This account represents the amount of capital contributed by shareholders when repurchasing their own shares. Therefore, crediting the gain to paid-in capital from treasury stock accurately reflects the increase in shareholders' equity resulting from the sale.

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59. If management wishes to "capitalize" part of the earnings, it may issue a

Explanation

A stock dividend is a distribution of additional shares to existing shareholders, which increases the number of shares outstanding without affecting the total value of the company. By issuing a stock dividend, management can capitalize part of the earnings by converting them into additional shares. This allows the company to reward shareholders without using cash or other assets.

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60. The balance in Common Stock Dividend Distributable should be reported as a(n)

Explanation

The balance in Common Stock Dividend Distributable should be reported as an addition to capital stock because it represents the amount of dividends declared by a company that have not yet been paid to shareholders. This balance is considered a temporary liability until the dividends are actually distributed to the shareholders, at which point it will reduce the company's cash and be transferred to the capital stock account. Therefore, it is appropriate to classify it as an addition to capital stock.

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61. A feature common to both stock splits and stock dividends is

Explanation

Both stock splits and stock dividends result in an increase in the number of shares outstanding without any change in the total stockholders' equity. In a stock split, the number of shares is increased by a certain ratio, while in a stock dividend, additional shares are distributed to existing shareholders. However, the value of each share is adjusted proportionally to maintain the same total value of the stockholders' equity. Therefore, both actions do not impact the overall equity position of the corporation.

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62. The major difference between convertible debt and stock warrants is that upon exercise of the warrants

Explanation

Upon exercise of the warrants, the holder has to pay a certain amount of cash to obtain the shares. This means that in order to acquire the shares, the warrant holder must make a cash payment to the company. This is different from convertible debt, where the conversion of debt into equity does not require a cash payment. Instead, the debt is simply converted into shares of stock.

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63. Which of the following is not a characteristic of a noncompensatory stock option plan?

Explanation

The given answer, "Unlimited time period permitted for exercise of an option as long as the holder is still employed by the company," is not a characteristic of a noncompensatory stock option plan. Noncompensatory stock option plans typically have a specified exercise period, after which the options expire if not exercised. Unlimited time periods for exercise would make the plan compensatory, as it allows employees to potentially benefit from future increases in the stock price without any risk.

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64. The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as

Explanation

When debt is extinguished early, any gain or loss is treated as a difference between the reacquisition price and the net carrying amount of the debt. This difference should be recognized in the period of redemption. In other words, if the debt is repurchased at a price higher or lower than its carrying amount, the resulting gain or loss should be recognized at the time of redemption. This method ensures that the financial statements accurately reflect the impact of the early extinguishment of debt on the company's financial position.

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65. When a note payable is exchanged for property, goods, or services, the stated interest rate is presumed to be fair unless

Explanation

When a note payable is exchanged for property, goods, or services, the stated interest rate is presumed to be fair unless any of the following conditions are met: no interest rate is stated, the stated interest rate is unreasonable, or the stated face amount of the note is materially different from the current cash sales price for similar items or from the current fair value of the note. In other words, if any of these conditions are present, it suggests that the stated interest rate may not be fair or reasonable. Therefore, any of these answers could be correct in determining whether the stated interest rate is presumed to be fair or not.

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66. The pre-emptive right of a common stockholder is the right to

Explanation

The pre-emptive right of a common stockholder refers to their right to purchase additional shares of stock in the company before it is offered to other investors. This allows common stockholders to maintain their proportional ownership in the company and prevents dilution of their ownership stake. Therefore, the correct answer is that common stockholders have the right to share proportionately in any new issues of stock of the same class.

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67. In a corporate form of business organization, legal capital is best defined as

Explanation

Legal capital in a corporate form of business organization refers to the minimum amount of capital that a company must maintain in order to protect creditors. It is typically set by the state of incorporation and represents the par value of all capital stock issued by the company. This value is important because it ensures that there is a certain level of financial stability and assets available to cover any debts or liabilities. It is not related to the amount of capital allowed by the federal government or the total capital raised by the corporation within SEC limits.

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68. Stockholders' equity is generally classified into two major categories:

Explanation

Stockholders' equity represents the ownership interest in a company. It is divided into two major categories: earned capital and contributed capital. Earned capital refers to the portion of equity that is generated through the company's operations and profits. This includes retained earnings, which are the accumulated profits that have not been distributed to shareholders as dividends. Contributed capital, on the other hand, represents the equity that is contributed by the shareholders through investments in the company, such as through the purchase of common stock. Therefore, the correct answer is earned capital and contributed capital.

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69. A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

Explanation

When a company declares a liquidating dividend, it is distributing its assets to shareholders as a return of their investment. This means that the company will be reducing its paid-in capital, which represents the amount of money contributed by shareholders in exchange for shares of the company's stock. Therefore, the journal entry to record the declaration of a liquidating dividend should include a debit to a paid-in capital account.

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70. The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the

Explanation

A bond indenture is a legal document that outlines the terms and conditions of a bond agreement between the issuer of the bonds and the lender. It includes details such as the interest rate, maturity date, repayment terms, and any covenants or restrictions placed on the issuer. This document serves as a binding contract between the two parties and provides clarity and protection for both the issuer and the lender.

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71. Which of the following best describes a possible result of treasury stock transactions by a corporation?

Explanation

Treasury stock transactions refer to when a corporation buys back its own stock from shareholders. This can result in a decrease in retained earnings because the money used to repurchase the stock is taken out of the company's earnings. However, it cannot increase retained earnings because the repurchased stock is considered to be "retired" and no longer counts as part of the company's equity. Therefore, the correct answer is that treasury stock transactions may decrease but not increase retained earnings.

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72. According to the FASB, redeemable preferred stock should be

Explanation

According to the FASB (Financial Accounting Standards Board), redeemable preferred stock should be included as a liability. This is because redeemable preferred stock represents an obligation of the company to redeem the shares at a future date or at the option of the shareholder. It is similar to a debt instrument and is therefore classified as a liability on the balance sheet rather than being included with common stock or as a contra item in stockholders' equity.

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73. Cash dividends are paid on the basis of the number of shares

Explanation

Cash dividends are paid on the basis of the number of shares outstanding. This means that only the shares that are currently held by shareholders and not held as treasury shares are eligible to receive cash dividends. Shares that have been authorized or issued but are not currently held by shareholders are not considered when determining the amount of cash dividends to be paid.

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74. Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to

Explanation

The correct answer is "the market rate multiplied by the beginning-of-period carrying amount of the bonds." Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is calculated based on the market rate of interest and the carrying amount of the bonds at the beginning of the period. This method ensures that the interest expense recognized over the life of the bond reflects the effective interest rate rather than the nominal rate.

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75. The conversion of preferred stock is recorded by the

Explanation

The conversion of preferred stock is recorded by the book value method. This method involves converting the preferred stock at its book value, which is the value reported on the balance sheet. The book value is calculated by dividing the total equity by the number of outstanding shares. This method ensures that the conversion is recorded based on the actual value of the preferred stock, as reported in the company's financial statements.

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76. Treasury bonds should be shown on the balance sheet as

Explanation

Treasury bonds should be shown on the balance sheet as a deduction from bonds payable issued to arrive at net bonds payable and outstanding because treasury bonds are bonds that have been repurchased by the issuing company. By deducting the treasury bonds from the bonds payable, it reflects the reduction in the company's outstanding debt. This allows for a more accurate representation of the company's net bonds payable and outstanding on the balance sheet.

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77. Compensation expense resulting from a compensatory stock option plan is generally

Explanation

Compensation expense resulting from a compensatory stock option plan is generally recognized in the period of exercise. This means that the expense is recorded when the employee exercises their stock options and becomes entitled to the shares. The expense is not recognized in the period of grant, as the employee does not yet have the right to exercise the options at that time. Similarly, the expense is not allocated over the employee's service life to retirement, as it is recognized when the employee actually exercises the options. Finally, the expense is not allocated to the periods of the employee's service life, but rather to the periods benefited by the employee's required service, which is typically the period between the grant date and the exercise date.

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78. A corporation borrowed money from a bank to build a building. The long-term note signed by the corporation is secured by a mortgage that pledges title to the building as security for the loan. The corporation is to pay the bank $80,000 each year for 10 years to repay the loan. Which of the following relationships can you expect to apply to the situation?

Explanation

This relationship can be expected because as the loan is outstanding, the corporation will be paying off the principal amount of the loan through the annual payments. As the principal amount decreases, the interest expense will also decrease over time. This is because interest is calculated based on the outstanding balance of the loan. Therefore, the portion of the annual payment applied to the loan principal will increase each period, while the amount of interest expense will decrease.

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79. A project financing arrangement refers to:

Explanation

A project financing arrangement refers to an arrangement where a company creates a special-purpose entity to perform a special project. This means that the company sets up a separate entity specifically for the purpose of carrying out a particular project. This arrangement allows the company to isolate the risks and liabilities associated with the project, ensuring that the project's success or failure does not impact the overall financial health of the company. It also allows for more efficient management and allocation of resources for the project.

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80. A company uses income from continuing operations to determine whether potential common stock is dilutive or antidilutive, and this is referred to a

Explanation

The company uses income from continuing operations to determine whether potential common stock is dilutive or antidilutive. This is referred to as the control number because it helps the company assess the impact of potential stock issuances on its earnings per share and overall financial performance. By comparing the income from continuing operations with the potential number of shares, the company can determine whether the stock issuance will have a dilutive or antidilutive effect on the earnings per share.

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81. The distribution of stock rights to existing common stockholders will increase paid-in capital at the      Date of Issuance          Date of Exercise           of the Rights                of the Rights

Explanation

The distribution of stock rights to existing common stockholders will not increase paid-in capital at the Date of Issuance, but it will increase paid-in capital at the Date of Exercise. This means that when the stock rights are initially distributed, there is no impact on paid-in capital. However, when the stock rights are exercised and new shares are issued, the proceeds from the exercise are recorded as an increase in paid-in capital.

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82. Direct costs incurred to sell stock such as underwriting costs should be accounted for as:1.   a reduction of additional paid-in capital.2.   an expense of the period in which the stock is issued.3.   an intangible asset.

Explanation

Direct costs incurred to sell stock such as underwriting costs should be accounted for as a reduction of additional paid-in capital. This is because underwriting costs are considered as a cost of issuing stock and are directly related to the sale of stock. Therefore, they should be deducted from the additional paid-in capital, which represents the amount received from investors in excess of the stock's par value. This treatment ensures that the costs are properly allocated and do not inflate the reported additional paid-in capital.

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83. Fox Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%.Another step in calculating the issue price of the bonds is to 

Explanation

not-available-via-ai

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84. With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure?

Explanation

An ownership interest consisting solely of common stock would be most indicative of a simple capital structure. This is because common stock represents the basic ownership in a company and does not have any complex features or rights attached to it. It does not include preferred stock or convertible securities, which can have additional features that complicate the computation of earnings per share. Additionally, having earnings derived from one primary line of business does not necessarily indicate a simple capital structure, as the ownership composition could still be complex.

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85. Long-term debt that matures within one year and is to be converted into stock should be reported

Explanation

not-available-via-ai

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86. In applying the treasury stock method to determine the dilutive effect of stock options and warrants, the proceeds assumed to be received upon exercise of the options and warrants

Explanation

The correct answer is that the proceeds assumed to be received upon exercise of the options and warrants are used to calculate the number of common shares repurchased at the average market price when computing diluted earnings per share. This means that when determining the dilutive effect of stock options and warrants, the assumption is made that the proceeds from exercising these options and warrants will be used to repurchase common shares at the average market price. This is done to determine the potential impact on the diluted earnings per share calculation.

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87. A convertible bond issue should be included in the diluted earnings per share computation as if the bonds had been converted into common stock, if the effect of its inclusion is         Dilutive               Antidilutive

Explanation

If a convertible bond issue is included in the diluted earnings per share computation, it means that the assumption is being made that the bonds have been converted into common stock. If the inclusion of the convertible bond issue has a dilutive effect on earnings per share, it means that the conversion of the bonds would result in a decrease in earnings per share. Therefore, the answer "Yes No" suggests that the convertible bond issue should be included in the computation, but its inclusion would have an antidilutive effect on earnings per share.

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88. Which of the following is not a legal restriction related to profit distributions by a corporation?

Explanation

The statement "The amount distributed in any one year can never exceed the net income reported for that year" is incorrect because a corporation can distribute dividends even if the net income reported for that year is lower than the amount distributed. Corporations have the flexibility to distribute dividends from retained earnings or accumulated profits from previous years, even if the current year's net income is lower. Therefore, this statement does not represent a legal restriction related to profit distributions by a corporation.

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89. Porter Corp. purchased its own par value stock on January 1, 2014 for $20,000 and debited the treasury stock account for the purchase price. The stock was subsequently sold for $12,000. The $8,000 difference between the cost and sales price should be recorded as a deduction from

Explanation

The $8,000 difference between the cost and sales price of the stock should be recorded as a deduction from additional paid-in capital to the extent that previous net "gains" from sales of the same class of stock are included therein. This means that if there have been previous net gains from sales of the same class of stock included in the additional paid-in capital account, the $8,000 difference should be deducted from that account. However, if there have been no previous net gains from sales of the same class of stock included in the additional paid-in capital account, the $8,000 difference should be deducted from retained earnings.

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90. Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2014, Houser distributed these shares of stock as a dividend to its stockholders. This is an example of a

Explanation

A property dividend is when a company distributes shares of stock in another company to its stockholders. In this case, Houser Corporation distributed its 4,000,000 shares of stock in Baha Corporation to its stockholders. This means that Houser distributed ownership of Baha Corporation to its stockholders as a dividend. Therefore, the correct answer is property dividend.

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91. Which of the following arguments is presented by FASB to explain why a gain is recorded by a company when its creditworthiness is becoming worse?

Explanation

When a company's creditworthiness is becoming worse, it is likely that the company will default on its debt obligations. This means that the debtholders will suffer a loss as they may not receive the full amount of their investment back. On the other hand, the shareholders of the company may benefit from this situation as the company's financial distress may result in a decrease in the value of its debt, which in turn increases the value of the equity shares held by the shareholders. Therefore, the debtholders' loss becomes the shareholders' gain.

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92. When a business enterprise enters into what is referred to as off-balance-sheet financing, the company

Explanation

When a business enterprise enters into off-balance-sheet financing, it aims to enhance the quality of its financial position and potentially make it easier to obtain credit at a lower cost. By keeping the debt off the balance sheet, the company can present a stronger financial picture to shareholders and potential creditors. This strategy allows the company to improve its financial ratios and make it appear more attractive to lenders. It is not an attempt to conceal the debt from shareholders, but rather a way to optimize the company's financial position and access credit more easily.

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93. A "secret reserve" will be created if

Explanation

not-available-via-ai

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94. The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding

Explanation

When a stock dividend larger than 25% of the shares previously outstanding is declared and issued, it decreases the amount of retained earnings. This is because a stock dividend is paid out of retained earnings. However, it does not change the total stockholders' equity. The total stockholders' equity remains the same because the increase in common stock outstanding due to the stock dividend is offset by the decrease in retained earnings. Therefore, the correct answer is that it decreases retained earnings but does not change total stockholders' equity.

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95. Younger Company has outstanding both common stock and nonparticipating, non-cumulative preferred stock. The liquidation value of the preferred is equal to its par value. The book value per share of the common stock is unaffected by

Explanation

The book value per share of the common stock is unaffected by the payment of a previously declared cash dividend on the common stock because cash dividends do not affect the book value of a company. Book value per share is calculated by dividing the total shareholders' equity by the number of outstanding shares, and cash dividends are not considered as part of shareholders' equity. Therefore, the payment of a cash dividend does not impact the book value per share of the common stock.

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96. The printing costs and legal fees associated with the issuance of bonds should

Explanation

The correct answer is to accumulate the printing costs and legal fees in a deferred charge account and amortize them over the life of the bonds. This is because these costs are directly related to the issuance of the bonds and should be allocated over the period in which the bonds are outstanding. By doing so, the expenses are matched with the revenue generated from the bonds, providing a more accurate representation of the financial performance.

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97. Due to the importance of earnings per share information, it is required to be reported by all      Public Companies          Nonpublic Companies

Explanation

Earnings per share information is required to be reported by all public companies because it is an important measure of a company's profitability and financial performance. However, it is not required to be reported by nonpublic companies because they are not required to disclose their financial information to the public. Therefore, the correct answer is b. Yes for public companies and No for nonpublic companies.

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98. When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the

Explanation

When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the par value of the shares issued. Par value represents the minimum legal value assigned to each share of stock, and it does not reflect the actual value of the services received. The market value of the services received or the market value of the shares issued would be more appropriate measures for recording the transaction, as they reflect the fair value of the exchange. Therefore, the par value of the shares issued is the least suitable basis for recording the transaction.

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99. When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what account(s) should be debited?

Explanation

When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, the account that should be debited is "Treasury stock for the purchase price." This is because treasury stock represents shares of a company's own stock that has been repurchased, and the purchase price is recorded as a reduction in the company's equity. Since the cost method is used, the excess of the purchase price over the par value is not recorded separately in any other account.

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100. Which dividends do not reduce stockholders' equity?

Explanation

Stock dividends do not reduce stockholders' equity because they involve the distribution of additional shares of stock to existing shareholders. This means that the total number of shares outstanding increases, but the proportionate ownership and value of each shareholder's stake remains the same. As a result, there is no impact on the overall equity of the company. Cash dividends, property dividends, and liquidating dividends, on the other hand, involve the distribution of assets or cash to shareholders, which directly reduces the company's equity.

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101. In January 2014, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2014, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares

Explanation

The acquisition of treasury shares by a company decreases total stockholders' equity. This is because treasury shares are considered to be issued shares that have been repurchased by the company. As a result, the company's ownership of its own stock increases, but the ownership of other shareholders decreases. This reduction in ownership leads to a decrease in total stockholders' equity.

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102. Assume common stock is the only class of stock outstanding in the Manley Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called

Explanation

The book value per share is calculated by dividing the total stockholders' equity by the number of common stock shares outstanding. This metric represents the value of each share of common stock based on the company's net assets. It is a measure of the company's intrinsic value and can be used to assess the financial health and performance of the company.

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103. In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)?

Explanation

When computing earnings per share, the equivalent number of shares of convertible preferred stock are added to the denominator. If the preferred stock is cumulative, it means that any unpaid dividends accumulate and must be paid before common stockholders receive dividends. Therefore, the amount that should be added to the numerator as an adjustment is the annual preferred dividend, as it represents the amount that needs to be paid to preferred stockholders before calculating earnings available to common stockholders.

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104. When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to

Explanation

When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to premium on bonds payable. This is because the premium on bonds payable represents the amount received from investors that is above the face value of the bonds. In this case, the excess cash proceeds from the detachable stock warrants are considered additional premium on the bonds, which is recorded as a liability on the balance sheet.

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105. What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively?

Explanation

The acquisition of treasury stock refers to a company buying back its own shares from the open market. This action decreases the number of outstanding shares, which in turn reduces stockholders' equity. This decrease occurs because the company is essentially using its own assets to repurchase its shares, thereby reducing the amount of equity available to shareholders. However, the acquisition of treasury stock has no direct effect on earnings per share. Earnings per share is calculated by dividing the net income by the weighted average number of outstanding shares, and since the acquisition of treasury stock does not impact net income, it does not affect earnings per share.

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106. The pre-emptive right enables a stockholder to

Explanation

not-available-via-ai

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107. Which of the following statements about property dividends is not true?

Explanation

All of these statements are true. A property dividend is usually in the form of securities of other companies. It is also called a dividend in kind. The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.

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108. Antidilutive securities

Explanation

Antidilutive securities should be ignored in all earnings per share calculations because their inclusion would not have a dilutive effect on the earnings per share. These securities are typically stock options or warrants that have an exercise price higher than the average market price of common stock, meaning they would not decrease the earnings per share if exercised. Therefore, including them in the calculations would not accurately reflect the potential dilution of earnings per share.

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109. The payout ratio can be calculated by dividing

Explanation

The payout ratio is a financial metric that measures the proportion of earnings distributed to shareholders in the form of dividends. It indicates how much of the company's profits are being paid out to investors. To calculate the payout ratio, cash dividends (the amount of dividends paid out in cash) should be divided by net income less preferred dividends (the company's total earnings minus any dividends paid to preferred shareholders). This calculation provides a more accurate representation of the proportion of earnings being distributed to common shareholders.

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110. The issuer of a 5% common stock dividend to common stockholders should transfer from retained earnings to paid-in capital an amount equal to the

Explanation

When a company issues a common stock dividend to common stockholders, it should transfer an amount equal to the fair value of the shares issued from retained earnings to paid-in capital. This means that the company should record the value of the shares at their current market value. This ensures that the company accurately reflects the value of the shares issued and maintains transparency in its financial statements. The fair value of the shares is considered a more accurate measure than the book value, minimum legal requirements, or par value.

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111. At the date of declaration of a small common stock dividend, the entry should not include

Explanation

When a small common stock dividend is declared, it means that the company is distributing additional shares of its common stock to its shareholders. This distribution does not affect the total value of the shareholders' equity, as the value of the additional shares being distributed is relatively small. Therefore, there is no need to credit the Common Stock account, which represents the total value of the company's common stock. Instead, the entry should include a credit to Paid-in Capital in Excess of Par, which represents the amount received from shareholders in excess of the stock's par value, and a debit to Retained Earnings, which reduces the accumulated profits of the company.

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Bonds for which the owners' names are not registered with the...
The conversion of bonds is most commonly recorded by the
When the effective-interest method is used to amortize bond premium or...
If a company chooses the fair value option, a decrease in the fair...
Which of the following represents the total number of shares that a...
If bonds are issued initially at a premium and the effective-interest...
The interest rate written in the terms of the bond indenture is known...
Fox Co. issued $100,000 of ten-year, 10% bonds that pay interest...
Early extinguishment of bonds payable, which were originally issued at...
A primary source of stockholders' equity is
Which of the following is not a characteristic of a noncompensatory...
Dilutive convertible securities must be used in the computation of
The debt to assets ratio is computed by dividing
Which one of the following disclosures should be made in the equity...
Theoretically, the costs of issuing bonds could be
An example of an item which is not a liability is
Treasury shares are shares
Which of the following features of preferred stock makes it more like...
At the date of the financial statements, common stock shares issued...
In the diluted earnings per share computation, the treasury stock...
Common stockholders of a business enterprise are said to be the...
How should a "gain" from the sale of treasury stock be...
An entry is not made on the
Quirk Corporation issued a 100% stock dividend of its common stock...
The rate of return on common stock equity is calculated by dividing
Reich, Inc. issued bonds with a maturity amount of $200,000 and a...
Convertible bonds
If a company offers additional considerations to convertible...
Corporations issue convertible debt for two main reasons. One is the...
The conversion of preferred stock into common stock requires that any...
When the interest payment dates of a bond are May 1 and November 1,...
"In-substance defeasance" is a term used to refer to an...
A debt instrument with no ready market is exchanged for property whose...
Note disclosures for long-term debt generally include all of the...
Total stockholders' equity represents
Stock that has a fixed per-share amount printed on each stock...
Cumulative preferred dividends in arrears should be shown in a...
In computations of weighted average of shares outstanding, when a...
Which of the following must be disclosed relative to long-term debt...
What effect does the issuance of a 2-for-1 stock split have on each of...
The accounting problem in a lump sum issuance is the allocation of...
The cumulative feature of preferred stock
A dividend which is a return to stockholders of a portion of their...
When convertible debt is retired by the issuer, any material...
If bonds are initially sold at a discount and the straight-line method...
If bonds are issued between interest dates, the entry on the books of...
Proceeds from an issue of debt securities having stock warrants should...
Stock warrants outstanding should be classified as
A corporation issues bonds with detachable warrants. The amount to be...
The date on which to measure the compensation element in a stock...
Which of the following is an advantage of a restricted-stock plan?
In computing earnings per share for a simple capital structure, if the...
When computing diluted earnings per share, convertible bonds are
The times interest earned ratio is computed by dividing
The term used for bonds that are unsecured as to principal is
The residual interest in a corporation belongs to the
Bonds that pay no interest unless the issuing company is profitable...
Gains on sales of treasury stock (using the cost method) should be...
If management wishes to "capitalize" part of the earnings,...
The balance in Common Stock Dividend Distributable should be reported...
A feature common to both stock splits and stock dividends is
The major difference between convertible debt and stock warrants is...
Which of the following is not a characteristic of a noncompensatory...
The generally accepted method of accounting for gains or losses from...
When a note payable is exchanged for property, goods, or services, the...
The pre-emptive right of a common stockholder is the right to
In a corporate form of business organization, legal capital is best...
Stockholders' equity is generally classified into two major...
A mining company declared a liquidating dividend. The journal entry to...
The covenants and other terms of the agreement between the issuer of...
Which of the following best describes a possible result of treasury...
According to the FASB, redeemable preferred stock should be
Cash dividends are paid on the basis of the number of shares
Under the effective-interest method of bond discount or premium...
The conversion of preferred stock is recorded by the
Treasury bonds should be shown on the balance sheet as
Compensation expense resulting from a compensatory stock option plan...
A corporation borrowed money from a bank to build a building. The...
A project financing arrangement refers to:
A company uses income from continuing operations to determine whether...
The distribution of stock rights to existing common stockholders will...
Direct costs incurred to sell stock such as underwriting costs should...
Fox Co. issued $100,000 of ten-year, 10% bonds that pay interest...
With respect to the computation of earnings per share, which of the...
Long-term debt that matures within one year and is to be converted...
In applying the treasury stock method to determine the dilutive effect...
A convertible bond issue should be included in the diluted earnings...
Which of the following is not a legal restriction related to profit...
Porter Corp. purchased its own par value stock on January 1, 2014 for...
Houser Corporation owns 4,000,000 shares of stock in Baha Corporation....
Which of the following arguments is presented by FASB to explain why a...
When a business enterprise enters into what is referred to as...
A "secret reserve" will be created if
The declaration and issuance of a stock dividend larger than 25% of...
Younger Company has outstanding both common stock and...
The printing costs and legal fees associated with the issuance of...
Due to the importance of earnings per share information, it is...
When a corporation issues its capital stock in payment for services,...
When treasury stock is purchased for more than the par value of the...
Which dividends do not reduce stockholders' equity?
In January 2014, Finley Corporation, a newly formed company, issued...
Assume common stock is the only class of stock outstanding in the...
In computing earnings per share, the equivalent number of shares of...
When the cash proceeds from a bond issued with detachable stock...
What effect will the acquisition of treasury stock have on...
The pre-emptive right enables a stockholder to
Which of the following statements about property dividends is not...
Antidilutive securities
The payout ratio can be calculated by dividing
The issuer of a 5% common stock dividend to common stockholders should...
At the date of declaration of a small common stock dividend, the entry...
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