2. THE NET AMOUNT OF A BOND LIABILITY THAT

05 Jun 2. THE NET AMOUNT OF A BOND LIABILITY THAT

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• Use upper case letters for the multiple choice answers.
• Point value: Questions 1-16, 18-24 worth approximately 2.2 points each; Question 17 worth approximately 10 points; Question 25 worth approximately 5 points; Problems 1-2 worth 17.5% each.

 

 

 

 

 

University of Maryland University College

ACCT311 Intermediate Accounting II

Spring 2016 Comprehensive Final Examination

 

 

____    1.   Callable bonds

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

 

 

 

____    2.   The net amount of a bond liability that appears on the balance sheet is the

a.	call price of the bond plus bond discount or minus bond premium.
b.	face value of the bond plus related premium or minus related discount.
c.	face value of the bond plus related discount or minus related premium.
d.	maturity value of the bond plus related discount or minus related premium.

 

 

 

____    3.   Which of the following shareholder rights is most commonly enhanced in an issue of

preferred stock?

a.	The right to vote for the board of directors
b.	The right to maintain one’s proportional interest in the corporation
c.	The right to receive a full cash dividend before dividends are paid to other classes of stock
d.	The right to vote on major corporate issues

 

 

 

____    4.   How would the declaration of a 10 percent stock dividend by a corporation affect each of the

following on its books?

 

Retained       Total Stock-

Earnings       holders’ Equity

a.	Decrease       No effect
b.	Decrease       Decrease
c.	No effect      Decrease
d.	No effect      No effect

 

 

 

____    5.   Which of the following taxes is not included in the payroll tax expense of the employer?

a.	State unemployment taxes
b.	Federal unemployment taxes
c.	FICA taxes
d.	Federal income taxes

 

 

 

____    6.   Which of the following payroll taxes are paid by the employer?

a.	FICA taxes
b.	Federal unemployment taxes
c.	State unemployment taxes
d.	All of these

 

 

 

____    7.   Which of the following statements characterizes an operating lease?

a.	The lessee records depreciation and interest.
b.	The lessee records the lease obligation related to the leased asset.
c.	The lessor transfers title of the leased property to the lessee for the duration of the lease term.
d.	The lessor records depreciation and lease revenue.

 

 

 

____    8.   One of the four general criteria for a capital lease is that the present value at the beginning of

the lease term of the minimum lease payments equals or exceeds

a.	the property’s fair market value.
b.	90 percent of the property’s fair market value.
c.	75 percent of the property’s fair market value.
d.	50 percent of the property’s fair market value.

 

 

 

____    9.   One of the four general criteria for a capital lease specifies that the lease term be equal to or

greater than

a.	the estimated economic life of the property.
b.	90 percent of the estimated economic life of the property.
c.	75 percent of the estimated economic life of the property.
d.	50 percent of the estimated economic life of the property.

 

 

 

____   10.   On December 1, 2011, Blue Inc. signed an operating lease for a warehouse for ten years at

$24,000 per year. Upon execution of the lease, Blue paid $48,000 covering rent for the first two

years. How much should be shown in Blue’s income statement for the year ended December 31,

2011, as rent expense?

a.	$0
b.	$2,000
c.	$24,000
d.	$48,000

 

 

 

____   11.   In a lease that is recorded as an operating lease by the lessee, the equal monthly rental

payments should be

a.	allocated between interest expense and depreciation expense.
b.	allocated between a reduction of the liability for leased assets and interest expense.
c.	recorded as a reduction in the liability for leased assets.
d.	recorded as a rental expense.

 

 

____   12.   In calculating diluted earnings per share, which of the following should not be considered?

a.	The weighted average number of common shares outstanding
b.	The amount of dividends declared on cumulative preferred shares
c.	The amount of cash dividends declared on common shares
d.	The number of common shares resulting from the assumed conversion of debentures outstanding

 

 

____   13.   The main purpose of reporting diluted earnings per share is to

a.	provide a comparison figure for debt holders.
b.	indicate earnings shareholders will receive in future periods.
c.	distinguish between companies with a complex capital structure and companies with a simple capital structure.
d.	show the maximum possible dilution of earnings.

 

 

 

____   14.   In determining earnings per share, interest expense, net of applicable income taxes, on

convertible debt which is dilutive should be

a.	ignored for diluted earnings per share.
b.	added back to net income for diluted earnings per share.
c.	deducted from net income for diluted earnings per share.
d.	none of these.

 

 

 

____   15.   When computing diluted EPS for a company with a complex capital structure, what is the

denominator in the computation?

a.	Number of common shares outstanding at year-end
b.	Weighted-average number of common shares outstanding
c.	Weighted-average number of common shares outstanding plus all other potentially antidilutive securities
d.	Weighted-average number of common shares outstanding plus all other potentially dilutive securities

 

 

 

____   16.   When an investor uses the equity method to account for investments in common stock,

cash dividends received by the investor from the investee should be recorded as

a.	an increase in the investment account.
b.	a deduction from the investment account.
c.	dividend revenue.
d.	a deduction from the investor’s share of the investee’s profits.

 

 

 

____   17.   The Bee Corporation reported a $66,000 operating loss in 2011. In the preceding three

years, Bee reported the following income before taxes and paid the indicated income taxes: