ACCT 312 Week 4 Midterm Exam Answers
ACCT 312 Week 4 Midterm Exam Answers
| 1. | Question : | (TCO 1) Which event will result in a deferred tax liability? | |
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| Student Answer: |
| Accelerated depreciation in the tax return | |
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| Interest income on municipal bonds | |
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| Subscriptions collected in advance | |
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| Estimated warranty expense | |
| Instructor Explanation: | See Chapter 16. |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 2. | Question : | (TCO 1) Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset? | |
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| Student Answer: |
| Tax depreciation in excess of book depreciation | |
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| The installment sales method for tax purposes | |
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| Revenue collected in advance | |
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| None of the above | |
| Instructor Explanation: | See Chapter 16. |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 3. | Question : | (TCO 2) Interest cost is calculated by multiplying the | |
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| Student Answer: |
| ABO by the expected return on the plan assets. | |
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| ABO by the discount rate. | |
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| PBO by the expected return on plan assets. | |
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| PBO by the discount rate. | |
| Instructor Explanation: | See Chapter 17. |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 4. | Question : | (TCO 3) Accounting for postretirement healthcare benefits is similar, in most respects, to accounting for | |
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| Student Answer: |
| payroll taxes. | |
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| health insurance costs for current employees. | |
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| pension benefits. | |
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| sick pay and vacation pay. | |
| Instructor Explanation: | See Chapter 17. |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 5. | Question : | (TCO 4) Retained earnings represents a company’s | |
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| Student Answer: |
| undistributed net assets. | |
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| undistributed net income. | |
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| extra paid-in capital. | |
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| undistributed cash. | |
| Instructor Explanation: | See Chapter 18. |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 6. | Question : | (TCO 4) Any dividend that is considered to be a liquidating dividend will | |
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| Student Answer: |
| reduce retained earnings. | |
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| reduce paid-in capital. | |
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| increase paid-in capital. | |
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| reduce the common stock account. | |
| Instructor Explanation: | See Chapter 17. |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 7. | Question : | (TCO 5) Executive stock options should be reported as compensation expense | |
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| Student Answer: |
| using the intrinsic value method. | |
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| using the fair value method. | |
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| using either the fair value method or the intrinsic value method. | |
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| only on rare occasions. | |
| Instructor Explanation: | See Chapter 19. |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 8. | Question : | (TCO 5) Our company granted options for 2 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $35 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $9 per option. If the options have a vesting period of 5 years, which would be the balance in Paid-in Capital – Stock Options 3 years after the grant date? | |
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| Student Answer: |
| A credit of $10.8 million | |
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| A credit of $18 million | |
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| A debit of $70 million | |
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| A debit of $3.6 million | |
| Instructor Explanation: | 2,000,000 × $9 × (3 ÷ 5) = $10,800,000 |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 9. | Question : | (TCO 6) Our company declared and paid cash dividends to its common shareholders in February of the current year. The dividend | |
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| Student Answer: |
| will be added to the numerator of the earnings per share fraction for the current year. | |
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| will be added to the denominator of the earnings per share fraction for the current year. | |
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| will be subtracted from the numerator of the earnings per share fraction for the current year. | |
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| has no effect on the earnings per share for the coming year. | |
| Instructor Explanation: | See Chapter 19. |
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| Points Received: | 20 of 20 | |
| Comments: |
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| Question 10. | Question : | (TCO 6) Basic earnings per share is computed using | |
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| Student Answer: |
| the actual number of common shares outstanding at the end of the year. | |
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| a weighted average of preferred and common shares. | |
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| the number of common shares outstanding plus common stock equivalents. | |
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| weighted-average common shares outstanding for the year. | |
| Instructor Explanation: | See Chapter 19. |
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| Points Received: | 20 of 20 | |
| Comments: |
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