ACCT 311 ACCT311 Comprehensive Exam Solution ( Spring 2016) (UMUC)

ACCT 311 ACCT311 Comprehensive Exam Solution ( Spring 2016) (UMUC)

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ACCT 311 Comprehensive Exam ( Spring 2016)

  1. Coleman Services granted 15 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $8 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives? 
  2. If restricted stock is forfeited because an employee leaves the company, the appropriate accounting procedure is to
  3. On January 1, 2015, Russell Inc. issued stock options for 200,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three years. Russell initially estimates that it is probable the goal will be achieved. Ignoring taxes, what is reduction in earnings in 2015?
  4. On January 1, 2015, Zheng Foods issued stock options for 40,000 shares to a division manager. The options have an estimated fair value of $5 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Zheng Foods' stock price increases by 5% in four years. Zheng Foods initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in each of the next four years? 
  5. Which of the following results in increasing basic earnings per share? 
  6. Paige Inc declared and paid cash dividends to its common shareholders in January of the current year. The dividend:
  7. On December 31, 2014, the Meisenhelder Company had 250,000 shares of common stock issued and outstanding. On March 31, 2015, the company sold 50,000 additional shares for cash. Meisenhelder’s net income for the year ended December 31, 2015 was $700,000. During 2015, Meisenhelder declared and paid $80,000 in cash dividends on its nonconvertible preferred stock. What is the 2015 basic earnings per share (rounded)?
  8. The following information pertains to Q Company's outstanding stock for 2015:
    Common Stock, $1 Par
    Shares Outstanding , 1/1/2015            10,000
    2 for 1 stock split, 45/1/2015                          10,000
    Shares Issued, 7/1/2015                                    5,000
    Preferred Stock, $100 par, 7% cumulative
    Shares outstanding, 1/1/2015                           4,000
     
      
    What is the number of shares Q should use to calculate 2015 basic earnings per share?
  9. Which of the following changes would not be accounted for using the prospective approach? 
  10. Accounting changes occur for which of the following reasons? 
  11. Which of the following is an example of a change in accounting principle?
  12. . Velasco Co. changed from straight-line to DDB depreciation. The journal entry to record the change includes:
  13. During 2015, Hutton Co. decides to use FIFO to account for its inventory transactions. Previously, it had used LIFO.
  14. A change in the residual value of equipment is treated ______________.
  15. Hemmingway Company bought a copyright for $90,000 on January 1, 2012, at which time the copyright had an estimated useful life of 15 years. On January 5, 2015, the company determined that the copyright would expire at the end of 2018. How much should Hemmingway record as amortization expense for this copyright for 2015?
  16. Judd, Inc., owns 35% of Cosby Corporation. During the calendar year 2015, Cosby had net earnings of $300,000 and paid dividends of $30,000. Judd mistakenly recorded these transactions using the fair value method rather than the equity method of accounting. What effect would this have on the investment account, net income, and retained earnings, respectively?
  17. Which of the following is a change in reporting entity?
  18. Carlock Inc. took physical inventory at the end of 2015. Purchases that were acquired FOB destination were in transit, so they were not included in the physical count.
  19. Heuer Company's prepaid insurance was $8,000 at December 31, 2014, and $10,000 at December 31, 2015. Heuer reported insurance expense of $15,000 on the 2015 income statement. What amount would be reported in the statement of cash flows as insurance paid using the direct method?
  20. Which of the following circumstances creates a future taxable amount? 
  21. Which of the following usually results in an increase in a deferred tax liability?
  22. For its first year of operations Tavani Corporation's reconciliation of pretax accounting income to taxable income is as follows:

      
    Tavani's tax rate is 40%. Assume that no estimated taxes have been paid.
    What should Tavani report as income tax payable for its first year of operations
  23. . On October 1, 2015, Simeon Builders borrowed $16 million cash and issued a 7-month, noninterest-bearing note. The loan was made by Star Finance Co. The stated discount rate is 8%. Sky's effective interest rate on this loan is:  
  24. During the current year, Stern Company had pretax accounting income of $45 million. Stern's only temporary difference for the year was rent received for the following year in the amount of $15 million. Stern's taxable income for the year would be:
  25. During the current year, Stern Company had pretax accounting income of $45 million. Stern's only temporary difference for the year was rent received for the following year in the amount of $15 million. Stern's taxable income for the year would be:
  26. Hemmingway Company bought a copyright for $90,000 on January 1, 2012, at which time the copyright had an estimated useful life of 15 years. On January 5, 2015, the company determined that the copyright would expire at the end of 2018. How much should Hemmingway record retrospectively as the effect of change?
  27. The percentage-of-completion method must be used when certain conditions exist. Which of the following is not one of those necessary conditions?
  28. On December 1, 2015, Goetz Corporation leased office space for 10 years at a monthly rental of $90,000. On that date Perez paid the landlord the following amounts:
    Rent deposit                                                 $   90,000
    First month's rent                                               90,000
    Last month's rent                                               90,000
    Installation of new walls and offices                 495,000
                                                                         $765,000
    The entire amount of $765,000 was charged to rent expense in 2015. What amount should Goetz have charged to expense for the year ended December 31, 2015?
  29. On January 1, 2015, Shelley Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Shelley to make annual payments of $100,000 at the end of each year for ten years with title to pass to Shelley at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Shelley uses the straight-line method of depreciation for all of its fixed assets. Shelley accordingly accounted for this lease transaction as a capital lease. The lease payments were determined to have a present value of $671,008 at an effective interest rate of 8%. With respect to this capitalized lease, Shelley should record for 2015
  30. Which of the following results in increasing basic earnings per share?

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