lOMoAR cPSD|12263423 Downloaded by Anna Maina () Harvard Financial Accounting Final Exam 3-
with 100% verified solutions -2023 Q1. Freeman, Inc., reported net income of $40,000 for 2015. However, the company’s income tax return excluded a revenue item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 201 6. Assuming a 30% income tax rate, this situation would cause a 2015 deferred tax amount of • $3,000 asset. • $3,000 liability • $ 900 asset. • $ 900 liability. Q2. What is the major accounting difference between interest incurred during a period and cash dividends declared during the same period? • Interest decreases retained earnings while dividend declared increases retained earnings • Interest reduces net income while dividends declared do not affect net income • Interest does not affect net income while dividends reduce net income • There is no major difference. Both are treated identically for accounting purposes. Q3. ABC expenses stock options as required by GAAP. On January 1, 2015, ABC granted 50 key executives 100 options each. Each option entitled the option holder to purchase 1 share of ABC common stock at $60 per share. The options will vest on January 1st 2018. On the grant date, January 1st, 2015, the stock was quoted on the stock exchange at $63 per share. The fair value of the options on the grant date was estimated at $15 per option. The amounts of compensation expense ABC should recognize with respect to the options during 2015, 2016, and 2017 are: • 1 • 2 • 3 • 4 Q4. International, Inc. established an allowance for bad debts at the end of lOMoAR cPSD|12263423 Downloaded by Anna Maina () October. In November, International wrote off a $500 account receivable because payment was considered to be remote. What would be the effect of the $500 account receivable write -off on International’s November financial statements?
with 100% verified solutions -2023 Q1. Freeman, Inc., reported net income of $40,000 for 2015. However, the company’s income tax return excluded a revenue item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 201 6. Assuming a 30% income tax rate, this situation would cause a 2015 deferred tax amount of • $3,000 asset. • $3,000 liability • $ 900 asset. • $ 900 liability. Q2. What is the major accounting difference between interest incurred during a period and cash dividends declared during the same period? • Interest decreases retained earnings while dividend declared increases retained earnings • Interest reduces net income while dividends declared do not affect net income • Interest does not affect net income while dividends reduce net income • There is no major difference. Both are treated identically for accounting purposes. Q3. ABC expenses stock options as required by GAAP. On January 1, 2015, ABC granted 50 key executives 100 options each. Each option entitled the option holder to purchase 1 share of ABC common stock at $60 per share. The options will vest on January 1st 2018. On the grant date, January 1st, 2015, the stock was quoted on the stock exchange at $63 per share. The fair value of the options on the grant date was estimated at $15 per option. The amounts of compensation expense ABC should recognize with respect to the options during 2015, 2016, and 2017 are: • 1 • 2 • 3 • 4 Q4. International, Inc. established an allowance for bad debts at the end of lOMoAR cPSD|12263423 Downloaded by Anna Maina () October. In November, International wrote off a $500 account receivable because payment was considered to be remote. What would be the effect of the $500 account receivable write -off on International’s November financial statements?
