Intermediate Accounting II - Exam questions and verified correct answers

The "treasury stock" method of calculating shares outstanding for diluted earnings per share is used when? A. bonds are converted to common stock B. preferred stock is converted to common stock C. stock options are exercisable D. treasury stock has been reissued - correct answer C. stock options are exercisable Which of the following is NOT a classification for debt securities investments? A. available for sale B. consolidated C. held to maturity D. trading - correct answer B. consolidated The general "cut line" for determining whether fair value or equity method is used in valuing equity securities is ______________. [ 10%, 20%, 50% ] - correct answer 20% The general "cut line" for determining whether equity value or consolidated method is used in valuing equity securities is _____________. [50%, 60%, 80% ] - correct answer 50% On January 1, 2017; RHYME Company (a calendar fiscal year company) had 20,000 shares of stock outstanding. On February 27, a 3 for 2 stock split was announced. On April 1, 12,000 new shares of stock were issued and on October 1, 6,000 shares were retired. No shares were in the treasury during 2017. Calculate weighted average shares of stock outstanding for 2017. - correct answer 20,000 * 3/2 = 30,000 12,000 * 9/12 = 9,000 6,000 * 3/12 = 1,500 30,000 + 9,000 - 1,500 = 37,500 Assume that basic earnings per share would be $2.00. Which of the following securities would be ANTIDILUTIVE? A. convertible bonds, 5,000 shares would be issued, interest expense of $12,000 (adjusted for taxes) would be avoided.