Intermediate Accounting II - Exam #2 All Answers Correct

Intermediate Accounting II - Exam #2 All Answers Correct 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 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 B. consolidated The general "cut line" for determining whether fair value or equity method is used in valuing equity securities is ______________. [ 10%, 20%, 50% ] 20% The general "cut line" for determining whether equity value or consolidated method is used in valuing equity securities is _____________. [50%, 60%, 80% ] 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. 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. B. convertible preferred stock, 10,000 additional shares would be used; preferred dividends of $14,000 would be avoided. C. stock options permitting issuance of 5,000 shares would be issued; exercise price is $30; present stock price is $40. D. a 10% stock dividend will be issued if net income exceeds $100,000 for the year. A. convertible bonds, 5,000 shares would be issued, interest expense of $12,000 (adjusted for taxes) would be avoided. If applicable, which of the following would be subtracted from net income in calculating earnings per share? A. common dividends B. preferred dividends C. prior period adjustments D. treasury stock B. preferred dividends Separate calculation of EPS is NOT required for: A. cumulative effect-change of accounting principle B. discontinued operations C. extraordinary gains and losses D. selling and administrative expense D. selling and administrative expense Which of the following is NOT a category used in grouping equity securities? A. available for sale B. consolidated C. held-to-maturity D. trading C. held-to-maturity BUNT Company used the equity method for an investment in BASE Enterprises. If BUNT owns 30% of BASE stock, BASE has net income of $80,000 and pays dividends of $30,000; the Investment in BASE account for BUNT will increase by? A. $9,000 B. $15,000 C. $24,000 D. $33,000 B. $15,000 Which of the following is NOT required for a sale to be recorded when a right of return exists? A. the amount of returns can be estimated B. buyer must pay even if item was stolen C. the buyer has never returned goods in the past D. the seller has no future requirements C. the buyer has never returned goods in the past Among the following methods, which generally will NOT produce revenue? A. completed contracted method B. cost recovery method C. deposit method D. instalment sales method C. deposit method Of the following terms, which has a meaning least like the others? A. "book" income B. income before income taxes C. pretax income D. taxable income D. taxable income An example of a temporary item increasing taxable income (vs. pretax GAAP income) in this year with lesser taxable income (vs. GAAP) in future years would be: A. doubtful accounts B. fines for pollution C. instalment sale revenue D. interest on municipal bonds A. doubtful accounts Net operating losses can be carried back for tax purposes for: A. two years B. five years C. ten years D. twenty years A. two years The __________________ [converted/treasury stock] method is used to determine shares outstanding for dilution purposes in earnings per share calculations when convertible bonds exist. converted A taxable temporary difference produced a deferred tax __________________ [asset/liability]. liability If the current tax expense is $40,000 and the deferred tax benefit is $10,000; total income tax expense would be ___________________ [$30,000/$50,000]. $30,000 If net future tax rates are enacted and a net operating loss is carried forward, the deferred tax asset should be calculated using __________________ [current/projected] tax rates. current