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ACCT3033IntermediateAccountingIII
Exam2
Fall2011

Instructions

1.Thisexamconsistsof25multiplechoicequestions.
2.Foreachmultiplechoicequestion,choosethebestresponseandcarefullymarkitscode
ontheanswersheet.
3.Allocateyourtimeamongquestionssoastomaximizethenumberofpointsyoureceive.
4.Theexamisclosedbook.Acalculatorispermitted.
5.Submityourexamandmultiplechoiceanswersheetsaftertheexam.

GOODLUCK!!!!

1.Whateffectdoestheissuanceofa2for1stocksplithaveoneachofthefollowing?
A.
B.
C.
D.

Parvaluepershare
Noeffect
Increase
Decrease
Decrease

Earningspershare
Noeffect
Noeffect
Increase
Decrease

2.Whenmorethanonesecurityissoldforasinglepriceandthetotalsellingpriceisnotequalto
thesumofthemarketprices,thecashreceivedisallocatedbetweenthesecuritiesbased
on:
A.Relativebookvalues.
B.Parvalues.
C.Relativemarketvalues.
D.Theearningspershare.
3.RickCo.had30millionsharesof$1parcommonstockoutstandingatJanuary1,2009.In
October,2009,RickCo.'sBoardofDirectorsdeclaredanddistributeda1%common
stockdividendwhenthemarketvalueofitscommonstockwas$60pershare.In
recordingthistransaction,Rickwould:
A.Debitretainedearningsfor$18million.
B.Creditpaidincapitalexcessofparfor$18million.
C.Creditcommonstockfor$18million.
D.Noneofthemarecorrect.

4.LongCo.had100,000sharesofcommonstockissuedandoutstandingatJanuary1,2009.
During2009,Longtookthefollowingactions:
March15

Declareda2for1stocksplit,whenthefairvalue
ofthestockwas$80pershare.
December15 Declareda$0.50persharecashdividend
InLongsstatementofshareholdersequityfor2009,whatamountshouldLongreportas
dividends?
A.$50,000.
B.$100,000.
C.$850,000.
D.$950,000.

5.Coy,Inc.initiallyissued200,000sharesof$1parvaluestockfor$1,000,000in2007.In2008,
thecompanyrepurchased20,000sharesfor$200,000.In2009,10,000oftherepurchased
shareswereresoldfor$160,000.InitsbalancesheetdatedDecember31,2009,Coy,
Inc.'streasurystockaccountshowsabalanceof:
A.$0.
B.$40,000.
C.$100,000.
D.$200,000.
6.Whentreasurysharesaresoldatapriceabovecost:
A.Againaccountiscredited.
B.Alossisreported.
C.RetainedEarningsaccountisdebited.
D.PaidincapitalShareRepurchaseaccountiscredited.
7.Duringthecurrentyear,EastCorporationhad2millionsharesofcommonstockoutstanding.
Twothousand,$1,000,8%convertiblebondswereissuedatfaceamountatthebeginning
oftheyear.Eastreportedincomebeforetaxof$3millionandnetincomeof$1.8million
fortheyear.Eachbondisconvertibleintotensharesofcommonstock.WhatisEast
Corporationsdilutedearningspershare?
A.$0.97.
B.$0.94.
C.$0.91.
D.$0.89.
8.McGlinchCompanyhad100,000sharesof$4parvaluecommonstockoutstandingonJune
12ofthecurrentyear.Onthisdate,Mcglinchyacquired1,000ofitsownsharesas
treasurystockatacostof$12pershare.Asaresultofthistreasurystockpurchase,
A.Totalassetsandtotalequitydecreased.
B.Totalassetsandtotalequitywereunaffected.
C.Totalassets,retainedearnings,andtotalequitydecreased.
D.Totalassetswereunaffected,butretainedearningsdecreased.
9.ABCdeclaredandpaidcashdividendsinJanuaryofthecurrentyeartoitscommon
shareholders.Thedividend:
A.Willbeaddedtothenumeratoroftheearningspersharefractionforthecurrentyear.
B.Willbeaddedtothedenominatoroftheearningspersharefractionforthecurrent
year.
C.Willbesubtractedfromthenumeratoroftheearningspersharefractionforthecurrent
year.
D.Hasnoeffectontheearningspershareforthecomingyear.

10.Whencomputingearningspershare,cumulativepreferreddividendsnotdeclaredshouldbe:
A.Deductedfromearningsfortheyear.
B.Deducted,netoftaxeffect,fromearningsfortheyear.
C.Addedtoearningsfortheyear.
D.Ignored.
11.Thedeclarationandissuanceofastockdividendlargerthan25%ofthesharespreviously
outstanding
A.increasescommonsharesoutstandingandincreasestotalstockholdersequity.
B.mayincreaseordecreasepaidincapitalinexcessofparbutdoesnotchangetotal
stockholdersequity.
C.decreasesretainedearningsbutdoesnotchangetotalstockholdersequity.
D.increasesretainedearningsandincreasestotalstockholdersequity.

12.Allotherthingsequal,whatistheeffectonearningspersharewhenacorporationacquires
sharesofitsownstockontheopenmarket?
A.Decrease.
B.Noeffectifthesharesareheldastreasuryshares.
C.Increaseonlyifthesharesareconsideredtoberetired.
D.Increase.
13.OnDecember31,2005,AlbacoreCompanyhad300,000sharesofcommonstockissuedand
outstanding.Albacoreissueda10%stockdividendonJune30,2006.OnSeptember30,
2006,12,000sharesofcommonstockwerereacquiredastreasurystock.Whatisthe
appropriatenumberofsharestobeusedinthebasicearningspersharecomputationfor
2006?
A.288,000.
B.318,000.
C.326,700.
D.327,000.
14.OnDecember31,2005,theFrisbeeCompanyhad250,000sharesofcommonstockissued
andoutstanding.OnMarch31,2006,thecompanysold50,000additionalsharesforcash.
Frisbee'snetincomefortheyearendedDecember31,2006was$700,000.During2006,
Frisbeedeclaredandpaid$80,000incashdividendsonitsnonconvertiblepreferred
stock.Whatisthe2006basicearningspershare?
A.$2.16.
B.$2.06.
C.$3.10.
D.$2.80.

15.OnJanuary1,2009,MCompanygranted90,000stockoptionstocertainexecutives.The
optionsareexercisablenosoonerthanDecember31,2011andexpireonJanuary1,2015.
Eachoptioncanbeexercisedtoacquireoneshareof$1parcommonstockfor$12.An
optionpricingmodelestimatesthefairvalueofeachoftheoptionstobe$5onthedate
ofgrant.WhatamountshouldMrecognizeascompensationexpensefor2009?
A.$30,000
B.$60,000
C.$120,000
D.$150,000
16.Ifthepreferredstockofacorporationhasacumulativefeature:
A.Divdendsonpreferredstockareguaranteed.
B.Dividendscannotbedeclaredinanamountlessthanstatedonthestockcertificate.
C.Preferredstockholdersparticipateindividendspaidinexcessofastatedamounton
thecommonshares.
D.Dividendsinarrearsmustbepaidonpreferredstockbeforeanydividendcanbe
paidoncommonstock.
17.Astockoptionplanmayormaynotbeintendedtocompensateemployeesfortheirwork.
Thecompensationexpenseforcompensatorystockoptionplansshouldberecognizedin
theperiodsthe:
A.employeesbecomeeligibletoexercisetheoptions.
B.employeesperformservices.
C.stockisissued.
D.optionsaregranted.
18.RobertoCorporationwasorganizedonJanuary1,2011.Thefirmwasauthorizedtoissue
100,000sharesof$5parcommonstock.During2011,Robertohadthefollowing
transactionsrelatingtoshareholdersequity:
Issued10,000sharesofcommonstockat$7pershare.
Issued20,000sharesofcommonstockat$8pershare.
Reportedanetincomeof$100,000.
Paiddividendsof$50,000.
Purchased3,000sharesoftreasurystockat$10.
Whatistotalshareholdersequityattheendof2011?


A.$170,000.
B.$310,000.
C.$250,000.
D.$750,000.
19.Preferredstockiscalledpreferredbecauseitusuallyhastwopreferences.Thesepreferences
relateto:
A.Dividendsandvotingrights.
B.Parvalueanddividends.
C.Thepreemptiverightandvotingrights.
D.Assetsatliquidationanddividends.
20.Theresultofastocksplitis:
A.Alargernumberofmorevaluableshares.
B.Anincreaseincorporateassets.
C.Anincreaseinshareholdersequity.
D.Alargernumberoflessvaluableshares.
21.AtDecember31,2011,HansenCorporationhad50,000sharesofcommonstockand5,000
sharesof6%,$100parnoncumulativepreferredstockoutstanding.Nodividendswere
declaredorpaidin2011.Netincomewasreportedas$200,000.Whatisbasicearnings
pershare?
A.$4.00.
B.$3.40.
C.$3.64.
D.$4.02.
22.TheAlfordGrouphad202,000sharesofcommonstockoutstandingatJanuary1,2011.The
followingactivitiesaffectedcommonsharesduringtheyear.Therearenopotential
commonsharesoutstanding.
2011
Feb.28
Oct.31
Nov.30
Dec.31

Purchased6,000sharesoftreasurystock.
SoldthetreasurysharespurchasedonFebruary28.
Issued24,000newshares.
Netincomefor2011is$400,000.

2012
Jan.15
Dec.31

Declaredandissueda2for1stocksplit.
Netincomefor2012is$226,000.

Whatisthe2012Basicearningspershare?


A.$0.88.
B.$0.57.
C.$0.50.
D.$1.13.
23.BaldwinCompanyhad40,000sharesofcommonstockoutstandingonJanuary1,2011.On
April1,2011,thecompanyissued20,000sharesofcommonstock.Thecompanyhad
outstandingfullyvestedincentivestockoptionsfor10,000sharesexercisableat$10that
hadnotbeenexercisedbyitsexecutives.Theaveragemarketpriceofcommonstockfor
theyearwas$12.Whatnumberofsharesofstock(rounded)shouldbeusedincomputing
dilutedearningspershare?
A.65,000.
B.56,667.
C.55,000.
D.61,667.
24.LanderCorporationwasorganizedonJanuary1,2011.Onthatdate,itissued300,000shares
ofits$10parvaluecommonstockat$15pershare(400,000shareswereauthorized).
Duringthefirstyearofitsoperations,Landerreportednetincomeof$750,000andpaid
cashdividendsof$380,000.OnJanuary5,2011,Landerpurchased12,000sharesofits
commonstockat$12pershare(Landerusestreasurystockmethod).OnDecember31,
2011,8,000treasurysharesweresoldat$8pershare.Whatisthetotalstockholders
equityasofDecember31,2011?
A.$4,790,000
B.$4,806,000
C.$4,838,000
D.$4,870,000
25.OnDecember31,2011,PottCo.declaredanddistributedapropertydividendwhenthefair
valueexceededthecarryingamount.Asaconsequenceofthedividenddeclarationand
distribution,whataretheaccountingeffects?

A.
B.
C.
D.

PropertyDividends
Recordedat
Fairvalue
Fairvalue
Cost
Cost

RetainedEarnings
Decreased
Increased
Increased
Decreased

ACCT3033IntermediateAccountingIIIExam2
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