Question 1 1 out of 1 points The equation, assets = equities, expresses which of the following theories of equity?

Answer Selected Answer: Entity theory. Correct Answer: Entity theory. Question 2 1 out of 1 points Under which of the theories of equity is a managers goals considered as important as those of the common stockholder. Answer Selected Answer: Commander theory. Correct Answer: Commander theory. Question 3 1 out of 1 points When a stock option plan for employees is compensatory, the measurement date for determining compensation cost is the Answer Selected

Answer:

First date on which are known both the number of shares than an individual employee is entitled to receive and the option or purchase price, if any

Correct Answer:

First date on which are known both the number of shares than an individual employee is entitled to receive and the option or purchase price, if any

Question 4 1 out of 1 points When a dividend paid to stockholders who own mandatorily redeemable preferred stock, the company must report the dividend Answer Selected Answer: As an expense in the income statement. Correct Answer: As an expense in the income statement. Question 5 1 out of 1 points For a compensatory stock option plan for which the date of grant and measurement date are the same, compensation cost should be recognized in the income statement Answer Selected Answer: At the adoption date of the plan Correct Answer:

At the adoption date of the plan Question 6 1 out of 1 points When employees are granted options as part of a compensatory stock option plan, Answer Selected Answer: Total compensation is measured when the options are in the money. Correct Answer: Total compensation is measured when the options are in the money. Question 7 1 out of 1 points Gilbert Corporation issued a 40percent stock split-up of its common stock that had a par value of $10 before and after the split-up. At what amount should retained earnings be capitalized for the additional shares issued? Answer Selected Answer: Market value on the declaration date Correct Answer: Market value on the declaration date Question 8 1 out of 1 points When preferred stock is converted to common stock Answer

Selected Answer: The debt-to-equity ratio is unchanged. Correct Answer: The debt-to-equity ratio is unchanged. Question 9 1 out of 1 points The directors of Corel Corporation, whose $40 par value common stock is currently selling at $50 per share, have decided to issue a stock dividend. The corporation has an authorization for 200,000 shares of common, has issued 110,000 shares of which 10,000 shares are now held as treasury stock, and desires to capitalize $400,000 of the retained earnings balance. To accomplish this, the percentage of stock dividend that the directors should declare is Answer Selected Answer: 10 Correct Answer: 10 Question 10 1 out of 1 points Assuming the issuing company has only one class of stock, a transfer from retained earnings to capital stock equal to the market value of the shares issued is ordinarily a characteristic of Answer Selected Answer: A stock dividend but not a stock split

Correct Answer: A stock dividend but not a stock split Question 11 1 out of 1 points A feature common to both stock splits and stock dividends is Answer Selected Answer: A reduction in book value per share Correct Answer: A reduction in book value per share Question 12 1 out of 1 points The par value method of reporting a treasury stock transaction Answer Selected Answer: Assumes constructive retirement of the treasury shares. Correct Answer: Assumes constructive retirement of the treasury shares. Question 13 1 out of 1 points On December 31, 2010, when the Conn Companys stock was selling at $36 per share, its capital accounts were as follows Capital stock (par value $20, 100,000 shares issued) $2,000,000

Premium on capital stock 800,000 Retained Earnings 4,550,000 If a 100 percent stock dividend were declared and the par value per share remained at $20 Answer Selected Answer: Capital stock would increase to $4,000,000 Correct Answer: Capital stock would increase to $4,000,000 Question 14 1 out of 1 points A company has not paid dividends on its cumulative nonvoting preferred stock for 20 years. Healthy earnings have been reported each year, but they have been retained to support the growth of the company. The board of directors appropriately authorized management to offer the preferred shareholders an exchange of bonds and common stock for all the preferred stock. The exchange is about to be consummated. Which of the following best describes the effect of the exchange on the company? Answer Selected Answer:

Regardless of the market value of the bonds and common stock, no gain or loss should be recognized by the company on the exchange, and no dividends need to be paid on the preferred stock exchanged.

Correct Answer:

Regardless of the market value of the bonds and common stock, no gain or loss should be recognized by the company on the exchange, and no dividends need to be paid on the preferred stock exchanged.

Question 15

1 out of 1 points Which of the following securities must be reported as a liability because they have the characteristics of both liabilities and equity, but the liability characteristic is dominant? Answer Selected Answer: Mandatorily redeemable preferred stock. Correct Answer: Mandatorily redeemable preferred stock. Question 16 1 out of 1 points Arkin, Inc., owns 90 percent of the outstanding stock of Baldwin Company. Curtis, Inc., owns 10 percent of the outstanding stock of Baldwin Company. On the consolidated financial statements of Arkin, Curtis should be considered as Answer Selected Answer: A noncontrolling interest Correct Answer: A noncontrolling interest Question 17 1 out of 1 points Meredith Company and Kyle Company were combined in an acquisition transaction. Meredith was able to acquire Kyle at a bargain price. The sum of the market or appraised values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Meredith. After revaluing noncurrent assets to zero there was still some of the bargain purchase amount remaining (formerly termed negative goodwill). Proper

accounting treatment by Meredith is to report the amount as Answer Selected Answer: Part of current income in the year of combination Correct Answer: Part of current income in the year of combination Question 18 1 out of 1 points On October 1, Company X acquired for cash all of the outstanding common stock of Company Y. Both companies have a December 31 year end and have been in business for many years. Consolidated net income for the year ended December 31 should include net income of Answer Selected Answer: Company X for 12 months and Company Y for 3 months Correct Answer: Company X for 12 months and Company Y for 3 months Question 19 1 out of 1 points The acquisition method of accounting for a business combination is consistent with Answer Selected Answer: Entity theory.

Correct Answer: Entity theory. Question 20 1 out of 1 points The theoretically preferred method of presenting noncontrolling interest on a consolidated balance sheet is Answer Selected Answer: As a separate item within the stockholders equity section Correct Answer: As a separate item within the stockholders equity section Question 21 1 out of 1 points The profitability information that should be reported for each reportable segment of a business enterprise consists of Answer Selected Answer:

An operating profit-or-loss figure consisting of segment revenues less traceable costs and allocated common costs

Correct Answer:

An operating profit-or-loss figure consisting of segment revenues less traceable costs and allocated common costs

Question 22 1 out of 1 points

In a business combination that is accounted for under the acquisition method the entity that obtains control over one or more businesses and establishes the acquisition date that control was achieved is called the Answer Selected Answer: Acquirer. Correct Answer: Acquirer. Question 23 1 out of 1 points Under the acquisition method for a business combination, the cost incurred to effect the business combination, such as finders and legal fees are Answer Selected Answer: Expensed as incurred. Correct Answer: Expensed as incurred. Question 24 1 out of 1 points Which of the following is not a consideration in segment reporting for diversified enterprises? Answer Selected Answer: Consolidation policy

Correct Answer: Consolidation policy Question 25 1 out of 1 points Goodwill represents the excess of the cost of an acquired company over the Answer Selected Answer:

Sum of the fair values assigned to identifiable assets acquired less liabilities assumed

Correct Answer:

Sum of the fair values assigned to identifiable assets acquired less liabilities assumed

Question 26 1 out of 1 points Under the acquisition method of accounting for a business combination when the parent company has acquired only 90% of the voting stock of a subsidiary, Answer Selected Answer:

The consolidated balance sheet will report 100% of the value of goodwill.

Correct Answer: The consolidated balance sheet will report 100% of the value of goodwill. Question 27 1 out of 1 points

Under the acquisition method of accounting for a business combination, a bargain purchase is Answer Selected Answer: Reported as a gain in the income statement. Correct Answer: Reported as a gain in the income statement. Question 28 1 out of 1 points Under the acquisition method of accounting for a business combination, goodwill is equal to Answer Selected Answer:

The excess of the cost of the acquisition plus the fair value of the noncontrolling interest over the fair value of the acquirees net assets.

Correct Answer:

The excess of the cost of the acquisition plus the fair value of the noncontrolling interest over the fair value of the acquirees net assets.

Question 29 1 out of 1 points A sale of goods, denominated in a currency other than the entitys functional currency, resulted in a receivable that was fixed in terms of the amount of foreign currency that would be received. Exchange rates between the functional currency and the currency in which the transaction was denominated changed. The resulting gain should be include as a (an)

Answer Selected Answer: Other comprehensive income Correct Answer: Other comprehensive income Question 30 1 out of 1 points Consolidated statements are proper for Neely, Inc., Randle, Inc., and Walker, Inc., if Answer Selected Answer:

Neely owns 80 percent of the outstanding common stock of Randle and 40 percent of Walker; Randle owns 30 percent of Walker.

Correct Answer:

Neely owns 80 percent of the outstanding common stock of Randle and 40 percent of Walker; Randle owns 30 percent of Walker