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ACCT 551 Final Exam Set 1 NEW
ACCT 551 Final Exam Set 1 NEW
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ACCT 551 Final Exam Set 1 NEW

Question 1. (TCO C) Which characteristic is not possessed by intangible assets? 
        Physical existence
        Short-lived
        Result in future benefits
        Expensed over current and/or future years 
 
 
 
Question 2. (TCO C) Which intangible assets are amortized? 
Limited Life       Indefinite Life
 
 
Question  3. (TCO C) Which of the following is often reported as an extraordinary item?
        Amortization expense
        Impairment losses for intangible assets other than goodwill
        Impairment losses on goodwill
        None of the above 
 
 
Question  4. (TCO D) Which of the following is a current liability? 
        A long-term debt maturing currently, which is to be paid with cash in a sinking fund
        A long-term debt maturing currently, which is to be retired with proceeds from a new debt issue
        A long-term debt maturing currently, which is to be converted into common stock
        A long-term debt maturing currently, which is to be paid with current assets 
 
 
Question  5. (TCO D) Jeff Beck is a farmer who owns land that borders on the right-of-way of the Northern Railroad. On August 10, 2010, due to the admitted negligence of the railroad, hay on the farm was set on fire and burned. Beck had had a dispute with the railroad for several years concerning the ownership of a small parcel of land. The representative of the railroad has offered to assign any rights the railroad may have in the land to Beck in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Beck appears inclined to accept the railroad's offer. The railroad's 2010 financial statements should include the following related to the incident:  
        recognition of a loss and creation of a liability for the value of the land.
        recognition of a loss only.
        creation of a liability only.
        disclosure in note form only. 
 
 
Question 6.  (TCO D) Which of the following best describes the cash-basis method of accounting for warranty costs?  
        Expensed based on estimate in year of sale
        Expensed when liability is accrued
        Expensed when warranty claims are certain
        Expensed when incurred 
 
 
Question 7. (TCO D) The term used for bonds that are unsecured regarding principal is 
        junk bonds.
        debenture bonds.
        in-debenture bonds.
        callable bonds. 
 
 
Question  8. (TCO D) On November 1, Year 1, Dixon Corporation issued $800,000 of its 10-year, 8% term bonds dated October 1, Year 1. The bonds were sold to yield 10%, with total proceeds of $700,000 plus accrued interest. Interest is paid every April 1 and October 1.  What amount should Dixon report for interest payable in its December 31, Year 1 balance sheet?  
        $17,500
        $16,000
        $11,667
        $10,667 
 
 
Question  9. (TCO E) A primary source of stockholders' equity is 
        income retained by the corporation.
        appropriated retained earnings.
        contributions by stockholders.
        both income retained by the corporation and contributions by stockholders. 
 
 
Question 10.  (TCO F) Which of the following statements about property dividends is not true? 
        A property dividend is usually in the form of securities of other companies.
        A property dividend is also called a dividend in kind.
        The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.
        All of the above 
 
 
1. (TCO C) Redstone Company spent $190,000 developing a new process, $45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented. How should these costs be accounted for in the year they are incurred?
2. (TCO D) Total payroll of Watson Co. was $920,000, of which $160,000 represented amounts paid in excess of $100,000 to certain employees. The amount paid to employees in excess of $7,000 was $720,000. Income taxes withheld were $225,000. The state unemployment tax is 1.2%, the federal unemployment tax is .8%, and the FICA tax is 7.65% on an employee’s wages to $100,000 and 1.45% in excess of $100,000. 
(a) Prepare the journal entry for the wages and salaries paid.
(b) Prepare the entry to record the employer payroll taxes.
 
3. (TCO D) Hurst, Incorporated sold its 8% bonds with a maturity value of $3,000,000 on August 1, 2009 for $2,946,000. At the time of the sale, the bonds had 5 years until they reached maturity. Interest on the bonds is payable semiannually on August 1 and February 1. The bonds are callable at 104 at any time after August 1, 2011. By October 1, 2011, the market rate of interest has declined and the market price of Hurst's bonds has risen to a price of 101. The firm decides to refund the bonds by selling a new 6% bond issue to mature in 5 years. Hurst begins to reacquire its 8% bonds in the market and is able to purchase $500,000 worth at 101. The remainder of the outstanding bonds is reacquired by exercising the bonds' call feature. In the final analysis, how much was the gain or loss experienced by Hurst in reacquiring its 8% bonds? (Assume the firm used straight-line amortization.) Show calculations.
 
4. (TCO E) Parker Corporation has issued 2,000 shares of common stock and 400 shares of preferred stock for a lump sum of $72,000 cash. 
Instructions:
(a) Give the entry for the issuance, assuming the par value of the common was $5 and the market value $30, and the par value of the preferred was $40 and the market value $50. (Each valuation is on a per-share basis and there are ready markets for each stock.)
(b) Give the entry for the issuance assuming the same facts as (a) above except the preferred stock has no ready market value, and the common stock has a market value of $25 per share. 
 
5. (TCO F) Describe the journal entry for a stock dividend on common stock (which has a par value)
 
6. (TCO A) At December 31, 2010, Kifer Company had 500,000 shares of common stock outstanding. On October 1, 2011, an additional 100,000 shares of common stock were issued. In addition, Kifer had $10,000,000 of 6% convertible bonds outstanding at December 31, 2010, which are convertible into 225,000 shares of common stock. No bonds were converted into common stock in 2011. The net income for the year ended December 31, 2011, was $3,000,000. Assuming the income tax rate was 30%, what would be the diluted earnings per share for the year ended December 31, 2011
 
7. (TCO B) Agee Corp. acquired a 25% interest in Trent Co. on January 1, 2010, for $500,000. At that time, Trent had 1,000,000 shares of its $1 par common stock issued and outstanding. During 2010, Trent paid cash dividends of $160,000 and thereafter declared and issued a 5% common stock dividend when the market value was $2 per share. Trent's net income for 2010 was $360,000. What is the balance in Agee’s investment account at the end of 2010?
 

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