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Learning Objective: Solve - Accounting Performance Measure: Embedded Exam Questions Assessment Point: ACCT340
COMPETENCY: Solve Intermediate

Accounting Problems

Questions: 1. The compensation associated with restricted stock under a stock award plan is: a. The book value of an unrestricted share of the same stock times the number of shares b. The estimated fair value of similar stock times the number of shares c. Allocated to expense over the service period which usually is the vesting period d. The book value of a share of similar stock times the number of shares Answer: C 2. If restarted stock is forfeited because an employee leaves the company, the appropriate accounting procedure is to: a. Reverse related entries previously made b. Do nothing c. Prepare correcting entries d. Record an income item Answer: A On January 1, 2011, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2013 and expire on January 1, 2017. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 pm the date of grant. 3. What amount should M recognize as compensation expense for 2011? a. $30,000 b. $60,000 c. $120,000 d. $150,000 4. If unexpected turnover in 2012 caused the company to estimate that 10% of the options would be forfeited, what amount should M recognize as compensation expense for 2012 a. $30,000 b. $60,000 c. $120,000 d. $150,000 Answer: D, C

5. Which of the following is not a potential common stock? a. Convertible preferred stock b. Convertible bonds c. Stock rights d. Participating preferred stock Answer: D 6. Basic earnings per share is computed using: a. Weighted-average common shares outstanding for the year b. A weighted-average of preferred and common shares c. The number of common shares outstanding plus common stock equivalents d. The actual number of common shares outstanding at the end of the year Answer: A 7. On December 31, 2010, the Frisbee Company had 250,000 shares of common stock issued and outstanding. On March 31, 2011, the company sold 50,000 additional shares for cash. Frisbees net income for the year ended December 31, 2011 was $700,000. During 2011, Frisbee declared and paid $80,000 in cash dividends on its nonconvertible preferred stock. What is the 2011 basic earnings per share (rounded)? a. $3.50 b. $2.16 c. $3.10 d. $2.80 Answer: B 8. The result of a stock split is: a. A larger number of more valuable shares b. An increase in corporate assets c. An increase in shareholders equity d. A larger number of less valuable shares Answer: D