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ACC 423 Final Exam Guide (New 2017, With EXCEL

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Week 5 Final Exam

CPA Question 01

CPA Question 02

CPA Question 05

Question 29

Brief Exercise 15-4

Exercise 15-1

CPA Question 04

CPA Question 06

Brief Exercise 16-2

Brief Exercise 16-7

Brief Exercise 17-1


Brief Exercise 17-9

Brief Exercise 17-13

Exercise 17-3

Exercise 17-10

Question 8

Brief Exercise 19-3

Brief Exercise 19-12

Exercise 19-2

CPA Question 08

CPA Question 02

Brief Exercise 20-8

Exercise 20-1

Exercise 20-5

Exercise 20-12

CPA Question 03

Exercise 22-19

CPA Question 01
On September 1, 2017, Hyde Corp., a newly formed company, had the following stock issued
and outstanding:
Common stock, no par, $1 stated value, 5,000 shares originally issued at $15 per share.
Preferred stock, $10 par value, 1,500 shares originally issued for $25 per share.
Hyde's September 1, 2017 statement of stockholders' equity should report
Common Preferred Additional Paid-
stock stock in capital

CPA Question 02
Beck Corp. issued 200,000 shares of common stock when it began
operations in year 1 and issued an additional 100,000 shares in year 2.
Beck also issued preferred stock convertible to 100,000 shares of
common stock. In year 3, Beck purchased 75,000 shares of its
common stock and held it in Treasury. At December 31, year 3, how
many shares of Beck's common stock were outstanding?

CPA Question 05
Jones Co. had 50,000 shares of $5 par value common stock
outstanding at January 1. On August 1, Jones declared a 5% stock
dividend followed by a two-for-one stock split on September 1. What
amount should Jones report as common shares outstanding at
December 31?

Question 29
Grouper Corp. had $100,000 of 7%, $20 par value preferred stock and
12,000 shares of $25 par value common stock outstanding throughout
2017.
Assuming that total dividends declared in 2017 were $64,000, and
that the preferred stock is not cumulative but is fully participating,
common stockholders should receive 2017 dividends of what
amount?
Assuming that total dividends declared in 2017 were $64,000, and
that the preferred stock is fully participating and cumulative with
preferred dividends in arrears for 2016, preferred stockholders should
receive 2017 dividends totaling what amount?
Assuming that total dividends declared in 2017 were $30,000, that the
preferred stock is cumulative, nonparticipating, and was issued on
January 1, 2016, and that $5,000 of preferred dividends were declared
and paid in 2016, the common stockholders should receive 2017
dividends totaling what amount?

Brief Exercise 15-4


Kingbird Corporation issued 384 shares of $10 par value common
stock and 144 shares of $50 par value preferred stock for a lump sum
of $19,872. The common stock has a market price of $20 per share,
and the preferred stock has a market price of $100 per share.

Prepare the journal entry to record the issuance.

Exercise 15-1
During its first year of operations, Metlock Corporation had the
following transactions pertaining to its common stock.
Jan.
Issued 80,500 shares for cash at $6 per share.
10
Issued 5,000 shares to attorneys in payment of a bill for
Mar.
$37,700 for services rendered in helping the company to
1
incorporate.
July
Issued 33,300 shares for cash at $8 per share.
1
Sept.
Issued 62,100 shares for cash at $10 per share.
1

Prepare the journal entries for these transactions, assuming that


(a)
the common stock has a par value of $5 per share.
Prepare the journal entries for these transactions, assuming that
(b)
the common stock is no-par with a stated value of $2 per share.

CPA Question 04
A restricted stock award was granted at the beginning of 2015 calling
for 3,000 shares of stock to be awarded to executives at the beginning
of 2019. The fair value of one option was $20 at grant date. During
2017, 100 shares were forfeited because an executive left the firm.
What amount of compensation expense is recognized for 2017?
CPA Question 06
A company had the following outstanding shares as of January 1, year
2:
Preferred stock,
10,000
$60 par, 4%,
shares
cumulative
Common stock, 50,000
$3 par shares

On April 1, year 2, the company sold 8,000 shares of previously


unissued common stock. No dividends were in arrears on January 1,
year 2, and no dividends were declared or paid during year 2. Net
income for year 2 totaled $236,000. What amount is basic earnings
per share for the year ended December 31, year 2?

Brief Exercise 16-2


Oriole Corporation has outstanding 2,100 $1,000 bonds, each
convertible into 60 shares of $10 par value common stock. The bonds
are converted on December 31, 2017, when the unamortized discount
is $26,200 and the market price of the stock is $21 per share.

Record the conversion using the book value approach.

Brief Exercise 16-7


On January 1, 2017, Larkspur Corporation granted 2,000 shares of
restricted $5 par value common stock to executives. The market price
(fair value) of the stock is $66 per share on the date of grant. The
period of benefit is 2 years.

Prepare Larkspurs journal entries for January 1, 2017, and December


31, 2017 and 2018.

Brief Exercise 17-1


Teal Company purchased, on January 1, 2017, as a held-to-maturity
investment, $81,000 of the 8%, 5-year bonds of Chester Corporation
for $74,859, which provides an 10% return.

Prepare Teals journal entries for (a) the purchase of the investment,
and (b) the receipt of annual interest and discount amortization.
Assume effective-interest amortization is used.

BE 17-3

Brief Exercise 17-9


The following information relates to Culver Co. for the year ended
December 31, 2017: net income 1,321 million; unrealized holding
loss of $11.7 million related to available-for-sale debt securities
during the year; accumulated other comprehensive income of $56.3
million on December 31, 2016. Assuming no other changes in
accumulated other comprehensive income.

Determine (a) other comprehensive income for 2017, (b)


comprehensive income for 2017, and (c) accumulated other
comprehensive income at December 31, 2017

Exercise 17-3
On January 1, 2017, Carla Company purchased 8% bonds having a
maturity value of $360,000, for $390,329.57. The bonds provide the
bondholders with a 6% yield. They are dated January 1, 2017, and
mature January 1, 2022, with interest receivable January 1 of each
year. Carla Company uses the effective-interest method to allocate
unamortized discount or premium. The bonds are classified in the
held-to-maturity category.

Question 8
Skysong financial income for Lake Inc. is $290,000, and its taxable
income is $100,000 for 2018. Its only temporary difference at the end
of the period relates to a $100,000 difference due to excess
depreciation for tax purposes. If the tax rate is 39% for all periods,
compute the amount of income tax expense to report in 2018. No
deferred income taxes existed at the beginning of the year.

Brief Exercise 19-3

Marigold Corporation began operations in 2017 and reported pretax


financial income of $206,000 for the year. Marigolds tax depreciation
exceeded its book depreciation by $33,000. Marigolds tax rate for
2017 and years thereafter is 30%. Assume this is the only difference
between Marigolds pretax financial income and taxable income.

Prepare the journal entry to record the income tax expense, deferred
income taxes, and income taxes payable

Brief Exercise 19-12


Blossom Corporation had the following tax information.
Taxable Tax
Year Taxes Paid
Income Rate
2015 $306,000 34% $104,040
2016 324,000 29% 93,960
2017 393,000 29% 113,970

In 2018, Blossom suffered a net operating loss of $488,000, which it


elected to carry back. The 2018 enacted tax rate is 28%.

Prepare Blossoms entry to record the effect of the loss carryback.

Exercise 19-2
The following information is available for Pronghorn Corporation for
2016 (its first year of operations).
Excess of tax depreciation over book depreciation, $40,800. This
1.
$40,800 difference will reverse equally over the years 20172020.
Deferral, for book purposes, of $21,400 of rent received in
2.
advance. The rent will be recognized in 2017.
3. Pretax financial income, $319,400.
4. Tax rate for all years, 30%.

CPA Question 08
Brass Co. reported income before income tax expense of $60,000 for
2017. Brass had no permanent or temporary timing differences for tax
purposes. Brass has an effective tax rate of 30% and a $40,000 net
operating loss carry-forward from 2016. What is the maximum
income tax benefit that Brass can realize from the loss carry-forward
for 2017?

Brief Exercise 20-8


Windsor Corporation has the following balances at December 31,
2017.
Projected
benefit $2,705,000
obligation
Plan assets at
2,099,000
fair value
Accumulated
995,000
OCI (PSC)

What is the amount for pension liability that should be reported on


Windsor's balance sheet at December 31, 2017?

Exercise 20-1
The following information is available for the pension plan of
Marigold Company for the year 2017.
Actual and expected
$ 16,300
return on plan assets
Benefits paid to
38,400
retirees
Contributions
94,400
(funding)
Interest/discount rate 11%
Prior service cost
8,800
amortization
Projected benefit
obligation, January 1, 510,000
2017
63,300
Service cost

Exercise 20-12
Shamrock Company received the following selected information from its pension plan trustee
concerning the operation of the companys defined benefit pension plan for the year ended
December 31, 2017.
January 1, December
2017 31, 2017
Projected
benefit $1,499,000 $1,527,000
obligation
Market-related
and fair value of 802,000 1,127,200
plan assets
Accumulated
benefit 1,622,000 1,742,500
obligation
Accumulated
OCI (G/L) 0 (199,900)
Net gain

The service cost component of pension expense for employee services


rendered in the current year amounted to $78,000 and the
amortization of prior service cost was $120,500. The companys
actual funding (contributions) of the plan in 2017 amounted to
$245,000. The expected return on plan assets and the actual rate were
both 10%; the interest/discount (settlement) rate was 10%.
Accumulated other comprehensive income (PSC) had a balance of
$1,205,000 on January 1, 2017. Assume no benefits paid in 2017.

CPA Question 03
Your answer has been saved and sent for grading. See Gradebook for
score details.

During 2017, Orca Corp. decided to change from the FIFO method of inventory valuation to
the weighted-average method. Inventory balances under each method were as follows:
FIFO Weighted-average
January 1, 2017$71,000 $77,000
December 31, 2017$79,000 $83,000

Orca's income tax rate is 30%.

In its 2017 financial statements, what amount should Orca report as


the cumulative effect of this accounting change?

Exercise 22-18
Pina Tool Companys December 31 year-end financial statements contained the following
errors.
December 31, 2017 December 31, 2018
Ending inventory $10,500 understated $7,400 overstated
Depreciation expense $2,100 understated

An insurance premium of $70,200 was prepaid in 2017 covering the


years 2017, 2018, and 2019. The entire amount was charged to
expense in 2017. In addition, on December 31, 2018, fully
depreciated machinery was sold for $13,500 cash, but the entry was
not recorded until 2019. There were no other errors during 2017 or
2018, and no corrections have been made for any of the errors.
(Ignore income tax considerations.)
Question 18
In January 2017, installation costs of $5,800 on new machinery were
charged to Maintenance and Repairs Expense. Other costs of this
machinery of $29,000 were correctly recorded and have been
depreciated using the straight-line method with an estimated life of 10
years and no salvage value. At December 31, 2018, it is decided that
the machinery has a remaining useful life of 20 years, starting with
January 1, 2018. What entries should be made in 2018 to correctly
record transactions related to machinery, assuming the machinery has
no salvage value? The books have not been closed for 2018 and
depreciation expense has not yet been recorded for 2018.