Set 2

Question 1

Calculate shares of common stock outstanding

Answer 1

[Shares outstanding + stock dividend ie (% stock dividend declared * shares outstanding) - shares purchased + shares reissued] * stock split

Question 3

Calculate amount reported as treasury stock gain at year end

Answer 3

0 b/c treasury stock gains/losses are not allowed to be recorded in I/S, rather reported as direct adj to stockholders equity. Gains= credit APIC treasury stock; losses = reduce any existing APIC TS to $0 and debit additional loss to RE

Question 4

What are assets or capital distributions to stockholders?

Answer 4

• liquidating dividends b/c return of capital ie capital distribution
• property distribution an asset distribution
• cash dividend an asset distribution

Question 5

How does exercising stock warrants affect on additional paid in capital and NI?

Answer 5

Additional paid in capital increases when exercised but has no effect on NI

Question 6

What is the JE when purchasing goods

Answer 6

DR purchases and CR AP

Question 7

What is the criteria on disclosure of vulnerability to a concentration?

Answer 7

a) The concentration exists as of the financial statement date.
b) The concentration makes the entity vulnerable to the risk of a near-term severe impact.
c) It is at least reasonably possible that the events that could cause a severe impact from the vulnerability will occur in the near term.

Question 8

Example: calculate foreign currency transaction gain/loss to be reported on I/S year end Y3?

Answer 8

3 dates: purchased Y2, year end Y2, and paid Y3.
= year end Y2 minus paid Y3

Question 9

How is property dividend recorded?

Answer 9

@ fair value of property distributed meaning property must be adjusted to fair value with adj affecting NI, not additional paid in capital

Question 10

How do these transactions affect comprehensive income?

Answer 10

a) trading security unrealized loss is loss on I/S = reduce NI & comprehensive income
b) amortization of actuarial pension loss will increase OCI & pension expense meaning decrease in NI therefore no net impact on CI
c) unrealized gain on available for sale debt security = increase OCI & CI

Question 11

Treasury stock transactions cost method

Answer 11

Additional paid in capital treasury stock account will have loss if acquired shares are reissued at lower price until reaching $0. Remaining loss recognized as reduction ie debit to RE account

Question 12

If an accounting principle change is inseparable from accounting estimate change then?

Answer 12

Treated as overall effect as change in estimate ie prospective as component of income from continuing operations

Question 13

Calculate total cash disbursements by

Answer 13

Month disbursements minus outstanding checks that did not clear the bank

Question 14

Calculate gain as separate component of income from continuing operations

Answer 14

= Insurance proceeds - costs to dismantle old warehouse minus -current carrying amount
a) Insurance proceeds = Replacement minus deductible clause

Question 15

Calculate adj stockholders equity

Answer 15

Total stockholders equity minus shares of its own common stock held by corporation

Question 16

During rising prices, when changing inv valuation method from FIFO to LIFO, what happens?

Answer 16

Ending Inv & NI decrease

Question 17

Calculate unrealized loss in Y1 statement of comprehensive income

Answer 17

[YE 2 FMV - YE 2 Aggregate cost] - YE 1 unrealized loss

Question 18

Calculate estimated liability accrue to redemption of box tops?

Answer 18

[(# boxes sold * % box tops redeemed) - actual box tops redeemed] /# box tops per glass

Question 19

Under the sum-of-the-years’ digits method, determine accumulated depreciation

Answer 19

(Original cost - less salvage value) * sum digits basis

Calculate Sum digits basis example, estimated useful life 5 years and YR 4 accumulated depreciation is.. digit basis is 14/15 b/c Y1+Y2+Y3+Y4+Y5 = 15; 14 = Y1 is 5, Y2 is 4, Y3, is 3, Yr 4 is 2

Question 20

During rising prices, LIFO v FIFO?

Answer 20

LIFO last cost inventoried are 1st transferred to COGS ie end inv includes oldest costs = a) COGS higher than FIFO = higher expense = income tax expense lower= tax liab lower b) end inv lower then FIFO c)

Question 21

Calculate current tax liability

Answer 21

(income before provision for income tax - income from exempt municipal bonds + Rent received in advance - depreciation ) * tax rate

Question 22

How will reversal of current temporary differences result in future deductible amounts?

Answer 22

a) deductible amounts b/c a future tax savings occurs from deferred tax assets is realized in deductions and reduce future taxes owed
b) Taxable status profit b/c its reporting a deferred tax asset… if loss it requires full valuation allowance against deferred tax asset