1. Which of the following is an acceptable method of accounting for employee stock options?
prospective method
fair value method
intrinsic method
historical value method
2. Which of the following is the date on which a company incurs a legal liability to distribute the dividend to owners of the stock?
date of record
commitment date
date of declaration
date of payment
3. Goodwill represents
the synergies that will be achieved through the acquisition.
the difference between the acquisition cost and the market value of the identifiable assets and liabilities.
the difference between the acquisition cost and the book value of the identifiable assets and liabilities.
the merger premium.
4. Which of the following is not normally recognized as a liability on the balance sheet?
Warranties Payable.
Bonds payable.
Subscription Fees Received in Advance.
Employment Commitments.
5. Expenditures included in the cost of a long-lived asset are
intangible.
charged off.
expensed.
capitalized.
6. All of the following are factors that must be considered when measuring depreciation expense except:
acquisition cost
active markets for the depreciable asset
expected useful life of the depreciable asset
depreciation method
7. Porter Corporation
NOTE: The following multiple choice questions require present value information.
On January 1, 2012, Porter Corporation signed a five-year noncancelable lease for certain machinery. The terms of the lease called for:
1) Price to make annual payments of $60,000 at the end of each year (starting on Dec. 31, 2012) for five years. Porter must return the equipment to the lessor end of this period.
2) The machinery has an estimated useful life of 6 years and no expected salvage value.
3) Porter uses the straight-line method of depreciation for all of its fixed assets.
4) Porter's incremental borrowing rate is 8%.
5) The fair value of the asset at January 1, 2012 is $275,000.
What accounting method should Porter use to account for the equipment lease?
Operating Lease method
Capital Lease method
Equipment Lease method
Lessee Accounting method
8. Which is the date when a firm gives a stock option to employees?
vesting date
grant date
exercise date
market date
9. Which one of the following is an example of the expected benefit approach for valuing long-lived assets?
Current cost.
Historical cost.
Discounted present value.
Current replacement value.
10. Olivia Co. owns 4,000 of the 10,000 outstanding shares of Hobbitt Corp. common stock and exercises significant influence over the company. During 2011, Hobbitt earns $80,000 and pays cash dividends of $30,000. If the beginning balance in the investment account was $160,000, the balance at December 31, 2011 should be:
$192,000
$172,000
$180,000
$160,000