QUESTION 1
Corresponds to CLO 1(a) Parson Corporation had 500,000 shares of common stock outstanding on January 1, issued 100,000 shares on October 1, and had income applicable to common stock of $730,000 for the year ended December 31, 2013. Rounded to the nearest penny, earnings per share of common stock for 2013 would be
$1.67
$1.46
$1.39
$1.22
QUESTION 2
Corresponds to CLO 1(b) The following information is available for Packard Corporation:
January 1, 2013 Shares outstanding 1,500,000
April 1, 2013 Treasury shares purchased 100,000
October 1, 2013 Shares issued in a 100% stock dividend 1,400,000
The weighted-average number of shares to be used in computing earnings per common share for 2013 is
1,033,333
2,800,000
2,850,000
3,000,000
QUESTION 3
Corresponds to CLO 1(c) On January 2, 2013, Interval Co. issued at par $1,000,000 of 7% convertible bonds. Each $1,000 bond is convertible into 20 shares of common stock. No bonds were converted during 2013. Interval had 200,000 shares of common stock outstanding during 2013. Interval's 2013 net income was $300,000 and the income tax rate was 30%. Interval's diluted earnings per share for 2013 would be (rounded to the nearest penny):
$1.74
$1.59
$1.50
$1.68
QUESTION 4
Corresponds to CLO 1(d) On January 1, 2013, Lakewood Corporation granted stock options to officers and key employees for the purchase of 50,000 shares of the company's $20 par common stock at $40 per share as additional compensation for services to be rendered over the next three years. The market price of common stock was $49 per share at the date of grant. The options are exercisable during a five-year period beginning January 1, 2016 by grantees still employed by Lakewood. The Black-Scholes option pricing model determines total compensation expense to be $600,000. The 2013 income statement will include compensation expense related to these stock options in the amount of:
$600,000
$450,000
$200,000
$120,000
QUESTION 5
Corresponds to CLO 2(a) On July 1, 2103, Atlas Corporation acquired 500, $1,000, 7% bonds at 97 plus accrued interest. The bonds were dated April 1, 2013, and mature on March 31, 2018, with interest paid each September 30 and March 31. The bonds will be added to Atlas's available-for-sale portfolio. The journal entry to record the purchase of this investment will include
a debit to Bond discount for $15,000.
a credit to Investments for $500,000.
a debit to Cash for $500,000.
a credit to Cash for $485,000.
QUESTION 6
Corresponds to CLO 2(b) On January 1, 2013, King Corporation paid $470,124 to acquire 10% bonds with a face value of $500,000. The discount of $29,876 provides an effective yeld of 11%. King Corporation uses the effective-interest method and plans to hold these bonds to maturity. On July 1, 2013, King Corporation should increase the carrying value of these bonds by (round to the nearest dollar):
$4,701
$857
$2,500
$1,494
QUESTION 7
Corresponds to CLO 2(c) Hollister Company's trading securities portfolio, which is appropriately included in current assets, is as follows on December 31, 2013: Meyer Corporation - cost of $400,000 and fair value of $325,000; Fischer Corporation - cost of $500,000 and fair value of $535,000. Ignoring income taxes, what amount should be reported as a charge against income in Hollister's 2013 income statement if 2013 is Hollister's first year of operation?
$40,000 Unrealized Loss
$35,000 Unrealized Gain
$75,000 Unrealized Loss
$ -0-
QUESTION 8
Corresponds to CLO 2(d) Patton Corporation owns 3,000 of the 10,000 outstanding shares of Forman Corporation. During 2013, Forman Corporation earns $1,500,000 and pays cash dividends of $120,000. What amount should Patton show in the Forman investment account at December 31, 2013 if the beginning of the year balance in the account was $800,000?
$1,286,000
$1,250,000
$1,214,000
$800,000
QUESTION 9
Corresponds to CLO 3(a) Tax rates other than the current tax rate may be used to calculate the deferred income tax amounts on the balance sheet if
it is probable that a future tax rate change will occur.
it appears likely that a future tax rate will be greater than the current tax rate.
the future tax rates have been enacted into law.
it appears likely that a future tax rate will be less than the current tax rate.