DeVry ACCT 312 Midterm Exam

DeVry ACCT 312 Midterm Exam

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1. Question : (TCO 1) Which creates a deferred tax liability?

Student Answer: An unrealized loss from recording inventory at lower cost than market.

Estimated warranty expense

Subscriptions collected in advance

Accelerated depreciation in the tax return

2. Question : (TCO 1) A deferred tax asset represents a

Student Answer: future cash collection.

future income tax benefit.

future tax refund.

future amount of money to be paid out.

3. Question : (TCO 2) The three components of pension expense that are present most often are

Student Answer: service cost, prior service cost, and gain on plan assets.

service cost, interest cost, and gain from revisions in pension liability.

service cost, contribution cost, and prior service cost.

service cost, interest cost, and expected return on plan assets.

4. Question : (TCO 2) Which of the following constitutes the accumulated benefit obligation?

Student Answer: Present value of vested benefits at present pay levels

Present value of nonvested benefits at present pay levels

Present value of additional benefits related to projected pay increases

Both A and B

5. Question : (TCO 3) Prior to 1993, postretirement benefits other than pensions generally were accounted for on the

Student Answer: accrual basis.

cash basis.

modified accrual basis.

hybrid basis.

6. Question : (TCO 4) Which of the following transactions decreases retained earnings?

Student Answer: A property dividend

A stock dividend

A cash dividend

All of the above

7. Question : (TCO 4) When a property dividend is declared, the reduction in retained earnings is for

Student Answer: the book value of the property on the date of declaration.

the book value of the property on the date of distribution.

the fair value of the property on the date of declaration.

the fair value of the property on the date of distribution.

8. Question : (TCO 5) Executive stock options should be reported as compensation expense

Student Answer: using the intrinsic value method.

using the fair value method.

using either the fair value method or the intrinsic value method.

only on rare occasions.

9. Question : (TCO 5) Our company granted options for 2 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $35 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $9 per option. If the options have a vesting period of 5 years, which would be the balance in Paid-in Capital – Stock Options 3 years after the grant date?

Student Answer: A credit of $10.8 million

A credit of $18 million

A debit of $70 million

A debit of $3.6 million

10. Question : (TCO 6) Which of the following is not a potential common stock?

Student Answer: Convertible preferred stock

Convertible bonds

Stock rights

Participating preferred stock

11. Question : (TCO 6) When computing diluted earnings per share, which of the following will be omitted from the calculation?

Student Answer: The weighted average common shares

The effect of stock splits

Dividends paid on common stock

The number of common shares represented by stock purchase warrants

12. Question : (TCO 1) Please describe permanent differences and provide three examples.

13. Question : (TCO 2) Please describe defined-contribution plans. What is an example? Who bears the risk? Who typically contributes to these plans?

14. Question : (TCO 4) What are the two ways for a company to reacquire stock? Please also discuss when a company reacquires stock and whether there is a difference between the amount the shares were originally sold for and the cash paid to buy the shares back.

15. Question : (TCO 5) What is FASB's stance on companies recording compensation expense for stock option plans? What method is preferable? What is the journal entry to record compensation expense?

DeVry ACCT 312 Midterm Exam

Click on the link below for the solution:

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