(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?
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