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120 Cards in this Set
- Front
- Back
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Companies generally design pension plans that are...
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Qualified
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In a defined-benefit plan, funding refers to...
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Making the periodic contributions to a funding agency to ensure that funds are available to meet retiree's claims
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These increase pension expense (3)
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1. interest on the liability
2. service cost 3. amortization of prior service cost |
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FASB argues that this indicated a more realistic measure of the employer's obligation under the pension plan on a going-concern basis and should be used as a the basis for determining service costs
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Project Benefit Obligation (PBO)
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The interest on the PBO component of pension expense
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reflect the rates at which pension benefits could effectively be settled
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which of the following is not a component of pension expense:
a. actual return on plan assets b. amortization of PBO c. Gain/Loss d. Amortization of prior service cost |
B. Amortization of PBO
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If the actual return on plan assets is positive, then it is _____ from annual pension expense
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Subtracted
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Prior service cost is amortized on a...
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straight line basis over the average remaining service life of active employees
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The unexpected gains/losses that result from changes in the PBO are called...
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Liability gains/losses
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The unrecognized net gain/loss balance must be amortized when it exceeds 10% of the larger of the...
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Beg. PBO or Beg. Plan Asset
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Commonly, in a defined-benefit plan, the contributions to the plan are made by the...
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employer
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When the employer bears the entire cost of a pension plan's costs the plan is called a...
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noncontributory plan
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In a defined-contribution plan, a formula is used that...
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requires an employer to contribute a certain sum each period
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The accumulated benefit obligation measures...
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The pension obligation on the basis of the plan formula applied to years of service to date and existing salary levels
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Service cost is the expense caused by the increase in pension benefits payable to employees because of their services during ____.
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the current year
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Amortization of prior service costs generally ____ pension expense
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increase
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The rate used to determine the interest on the liability component of pension expense is the...
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settlement rate
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In a defined-benefit plan, pension expense is equal to the firm's cash contribution. True or False?
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False
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The balance of the Pension Asset/Liability column in the pension worksheet should equal the...
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net balance in the memo record
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Prior Service Costs due to a pension plan amendment are ____ .
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Amortized over future periods
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Amortization of prior service costs is based on...
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Years of service method
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The market-related asset value is used to determine ...
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Corridor and expected return on plan asset
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The main purpose of the Pension Benefit Guaranty Corporation is to...
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Administer terminated plans and to impose liens on the employer's assets for certain unfunded pension liabilities
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Pension plan assets ____ recognized in the company's accounts or its financial statements
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are not
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Appalachain Co. maintains a defined-benefits pension plan for its employees. At each balance sheet date, A Co. should report pension asset/liability equal to the ...
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funded status relative to the PBO
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What results from unexpected decreases in the pension obligation?
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Liability gain
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The corridor approach is used to prevent the balance of ___ from getting too large.
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OCI Gain/Loss
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Which of the following should decrease the annual pension expense amount?
a. Amortization of PSC b. Service Cost c. Interest on the liability d. Actual Return on Plan Assets |
D. Actual Return on Plan Assets
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Which of the following is not included in determining the balance of plan assets?
a. Benefits Paid b. Contributions made c. Expected Return d. Actual Return |
C. Expected Return
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Whenever a defined-benefits plan is amended and credit is given to employees for years of service provided before the date of amendment...
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Both the pension expense and the PBO are usually greater than before
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The three measures of pension obligation that actuaries provide
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1. Vested Benefits
2. Accumulated Benefits 3. Projected Benefits |
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What benefits are for vested employees at current salaries?
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Vested Benefits
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What benefits are for non-vested employees at current salaries?
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Accumulated Benefits
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What benefits are for both vested and non-vested employees at future salaries?
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Projected Benefits
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What rights do employees earn once vested?
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Benefits that they are entitles to without having to provide additional service to the company
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What are the two types of retirement plans?
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1. Defined-contribution plans
2. Defined-benefit plans |
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5 components of Pension Expense
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1. Service cost (+)
2. Interest Cost (+) 3. Actual Return on Plan Asset (+/-) 4. Amortization of PSC (+) 5. Gain/Loss a. Asset G/L (+/-) b. Liability G/L (no affect) c. Corridor (+/-) |
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Intangibles are normally classified as ___ assets.
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Long-term
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Which of the following is not a characteristic of intangible assets?
a. Long-term b. Lack physical existence c. All subject to amortization d. Not financial instruments |
C. All subject to amortization
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Expensing all R&D costs associated with internally created intangible assets results in...
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Understating assets and Overstating expenses
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Factors to be considered when determine a limited-life intangible asset's useful life (3)
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1. Any legal provisions that may limit useful life
2. Effect of obsolescence 3. Expected useful life of any related assets |
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A purchased limited life intangible asset ___ amortized and is impaired using ___.
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Is; the recoverability test and fair value test
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Construction permits are ...
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Contract-related intangible assets
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Which of the following is not one of the major categories of intangibles?
a. Contract b. Financing c. Artistic d. Marketing |
B. Financing
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Market-related intangibles would include...
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brand names
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What is the current method of accounting for R&D costs?
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Immediate recognition as an expense
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What R&D costs may be capitalized?
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R&D equipment to be used on current and future projects
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The presentation of intangible assets in the financial statements includes... (3)
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1. disclosure of the amort. exp. for next 5 yrs
2. crediting amort. directly to the int. asset acct. 3. reporting R&D as an expense on I/S |
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If the life of a limited-life intangible asset changes, the remaining carrying amount is amortized over...
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The revised remaining useful life
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The residual value of intangible assets should be assumed to be ___ unless its useful life is ___ than its economical useful life.
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0, less
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Production backlogs fall under which intangible asset category?
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Customer-related
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What represents a federally granted right?
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Copyright
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Which of the following would not be amortized?
a. Patent b. Trade Name c. Customer List d. Copyright |
B. Trade Name
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Examples of contract-related assets (3)
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1. Broadcast rights
2. Franchise 3. Construction permits |
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Capitalizing goodwill only when it is purchased in an arm's-length transaction, and not capitalizing any goodwill generated internally is an example of...
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Faithful representation winning out over relevance
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Which of the following should be excluded from R&D expense?
a. Engineering activity to advance the design of a product b. Modification of the design of a product c. Acquisition of R&D equip. to use on a current project only d. Cost of marketing research for a new project |
D. Cost of marketing research for a new project
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List the three types of intangible assets:
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1. Limited Life
2. Indefinite Life 3. Goodwill |
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In every corporation the class of stock that represents the basic ownership interest is...
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Common Stock
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The residual interest in a corporation belongs to ...
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Common stockholders
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Additional Paid-in Capital is not affected by the issuance of...
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No-par stock
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Treasury stock is classified on the balance sheet as ___.
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Contra-stockholder's equity
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Treasury stock sold for less that it cost decreases ___.
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Retained Earnings
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Preferred Stockholders ___ have voting rights.
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Do not
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Cumulative preferred dividends in arrears should be shown in a corporations Balance Sheet as ___.
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A footnote
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The most common type of preferred stock is...
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cumulative preferred stock
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The payment of a dividend ___ have to be in the same period it was declared.
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Does not
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Before declaring cash dividends, management must consider what?
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The availability of funds
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Cash dividends are paid on the basis of the number of shares ____.
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Outstanding
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A large stock dividend uses what amount for capitalization?
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Par Value
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Redeemable preferred stock should be classified as a ___ on the balance sheet.
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Liability
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Which of the following is not a right of common stockholders?
a. share in assets upon liquidation b. share in all management decisions c. share in any new issuance of stock d. share in profits and losses |
B. share in all management decisions
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Treasury stock transactions by a corporation may ___ but not ___ Retained Earnings
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decrease; increase
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What dividend does not reduce total stockholders' equity?
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Stock dividends
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At the date of declaration of a large common stock dividend, the entry should include...
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a debit to retained earnings
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The rate of return on common stock equity is computed by dividing ...
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(Net income - Preferred Dividends) / Avg. common stockholder's equity
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Total Stockholder's equity represents ...
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A claim against a portion of the total assets of an enterprise
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Stock splits ____ decrease retained earnings.
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Do not
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Common stock dividends distributable are reported on the balance sheet as ...
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An addition to common stock
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If a company only has common stock outstanding, book value per share is computed by ...
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(Total SH equity) / (# C/S shares outstanding)
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Stockholder's equity is generally classified into what 2 major categories?
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1. Retained Earnings
2. Contributed Capital |
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Under cost method, when treasury stock is sold for more than its cost, the excess is credited to...
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Paid-in capital from treasury stock
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When a property dividend is declared, retained earnings is reduced by the ...
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Fair value of the property
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What increases the number of shares outstanding and decreases the par value per share?
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Stock split
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The book value per share is based on ...
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Common shares outstanding
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Noncumulative preferred dividends in arrears are...
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Not paid or disclosed
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Preferred stockholders generally receive the largest amount of cash dividends if the preferred stock is___.
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Cumulative and fully participating
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GAAP requires that the issuer of a convertible debt record ...
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The liability
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Convertible bonds are usually converted into ...
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Common Stock
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When a bond issuer offers some form of additional consideration (a "sweetner") to induce conversion, the sweetner is accounted for as an...
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Expense
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The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be...
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Treated as a direct reduction of retained earnings
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Nondetachable warrants ___ require an allocation of the proceeds between the bonds and the warrants.
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Do not
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The conversion of preferred stock may be recorded by ...
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The book value method
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The proceeds from the sale of debt with detachable stock warrants should be allocated between the 2 securities based on the ...
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Aggregate fair market value of the bonds and the warrants
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Disclosure for compensation plans should include (3)
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1. number of shares under option
2. weighted avg. fair value of options granted during the year 3. significant assumptions used to estimate the fair value of the stock options |
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Commonly used stock compensation plans are (3):
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1. Stock options plan
2. Stock appreciation rights plan 3. Restricted-stock plan |
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When convertible debt is retired...
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Either a gain or loss on retirement is recognized
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Detachable stock warrants outstanding should be classified as...
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Paid-in Capital
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The issuance of warrants arises under all the following situations except:
a. Provide compensation to executives b. Give existing stockholders a preemptive right to purchase stock c. Give bondholders the preemptive right to purchase additional stock d. Make different types of securities more attractive to new investors |
C. Give bondholders the preemptive right to purchase additional stock
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Compensation expense resulting form a compensatory stock option plan is generally...
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Allocated to the periods benefited by the employee's required service
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Under the fair-value method of recording stock options, companies will report ...
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A higher compensation cost relative to the intrinsic-value method
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Accounting for stock option plans must be based on...
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The fair-value method
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Why do companies issue convertible debt?
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In order to obtain financing at a cheaper interest rate
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For which security is an allocation of the sales proceeds necessary?
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Bonds issued with detachable warrants
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Under the fair value method, compensation expense is recorded ...
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Evenly over the service period
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Convertibel bonds may be exchanged for ...
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Equity securities
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Which method has the FASB historically preferred in accounting for stock-based compensation?
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Fair value method
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Under the fair value method net income relative to the intrinsic-value method will be ...
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Lower
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What is the formula for computing EPS?
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(Net income - Preferred dividends)/WAV shrs out.
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A contingent issue agreement results in ...
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An issuance of shares when specific events occur
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When only the fair market value of the stock warrant is known, the sales price of the bonds with detachable warrants is allocated using the...
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Incremental Method
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EPS is reported for ___ stock only
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Common
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If the exercise price of the option/warrants exceeds the average market price, the computation would be...
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Anti-dilutive
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What will the numerator of the diluted EPS calculation consist of when convertible preferred stock is being included?
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Net income only
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Dilutive convertible securities must be used in the computation of...
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Diluted EPS
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If there are multiple potentially dilutive securities, the one that should be used first to recalculate EPS is the one that is ___ dilutive.
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Most
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Which EPS amounts are reported in a complex capital structure?
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Basic and Dilutive EPS
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Diluted EPS computation considers (3)...
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1. Stock warrants
2. Stock options 3. Convertible securities |
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If preferred stock is cumulative, and dividends have not been declared in the past 2 years or in the current year, what amount should be deducted from net income in the EPS calc?
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Only what should have been declared in the current year
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Anti-dilutive securities are securities that upon conversion or exercise ___ EPS.
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Increase
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In computations of weighted average number of shares outstanding, when a stock dividend or stock split occurs, the additional shares are...
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Considered outstanding at the beginning of the year.
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