1 Consider the following facts: - At the beginning of the year, Company A had 20
ID: 2459005 • Letter: 1
Question
1
Consider the following facts:
- At the beginning of the year, Company A had 20,000 shares of common shares outstanding.
- During the year, it sold another 2,600 shares on July 1.
- On November 1, it repurchased 600 shares.
- For the year, Company A had net income of $337,600.
- Company A also has 15,000 shares of $10 par value, 6%, cumulative preferred stock outstanding.
- For the last two years, no dividends have been declared on the preferred stock.
In this scenario, the basic earnings per share for Company A is $ _______.
$14.92
$15.08
$16.50
$15.65
None of these answers are correct.
2
Consider the following facts:
- Company A has partially satisfied its obligation under a multiple performance obligation contract.
Company A should report this partial obligation satisfaction on its balance sheet as:
contract asset
contract liability
None of these answers are correct
unearned service revenue
receivable
3
A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2014. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,144. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2014 balance sheet?
$19,608,308
$20,000,000
$19,625,124
None of these answers are correct
$19,612,642
4
Consider the following facts:
- During 2013, Company B introduced a new line of equipment that carry a three-year warranty against defects.
- Industry experience suggests that warranty costs are estimated as follows:
1% of sales in the year of sale
3% of sales in the year after sale
4% in the second year after sale
Company B's sales and actual warranty expenditures for its first three-year period were as follows under the accrual method:
Sales:
2013 = $1,400,000
2014 = $1,000,000
2015 = $1,400,000
Actual Warranty Expenditures:
2013 = $26,000
2014 = $40,000
2015 = $90,000
What amount should Company B report as warranty liability at December 31, 2015?
$148,000
$14,000
$22,000
None of these answers are correct
$0
5
Consider the following facts:
- Company A invests in Company B.
- Company A uses the equity method to account for its investment in Company B.
In this scenario, Company A should recognize its share of Company B's earnings when _________________.
Company B reports earnings on its income statement.
Company B declares a cash dividend.
Company B pays a cash dividend.
Company A sells the investment.
None of these answers are correct
Explanation / Answer
1. 15.08
2. Contract liability
3. $20,000,000
4.14000
5.None of these answers are correct
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