AC 430 FINAL EXAM A GRADE
1. Question: When common stock is issued at an amount greater than par value, the difference between the par value and the proceeds from the sale is recorded by
2. Question: On January 1, 2010, Marvel, Inc., grants a compensatory stock option plan to 10 of its executives. The plan allows each executive to buy 1,000 shares of its $1 par common stock at $30 a share after a three-year service period. The value of each option is estimated to be $8. The company estimates it will have an annual 2% employee turnover rate during the service period. What is the compensation expense for the year ended December 31, 2011?
3. Question: Battleground, Inc. had never had a treasury stock transaction prior to 2010. It experienced the following treasury stock transactions during 2010:
4/1/2010: Reacquired 1,000 shares of its own $5 par common stock, originally sold at $12 a share, for $10 a share. This was the first time that Battleground had reacquired its own stock.
4/8/2010: Reissued 400 shares at $8 a share.
5/2/2010: Reissued 500 shares at $13 a share.
5/10/2010: Retired the remaining 100 shares.
Assuming the cost method is used, the entry to record the reissuance of 400 shares on 4/8/2010 read more would include a
credit to Treasury Stock for $3,200
debit to Additional Paid-in Capital from Treasury Stock for $800
debit to Retained Earnings for $800
credit to Additional Paid-in Capital on Common Stock for $800
4. Question: When calculating earnings per share, dividends declared on noncumulative preferred stock, but not paid, should be
5. Question: Which of the following items would not be included in a basic earnings per share calculation?
undeclared dividends on noncumulative preferred stock
declared dividends on noncumulative preferred stock
undeclared dividends on cumulative preferred stock
declared dividends on cumulative preferred stock
6. Question: On January 1, a corporation had 10,380 shares of common stock outstanding. On August 1, AC430FINAL EXAM A GRADE it sold an additional 6,000 shares. During the year, dividends of $4,800 and $56,000 were declared and paid on the common and preferred stock, respectively. Net income for the year was $240,000. The basic earnings per AC 430 share for the year was
7. Question: Smock Corporation had 30,000 shares of common stock outstanding during the year. In addition, there were compensatory stock options to purchase 3,000 shares of common stock at $20 a share outstanding the entire year. The average market price for the common stock during the year was $36 a share. The unrecognized compensation cost (net of tax) relating to these options was $4 a share. The denominator to compute the diluted earnings per share is
8. Question: When a company is determining its dividend policy, the company must adhere to legal requirements. The legal requirements are determined by the
Financial Accounting Standards Board (FASB)
state in which the company was incorporated
Securities and Exchange Commission (SEC)
Federal Trade Commission (FTC)
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