11 Jan Dividends paid on common stock

Week 4 midterm

1.Question Which event will result in a deferred tax liability?

Accelerated depreciation in the tax return

Interest income on municipal bonds

Subscriptions collected in advance

Estimated warranty expense

Question 2.Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset?

Tax depreciation in excess of book depreciation

The installment sales method for tax purposes

Revenue collected in advance

None of the above

Question 3.Pension expense is decreased by

amortization of prior service cost.

amortization of net gain.

benefits paid to retired employees.

prior service cost.

Question 4. An overfunded pension plan means that the

PBO is less than plan assets.

PBO exceeds plan assets.

ABO is less than plan assets.

ABO exceeds plan assets.

Question 5. Accounting for postretirement healthcare benefits is similar, in most respects, to accounting for

payroll taxes.

health insurance costs for current employees.

pension benefits.

sick pay and vacation pay.

Question 6.Which of the following transactions decreases retained earnings?

A property dividend

A stock dividend

A cash dividend

All of the above

Question 7.When a property dividend is declared, the reduction in retained earnings is for

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.

Question 8. The most important accounting objective for executive stock options is

measuring their fair value for balance sheet purposes.

measuring and reporting the amount of compensation expense during the service period.

to disclose increases or decreases in the stock options held at the end of each accounting period.

None of the above

Question 9. Our company offered an incentive stock option plan to its employees. On January 1, 20X1, options were granted for 60,000 $1 par common shares. The exercise price equals the $5 market price of the common stock on the grant date. The options cannot be exercised before January 1, 20X3, and expire December 31, 20X5. Each option has a fair value of $2 based on an option pricing model. Which is the total compensation cost for this plan?

$0

$60,000

$120,000

$300,000

Question 10. Nonconvertible bonds affect the calculation of

basic earnings per share.

diluted earnings per share.

both basic and diluted earnings per share.

None of the above

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

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

Question 12.Please describe a deferred tax liability. Also, please provide three examples of timing differences that result in a deferred tax liability.

Question 13. Please describe defined-benefit plans. Who bears this risk? What factors contribute to the amount that the employee receives upon retirement? What are the key elements of a defined-benefit plan?

Question 14. 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.

Question 15.Please describe a stock option plan. What are the key dates? What are some different ways that these plans can vest?