Practice Question 35

At the date of declaration of a large common stock dividend, the entry should include

a credit to Paid-in Capital in Excess of Par.
a credit to Common Stock Dividend Payable.
a debit to Retained Earnings.
a credit to Cash.

Practice Question 37

Terpsichore Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. No dividends were paid in 2016. In 2017, $75,000 of dividends are declared and paid. If the preferred stock is nonparticipating, what are the dividends received by the preferred stockholders in 2017?


Practice Question 39

The accounting for treasury stock retirements under IFRS

is to charge the entire amount to paid-in capital.
is to charge the excess of the cost of treasury stock over par value to retained earnings.
is to allocate the difference between paid-in capital and retained earnings.
may have the excess charged to paid-in capital, depending on the original transaction related to the issuance of the stock.

CPA Question 01

In analyzing an entity’s annual financial report, which financial statement would an analyst primarily use to assess the entity’s liquidity?

Statement of Profit or Loss.
Statement of Cash Flows.
Statement of Changes in Equity.
Balance Sheet.

CPA Question 01

On September 1, 2017, Hyde Corp., a newly formed company, had the following stock issued and outstanding: • Common stock, no par, $1 stated value, 5,000 shares originally issued at $15 per share. • Preferred stock, $10 par value, 1,500 shares originally issued for $25 per share. Hyde’s September 1, 2017 statement of stockholders’ equity should report

Common stock Preferred stock Additional Paid-in capital

 $75,000  $15,000  $22,500
 $5,000  $37,500  $70,000
 $75,000  $37,000  $0
 $5,000  $15,000  $92,500

CPA Question 01

FASB ASC 606, commonly referred to as the revenue recognition standard, includes all of the following in its five step process to recognize revenue except:

Recognize revenue when (or as) the entity is paid for a performance obligation.
Identify the performance obligations in the contract.
Allocate the transaction price to the performance obligations in the contract.
Identify the contract with the customer.

CPA Question 01

How many of the following four aspects of accounting for pension gains and losses contribute to the reduction in volatility of reported pension expense: (1) use of corridor amortization as an acceptable method, (2) gains and losses cancel, (3) spreading the amount subject to amortization over the average remaining service period of plan participants, (4) the use of expected return for component 3 of pension expense?


CPA Question 01

Bain Co. entered into a 10-year lease agreement for a new piece of equipment worth $500,000. At the end of the lease, Bain will have the option to purchase the equipment. Which of the following would require the lease to be accounted for as a capital lease?

The estimated useful life of the leased asset is 12 years.
The purchase option at the end of the lease is at fair market value.
The lease includes an option to purchase stock in the company.
The present value of the minimum lease payments is $400,000.

CPA Question 01

New England Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000. New England’s cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000, and proceeds of $40,000 were received from the sale. What was New England’s cash balance at the end of the year?

$ 27,000
$ 40,000

CPA Question 02

The following trial balance of Trey Co. at December 31, 2017 has been adjusted except for income tax expense.

Dr. Cr.
Cash $550,000
Accounts Receivable, net 1,650,000
Prepaid taxes 300,000
Accounts payable $120,000
Common stock 500,000
Additional paid-in capital 680,000
Retained earnings 630,000
Foreign currency translation adjustment 430,000
Revenues 3,600,000
Expenses 2,600,000
$5,530,000 $5,530,000

Additional information: •During 2017, estimated tax payments of $300,000 were charged to prepaid taxes. Trey has not yet recorded income tax expense. There were no differences between the financial statement and the income tax income, and Trey’s tax rate is 30%. •Included in accounts receivable is $500,000 due from a customer. Special terms granted to this customer require payments in equal, semiannual installments of $125,000 every April 1 and October 1. In Trey’s December 31, 2017 Balance Sheet, what amount should be reported as total current assets?


CPA Question 02

Beck Corp. issued 200,000 shares of common stock when it began operations in year 1 and issued an additional 100,000 shares in year 2. Beck also issued preferred stock convertible to 100,000 shares of common stock. In year 3, Beck purchased 75,000 shares of its common stock and held it in Treasury. At December 31, year 3, how many shares of Beck’s common stock were outstanding?


CPA Question 02

The following information is available about a signed agreement between two entities: • The entities have agreed to specific performance obligations. • The entities have agreed on a price related to the performance obligations. • No work has begun on the performance obligations and the contract is cancelable without payment of penalty or other consideration. • It is probable that the company completing the work will collect the agreed upon consideration. Does a contract exist between the entities to which the revenue recognition criteria may be applied?

A contract to which the revenue recognition criteria applies exists because the contract includes important terms such as the agreed upon price and specific performance obligations.
A contract to which the revenue recognition criteria applies does not exist because the transaction price has not yet been allocated to the specific performance obligations.
A contract to which the revenue recognition criteria applies does not exist because it is cancelable without penalty and no work on the performance obligations has begun.
A contract to which the revenue recognition criteria applies exists because it identifies specific performance obligations and collectibility of the consideration is probable.

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