Business & Finance essay
Accountancy 1. What is the effect on a firm’s total stockholders’ equity on the date qualified stock options are granted and on the date qualified stock options are forfeited? Grant date Forfeiture date A. No effect No effect B. Decrease Increase C. No effect Increase D. Decrease No effect 2. Which of the following statements is correct? A. The use of the book value method of accounting for the conversion of convertible bonds assumes that the investors who acquired the convertible bonds always intended to be common stockholders. B. Paid in capital-expired stock rights is credited when pre-emptive stock rights expire. C. A and B. D. Neither A nor B. 3. Which of the following statements is correct? A. Common stock is credited for par value and paid in capital-excess over par is credited at year-end when compensation expense is accrued for executives who are awarded common stock based upon exceeding performance goals for the current year. B. Paid in capital-expired stock options is credited when “out of the money” vested qualified stock options expire. C. A and B. D. Neither A nor B.. 4. According to the Accounting Standards Codification, characteristics of convertible bonds generally include an A. interest rate that is lower than the issuer could establish for nonconvertible bonds. B. initial conversion price that is higher than the fair value of the common stock at time of issuance. C. A and B. D. Neither A nor B. 5. Which of the following statements is correct? A. For financial reporting under U.S. GAAP, there is no compensation expense reported for employee stock purchase plans (ESPPs) if the discount from the market price of the common stock is 10% or less. B. According to the Accounting Standards Codification, no portion of the proceeds from the issuance of convertible debt shall be accounted for as attributable to the conversion feature. C. A and B. D. Neither A nor B. 6. Which of the following statements is correct? A. When computing diluted earnings per share, qualified stock options that are below water (out of the money), based on the average market price of the common stock for the year, are antidilutive. B. Diluted earnings per share is based only on pro forma events. C. A and B. D. Neither A nor B. 7. On January 1, 2021, Bat Co. had 888,000 shares of common stock issued and 96,000 shares of treasury stock. During 2021, the following stockholder equity transactions occurred: · On May 1, employees purchased 48,000 shares of unissued common stock by exercising their stock options. · On August 1, 72,000 treasury shares were sold. · On December 1, Bat distributed a 10% stock dividend on outstanding common shares. At December 31, 2021, how many shares of common stock are issued, and, for basic earnings per share computations for 2021, what is the weighted average of common shares outstanding? Shares issued 12/31/21 Weighted average shares for 2021 A. 1,027,200 1,003,200 B. 1,027,200 939,400 C. 1,003,200 939,400 D. 1,003,200 1,027,200 8. Which of the following statements is correct? A. Diluted earnings per share should be based on the most advantageous conversion rate from the standpoint of the security holder. B. Convertible preferred stock and convertible bonds are always potentially dilutive. C. A and B. D. Neither A nor B. 9. The following information relates to Dover Inc.’s earnings per share computations for 2021: · Net income $ 825,000 · 6% cumulative nonconvertible preferred stock, $100 par, 10,000 shares outstanding during all of 2021 $ 1,000,000 · Income tax rate 21% · Weighted average of common shares outstanding 600,000 · Dover issued $4,800,000 face amount convertible bonds during 2018. Each $1,000 bond is convertible into 50 shares of Dover’s common stock starting in 2024. For the year ended December 31, 2021, interest expense of $300,000 on the bonds was reported on Dover’s income statement. · At December 31, 2020, there were no dividend arrearages on the preferred stock. For the year ended December 31, 2021, what is basic earnings per share? A. $1.375. B. $1.225. C. $1.275. D. $1.338. 10. Refer to the previous question. For the year ended December 31, 2021, what is diluted earnings per share, and is it reported on the income statement? Diluted EPS Reported on Income Statement A. $1.193 Yes B. $1.264 Yes C. $1.268 Yes D. $1.339 No 11. The following information relates to Dover Inc.’s earnings per share computations for 2021: · Net income $ 750,000 · 6% cumulative, convertible preferred stock, $100 par, 10,000 shares outstanding during all of 2021; each share of preferred stock is convertible into 5 shares of common beginning in 2025 $ 1,000,000 · Income tax rate 21% · Weighted average of common shares outstanding 600,000 · At December 31, 2020, there were no dividend arrearages on the preferred stock. For the year ended December 31, 2021, what is basic earnings per share? A. $1.275. B. $1.25. C. $1.171. D. $1.15. 12. Refer to the previous question. For the year ended December 31, 2021, what is diluted earnings per share, and is it reported on the income statement? Diluted EPS Reported on Income Statement A. $1.062 Yes B. $1.134 Yes C. $1.268 No D. $1.154 No 13. In the computation of diluted earnings per share, the “treasury stock” method applied to dilutive qualified stock options will add A. $0 to the numerator. B. Common shares assumed to be issued upon exercise of the stock options that were not acquired as treasury stock at the average market price of the common stock for the year. C. A and B. D. Neither A nor B. 14. Which of the following statements is correct? A. Basic earnings per share is based on actual events. B. Diluted earnings per share is based only on pro forma events. C. A and B. D. Neither A nor B. 15. Which of the following statements is correct? A. Dilution is defined as the reduction in Basic EPS resulting from the actual conversion of convertible securities and the exercise of qualified stock options. B. Preferred dividends on convertible noncumulative preferred stock are deducted from net income in computing basic earnings per share only if they have been declared. C. A and B. D. Neither A nor B. 16. Which of the following statements is correct? A. Both qualified stock options and restricted stock awards have vesting periods. B. Qualified stock options have exercisable periods, but restricted stock awards do not. C. A and B. D. Neither A nor B. 17. On the grant date, which of the following stock compensation methods requires a journal entry to record the partial execution of the contract? Qualified stock options Restricted stock awards A. Yes No B. No No C. Yes Yes D. No Yes 18. Which of the following statements is correct about qualified stock options? A. The market price and exercise price of the common stock must be equal on the grant date. B. Employees who receive stock options owe federal income tax when the options are exercised. C. A and B. D. Neither A nor B. Use the information below to answer questions 19 and 20. · Butler Company issued $600,000 face value convertible bonds for $578,400 on September 1, 2017. · Each $1,000 bond is convertible into 30 shares of Butler’s $5 par value common stock beginning on September 1, 2021. · On September 1, 2021, holders of 100 bonds converted their bonds into the company’s common stock. · The market value of the common stock on the day of conversion was $36 per share, and the unamortized discount related to all 600 bonds on the same date was $15,000. 19. On September 1, 2021, what is the amount that should be credited to paid in capital-bond conversion, assuming Butler used the book value method? A. $85,000. B. $87,500. C. $70,000. D. $82,500. 20. On September 1, 2021, what is the amount that should be debited to loss from bond conversion, assuming the bond conversion was accounted for using the market value method? A. $ 5,500. B. $23,000. C. $ 8,000. D. $10,500. 21. Which of the following statements is correct? A. The financial accounting and reporting for convertible bonds is based on the inseparability argument which concludes that imbedded options cannot be objectively valued above $0. B. When pre-emptive stock rights are exercised, cash is debited for the market value of the common stock on the exercise date. C. A and B. D. Neither A nor B. 22. Which of the following statements is correct about the unearned (deferred) compensation that is recorded for restricted stock awards (RSAs)? A. The unamortized balance at year-end is reported on the balance sheet as a negative item in stockholders’ equity. B. When employees leave the company before their RSAs are vested, the account is credited for previously recorded compensation expense related to these employees. C. A and B. D. Neither A nor B. 23. Go online and find Apple Inc.’s 10-K for the year ended September 26, 2020. Find Note 9 that discloses Apple’s benefit plans and answer whether each of the following statements is correct (note: Apple uses restricted stock units (RSU’s) instead of RSAs. The reason for using RSUs is because of federal income tax benefits these plans have over RSAs. The financial accounting and reporting is the same for both RSAs and RSUs.) A. The number of RSUs that vested in the year ended September 26, 2020, was 156,800,000. B. Share-based compensation expense for the year ended September 26, 2020, was $6,829,000,000. C. A and B. D. Neither A nor B. 24. Continue looking at Note 9 in Apple’s 10-K for the year ended September 26, 2020. Which of the following statements is correct? A. In Apple’s Employee Stock Purchase Plan (ESPP), employees can purchase the Company’s common stock at a discount of 15% using their payroll deductions. B. The vesting period for the Company’s RSUs is generally 3 years. C. A and B. D. Neither A nor B. 25. Sara Lea Co. has an employee stock purchase plan (ESPP) that allows selected employees to acquire the company’s common stock for a discount of 15% from its market value. For the month of December, 2021, employees acquired shares of the Company’s $2 par value common stock for $15.30 a share when the market value was $18 per share. $1,912,500 was withheld from employees’ paychecks in December and used to acquire the Company’s common stock. In the entry to record the issuance of the common stock to employees, what is the amount of the credit to “Common Stock”? A. $235,000. B. $225,000. C. $212,500. D. $250,000. Problem 2: Restricted stock award On January 2, 2021, Manders Inc. granted 250,000 shares of restricted common stock to its key executives. Manders $2 par value common stock had a $38.40 market value per share on the grant date. The restricted stock vests on December 31, 2023. In early January, 2022, executives who were granted 60,000 shares left Manders to work for Kruz Inc. Executives who received the remaining 190,000 restricted shares completed the vesting period. Required: Answer the following questions: A. Make the journal entry to record the grant of the restricted stock on January 2, 2021. B. What is compensation expense for 2021? C. What is compensation expense for 2022? D. What is compensation expense for 2023? Problem 3: Qualified stock options On January 2, 2021, Manders Inc. granted 250,000 qualified stock options to acquire 250,000 shares of Manders $2 par value common stock at $38.40 per share. The options vest on December 31, 2023, and expire on December 31, 2027. Using an appropriate options pricing model, the estimated value of a single option on the grant date was estimated to be $1.80. In early January, 2022, employees who were granted 60,000 options left Manders to work for Kruz Inc. During 2024, employees exercised 140,000 options when the market price of Manders common stock was $43 per share. Required: Answer the following questions: A. What is compensation expense for 2021? B. What is compensation expense for 2022? C. What is compensation expense for 2023? D. Make the journal entry to record the exercise of the stock options in 2024. 8 -research paper writing service