Download Accounting 120B Final Exam Questions And Answers and more Exams Accounting in PDF only on Docsity!
Answers
The accounting objective is to record compensation expense ______. - correct answer ✅Over the periods in which related services are performed Restricted shares are subject to forfeiture _______. - correct answer ✅If the employee doesn't remain w/ the company When restrictions are lifted, ______ is replaced by common stock & paid-in capital - excess of par. - correct answer ✅Paid-in capital - restricted stock The FASB consented to encourage, rather than require, that the _____ of options be recognized as expense. - correct answer ✅Fair value There were consistent criticisms of the FASB's requirement to expense ______. - correct answer ✅Option compensation
Answers
Current GAAP now requires companies to record the value of their options in their ____. - correct answer ✅Income statements We've witnessed a discernable shift in the way executives are compensated. - correct answer ✅Fewer options, more stock awards & bonuses The ______ of a stock option can be determined by employing a recognized option pricing model. - correct answer ✅Fair value An ________ takes into account several variables. - correct answer ✅Option pricing model The techniques for estimating ______ have been among the most controversial issues in the debate. - correct answer ✅Fair value _____ is estimated at the date of grant. - correct answer ✅Fair value
Answers
Paid-in capital - stock options become paid-in capital - expiration of stock options, when options _______. - correct answer ✅Expire w/o being exercised Tax treatment favors the employer in a ___________. - correct answer ✅Nonqualified stock option plan Because an incentive plan provides no tax deduction, it has no _____ consequences. - correct answer ✅Deferred tax A ___________ is recognized now for the future tax savings from the tax deduction when the nonqualified stock options are exercised. - correct answer ✅Deferred tax asset If the eventual tax savings exceed the deferred tax asset, the difference is recognized as ______. - correct answer ✅Equity
Answers
The terms of performance options vary w/ some measure of performance that ties rewards to _______. - correct answer ✅Productivity If compensation from a stock option depends on meeting a performance target, compensation is recorded only if __________.
correct answer ✅It's probable the target will be met If it later becomes probable that a performance target will not be met, we _________. - correct answer ✅Reverse any compensation expense already recorded When we revise our estimate of total compensation because our expectation of probability changes, we record the effect of the change ________. - correct answer ✅In the current period If the target is based on changes in the market rather than on performance, we record compensation _______. - correct answer ✅As if there were no target
Answers
_______ reflects no dilution, only shares now outstanding. - correct answer ✅Basic EPS ______ expresses a firm's profitability on a per share basis. - correct answer ✅EPS In the most elemental setting, _______ is simply a company's earnings divided by the number of outstanding shares. - correct answer ✅Earnings per share Any new shares issued are ________ by the fraction of the period they were outstanding & then added to the number of shares outstanding for the entire period. - correct answer ✅Time-weighted Shares outstanding prior to the stock dividend are _______ restated to reflect the percentage increase in shares - that is, treated as if the distribution occurred at the beginning of the period. - correct answer ✅Retroactively
Answers
The adjustment for reacquired shares is the same as for new shares sold except the shares are ______. - correct answer ✅Deducted, not added Any sales or purchases of shares that occur _____ a stock dividend or split are affected by the distribution. - correct answer ✅Before, but not after ______ are subtracted from net income so that earnings available to common shareholders is divided by the weighted-average number of common shares. - correct answer ✅Preferred dividends _____ reduce earnings available to common shareholders unless the preferred stock is noncumulative & no dividends were declared that year. - correct answer ✅Preferred dividends In a complex capital structure, a second EPS computation takes into account the assumed effect of _______, essentially a worst case scenario. - correct answer ✅Potential common shares
Answers
The numerator is increased by _____ that would have been avoided. - correct answer ✅After-tax interest The ______ do not affect the calculation of basic EPS. - correct answer ✅Convertible bonds If the bonds had been converted, more common shares would have been issued, & ______ would have been higher by the interest saved from not having the bonds outstanding. - correct answer ✅Net income We assume _______were converted at the beginning of the reporting period or at the time the securities are issued. - correct answer ✅Convertible securities Since diluted EPS is calculated as if the preferred shares had been converted, there are no ______. - correct answer ✅Dividends
Answers
_______ are ignored when calculating both basic & dilutive EPS. - correct answer ✅Antidilutive securities The incremental effect of conversion of the bonds is the after-tax interest saved divided by the _______. - correct answer ✅Additional common shares from conversion The ________ of the preferred stock is the dividends that wouldn't be paid divided by the additional common shares from conversion.
correct answer ✅Incremental effect of conversion A convertible security might seem to be dilutive when looked at individually but may be ____ when included in combination w/ other convertible securities. - correct answer ✅Antidilutive For the ________ method, "proceeds" include: the amount received from the hypothetical exercise of options or vesting of restricted stock, & the total compensation from the award that's not yet been expensed. - correct answer ✅Treasury stock
Answers
The _____ approach offers consistency & comparability. - correct answer ✅Retrospective The effects of a change are reflected in the financial statements of only the current & future years under the _____ approach. - correct answer ✅Prospective Although _________ are desirable, changing to a new method sometimes is appropriate. - correct answer ✅Consistency & comparability ______ usually produces higher cost of goods sold because more recently purchased goods are assumed sold first. - correct answer ✅LIFO The company recasts ______ to appear as if the accounting method adopted had been used in prior years. - correct answer ✅Comparative statements
Answers
_____ usually produces lower cost of goods sold & higher inventory. - correct answer ✅FIFO When costs are rising, _____ produces lower cost of goods sold & higher net income & retained earnings. - correct answer ✅FIFO ______ is revised each year to reflect FIFO. - correct answer ✅Retained earnings Cost of goods sold is lower with _____. - correct answer ✅FIFO ______ explain why the change was needed as well as its effects on items not reported on the face of the primary statements. - correct answer ✅Note disclosures Sometimes a lack of information makes it impracticable to report a change retrospectively, so the new method is simply applied _____.
Answers
An exception to retrospective application of a change in accounting principle is a change in the ______. - correct answer ✅Method of depreciation/amortization Companies report a change in depreciation _____. - correct answer ✅Prospectively A company must justify any change in principle as _____ to the previous method. - correct answer ✅Preferable When it's not possible to distinguish b/w a change in principle & a change in estimate, the change should be treated as ______. - correct answer ✅A change in estimate A change in reporting entity requires that financial statements of prior periods be ____ revised to report the financial information for the new reporting entity in all periods. - correct answer ✅Retrospectively
Answers
Previous years' financial statements are ____ restated to reflect the correction of an error. - correct answer ✅Retrospectively ____ financial statements are revised to reflect the use the new accounting method. - correct answer ✅Prior years' Since it's the earliest year reported, beginning ____ is adjusted for the portion of the cumulative income effect of the change attributable to prior years. - correct answer ✅Retained earnings The ____ approach is used for the correction of errors. - correct answer ✅Retrospective The correction of an error is treated as a ______. - correct answer ✅Prior period adjustment
Answers
Cash flows to ____ depend on the corporation generating cash flows to itself - correct answer ✅Investors & creditors Many decisions benefit from information about the company's underlying ____. - correct answer ✅Cash flow process The ____ provides information about cash flows that is lost when reported only indirectly by the balance sheet & the income statement. - correct answer ✅Statement of cash flows There (is, is not) differentiation b/w amounts held as cash & amounts held in cash equivalent investments. - correct answer ✅Is not Each firm's policy regarding which short-term, highly liquid investments is classifies as cash equivalents should be _____ in the financial statements. - correct answer ✅Disclosed
Answers
The cash effects of the elements of net income are reported as cash flows from ____. - correct answer ✅Operating activities Cash flows from ____ are the elements of net income, but reported on a cash basis. - correct answer ✅Operating activities By the ___ method, we start w/ reported net income & work backwards to convert that amount to a cash basis. - correct answer ✅Indirect Cash outflows & inflows due to the acquisition & disposition of assets are reported as cash flows from _____. - correct answer ✅Investing activities Cash flows from ____ include investments in assets & their subsequent sale. - correct answer ✅Investing activities
