Introduction to Financial Accounting

2084 Words Dec 11th, 2011 9 Pages
Introduction to Financial Accounting ACCT6331 –Prior Year Suggested Time: 90 minutes

1. When the amount of expenses recognized for the purpose of financial reporting exceeds the expenses recognized for the purpose of tax reporting, a company will have deferred tax assets. Please indicate if the above statement is true or false.

a. true b. false

2. BJ Services is an oil and gas service firm. The company does not issue any preferred stocks or convertible securities. The company reports the following EPS data in its 2008 annual report (in thousands except per share data).

Net income | $609,365 | Earnings per share: | | Basic | $2.08 | Diluted | $2.06 | Weighted average shares outstanding: | |
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The sale results in a gain of $200,000 d. The sale results in a loss of $200,000

10. When investments are classified as available-for-sale, fair-value changes are recognized in the balance sheet as unrealized gains or losses (AOCI) that affect owners’ equity. Please indicate if the above statement is true or false.
a. true
b. false

11. Under the equity method accounting, the investment account is recorded at fair value but only if fair value exceeds original cost. Please indicate if the above statement is true or false.
a. true
b. false

Answer: b, False
Rationale: Fair-value accounting is not used for equity method investments.

12. Solomar Inc. has fiscal year ending on 12/31. Solomar purchased security A on 4/20/2007 for $450,000. As of 12/31/2007, the fair market value of security A has increased to $658,000. On 5/3/2008, Solomar sold security A for $700,000. How much is recorded as realized gain at the time of sale if the security is classified as available-for-sale security?
a. $42,000
b. $208,000
c. $40,500
d. $250,000

13. Using the information provided in question #25, how much is recorded as realized gain at the time of sale if the security is classified as trading security?
a. $42,000
b. $208,000
c. $40,500
d. $250,000

14. A company purchased available for sale securities on 1/1/2008 for $80,000. On 12/31/2008, the fair market value of the available for sale security increases by $45,000,
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