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Multiple Choice

The following questions are ones that I am unsure of. I need this to study for my final. It is multiple choice but I want to be confident I have the correct answers to study with. My final is Monday so if I can get this answered by Sunday it would be great. Thank you.

The following data are provided:
December 31,
2007 2006
10% Cumulative preferred stock, $50 par $100,000 $100,000
Common stock, $10 par 120,000 90,000
Additional paid-in capital 80,000 65,000
Retained earnings (includes current year net income) 240,000 215,000
Net income 90,000
Additional information:
On May 1, 2007, 3,000 shares of common stock were issued. The preferred dividends were not declared during 2007. The market price of the common stock was $50 at December 31, 2007.

1. The book value per share of common stock at 12/31/07 is

a) 430 ÷ 12.
b) 200 ÷ 12.
c) 330 ÷ 12.
d) 440 ÷ 11.
Use the following to answer question 3:

Garrison Co. owns 20,000 of the 50,000 outstanding shares of Steele, Inc. common stock. During 2008, Steele earns $800,000 and pays cash dividends of $640,000.

3. Garrison should report investment revenue for 2008 of

a) $320,000.
b) $256,000.
c) $64,000.
d) $0.

4. What effect does the issuance of a 2-for-1 stock split have on each of the following?

a) a
b) b
c) c
d) d

5. On January 1, 2007, Sloane Co. purchased 25% of Orr Corp.'s common stock; no goodwill resulted from the purchase. Sloane appropriately carries this investment at equity and the balance in Sloane's investment account was $720,000 at December 31, 2007. Orr reported net income of $450,000 for the year ended December 31, 2007, and paid common stock dividends totaling $180,000 during 2007. How much did Sloane pay for its 25% interest in Orr?

a) $652,500.
b) $765,000.
c) $787,500.
d) $877,500.
10. Hannah Company began operations on January 1, 2007, and uses the FIFO method in costing its raw material inventory. Management is contemplating a change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following information has been developed:
Final Inventory 2007 2008
FIFO $320,000 $360,000
LIFO 240,000 300,000
Net Income (computed under the FIFO method) 500,000 600,000
Based upon the above information, a change to the LIFO method in 2008 would result in net income for 2008 of

a) $540,000.
b) $600,000.
c) $620,000.
d) $660,000.
14. Markes Corporation's partial income statement after its first year of operations is as follows:
Income before income taxes $3,750,000
Income tax expense
Current
$1,035,000
Deferred 90,000 1,125,000
Net income $2,625,000
Markes uses the straight-line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $1,500,000. No other differences existed between book income and taxable income except for the amount of depreciation. Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?

a) $1,200,000
b) $1,425,000
c) $1,500,000
d) $1,800,000
Use the following to answer question 16:

Waeglein Corporation purchased machinery on January 1, 2006 for $630,000. The company used the straight-line method and no salvage value to depreciate the asset for the first two years of its estimated six-year life. In 2008, Waeglein changed to the sum-of-the-years'-digits depreciation method for this asset. The following facts pertain:

16. Waeglein is subject to a 40% tax rate. The cumulative effect of this accounting change on beginning retained earnings is

a) $135,000.
b) $120,000.
c) $72,000.
d) $0.
19. On January 1, 2007, Lebo, Inc. purchased a machine for $720,000 which will be depreciated $72,000 per year for financial statement reporting purposes. For income tax reporting, Lebo elected to expense $80,000 and to use straight-line depreciation which will allow a cost recovery deduction of $64,000 for 2007. Assume a present and future enacted income tax rate of 30%. What amount should be added to Lebo's deferred income tax liability for this temporary difference at December 31, 2007?

a) $43,200
b) $24,000
c) $21,600
d) $19,200
20. On July 4, 2007, Diaz Company issued for $4,200,000 a total of 40,000 shares of $100 par value, 7% noncumulative preferred stock along with one detachable warrant for each share issued. Each warrant contains a right to purchase one share of Diaz $10 par value common stock for $15 per share. The stock without the warrants would normally sell for $4,100,000. The market price of the rights on July 1, 2007, was $2.50 per right. On October 31, 2007, when the market price of the common stock was $19 per share and the market value of the rights was $3.00 per right, 16,000 rights were exercised. As a result of the exercise of the 16,000 rights and the issuance of the related common stock, what journal entry would Diaz make?

a) a
b) b
c) c
d) d
22. Eaton Company began operations on January 1, 2007, and uses the FIFO method in costing its raw material inventory. Management is contemplating a change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following information has been developed:

Final Inventory
2007
2008
FIFO $640,000 $ 712,000
LIFO 560,000 636,000
Net Income (computed under the FIFO method) 980,000 1,080,000
Based on the above information, a change to the LIFO method in 2008 would result in net income for 2008 of

a) $1,120,000.
b) $1,080,000.
c) $1,004,000.
d) $1,000,000.
24. On January 1, 2008, Dingler Corporation had 125,000 shares of its $2 par value common stock outstanding. On March 1, Dingler sold an additional 250,000 shares on the open market at $20 per share. Dingler issued a 20% stock dividend on May 1. On August 1, Dingler purchased 140,000 shares and immediately retired the stock. On November 1, 200,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2008?

a) 510,000
b) 375,000
c) 358,333
d) 258,333

25. Mouser Company issues 4,000 shares of its $5 par value common stock having a market value of $25 per share and 6,000 shares of its $15 par value preferred stock having a market value of $20 per share for a lump sum of $192,000. What amount of the proceeds should be allocated to the preferred stock?

a) $172,000
b) $120,000
c) $104,727
d) $90,000

Use the following to answer question 26:

On May 1, 2007, Logan Co. issued $300,000 of 7% bonds at 103, which are due on April 30, 2017. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Logan's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2007, the fair value of Logan's common stock was $35 per share and of the warrants was $2.

26. On May 1, 2007, Logan should credit Paid-in Capital from Stock Warrants for

a) $11,520.
b) $12,000.
c) $12,360.
d) $21,000.

31. An analysis of stockholders' equity of Jinn Corporation as of January 1, 2007, is as follows:

Jinn uses the cost method of accounting for treasury stock and during 2007 entered into the following transactions:
Acquired 2,500 shares of its stock for $75,000.
Sold 2,000 treasury shares at $35 per share.
Sold the remaining treasury shares at $20 per share.
Assuming no other equity transactions occurred during 2007, what should Jinn report at December 31, 2007, as total additional paid-in capital?

a) $895,000
b) $900,000
c) $905,000
d) $915,000

35. Peine Co. had 300,000 shares of common stock issued and outstanding at December 31, 2006. No common stock was issued during 2007. On January 1, 2007, Peine issued 200,000 shares of nonconvertible preferred stock. During 2007, Peine declared and paid $100,000 cash dividends on the common stock and $80,000 on the preferred stock. Net income for the year ended December 31, 2007 was $620,000. What should be Peine's 2007 earnings per common share?

a) $2.07
b) $1.80
c) $1.73
d) $1.47

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The solution explains various multiple choice questions in accounting

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