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Accounting Questions

20. The following information is related to the pension plan of King, Inc. for 2008.
Actual return on plan assets $200,000
Amortization of unrecognized net gain 82,500
Amortization of unrecognized prior service cost 150,000
Expected return on plan assets 230,000
Interest on projected benefit obligation 362,500
Service cost 800,000
Pension expense for 2008 is
A) $1,195,000.
B) $1,165,000.
C) $1,030,000.
D) $1,000,000.

21. At December 31, 2006, Kegan Co. had 1,200,000 shares of common stock outstanding. In addition, Kegan had 450,000 shares of preferred stock which were convertible into 750,000 shares of common stock. During 2007, Kegan paid $600,000 cash dividends on the common stock and $400,000 cash dividends on the preferred stock. Net income for 2007 was $3,400,000 and the income tax rate was 40%. The diluted earnings per share for 2007 is (rounded to the nearest penny)
A) $1.24.
B) $1.74.
C) $2.51.
D) $2.84.

22. In 2006, Marly Corp. acquired 9,000 shares of its own $1 par value common stock at $18 per share. In 2007, Marly issued 4,000 of these shares at $25 per share. Marly uses the cost method to account for its treasury stock transactions. What accounts and what amounts should Marly credit in 2007 to record the issuance of the 4,000 shares?

Treasury Stock Additional Retained Common
Stock Paid-in Capital Earnings Stock
a. $72,000 $70,000
b. $72,000 $28,000
c. $96,000 $4,000
d. $28,000 $4,000

A) A
B) B
C) C
D) D

23. On August 1, 2007, Witten Co. acquired 200, $1,000, 9% bonds at 97 plus accrued interest. The bonds were dated May 1, 2007, and mature on April 30, 2013, with interest paid each October 31 and April 30. The bonds will be added to Witten's available-for-sale portfolio. The preferred entry to record the purchase of the bonds on August 1, 2007 is

a. Available for Sale Securities 198,500
Cash 198,500

b. Available for Sale Securities 194,000
Interest Receivable 4,500
Cash 198,500

c. Available for Sale Securities 194,000
Interest Revenue 4,500
Cash 198,500

d. Available for Sale Securities 200,000
Interest Revenue 4,500
Discount on Debt Securities 6,000
Cash 198,500

A) A
B) B
C) C
D) D

24. Which of the following is NOT generally correct about recording a sale of a debt security before maturity date?
A) Accrued interest will be received by the seller even though it is not an interest payment date.
B) An entry must be made to amortize a discount to the date of sale.
C) The entry to amortize a premium to the date of sale includes a credit to the Premium on Investments in Debt Securities.
D) A gain or loss on the sale is not extraordinary.

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20. The following information is related to the pension plan of King, Inc. for 2008.
Actual return on plan assets $200,000
Amortization of unrecognized net gain 82,500
Amortization of unrecognized prior service cost 150,000
Expected return on plan assets 230,000
Interest on projected benefit obligation 362,500
Service cost 800,000
Pension expense for 2008 is
A) $1,195,000.
B) $1,165,000.
C) $1,030,000.
D) $1,000,000.

Service Cost 800,000
Add: Prior service cost amortization 150,000
Interest Cost 362,500
Amortization of unrecognized net gain 82,500
Less: Actual return 200,000
Total Pension expense 1,195,000
21. At December 31, 2006, Kegan Co. had 1,200,000 shares of common stock outstanding. In addition, Kegan had 450,000 shares of preferred stock which were convertible into 750,000 shares of common stock. During 2007, Kegan paid $600,000 cash dividends on the common stock and $400,000 cash dividends on the preferred stock. Net income for 2007 was $3,400,000 and the income tax rate was 40%. The diluted earnings per share for 2007 is (rounded to the nearest penny)
A) $1.24.
B) $1.74.
C) $2.51.
D) ...

Solution Summary

This solution is comprised of a detailed explanation and calculation to answer the accounting questions.

$2.19