1) Proceeds from an issue of debt securities having stock warrants should NOT be allocated between debt and equity features when


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2) The conversion of preferred stock may be recorded by the


3) The conversion of preferred stock into common stock requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be


4) A primary source of stockholders equity is


5) Stockholders equity is generally classified into two major categories:


6) When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the


7) Treasury shares are


8) “Gains” on sales of treasury stock (using the cost method) should be credited to


9) How should a “gain” from the sale of treasury stock be reflected when using the cost method of recording treasury stock transactions?


10) In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings)?


11) When computing diluted earnings per share, convertible bonds are


12) What effect will the acquisition of treasury stock have on stockholders equity and earnings per share, respectively?


13) On May 1, 2007, Kent Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Kent had 100,000 shares of $1 par value common stock issued and outstanding. The fair value of Kent s common stock was $20 per share on May 1, 2007. As a result of this stock dividend, Kents total stockholders equity


14) How would the declaration and subsequent issuance of a 10% stock dividend by the issuer affect each of the following when the market value of the shares exceeds the par value of the stock?

Additional Common Stock | Paid-in Capital


15) At its date of incorporation, Wilson, Inc. issued 100,000 shares of its $10 par common stock at $11 per share. During the current year, Wilson acquired 20,000 shares of its common stock at a price of $16 per share and accounted for them by the cost method. Subsequently, these shares were reissued at a price of $12 per share. There have been no other issuances or acquisitions of its own common stock. What effect does the reissuance of the stock have on the following accounts?

Retained Earnings | Additional Paid-in Capital


16) Which of the following is correct about the effective-interest method of amortization?


17) An unrealized holding loss on a companys available-for-sale securities should be reflected in the current financial statements as


18) An unrealized holding gain on a companys available-for-sale securities should be reflected in the current financial statements as


19) Investments in debt securities should be recorded on the date of acquisition at


20) Securities which could be classified as held-to-maturity are


21) Which of the following is NOT a debt security?


22) An investor has a long-term investment in stocks. Regular cash dividends received by the investor are recorded as

Fair Value Method | Equity Method


23) When a company holds between 20% and 50% of the outstanding stock of an investee, which of the following statements applies?


24) Bista Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods?

Fair Value Method | Equity Method


25) Debt securities that are accounted for at amortized cost, NOT fair value, are


26) Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses as other comprehensive income and as a separate component of stockholders equity are


27) Use of the effective-interest method in amortizing bond premiums and discounts results in


28) All of the following are characteristics of a derivative financial instrument EXCEPT the instrument


29) The accounting for fair value hedges records the derivative at its


30) All of the following statements regarding accounting for derivatives are correct EXCEPT that