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accounting II test 2
adsf
19
Accounting
Undergraduate 1
02/17/2009

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Term
The Lange Company has a simple capital structure. The company has 20,000 shares of common stock outstanding. Net income for the year was $65,000. Lange declared and paid a preferred stock dividends of $4,000 during the year. Earnings per share for the year is:
Definition
$3.05
Term
Which of the following is an example of a temporary difference between taxable income and reported income?
Definition
B. using the straight-line depreciation method for income statement reporting and MACRS depreciation for taxable income
Term
The income before income tax for the first year of operations is $750,000. Because of timing differences in accounting and tax methods, the taxable income for the same year is $550,000. Assuming an income tax rate of 50%, the amount of the deferred income tax would be
Definition
B. $100,000
Term
An extraordinary item results from
Definition
D. a transaction or event that is unusual and occurs infrequently.
Term
The Poe Corporation has a simple capital structure. Thaw company has 50,000 shares of common stock outstanding. Net income for the year was $142,000. Poe declared and paid preferred stock dividends of $16,000 during the year. Earnings per share for the year is
Definition
$2.52
Term
Temporary differences affect the timing of when revenues and expenses are recognized for tax purposes and as a result, the total amount of taxes paid does not change
Definition
True
Term
A corporation has $300,000 income before income taxes, a 40% tax rate, and $120,000 taxable income. The deferred income taxes is $72,000
Definition
True
Term
Gains and losses on the disposal of fixed assets are examples of extraordinary items
Definition
False
Term
Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method
Definition
True
Term
On January 1, 2007, $1,000,000, 5-year, 10% bonds, were issued for $970,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is
Definition
C. $3,000
Term
One potential advantage of financing corporations through the use of bonds rather than common stock is
Definition
C. the interest expense is deductible for tax purposes by the corporation
Term
The market interest rate related to a bond is also called the
Definition
effective interest rate
Term
When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at
Definition
a discount
Term
When the market rate of interest was 12%, Newman Corporation issued $1,000,000, 11%, 10-year bonds that pay interest annually. The selling price of this bond issue was
Definition
C. $ 943,494
Term
A bond is simply a form of an interest bearing note
Definition
True
Term
A bond is usually divided into a number of individual bonds of $500 each.
Definition
False
Term
When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium
Definition
True
Term
The price of a bond is equal to the sum of the interest payments and the face amount of the bonds
Definition
False
Term
One reason a dollar today is worth more than a dollar 1 year from today is the time value of money
Definition
True
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