1. Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $530,000. How much of the proceeds would be allocated to the common stock?
a. $250,000
b. $240,909
c. $289,091
d. $281,563

2. Berry Corporation has 50,000 shares of $10 par common stock authorized. The following transactions took place during 2014, the first year of the corporation’s existence:
Sold 10,000 shares of common stock for $13.50 per share.
Issued 10,000 shares of common stock in exchange for a patent valued at $150,000.
At the end of the Berry’s first year, total paid-in capital amounted to
a. $60,000.
b. $135,000.
c. $150,000.
d. $285,000.

3. Norton Company issues 4,000 shares of its $5 par value common stock having a fair value of $25 per share and 6,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $210,000. What amount of the proceeds should be allocated to the preferred stock?
a. $171,818
b. $131,250
c. $114,545
d. $95,454

4. Long Co. issued 100,000 shares of $10 par common stock for $1,200,000. A year later Long acquired 12,000 shares of its own common stock at $15 per share. Three months later Long sold 6,000 of these shares at $19 per share. If the cost method is used to record treasury stock transactions, to record the sale of the 6,000 treasury shares, Long should credit
a. Treasury Stock for $114,000.
b. Treasury Stock for $60,000 and Paid-in Capital from Treasury Stock for $54,000.
c. Treasury Stock for $90,000 and Paid-in Capital from Treasury Stock for $24,000.
d. Treasury Stock for $90,000 and Paid-in Capital in Excess of Par for $24,000.

5. Presented below is the stockholders' equity section of Oaks Corporation at December 31, 2014:
Common stock, par value $20; authorized 75,000 shares;
issued and outstanding 45,000 shares $ 900,000
Paid-in capital in excess of par value 350,000
Retained earnings 300,000
$1,550,000
During 2015, the following transactions occurred relating to stockholders' equity:
3,000 shares were reacquired at $28 per share.
3,000 shares were reacquired at $35 per share.
1,800 shares of treasury stock were sold at $30 per share.
For the year ended December 31, 2015, Oaks reported net income of $450,000. Assuming Oaks accounts for treasury stock under the cost method, what should it report as total stockholders' equity on its December 31, 2015, balance sheet?
a. $1,865,000.
b. $1,861,400.
c. $1,857,800.
d. $1,415,000.

6. Layne Corporation had the following information in its financial statements for the years ended 2014 and 2015:
Cash dividends for the year 2015 $    10,000
Net income for the year ended 2015 83,000
Market price of stock, 12/31/14 10
Market price of stock, 12/31/15 12
Common stockholders’ equity, 12/31/14 1,600,000
Common stockholders’ equity, 12/31/15 1,980,000
Outstanding shares, 12/31/15 180,000
Preferred dividends for the year ended 2015 15,000

What is the payout ratio for Layne Corporation for the year ended 2015?
a. 30.1%
b. 18.1%
c. 14.7%
d. 12.0%

7. Layne Corporation had the following information in its financial statements for the years ended 2014 and 2015:
Cash dividends for the year 2015 $    10,000
Net income for the year ended 2015 83,000
Market price of stock, 12/31/14 10
Market price of stock, 12/31/15 12
Common stockholders’ equity, 12/31/14 1,600,000
Common stockholders’ equity, 12/31/15 1,980,000
Outstanding shares, 12/31/15 180,000
Preferred dividends for the year ended 2015 15,000

What is the book value per share for Layne Corporation for the year ended 2015?
a. $11.00
b. $9.92
c. $9.94
d. $8.89

8. Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 8% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past two years and the current year.

Assuming that $300,000 will be distributed as a dividend in the current year, how much will the common stockholders receive?
a. Zero.
b. $156,000.
c. $204,000.
d. $252,000.

9. Yoder, Inc. has 150,000 shares of $10 par value common stock and 75,000 shares of $10 par value, 6%, cumulative, participating preferred stock outstanding. Dividends on the preferred stock are one year in arrears. Assuming that Yoder wishes to distribute $405,000 as dividends, the common stockholders will receive
a. $ 90,000.
b. $165,000.
c. $240,000.
d. $315,000.

10. On January 2, 2015, Worth Co. issued at par $1,000,000 of 7% convertible bonds. Each $1,000 bond is convertible into 20 shares of common stock. No bonds were converted during 2015. Worth had 200,000 shares of common stock outstanding during 2015. Worth’s 2015 net income was $450,000 and the income tax rate was 30%. Worth’s diluted earnings per share for 2015 would be (rounded to the nearest penny):
a. $2.50.
b. $2.27.
c. $2.25.
d. $2.36.

11. In 2014, Eklund, Inc., issued for $103 per share, 70,000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Eklund's $25 par value common stock at the option of the preferred stockholder. In August 2015, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $30 per share. What total amount should be credited to additional paid-in capital from common stock as a result of the conversion of the preferred stock into common stock?
a. $1,190,000.
b. $ 910,000.
c. $1,750,000.
d. $1,960,000.

Use the following information for questions 17 and 18.

On May 1, 2014, Payne Co. issued $900,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of Payne’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, 2014, the fair value of Payne’s common stock was $35 per share and of the warrants was $2.

12. On January 1, 2014, Ellison Company granted Sam Wine, an employee, an option to buy 1,000 shares of Ellison Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $4,500. Wine exercised his option on October 1, 2014 and sold his 1,000 shares on December 1, 2014. Quoted market prices of Ellison Co. stock in 2014 were:
July 1 $30 per share
October 1 $36 per share
December 1 $40 per share
The service period is for three years beginning January 1, 2014. As a result of the option granted to Wine, using the fair value method, Ellison should recognize compensation expense for 2014 on its books in the amount of
a. $4,500.
b. $1,500.
c. $1,125.
d. $0.

13. On December 31, 2014, Kessler Company granted some of its executives options to purchase 45,000 shares of the company's $10 par common stock at an option price of $50 per share. The options become exercisable on January 1, 2015, and represent compensation for executives' services over a three-year period beginning January 1, 2015. The Black-Scholes option pricing model determines total compensation expense to be $270,000. At December 31, 2015, none of the executives had exercised their options. What is the impact on Kessler's net income for the year ended December 31, 2015 as a result of this transaction under the fair value method?
a. $90,000 increase
b. $0
c. $90,000 decrease
d. $270,000 decrease

14. Grant, Inc. had 60,000 shares of treasury stock ($10 par value) at December 31, 2014, which it acquired at $11 per share. On June 4, 2015, Grant issued 30,000 treasury shares to employees who exercised options under Grant's employee stock option plan. The market value per share was $13 at December 31, 2014, $15 at June 4, 2015, and $18 at December 31, 2015. The stock options had been granted for $12 per share. The cost method is used. What is the balance of the treasury stock on Grant's balance sheet at December 31, 2015?
a. $210,000.
b. $270,000.
c. $330,000.
d. $360,000.

15. Diluted earnings per share for 2015 is (rounded to the nearest penny)
a. $1.39.
b. $1.41.
c. $1.53.
d. $1.67.

16. Warrants exercisable at $20 each to obtain 60,000 shares of common stock were outstanding during a period when the average market price of the common stock was $25. Application of the treasury stock method for the assumed exercise of these warrants in computing diluted earnings per share will increase the weighted average number of outstanding shares by
a. 60,000.
b. 48,000.
c. 12,000.
d. 15,000.

Use the following information for questions 27 and 28.
Lerner Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $500,000 of 10% convertible bonds outstanding during 2015. The preferred stock is convertible into 40,000 shares of common stock. During 2015, Lerner paid dividends of $.45 per share on the common stock and $1.50 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2015 was $300,000 and the income tax rate was 30%.

17. What should be the basic earnings per share for the year ended December 31, 2015, rounded to the nearest penny?
a. $1.25
b. $1.54
c. $1.85
d. $2.00

18. What should be the diluted earnings per share for the year ended December 31, 2015, rounded to the nearest penny?
a. $1.74
b. $1.57
c. $1.33
d. $1.78

19. Marle Construction enters into a contract with a customer to build a warehouse for $850,000 on March 30, 2014 with a performance bonus of $50,000 if the building is completed by July 31, 2014. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by Probability
July 31, 2014 65%
August 7, 2014 25%
August 14, 2014 5%
August 21, 2014 5%

The transaction price for this transaction is
a. $895,000
b. $850,000
c. $552,500
d. $585,000

20. Entertainment Tonight, Inc. manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days. Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty. The total transaction price for the sale of the stereo system and the extended warranty is $3,000. The standalone price of each is $2,300 and $800, respectively. The estimated cost of the assurance-warranty is $350. The accounting for warranty will include a
a. debit to Warranty Expense, $800.
b. debit to Warranty Liability, $350
c. credit to Warranty Liability, $800
d. credit to Unearned Warranty Revenue, $800

21. P & G Auto Parts sells parts to AAA Car Repair during 2014. P&G offers rebates of 2% on purchases up to $30,000 and 3% on purchases above $30,000 if the customer’s purchases for the year exceed $100,000. In the past, AAA normally purchases $150,000 in parts during a calendar year. On March 25, 2014, AAA Car Repair purchased $37,000 of parts. The journal entry to record the purchase includes a
a. debit to Accounts Receivable for $37,000.
b. debit to Accounts Receivable for $36,400.
c. credit to Sales Revenue for $36,190.
d. credit to Sales Revenue for $36,400.

22. Roche Pharmaceuticals entered into a licensing agreement with Zenith Lab for a new drug under development. Roche will receive $6,750,000 if the new drug receives FDA approval. Based on prior approval, Roche determines that it is 85% likely that the drug will gain approval. The transaction price of this arrangement should be
a. $6,750,000.
b. $5,737,500.
c. $1,012,500.
d. $0 until approval is received.

23. Arizona Communications contracted to set up a call center for the City of Phoenix. Under the terms of the contract, Arizona Communications will design and set-up a call center with the following costs:
Design of call center $10,000
Computers, servers, telephone equipment $275,000
Software $85,000
Installation and testing of equipment $15,000
Selling commission $25,000
Annual service contract $50,000
In addition, Arizona Communications will maintain and service the equipment and software to ensure smooth operations of the call center for an annual fee of $90,000. Ownership of equipment installed remains with the City of Phoenix. The contract costs that should be capitalized is
a. $460,000
b. $410,000
c. $360,000
d. $370,000

24. Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Container Corporation purchased computer equipment, installation and training for a total cost of $120,000 on March 15, 2014. Estimated standalone fair values of the equipment, installation, and training are $75,000, $50,000, and $25,000 respectively. The transaction price allocated to equipment, installation and training is
a. $75,000, $50,000, $25,000 respectively
b. $40,000, $40,000, $40,000 respectively
c. $120,000 for the entire bundle.
d. $60,000, $40,000 and $20,000 respectively.

25. On August 5, 2014, Famous Furniture shipped 20 dining sets on consignment to Furniture Outlet, Inc. The cost of each dining set was $350 each. The cost of shipping the dining sets amounted to $1,800 and was paid for by Famous Furniture. On December 30, 2014, the consignee reported the sale of 15 dining sets at $850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense of $300, and installation and setup costs of $390. The amount cash received by Famous furniture is
a. $12,750
b. $11,985
c. $11,295
d. $11,685

26. Botanic Choice sell natural supplements to customers with an unconditional right of return if they are not satisfied. The right of returns extends 60 days. On February 10, 2014, a customer purchases $3,000 of products (cost $1,500). Assuming that based on prior experience, estimated returns are 20%. The journal entry to record the sale and cost of goods sold includes a
a. debit to Cash and a credit to Sales Revenue of $3,000.
b. credit to Refund Liability of $600 and a credit to Sales Revenue of $2,400.
c. debt to Cost of Goods Sold and credit to Inventory for $1,500.
d. credit to Estimated Inventory Returns of $300

27. Botanic Choice sells natural supplements to customers with an unconditional right of return if they are not satisfied. The right of returns extends 60 days. On February 10, 2014, a customer purchases $3,000 of products (cost $1,500). Assuming that based on prior experience, estimated returns are 20%. The journal entry to record the return of $200 of merchandise includes a
a. credit to Refund Liability for $200.
b. credit to Returned Inventory for $100.
c. credit to Estimated Inventory Returns for $100.
d. debit to Estimated Inventory Returns for $100.

28. On November 1, 2014, Green Valley Farm entered into a contract to buy a $75,000 harvester from John Deere. The contract required Green Valley Farm to pay $75,000 in advance on November 1, 2014. The harvester (cost of $55,000) was delivered on November 30, 2014. The journal entry to record the contract on November 1, 2014 includes a
a. credit to Accounts Receivable for $75,000.
b. credit to Sales Revenue for $75,000.
c. credit to Unearned Sales Revenue for $75,000.
d. debit to Unearned Sales Revenue for $75,000.

29. On November 1, 2014, Green Valley Farm entered into a contract to buy a $75,000 harvester from John Deere. The contract required Green Valley Farm to pay $75,000 in advance on November 1, 2014. The harvester (cost of $55,000) was delivered on November 30, 2014. The journal entry to record the delivery of the equipment includes a
a. debit to Unearned Sales Revenue for $75,000.
b. credit to Unearned Sales Revenue for $75,000.
c. credit to Cost of Goods Sold for $55,000.
d. debit to Inventory for $55,000

30. On August 5, 2014, Famous Furniture shipped 20 dining sets on consignment to Furniture Outlet, Inc. The cost of each dining set was $350 each. The cost of shipping the dining sets amounted to $1,800 and was paid for by Famous Furniture. On December 30, 2014, the consignee reported the sale of 15 dining sets at $850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense of $300, and installation and setup costs of $390. The total profit on units sold for the consignor is
a. $11,295
b. $4,695
c. $6,045
d. $9,945

Use the following information for questions 29 and 30.

Kiner, Inc. began work in 2014 on a contract for $16,800,000. Other data are as follows:
2014       2015
Costs incurred to date $7,200,000 $11,200,000
Estimated costs to complete 4,800,000 —
Billings to date 5,600,000 16,800,000
Collections to date 4,000,000 14,400,000

1. Manning Company issued 10,000 shares of its $5 par value common...