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Study Resources (Accounting)

36. If an SAR is determined to be an equity instrument, it would be valued at a. grant date and not revised at subsequent interim dates. b. each interim date. c. exercise date. d. grant date and revalued at exercise date. 37. Compensation expense resulting from a performance-type plan is generally a. determined at the measurement.
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Ex. 18-60—Operating loss carryforward with valuation allowance In 2011, its first year of operations, Tetrowski Inc. had a net operating loss of $200,000 when the tax rate was 20%. In 2012, Tetrowski had $250,000 in taxable income and the tax rate remained at 20%. Assume Tetrowski’s management thinks, at the end of.
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6. What effect will the acquisition of treasury shares have on shareholders' equity and basic earnings per share, respectively? 7. When calculating diluted earnings per share, convertible bonds are a. ignored. b. assumed converted whether they are dilutive or antidilutive. c. assumed converted only if they are antidilutive. d. assumed converted only if they are.
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11. In applying the treasury shares method to determine the dilutive effect of options and warrants, the proceeds assumed to be received upon exercise of the options and warrants a. are used to calculate the number of common shares repurchased at the average market price, when calculating diluted earnings per share. b..
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Ex. 18-55—Permanent and reversible differences. Explain whether each of the following independent situations should be treated as a reversible difference or a permanent difference. (a) For accounting purposes, Aye Corp. reports revenue from instalment sales on the accrual basis. For income tax purposes it reports the revenues by the instalment method, deferring.
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Ex. 17-47—Earnings per share. Throughout the calendar year 2012, Far and Away Corporation has 400,000 common shares outstanding (no preferred shares issued). In addition, the corporation has 5,000, 20-year, 7% bonds outstanding, issued at par in 2010. Each $1,000 bond is convertible into 20 common shares after September 23, 2013. During.
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46. Lahti Inc. uses the accrual method of accounting for financial reporting purposes and the instalment method of accounting for income tax purposes. Instalment income of $930,000 will be collected in the following years when the enacted tax rates are: The instalment income is Lahti's only reversible difference. What amount should.
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EXERCISES Ex. 17-43—Weighted average shares outstanding. At January 1, 2012, Yarrow Corporation had 300,000 common shares outstanding (no preferred issued). On March 1, the corporation issued 45,000 new shares to raise additional capital. On July 1, the corporation declared and issued a 2 for 1 stock split. On October 1, the corporation.
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Use the following information to answer Pr. 17-53 and 17-54. El Dorado Corp has been in existence for the past fifteen years. However, during recent years, its common shares outstanding changed as shown below. The corporation uses the calendar year as its fiscal year. Pr. 17-53 —Weighted average calculations. Calculate the weighted average.
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Ex. 18-58—Future income taxes. Baron Corp, at the end of 2012, its first year of operations, prepared a reconciliation between pretax accounting income and taxable income as follows: Estimated warranty expenses of $530,000 will be deductible in 2013, $200,000 in 2014, and $70,000 in 2015. The use of the depreciable assets will.
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Ex. 18-52—Reversible differences. There are four types of reversible differences. For each type: (1) indicate the cause of the difference, (2) give an example, and (3) indicate whether it will create a taxable or deductible amount in the future.       .
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PROBLEMS Pr. 17-49—Diluted earnings per share. On January 1, 2012, Mayberry Corp had 200,000 common shares outstanding. On April 1, 2012, 20,000 common shares were issued and on September 1, Mayberry bought back 30,000 treasury shares. There are 30,000 call options to buy common shares at $40 a share outstanding. The market.
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Use the following information for questions 28 through 30. At the end of 2012, its first year of operations, Easter Corp prepared the following reconciliation between pretax accounting income and taxable income: The estimated litigation expense of $750,000 will be deductible in 2014 when it is expected to be paid. The instalment.
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MULTIPLE CHOICE—CPA Adapted 37. At December 31, 2011, Tau Inc. had 500,000 common shares outstanding (no preferred shares issued). On July 1, 2012, an additional 50,000 common shares were issued. Tau also had unexercised call options to purchase 40,000 common shares at $15 per share outstanding throughout 2012. The average market.
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35. In 2012, Egghead Ltd accrued, for financial statement reporting, estimated losses on disposal of unused plant facilities of $750,000. The facilities were sold in March 2013 and a $750,000 loss was recognized for tax purposes. Also in 2012, Egghead paid $50,000 in premiums for a two-year life insurance policy.
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MULTIPLE CHOICE — CPA Adapted 41. Corvette Corp reported pretax accounting income of $300,000 for the year ended December 31, 2012. To calculate their income tax liability, the following data were considered: What amount should Corvette report as its current income tax liability on its December 31, 2012 balance sheet? a. $20,000. b. $26,000. c..
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PROBLEMS Pr. 18-61—Taxable income and accounting income. Explain the difference between accounting income and taxable income.   Pr. 18-62—Taxable Temporary Difference. Explain what a taxable temporary difference is and why a future or deferred income tax liability is recognized.       .
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EXERCISES Ex. 18-51—Permanent and reversible differences. Listed below are items that are treated differently for accounting purposes than they are for tax purposes. Indicate whether the items are permanent differences or reversible differences. For reversible differences, indicate whether they will create future income tax assets or future income tax liabilities. 1. Investments accounted.
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Ex. 17-46—Diluted earnings per share. During 2012, Ching Corp had 300,000 common shares outstanding. In addition, at December 31, 2012, 50,000 shares were issuable upon exercise of executive stock options, which require a $40 cash payment upon exercise (options were granted in 2010). The average market price of the common shares.
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MULTIPLE CHOICE—Conceptual 1. Which of the following is not considered to be an employee future benefit? a. Post-retirement pension plans. b. Long-term severance benefits. c. Regular vacation pay. d. Unrestricted sabbatical leaves. 2. In a defined contribution plan, a formula is used that a. defines the benefits that the employee will receive at retirement. b. ensures that pension.
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Pr. 18-66—Deferred income tax asset. Lunenberg Ltd, a publicly accountable enterprise, began business on January 1, 2011. Its pretax accounting income for the first two years was as follows: 2011$ 80,000 2012150,000 The following items caused the only differences between pretax accounting income and taxable income. 1. In 2011, the company collected $75,000 in rental.
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Ex. 17-45—Earnings per share. A publicly accountable enterprise is planning on issuing the following two securities in the coming year: 1. Convertible debt where mandatory conversion will take place five years after issue. 2. Debt with detachable warrants. The warrants can be exercised if profits exceed $1,000,000 in the next five years. Instructions Discuss how.
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MULTIPLE CHOICE—Computational 18. At January 1, 2012, Alpha Corp had 600,000 common shares outstanding (no preferred shares issued). On July 1, 2012, the corporation issued 900,000 shares, and reported net income of $630,000 for the year ended December 31, 2012. Basic earnings per share for 2012 would be a. $1.05. b. $0.70. c. $0.60. d..
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MULTIPLE CHOICE—Conceptual 1. With respect to the calculation of earnings per share, which of the following would be most indicative of a simple capital structure? a. Common shares and convertible bonds. b. Earnings derived from one primary line of business. c. Common shares and non-convertible preferred shares. d. Common shares and convertible preferred shares. 2. In.
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Use the following information to answer Pr. 17-53 and 17-54. El Dorado Corp has been in existence for the past fifteen years. However, during recent years, its common shares outstanding changed as shown below. The corporation uses the calendar year as its fiscal year. Pr. 17-54—Basic earnings per share. Assuming there were no.
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Pr. 18-64—Multiple reversible differences. The following information is available for the first three years of operations for Jedi Corporation: 1. 2. On January 2, 2011, heavy equipment was purchased for $500,000. The equipment had an estimated service life of 5 years and no residual value. The straight-line method of depreciation is used for.
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16. In regard to reconciling income reported on the financial statements to taxable income, which of the following statements is incorrect? a. All differences between accounting income and taxable income are considered. b. Only reversible differences are considered. c. Only those that result in temporary differences are considered when determining future income tax.
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Ex. 18-57—Deferred income taxes. Fortescue Ltd, at the end of 2012, its first year of operations, prepared a reconciliation between pretax accounting income and taxable income as follows: Use of the depreciable assets will result in taxable amounts of $200,000 in each of the next three years. The estimated expenses of $500,000.
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11. A future income tax liability (or deferred tax liability) is the a. current tax consequence of a taxable temporary difference. b. current tax consequence of a deductible temporary difference. c. future income tax consequence of a deductible temporary difference. d. future income tax consequence of a taxable temporary difference. 12. A future income tax.
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Pr. 18-67—Comprehensive income tax situation with multiple differences. Price Fisher Ltd, a private corporation which follows Accounting Standards for Private Enterprises (ASPE), is in the process of preparing its financial statements for its second year of operations ending December 31, 2012. Pertinent information follows: 1. Accounting income before tax is $1,500,000. 2. Depreciation.
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Ex. 18-59—Operating loss carryforward without valuation allowance. In 2011, its first year of operations, Lachinski Inc. had a $500,000 net operating loss when the tax rate was 30%. In 2012, Lachinski had $200,000 taxable income and the tax rate remained at 30%. Assume Lachinski’s management thinks that it is more likely than.
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Ex. 18-56—Calculation of taxable income. The records for Artoo Inc. show the following data for 2012: • Gross profit on instalment sales recorded on the books was $200,000. Gross profit from collections of instalment receivables was $150,000. • Golf club dues were $3,800. • Machinery was acquired in January for $300,000. Straight-line depreciation over.
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MULTIPLE CHOICE—Conceptual 1. Under International Accounting Standards, accounting income and taxable income are referred to as 2. When calculating income tax expense, taxable income of a corporation differs from pretax accounting income because of 3. For calculating income tax expense, Accounting Standards for Private Enterprises (ASPE) allows the use of a. any method as.
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Pr. 18-65—Interperiod tax allocation with change in enacted tax rates. Yoda Corp purchased equipment for $180,000 on January 2, 2011, its first day of operations. For book purposes, the equipment will be depreciated using the straight-line method over three years with no residual value. Pretax accounting income and taxable income are.
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Pr. 17-55—Basic earnings per share. Dawson Inc, a publicly accountable enterprise, has a July 31 year end. For the 2011 fiscal year, there were 100,000 common shares outstanding all year. Net income for the 2011 year was $950,000. The income tax rate is 30%. Part A. During the 2010 fiscal year, Dawson.
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Pr. 18-63—Differences between accounting and taxable income and the effect on future income taxes. The following differences apply to the reconciliation of accounting income and taxable income of Rhodes Inc for the year ended December 31, 2012, its first year of operations. The enacted income tax rate is 30% for all.
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32. At December 31, 2011, Omicron Limited had 4,000,000 common shares outstanding (no preferred shares issued). An additional 250,000 common shares were issued on July 1, 2012, and 500,000 more on October 1, 2012. As well, on April 1, 2012, Omicron issued 10,000, $1,000 face value, 8% convertible bonds. Each.
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Pr 17-56—Basic and diluted earnings per share. The following data are presented by Maxim Ltd. for the calendar year 2012: Additional information: 1) The common and preferred shares and the convertible bonds were outstanding from the beginning of the year. 2) In 2012, a $500,000 dividend was declared and distributed, however, no dividends were.
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MULTIPLE CHOICE—Computational 25. On January 2, 2011, Simmons Corp purchased a depreciable asset for $600,000. The asset has an estimated 4 year life with no residual value. Straight-line depreciation is being used for financial statement purposes but the following CCA amounts will be deducted for tax purposes: Assuming an income tax rate.
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Ex. 17-48—Earnings per share. Baksheesh Inc. reports net income (30% tax rate) of $1,600,000 for 2012, and an average of 500,000 common shares outstanding during the year. The corporation issued $2,000,000 par value, 10-year, 9% convertible bonds on January 1, 2010 at a $18,000 discount. The bonds are convertible into 60,000.
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