Question 29 Hendricks Inc. granted their executives incentive stock options on January 1, 2023. On this date, 275,000 sh
Posted: Wed May 04, 2022 7:29 am
Question 29
Hendricks Inc. granted their executives incentive stock options
on January 1, 2023. On this date, 275,000 shares of the company's
$5 par value common stock were granted at an option price of $40
per share. On the grant date, the market price of the stock was $50
per share. Market prices of the stock were as follows:
$70 per share
$82 per share
The Black-Scholes option pricing model determines total
compensation expense to be $1,500,000. The service period for the
options is 2 years. The options were exercisable beginning on
January 1, 2025 for employees still working at Hendricks. The
options expire on December 31, 2029. What journal entry should the
company make on January 1, 2023 under the fair value method?
Question 29 options:
a)
b)
No Entry needed.
c)
d)
Question 30
On May 15, 2024, Baez Co. issued bond with detachable
warrants. At the time of the issuance, the company issued
$15,000,000 par value 8% bond at 97. The company issued one
detachable warrant with each $1,000 par value bond. When the
bond was issued, the warrants were selling at $25 each. It is
estimated that the fair value of the bonds without the warrants is
$14,550,000.
What amount should the company debit to the Discount on Bonds
Payable? (round calculations to 2 decimal places)
Question 30 options:
a)
$0.00
b)
$886,500
c)
$450,000
d)
$375,000
Question 31
Arrieta Company, a sports equipment manufacturer, has 725,000
shares of common stock issued and outstanding. Arrieta's
Board of Directors voted to issue a 2-for-1 stock split during the
year. Arrieta Company's currently has their common stock
selling at $57 per share. Arrieta Company's per share par
value of the common stock is $10. Sangster's book value of
the common stock is $45 per share.
Determine the journal entry to record the declaration of the
2-for-1 stock split for Arrieta Company.
Question 31 options:
a)
There is no journal entry needed.
b)
c)
d)
Paid in Capital in Excess of Par - Common
Stock - Dividends Distributable
Question 32
McVoy Inc. sells franchises to independent operators
throughout the northwestern part of the United States. The contract
with the franchisee includes the following provisions.
Franchise agreement is signed on January 2, 2024. No
future services are required by the franchisor once the franchise
starts operations. The Franchise begins operations on June 1,
2024. What journal entry should McVoy make on January 2,
2024?
Question 32 options:
a)
b)
c)
d)
Question 33
Contreras Inc. purchased a put option during the year.
Over the course of the year, the time value of the put option has
declined. In recording the reduction of the time value of the put
option, the company will include in their journal entry a
Question 33 options:
a)
a credit to the Unrealized Holding Gain or Loss - Income.
b)
a credit to the cash account.
c)
a debit to the Unrealized Holding Gain or Loss - Income.
d)
debit to the put option.
Question 34
Bote Corp. has 2,000 $1,000 bonds outstanding. Each bond
is convertible into 10 shares of $5 par value common stock.
The bonds are converted into common stock on December 31, 2024. On
this date, the market value of the common stock was $20 per
share. At this time the unamortized discount on the bonds was
$75,000. The company records the conversion of the bonds using the
book value approach.
On December 31, 2024, the company's journal entry to record the
conversion of the bonds includes
Question 34 options:
a)
a debit to discount on bonds payable for $75,000
b)
a credit to Paid-in Capital in Excess of Par - Common Stock for
$1,900,000.
c)
a credit to bonds payable for $2,000,000.
d)
a credit to Paid-in Capital in Excess of Par - Common Stock for
$1,825,000.
Question 35
Rizzo Co. has Net Income of $279,000 for 2024. Over the past two
years, the company had outstanding 125,000 shares of common
stock. During the year, the company paid dividends on
preferred stock in the amount of $45,000. The company has
outstanding all year 20,000 shares of cumulative preferred
stock. Each share of preferred stock is convertible into 4
shares of common stock. The company's tax rate is 20
percent.
What is the company's diluted earnings per share?
Question 35 options:
a)
$1.14
b)
$2.23
c)
$1.87
d)
$1.36
Hendricks Inc. granted their executives incentive stock options
on January 1, 2023. On this date, 275,000 shares of the company's
$5 par value common stock were granted at an option price of $40
per share. On the grant date, the market price of the stock was $50
per share. Market prices of the stock were as follows:
$70 per share
$82 per share
The Black-Scholes option pricing model determines total
compensation expense to be $1,500,000. The service period for the
options is 2 years. The options were exercisable beginning on
January 1, 2025 for employees still working at Hendricks. The
options expire on December 31, 2029. What journal entry should the
company make on January 1, 2023 under the fair value method?
Question 29 options:
a)
b)
No Entry needed.
c)
d)
Question 30
On May 15, 2024, Baez Co. issued bond with detachable
warrants. At the time of the issuance, the company issued
$15,000,000 par value 8% bond at 97. The company issued one
detachable warrant with each $1,000 par value bond. When the
bond was issued, the warrants were selling at $25 each. It is
estimated that the fair value of the bonds without the warrants is
$14,550,000.
What amount should the company debit to the Discount on Bonds
Payable? (round calculations to 2 decimal places)
Question 30 options:
a)
$0.00
b)
$886,500
c)
$450,000
d)
$375,000
Question 31
Arrieta Company, a sports equipment manufacturer, has 725,000
shares of common stock issued and outstanding. Arrieta's
Board of Directors voted to issue a 2-for-1 stock split during the
year. Arrieta Company's currently has their common stock
selling at $57 per share. Arrieta Company's per share par
value of the common stock is $10. Sangster's book value of
the common stock is $45 per share.
Determine the journal entry to record the declaration of the
2-for-1 stock split for Arrieta Company.
Question 31 options:
a)
There is no journal entry needed.
b)
c)
d)
Paid in Capital in Excess of Par - Common
Stock - Dividends Distributable
Question 32
McVoy Inc. sells franchises to independent operators
throughout the northwestern part of the United States. The contract
with the franchisee includes the following provisions.
Franchise agreement is signed on January 2, 2024. No
future services are required by the franchisor once the franchise
starts operations. The Franchise begins operations on June 1,
2024. What journal entry should McVoy make on January 2,
2024?
Question 32 options:
a)
b)
c)
d)
Question 33
Contreras Inc. purchased a put option during the year.
Over the course of the year, the time value of the put option has
declined. In recording the reduction of the time value of the put
option, the company will include in their journal entry a
Question 33 options:
a)
a credit to the Unrealized Holding Gain or Loss - Income.
b)
a credit to the cash account.
c)
a debit to the Unrealized Holding Gain or Loss - Income.
d)
debit to the put option.
Question 34
Bote Corp. has 2,000 $1,000 bonds outstanding. Each bond
is convertible into 10 shares of $5 par value common stock.
The bonds are converted into common stock on December 31, 2024. On
this date, the market value of the common stock was $20 per
share. At this time the unamortized discount on the bonds was
$75,000. The company records the conversion of the bonds using the
book value approach.
On December 31, 2024, the company's journal entry to record the
conversion of the bonds includes
Question 34 options:
a)
a debit to discount on bonds payable for $75,000
b)
a credit to Paid-in Capital in Excess of Par - Common Stock for
$1,900,000.
c)
a credit to bonds payable for $2,000,000.
d)
a credit to Paid-in Capital in Excess of Par - Common Stock for
$1,825,000.
Question 35
Rizzo Co. has Net Income of $279,000 for 2024. Over the past two
years, the company had outstanding 125,000 shares of common
stock. During the year, the company paid dividends on
preferred stock in the amount of $45,000. The company has
outstanding all year 20,000 shares of cumulative preferred
stock. Each share of preferred stock is convertible into 4
shares of common stock. The company's tax rate is 20
percent.
What is the company's diluted earnings per share?
Question 35 options:
a)
$1.14
b)
$2.23
c)
$1.87
d)
$1.36