St Vincent College of Camarin, Inc.Department of AccountancyPractical Accounting 1Final Pre-board 2017INSTRUCTIONS:Select the best answer for each of the following questions. Mark only one answer for each item bymarking the box corresponding to the letter of your choice on the answer sheet provided. STRICTLY NO ERASURESALLOWED.1.Cyan Corp. issued 20,000 shares of 5 par common stock at 10 per share. On December 31, year 1, Cyan’s retained earnings were 300,000. In March year 2, Cyan reacquired 5,000 shares of its common stock at 20 per share. In June year 2, Cyan sold 1,000 of these shares to its corporate officers for 25 per share. Cyan uses the cost method to record treasury stock. Net income for the year ended December 31, year 2, was 60,000. At December 31, year 2, what amount should Cyan report as retained earnings? a. 360,000 b. 365,000 c. 375,000 d. 380,0002.A company decided to sell an unprofitable division of its business. The company can sell the entire operation for 800,000, and the buyer will assume all assets and liabilities of the operations. The tax rate is 30%. The assets and liabilities of the discontinued operation are as follows: Buildings5,000,000Accumulated depreciation3,000,000Mortgage on buildings1,100,000Inventory500,000Accounts payable600,000Accounts receivable200,000What is the after-tax net loss on the disposal of the division?3.A company’s activities for year 2 included the following:Gross sales3,600,000Cost of goods sold1,200,000Selling and administrative expense500,000Adjustment for a prior-year understatement of amortization expense59,000Sales returns34,000Gain on sale of available-for-sale securities8,000Gain on disposal of a discontinued business segment4,000Unrealized gain on available-for-sale securities2,000The company has a 30% effective income tax rate. What is the company’s net income for year 2?PRACTICAL ACCOUNTING 11
4.Ian Co. is calculating earnings per share amounts for inclusion in the Ian's annual report to shareholders. Ian has obtained the following information from the controller's office as well as shareholder services:Net income from January 1 to December 31 125,000Number of outstanding shares:January 1 to March 31 15,000April 1 to May 31 12,500June 1 to December 31 17,000In addition, Ian has issued 10,000 incentive stock options with an exercise price of 30 to its employees and a year-end market price of 25 per share. What amount is Ian's diluted earnings per share for the year ended December 31?
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