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# A3595E2W12_blue_sol.doc

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Sung Kwon
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ADMS 3595, Intermediate Accounting II Winter 2012 EXAM II (KEY) Blue Version I. MC Answer (30 @ 2 = 60 points) 1 .(b) 2.(d) 3.(a) 4.(b) 5.(c) 6.(c) 7.(b) 8.(d) 9.(c) 10.(a) 11.( c) 12.(a)13.(b)14.(d)15.(b)16.(c)17.(d)18.(a)19.(a) 20.(c) 21. (b) 22.(c)23.(a)24.(d)25.(a)26.(c)27.(a)28.(b)29.(b) 30.(b) \$510,000 5. c  3  = \$1.20 400,000 + 00,000 ×   12  \$1,500,000 + (\$5,000,00 0×.06 ×.7) 6. c 500,000 + 10,000 × 3 + 225,000 = \$2.28.  12  9. c \$1,700,000 = \$1.31. if converted method assumes that pref shares are 800,000 + 500,000 converted to common so no pref dividends subtracted from net income 10. a. 6,000,000 + (1,000,000 × 9/12) + (500,000 × 6/12) = 7,000,000 (BEPS). 7,000,000 calc above + (25,000 × 20 × 3/12) = 7,125,000 (DEPS). 12. a max[-1,000, 0] = \$0. 13. b Option Premium = Intrinsic Value (\$0) + Time Value = \$500. 14. d \$4,200 fair value less \$500 recorded cost = \$3,700 gain. 15. b \$0 – \$4,200 = \$4,200 loss. 28. b 100,000 less pref dividend in arrears and current year 20,000 x \$0.80x 2 years 29. b Current year 20,000 x0.80 or 16,000 to pref, like amount or 8% (16000/200,000) to common 8% x 300,000 or 24,000. Total current year is 16,000 plus 24,000 or 40,000 Participating pro rata: amount available 70,000 minus current year of 40,000 or 30,000 30,000/(200,000 plus 300,000) or 6% rate of participation – preferred 6%x200,000 or 12,000, common 6% x 300,000 or 18,000. Total to common: 24,000 + 18,000 or 42,000 30. b Dividend in arrears 20,000 x 0.80 or 16,000 to preferred. Current year 20,000 x0.80 or 16,000 to pref, like amount or 8% (16000/200,000) to common 8% x 300,000 or 24,000. Total current year is 16,000 plus 24,000 or 40,000 Participating pro rata: amount available 101,000 minus arrears of 16,000 + current year of 40,000 or 45,000 (101,000 – 56,000) 45,000/(200,000 plus 300,000) or 9% rate of participation – preferred 9%x200,000 or 18,000, common 9% x 300,000 or 27,000. Total to common: 24,000 + 27,000 or 51,000 II. Stockholders’ Equity (15 points) a) (11 marks – one for each line of journal entry) Jan 20: Preferred shares (\$2,040,000 ÷ 20,000) × 1,000............................. 102,000 Retained earnings........................................................5,000............... Cash (\$107 × 1,000)...........................................................107,000 Jan 28: Retained earnings............................................................................ 100,000 Preferred dividends payable (19,000 × \$1)............................ 19,000 Common dividends payable (\$100,000 – \$19,000)................ 81,000 Feb 28: Common shares (8,000 × (\$640,000 ÷ 80,000)).............................64,000 Contributed surplus (retirement of common shares)...................... 32,000 Cash (8,000 × \$12).............................................................96,000 Mar 2: Retained earnings (72,000 × 3% × \$11.50) 24,840   Common shares.....................................................................24,840 Part b) (4 marks) Share Capital Preferred shares, \$1, no par value, 100,000 shares authorized, cumulative, callable at \$107 plus dividends in arrears; issued and outstanding, 20,000 shares \$2,040,000 – 102,000....................................................................\$1,938,000 (1 mark) Common shares, no par, 100,000 shares authorized, 80,000 issued and outstanding.............................................................. 640,000-64,000+24,840...................................................600,840 (1 mark) Total Share capital............................................................................... 2,538,840 Contributed surplus (retirement of common shares)............................ 120,000-32,000...........................................................88,000( 1 mark).... Total paid-in capital.............................................................................. 2,626,840 Retained earnings...........................................
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