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# A3595E2F13_whitesol.doc

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Sung Kwon
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ADMS 3595, Intermediate Accounting II Fall 2013 EXAM II (KEY) White Colour I. MC Answer (30 @ 2 = 60 points) 1 .(b) 2.(d) 3.(d) 4.(a) 5.(a) 6.(a) 7.(c) 8.(b) 9.(a) 10.(a) 11.( b) 12.(a)13.(c)14.(b)15.(d)16.(b)17.(d)18.(b)19.(a) 20.(d) 21. (d) 22.(a)23.(a)24.(c)25.(d)26.(a)27.(b)28.(d)29.(b) 30.(c) 7. c 800,000 × \$10 = \$8,000,000 \$60,000 − (.06×\$350,000) 8. b = 26% [(\$60,000 + \$75,000) + (\$75,000 + \$90,000)]÷ 2 Note: preferred shares are not included in denominator X 9. a (\$5,300,000 −\$1,000,000) = .25, X = \$1,075,000 10. a \$32 ÷ \$2.46 = 13 17. d Agreed payment \$8,300 – \$8,000 current cost = \$300 loss 18. b 50,000 KRB @.\$17 = \$8,500 \$8,500 – \$8,300 settlement amount = \$200 gain overall \$200 gain + \$300 loss previously recorded = \$500 gain 19. a 500 x \$1,000 x .95 = \$475,000, balance to contributed surplus 20. d (\$300,000 × .95) + (300 × 25 × \$2) = \$300,000; \$300,000 × 1.04 = \$312,000 \$15,000 × \$312,000 = \$15,600 \$300,000 \$500,000 + (\$2,000,00 0 × .09 × .7) 27. b = \$3.68 100,000 + 50,000 + 20,000 28. d 50,000 × \$20 ÷ \$25 = 40,000 50,000 – 40,000 = 10,000 29. b 500,000 + (50,000 × 6 ÷ 12) + 40,000 – (40,000 × \$15 ÷ \$20) = 535,000 \$3,000,000 30. c 2,000,000 + 1,000,000 = \$1.00. II. Stockholders’ Equity (14 points) (a) (7.5 points) Jan. 15 Cash (10,000 X \$6)...................................60,000 (1 point) Common Shares.................................. 60,000 Feb. 12 Cash (2,000 X \$60)..................................120,000 (1 point) Preferred Shares.................................. 120,000 Jun. 30 Retained Earnings....................................52,500. (1 point) Cash (35,000 X \$1.50)......................... 52,500 Sept. 2 Land ................................................25,000........ (1 point) Common Shares.................................. 25,000 Oct. 31 Retained Earnings.....................................4,000. (1 point) Cash (2,000 X \$2)................................ 4,000 Nov. 15 Preferred Shares (500 X \$60).........................30,000 (1.5 Retained Earnings.....................................1,000. points) Cash (500 X \$62)................................. 31,000 The following entry might also be made: Dec. 31 Income Summary 532,000 (1 point) Retained Earnings 532,000 (b) (6.5 Points) Blue Book Ltd. Statement of Changes in Shareholders’ Equity Year ending December 31, 2014 Number of Number of Common Common Preferred Preferred Retained Total Share- shares Shares Shares Shares Earnings holders’ Equity Balance, January 1, 2014 25,000 \$100,000 – – \$365,000 \$465,000 Shares issued for cash 10,000 60,000 2,000 \$120,000 \$180,000 Shares issued for land 5,000 25,000 25,000 Dividends, common shares (52,500) (52,500) Dividends, preferred shares (4,000) (4,000) Shares purchased and retired (500) (30,000) (1,000) (31,000) Net Income _ _ _ _ _ 532,000 532,000 Balance, December 31, 2014 40,000 \$185,000 1,500 \$90,000 \$839,500 \$1,114,500 (1 point) (1 points) (1 point) (1 point) (1 point) (1.5 points) III. (Derivative Securities) (A) (4 points) 1. (a) Jan 3 intrinsic value max(\$40 - \$42, 0) = \$0; time value \$200 - \$0 = \$200. (2) (b) Mar 31 intrinsic value (\$53 - \$42) x 1,000 = \$11,000; (2) time value \$11,150 - \$11,000 = \$150 2. (4 points) (a) Jan 3 (1) Derivatives – financial assets...............................................200........ Cash........................
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