ACCT 301b Conceptual Questons

 Ivanhoe Company has a loss contingency. The company’s legal council’s opinion is that the contingency is probable and that they estimate that the amount of the loss will be $480,000. What is the proper accounting treatment for this contingency?

$408,000 should be accrued as a liability

On August 31, 2024, Sandhill University sold $406,000 in season tickets for the school’s 7-game home football season. As each game is played, how much revenue will Sandhill recognize?

406000/7

Which of the following sets of conditions would give rise to the accrual of a contingency under current generally accepted accounting principles?

Amount of loss is reasonably estimable and occurrence of the event is probable.

Oriole Company offers a cash rebate of $4 on each $10 package of a protein powder sold during 2024. Historically, 20% of their customers mail in the rebate form. During 2024, 3008000 packages are sold, and 250000 $4 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the company’s 2024 financial statements?

(3008000 × 20% x 4), ((‘‘-1000000)

Gain contingencies are recorded when

none of these answers is correct

For a bond issue which sells for less than its par value, the market rate of interest is

higher than rate stated on the bond

A company issued a bond with a stated rate of interest that is less than the effective interest rate on the date of issuance. The bond was issued on one of the interest payment dates. What should the company report on the first interest payment date?

an interest expense that is greater than the cash payment made to bondholders

Which of the following statements is not true regarding the fair value option?

When a company elects the fair value option, it must be applied to all financial assets and liabilities

If a corporation sells some of its treasury stock at a price that exceeds its cost, tis excess should be

credited to additional paid-in capital

When a property dividend is declared and the book value of the property exceeds its market value, the dividend is recorded at the

market value of the property at the date of declaration

The residual interest in a corporation belongs to the

stockholders

Which of the following increases the number of shares outstanding and decreases the par value per share

stock split

Which of the following dividends does not reduce total stockholder’s equity?

Stock dividends

On October 31, 2021, Flint Corp. declared and issued a 12% common stock dividend. Prior to this dividend, Flint had 336000 shares of $0.001 par value common stock issued and outstanding. The fair value of Flint’s common stock was $18.50 per share on October 31, 2021. As a result of this stock dividend, the company’s total stockholders’ equity

did not change