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| The Lange Company has a simple capital structure. The company has 20,000 shares of common stock outstanding. Net income for the year was $65,000. Lange declared and paid a preferred stock dividends of $4,000 during the year. Earnings per share for the year is: |
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| Which of the following is an example of a temporary difference between taxable income and reported income? |
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| B. using the straight-line depreciation method for income statement reporting and MACRS depreciation for taxable income |
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| The income before income tax for the first year of operations is $750,000. Because of timing differences in accounting and tax methods, the taxable income for the same year is $550,000. Assuming an income tax rate of 50%, the amount of the deferred income tax would be |
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| An extraordinary item results from |
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| D. a transaction or event that is unusual and occurs infrequently. |
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| The Poe Corporation has a simple capital structure. Thaw company has 50,000 shares of common stock outstanding. Net income for the year was $142,000. Poe declared and paid preferred stock dividends of $16,000 during the year. Earnings per share for the year is |
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| Temporary differences affect the timing of when revenues and expenses are recognized for tax purposes and as a result, the total amount of taxes paid does not change |
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| A corporation has $300,000 income before income taxes, a 40% tax rate, and $120,000 taxable income. The deferred income taxes is $72,000 |
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| Gains and losses on the disposal of fixed assets are examples of extraordinary items |
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| Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method |
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| On January 1, 2007, $1,000,000, 5-year, 10% bonds, were issued for $970,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is |
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| One potential advantage of financing corporations through the use of bonds rather than common stock is |
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Definition
| C. the interest expense is deductible for tax purposes by the corporation |
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| The market interest rate related to a bond is also called the |
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| When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at |
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| When the market rate of interest was 12%, Newman Corporation issued $1,000,000, 11%, 10-year bonds that pay interest annually. The selling price of this bond issue was |
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Definition
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| A bond is simply a form of an interest bearing note |
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| A bond is usually divided into a number of individual bonds of $500 each. |
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| When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium |
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| The price of a bond is equal to the sum of the interest payments and the face amount of the bonds |
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| One reason a dollar today is worth more than a dollar 1 year from today is the time value of money |
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