WGU Pre assessment for Intermediate Accounting 2 (Top 2024/2025 EXAM REVIEW PAPERS / GRADED A+/ 100% Accurate)

WGU Pre assessment for Intermediate Accounting 2 What are two descriptions of preemptive stock rights? -A privilege often referred to as warrant and a means of protecting stockholders from involuntary dilution of ownership. Why would a corporation reacquire stock by using the cost method rather than the par value method? - To make the stock available for future re-issue. What is a stockholder benefit of preferred stock? -Preferential payment of dividends. What is the effect on retained earnings of a company if the preferred stock holders convert shares? - Decrease How should the company record the value of warrants? -Add the market value without warrants and the market value of the warrants and get a % to apply to the issuance price Basic earnings per share of common stock with stock split -Take dates outstanding, shares outstanding, restatement, and fraction of year which is months in between and the dividing number (1/1-3/1 = 2 months so 2/12). The shares outstanding adds with issuing shares or subtracts with repurchasing shares. Compensation expense with market price of $42 on Jan 1 and $47 on dec 31. With an exercise price of $30 for 200,000 SARs over the next two years. -Take (47-30)/2 = 8.5. Now 8.5* 200,000 =$1,700,000 How are changes in the fair value of share options recorded under GAAP and IFRS? - Increases in fair value are recorded under both GAAP and IFRS, but only GAAP permits reductions. Which derivative instrument protects an investment against a price decrease and preserves its abolition to appreciate in value if the price increases? -Put option How does a company record a change in value for a futures contract that has gone up in price? - Debit futures contracts; credit unrealized holding gains or loss - equity. Which party must consolidate its financial statements to include a variable interest entity? -The party that is exposed to the majority risks and rewards of the variable interest entity. Which fair value disclosure is true for impaired, long lived assets that are held and used? - Impairment charges resulting from write-down to fair value are included in earnings for the period. Which situation should gains or losses be charged to OCI? -Under GAAP, when changes in value on derivatives are used as cash flow hedges. Selling bonds intended to achieve a % -PV calculations - the current fair value. (46,742.38- 45,000=1742) Which 2 circumstances represent the significant influence of an investor over an investee that requires use of the equity method of accounting for an equity investment rather than the fair value method? - Interchange of managers between investor and investee companies. And purchase of the majority of the investee's products of services. A company has a 30% stake in another company. The investment is in the books for $560,000. At the end of the current fiscal year, the investment has a fair value of $510,000. Which method should this company use to adjust the book value? -Fair value method. How should a company account for transfers of investment securities between categories? - When transferring held-to-maturity investments to available-for-sale securities, record any unrealized gain or loss in stockholders equity. What is the difference between the recognition of revenue and the recognition of gain? - Revenue results from ord