Name: ____________________________________Exam 2 Acct 414 – Corporate Accounting & Reporting II Spring 2009Name: ____________________________________Exam 2Acct 414 – Corporate Accounting & Reporting II Spring 2009INSTRUCTIONS:{Not following instructions could cost you up to 10 points.}Put your name on answer sheet and exam. Put your name and student ID number on answer sheet in both human and machine-readable formats. (For the ID number, do not put in a hyphen -- the last two columns will be blank.)MATCHING and MULTIPLE CHOICE: Darken your selected answer on the separate answer sheet. You should also clearly circle or otherwise mark your answer on the exam itself since the answer sheet will not be returned. There is no penalty for guessing.SHORT PROBLEMS & ESSAYS: Show any necessary computations if you want to be eligible for partial credit. Present your work in a neat, well-organized manner. Answer all parts of the problem. When you are using a financial calculator, spell out whatyou put in for n, i, PMT, FV, PV, etc. You could also draw a time-line if that would explain your thinking to me. You may use abbreviations in your essay answers but I need complete thoughts.1-17 Multiple Choice Questions (5 points each, maximum 50 points)includes extra credit IFRS questions on deferred taxes18. Pension Work Paper {FASB No. 158} (50 points) 19. Deferred Income Taxes (50 points)20. Earnings per share (50 points)21. Extra credit – pension computationsTotal points earned (max = 200)If you tear off the working papers, be sure your name is on the top AND that you staple the exam back together in page number order. DO NOT STAPLE ANSWER SHEET TO EXAM.Do not attempt extra credit section until all other sections of the exam have been completed.After Exam 2 - Course GradeTotal Points = __________/__________ = _________%Quiz and HW percentage = ___________%Projects percentage = ___________%Exam 2 – Acct 414 – Spring 2009 Page 2This page left blank intentionally – use for scratch paper if neededExam 2 – Acct 414 – Spring 2009 Page 3Multiple Choice Questions (10 points each, one point extra credit for each correct answer for thefive free misses – circle your answer here and also put it on the scantron form.1. The accumulated benefit obligation measuresa. the pension obligation on the basis of the plan formula applied to years of service todate and based on existing salary levels.b. the pension obligation on the basis of the plan formula applied to years of service todate and based on future salary levels.c. an estimated total benefit at retirement and then computes the level cost that will besufficient, together with interest expected to accumulate at the assumed rate, toprovide the total benefits at retirement.d. the shortest possible period for funding to maximize the tax deduction.2. Prior service cost is amortized on aa. straight-line basis over the expected future years of service.b. years-of-service method or on a straight-line basis over the average remainingservice life of active employees.c. straight-line basis over 15 years.d. straight-line basis over the average remaining service life of active employees or 15years, whichever is longer.3. Gillum, Inc. has a defined-benefit pension plan covering its 50 employees. Gillum agreesto amend its pension benefits. As a result, the projected benefit obligation increased by $1,500,000. Gillum determined that all its employees are expected to receive benefits under the plan over the next 5 years. In addition, 20% are expected to retire or quit each year. Assuming that Gillum uses the years-of-service method of amortization for prior service cost, the amount reported as amortization of prior service cost in year one after the amendment isa. $300,000.b. $500,000.c. $150,000.d. $400,000.Exam 2 – Acct 414 – Spring 2009 Page 44. On January 1, 2007, Doane Corp. granted an employee an option to purchase 6,000 shares of Doane's $5 par value common stock at $20 per share. The Black-Scholes option pricing model determines total compensation expense to be $140,000. The optionbecame exercisable on December 31, 2008, after the employee completed two years of service. The market prices of Doane's stock were as follows:January 1, 2007 $30December 31, 2008 50For 2008, Doane should recognize compensation expense under the fair value methodofa. $90,000.b. $30,000.c. $70,000.d. $0.5. On January 2, 2007, for past services, Titus Corp. granted Ken Pine, its president, 16,000 stock appreciation rights (SARs) that are exercisable immediately and expire on January 2, 2009. On exercise, Pine is entitled to receive cash for the excess of the market price of the stock on the exercise date over the market price on the grant date. Pine did not exercise any of the rights during 2007. The market price of Titus's stock was$30 on January 2, 2007, and $45 on December 31, 2007. Pine chose to exercise the SARs on Sept. 1, 2008 when the price was $48. As a result of the stock appreciation rights, Titus should pay Ken Pine a. $0.b. $80,000.c. $240,000.d. $288,000.6. Which of the following is not a characteristic of a noncompensatory stock purchase plan?a. It is open to almost all full-time employees.b. The discount from market price is small.c. The options are available to employees for 30 days.d. All of these are characteristics.Exam 2 – Acct 414 – Spring 2009 Page 57. On June 30, 2004, Sealey Corporation granted compensatory stock options for 30,000 shares of its $20 par value common stock to certain of its key employees. The market price of the common stock on that date was $36 per share and the option price was $30.The Black-Scholes option pricing model determines total compensation expense to be $360,000. The options are exercisable beginning January 1, 2007, provided those key employees are still in Sealey’s employ at the time the options are exercised. The optionsexpire on June 30, 2008.On January 4, 2007, when the market price of the stock was $42 per share, all 30,000options were exercised. What should be the amount of compensation expense recordedby Sealey Corporation for the calendar year 2006 using the fair value method?a. $0.b. $144,000.c. $180,000.d. $360,000.8. What effect will the acquisition of treasury stock have on stockholders' equity and earnings per share, respectively?a. Decrease and increase b. Decrease and no effect c. Increase and no effectd. Increase and decrease9. Due to the importance