Accounting 201 Final

A company should choose a depreciation method that

a. best allocates the original cost of the asset to the periods benefited by the use of the asset

When is a liability for dividends created?

b. at the date of declaration

Bonds sell at a premium when the

b. market rate of interest is less than the stated interest rate at the time of issue

Issued shares represent the

b. number of shares that the corporation has sold

All of the following accounts have normal credit balances except

inventory

Which of the following adjusting entries involves the cash account? a.Accrued Expenses b.Deferred Liabilities c.Deferred Revenues d.None of these choices are correct.

D

Depreciation is:

a. an effort to achieve proper matching of the cost of operating assets with related revenues

Par value represents the

a. arbitrary amount that establishes a minimum price for the stock when it is first issued

Which of the following would describe a callable bond?

a. borrower has the right to pay off the bonds prior to due date

What is the impact on the accounting equation of recording the issuance of a short-term note payable?

a. both assets and liabilities increase

The payment of accounts payable results in a(n)

a. decrease in both liabilities and assets

Capitalizing an expenditure rather than recording it as a revenue expenditure

a. impacts the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period

Failure to record the earned portion of unearned revenue would result in which of the following?

b. Net income being understated.

On October 1st, a company borrowed $60,000 from Eighth National Bank on a 1-year, 7% note. If the company's fiscal year ends on December 31st, a year-end adjusting entry is required to increase

c. interest payable by $1,050

A bond issuing at 101.25 means that the bond

d. sold for $1,012.50.

Treasury shares represent the

a. number of previously issued shares that have been repurchased by the corporation

Which of the following statements is true regarding a corporation's purchase of treasury stock?

a. the cost of treasury stock is a reduction in stockholders equity

Bonds are a popular source of financing because

a. the relative cost of issuing debt is often lower than the cost of issuing equity

Research and development costs are:

a. treated as an expense when incurred

What is the impact on the accounting equation of recording the accrual of interest expense?

d. liabilities increase and stockholders equity decreases

Authorized stock represents the

d. maximum number of shares that can be issued for each class of stock

After a corporation declares a cash dividend, what takes place on the date of record?

d. no entry is necessary

The asset account, Supplies, has a balance of $10,000 on January 1. During January, $22,000 of supplies were purchased on account and the liability was appropriately recorded. A count of supplies at the end of January indicates a balance of $2,000. What adjusting entry is necessary at January 31?

Supplies Expense30,000 Supplies30,000

On May 1st, a company borrowed $30,000 from the First National Bank on a 1 year, 6% note. Assuming the company keeps its records on a calendar year basis, an entry is needed on December 31st to increase

d. interest payable by $1,200

Kiss Greetings planned to raise $500,000 by issuing bonds. The bond certificates were printed bearing a stated interest rate of 6%, which was equal to the yield rate of interest. However, before the bonds could be issued, economic conditions forced the yield rate up to 7%. If the life of the bonds is 10 years and interest is paid annually on December 31, how much will the company receive from the sale of the bonds?

b. less than $500,000 because the 7% yield rate of interest was higher than the stated rate

If a company's bonds are callable,

b. the issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest is 4%

Which of the following statements is true with regard to 7% cumulative, participating preferred stock?

c. if the corporation pays a per share dividend in excess of 7% of the preferred stock's par value and there are no dividends in arrears, the preferred shares will receive a share of the amounts available for distribution as dividends to other classes of stock

When bonds are issued by a company, the accounting entry shows an

c. increase in assets and an increase in liabilities

Outstanding shares represent the

c. number of shares that are currently held by stockholders

Depreciation is a process by which

c. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset

If a corporation declares a 2-for-1 stock split, which of the following is true?

c. the number of outstanding shares is twice the number that were previously outstanding before the split

Which of the following statements regarding amortization is true?

d. amortization of a premium continues over the life of the bond until the balance in the account is reduced to zero

The discount on bonds payable account is shown on the balance sheet as

d. a contra-liability account that reduces the bond to market value at the issue date

The balance in the retained earnings account represents

d. accumulated earnings that have not been distributed to stockholders

Which of the following sets of factors is needed to calculate depreciation on plant and equipment?

d. the estimated life of the asset, its acquisition cost, and its estimated residual value

During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%.Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. Which of the following records the sale of the batteries?

b. Accounts Receivable636,000 Sales Revenue600,000 Sales Tax Payable36,000