Accounting Chapters 4&10 Final

Which of the following documents is used as a control measure to check cash receipts?

Bank deposit slips

Checks presented for payment and paid by the bank are known as

Cancelled checks

Which of the assets listed below is considered the most liquid?

Cash is always the most liquid

According to the Sarbanes-Oxley Act of 2002, who is primarily responsible for establishing and maintaining a system of internal control over the company's financial reporting?

Management of the Company

Which of the following would never appear on a bank statement for a checking account?

Outstanding checks

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

The par value will be reduced to half of the presplit par value.

What is the primary reason for a stock split?

To decrease the market value of the stock

When a corporation issues a stock dividend, which of the following is true?

Total stockholders' equity remains the same.

Which of the following is true for a corporation that issues 1,000 shares of $2 par common stock at $5 per share?

Total stockholders' equity will increase by $5,000

Which of the following is not part of the procedure used for establishing and maintaining a petty cash fund?

When the petty cash fund needs to be replenished, an entry is recorded to recognize an increase in the petty cash account.

The operating cycle is the elapsed time between the

purchase of goods or services and the ultimate collection of cash from customers related to the sale of those goods

Which internal control activity is violated when the cashier at a cash register in a retail store also records the daily receipts in a journal?

segregation of duties

When petty cash balance is replenished and the expenses are recognized, _____.

the petty cash balance is not affected

What will be the increase in the additional paid-in capital-common stock account if a corporation issues 20,000 shares of $1.00 par common stock for $6 per share?

$100,000

On June 1, the board of directors declared a $100,000 cash dividend to be distributed to common stockholders of record on June 15. The dividend will be paid on July 1. The required journal entry on June 1 includes a

$100,000 debit to dividends declared.

On January 1, 2020, a company issued 10,000 shares of 10%, $10 par value cumulative preferred stock. No dividends were declared in 2020 or 2021. In 2022, the company declared a dividend of $200,000. How much of the 2022 dividend should be paid to common stockholders?

$170,000

A Day Spa accepted a check from a customer as payment for services. Unfortunately, the customer's check bounced. The journal entry required on the company's books as a result of this bank reconciliation item will

have no net impact on total assets

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

A stockholder who previously held 100 shares will have 200 shares after the split.

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the company records?

bank service charges

Authorized stock represents the

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

Which of the following is one of the elements of stockholders' equity?

Retained Earnings

Which one of the following statements regarding internal control is false?

Separation of duties is the easiest control activity to implement in small companies.

Lakeshore Industries reported the following information on its recent balance sheet: Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding What is the effect on the company's accounting equation of issuing 1,000 additional shares of common stock at $15 per share?

Stockholders' equity increases by $15,000

A growing corporation had $180,000 of its $30 par common stock issued before its recent 3-for-1 stock split. The market price of the stock was $120 per share before the split. Which of the following is true as a result of the split?

The par value of the stock decreased to $10 per share.

Treasury shares represent the

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

Each of the following represents an effective cash management practice except

payments should be expedited in order to simplify record keeping

Strategic risk assessment is primarily concerned with

possible external threats to the company's success in accomplishing its objectives

The control activity "segregation of duties" is most effective in

preventing collusion.

A company's unadjusted bank balance is $3,000. Outstanding checks amount to $500 and deposits in transit total $300. Based on this information alone, what is the company's adjusted cash balance for the purpose of preparing a bank reconciliation?

$2,800

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

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

Lanthier's Heating & Air company began business on June 1. The articles of incorporation authorize issuance of 10,000 shares of $2 par common stock and 5,000 shares of $8 par, 6% cumulative preferred stock. On June 5, the company issued 2,400 shares of common stock for $20 per share. What effect does the entry to record the stock issuance have on total stockholders' equity?

Increase of $48,000

Having the same employee prepare company checks and sign those checks relates to which internal control activity?

a violation of proper segregation of duties

In the reconciliation of a bank statement, deposits in transit should be

added to the unadjusted bank statement balance.

Par value represents the

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

What types of accounts are Treasury Stock and Additional Paid-in Capital—Treasury Stock?

contra equity stockholders' equity

Many stockholders choose to invest in preferred stock because

dividends are distributed to preferred stockholders before common stockholders.

On January 15, a corporation paid a cash dividend that had been declared prior to the end of its previous fiscal year. The entry to pay the dividends includes a debit to

dividends payable and a credit to cash

he stockholders' equity section of the December 31, prior year, balance sheet is provided below: Common Stock, $3 par, 2,000 shares issued and outstanding$60,000Additional Paid-In Capital-Common Stock1,000Retained Earnings5,400 Total Stockholders' Equity$12,400 Assume that all 2,000 shares of stock were issued as of December 31, prior year, for $3.50 per share. On March 1, current year, the company reacquired 1,000 shares of its common stock for $4.50 per share. The journal entry to record the transaction on March 1, current year, includes a credit to what account and for what amount?

$4,500 to cash

Lanier Tech was incorporated as a new business on January 1. The company is authorized to issue 50,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par, cumulative, participating preferred stock. On January 1, the company issued 8,000 shares of the common stock for $15 per share and 2,000 shares of the preferred stock for $30 per share. Net income for the year ended December 31 was $375,000. Assume that no dividends were declared or paid during the first year of operations. What is the dollar amount of total stockholders' equity reported on the balance sheet at December 31?

$555,000

Amounts collected and recorded by a company but not yet reflected in a bank statement are known as

Deposits in Transit

Which of the following statements is true pertaining to participating preferred stock?

It includes the right to share in dividends in excess of the regular annual dividend.

The following information relates to LaFarge North America's stockholders' equity accounts: Common Stock, $7 par, 200,000 shares authorized$700,000Additional Paid-In Capital-Common Stock160,000Retained Earnings??Treasury Stock, 2,000 shares at cost15,000 Total Stockholders' Equity$975,000 How many shares of common stock are outstanding?

$98,000

Ladder Distributors The stockholders' equity section of the December 31, prior year, balance sheet is provided below: Common Stock, $30 par, 20,000 shares issued and outstanding$600,000Additional Paid-In Capital-Common Stock240,000Retained Earnings700,000 Total Stockholders' Equity$1,540,000 Assume that all of the 20,000 shares of stock that were issued as of December 31, prior year, were issued for $42 per share. On March 1, current year, the company reacquired 4,000 shares of its common stock for $50 per share. Suppose the company reissued 1,000 shares of its treasury stock on June 1, current year, for $39 each. Which of the following is true regarding the entry required to record this transaction?

A debit to retained earnings is required for $11,000

Suppose a corporation issues 5,000 shares of $1 par common stock for $30 per share. In addition to the increase in cash, what effect does this transaction have on the accounting equation?

Additional paid-in capital-common stock increases by $145,000.

Each of the following documents is used in the reconciliation of cash disbursements except

Bank Credit Memos

The account that records differences between amounts of cash deposited and amounts from the cash register tapes is called

Cash over and short

During the bank reconciliation process, an accountant identified an error. A check written for $20 to pay a supplier for goods purchased on credit was erroneously recorded in the company's records as $200. Which of the following entries would correct this error?

Cash. 180 Accounts Payable180

Allowing only certain employees to order goods and services on behalf of the company is an example of what internal control activity?

Clearly defined authority and responsibility

Which of the following statements best describes the act of collusion?

Collusion is an intentional act of two or more employees to accomplish theft of company assets.

If a corporation repurchases 500 shares of its previously issued common stock for $5,000 and then reissues it for $4,000, which of the following statements is true regarding the difference in the amounts of the repurchase and reissuance?

It is a decrease in stockholders' equity

If a corporation repurchases 500 shares of its previously issued common stock for $5,000 and then reissues it for $4,000, which of the following statements is true regarding the difference in the amounts of the repurchase and reissuance?

It is a decrease in stockholders' equity.