ACCT 210 Final Part 2 (Ch 9,10,11,12)

Below are several transactions for Louisville Company: Proceeds from issuance of bonds payable $635,000 Payment to purchase equipment 275,000 Payment of wages 115,000 Payment of dividends 155,000 Payment to pay off notes payable 195,000 Based on these transactions, what is the net cash flow from financing activities? a. $285,000 net cash provided by financing activities b. $275,000 net cash used for financing activities c. $0, because cash inflows equal cash outflows from financing activities d. $440,000 net cash provided by financing activities

$285,000 net cash provided by financing activities

During 2017, the accounts payable balance of Andreas Corp. decreased. Which of the following statements is true? a. This decrease is considered only when the Operating Activities section of a statement of cash flows is prepared under the direct method. b. This decrease is deducted from net income in the Operating Activities section of a statement of cash flows prepared under the indirect method. c. This decrease indicates that Andreas paid less during the period than it recognized as expenses on the income statement. d. This decrease is added to net income in the Operating Activities section of a statement of cash flows prepared under the indirect method.

This decrease is deducted from net income in the Operating Activities section of a statement of cash flows prepared under the indirect method.

A decreasing long-term liability account is presented on the statement of cash flows as a. a decrease in cash in the Investing Activities category. b. an increase in cash in the Operating Activities category. c. an increase in cash in the Financing Activities category. d. a decrease in cash in the Financing Activities category.

a decrease in cash in the Financing Activities category.

Bonds in the amount of $100,000 with a life of ten years were issued by Focus Company. If the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds? a. $60,000 b. $30,000 c. $120,000 d. $6,000

a. $60,000 (100,000*.06)*10=60,000

A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in inventory. If current liabilities are $14,350, then the quick ratio would be a. 1.2 to 1. b. 5.0 to 1. c. 2.0 to 1. d. 2.6 to 1.

a. 1.2 to 1. $8,000 (Cash) + $9,250 (Accounts Receivable)/$14,350 (Current Liabilities) = 1.2 to 1

Dali Company has 15,000 shares of stock authorized at January 1. Dali issues 4,500 shares to the stockholders during the year and then the company repurchases 1,500 shares as treasury stock. Based on this information, how many shares are outstanding at December 31? a. 18,000 b. 4,500 c. 3,000 d. 15,000

a. 18,000 15,000+ (4,500-1,500)= 18,000

Which of the following is not an operating activity? a. Cash payments for dividends to stockholders b. Cash payments for operating expenses c. Cash collections from credit customers d. Cash receipts for interest earned

a. Cash payments for dividends to stockholders

Rent owed to the landlord is a balance sheet item for Generic Products Company. How would it most likely be classified on the balance sheet? a. Current liability b. Long-term liability c. Owners' equity d. Current asset

a. Current liability

Which of the following accounts is not classified as a current liability? a. Note payable, due in three years b. Salaries payable c. Accounts payable d. Taxes payable

a. Note payable, due in three years

Which of the following is reported as a financing activity on the statement of cash flows? a. Payment of cash dividends b. Declaration of cash dividends c. Stock dividend d. Stock split

a. Payment of cash dividends

Which of the following is an example of a contingent liability? a. The liability for future warranty repairs on computers sold during the current period b. A lawsuit being threatened but not yet filed against a restaurant chain for improper preparation of food c. A corporate long-term employment contract with the chief executive officer d. A liability for notes payable with interest included in the face amount

a. The liability for future warranty repairs on computers sold during the current period

Weather Corp. issued ten-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium. Which one of the following statements is true? a. Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. b. Weather will receive $94,800 as the issue price. c. The cash paid to bondholders will be $520 each interest period. d. Weather's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year.

a. Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year.

If bonds were initially issued at a premium, the carrying value of the bonds on the issuer's books will a. decrease as the bonds approach their maturity date. b. increase as the bonds approach their maturity date. c. fluctuate throughout the bonds' life. d. remain constant throughout the bonds' life.

a. decrease as the bonds approach their maturity date.

Arco Corporation declared a cash dividend on June 2 of $6 per common share. The company has 2,000 shares of common stock authorized, 1,000 shares issued, and 200 in the treasury. The entry to record the declaration of the cash dividend increases a(n) a. liability. b. asset. c. expense. d. stockholders' equity account.

a. liability.

There are some liabilities, such as income tax payable, for which the amounts must be estimated. Failure to estimate these amounts and record them would be a violation of the a. matching principle. b. concept of historical cost. c. practice of consistency. d. convention of conservation.

a. matching principle.

Anole Company was incorporated as a new business on January 1, 2017. The company is authorized to issue 20,000 shares of $5 par value common stock and 10,000 shares of 6%, $10 par value, cumulative, participating preferred stock. On January 1, 2017, the company issued 8,000 shares of common stock for $15 per share and 2,000 shares of preferred stock for $30 per share. Net income for the year ended December 31, 2017, was $375,000. Refer to the information about Anole Company.Anole's total stockholders' equity reported on the balance sheet at December 31, 2017, is a. $180,000. b. $555,000. c. $120,000. d. $60,000.

b. $555,000. $180,000 + $375,000 = $555,000

Washington Corp. reported the following information for 2017 and 2018: 2017 2018 Accounts receivable $101,000 $93,000 Prepaid expenses 5,000 6,000 Accounts payable 71,000 76,000 Salaries payable 5,000 4,000 Net income 80,000 Depreciation expense 9,000 Gain on sale of equipment 5,000 If Washington uses the indirect method to prepare the Operating Activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2018? a. $73,000 b. $95,000 c. $83,000 d. $105,000

b. $95,000 $80,000 + ($101,000 - $93,000) - ($6,000 - $5,000) + ($76,000 - $71,000) - ($5,000 - $4,000) + $9,000 - $5,000 = $95,000

Frank Crawford Corporation's balance sheet showed the following amounts: Current Liabilities, $15,000; Bonds Payable, $8,000; Lease Obligations, $9,000; and Notes Payable, $5,600. Total stockholders' equity was $17,000. The debt-to-equity ratio is a. 0.71. b. 2.21. c. 1.18. d. 0.88.

b. 2.21. (15,000+8,000+9,000+5,600)/ 17,000= 2.21

Which of the following statements is true? a. If a company uses the accrual basis of accounting, it will improve its cash position if it reports net income for the same period. b. If a company uses the accrual basis of accounting, its cash balance can increase even if it reports a net loss. c. If a company reports a net loss on its income statement, it should report a decrease in cash on its statement of cash flows. d. If a company reports net income on its income statement, it should report an increase in cash on its statement of cash flows.

b. If a company uses the accrual basis of accounting, its cash balance can increase even if it reports a net loss.

Which of the following statements about bonds is correct? a. The cash interest paid is calculated as the bond face value × the effective rate of interest. b. The cash interest paid is calculated as the bond face value × the face rate of interest. c. The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount. d. The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium.

b. The cash interest paid is calculated as the bond face value × the face rate of interest.

If bonds are issued at 101.25, this means that a. a $1,000 bond sold for $101.25. b. a $1,000 bond sold for $1,012.50. c. the bonds sold at a discount. d. the bond rate of interest is 10.13% of the market rate of interest.

b. a $1,000 bond sold for $1,012.50. (101.25/100)*1000= 1,012.50

A mortgage incurred in exchange for an office building would be reported in the statement of cash flows in a. the cash flows from Investing Activities section. b. a separate schedule. c. the cash flows from Operating Activities section. d. the cash flows from Financing Activities section.

b. a separate schedule.

The Premium on Bonds Payable account is shown on the balance sheet as a(n) a. contra asset. b. addition to a long-term liability. c. subtraction from a long-term liability. d. reduction of an expense.

b. addition to a long-term liability.

The book value per share for a corporation is a. the amount stockholders would receive if they sold their shares back to the corporation. b. based on the excess of total assets over total liabilities. c. the cost of investments in stock of other corporations. d. the market price of the stock.

b. based on the excess of total assets over total liabilities.

When the owner of a sole proprietorship withdraws assets from the business for personal use, a. it is treated like a noncash dividend. b. it is recorded as a reduction of owner's equity. c. it would be recorded as a loss by the proprietorship. d. it is illegal because the assets belong to the separate entity, the proprietorship.

b. it is recorded as a reduction of owner's equity.

With regard to preferred stock, a. its issuance provides no flexibility to the issuing company because its terms always require mandatory dividend payments. b. its stockholders may have the right to participate, along with common stockholders, if an extra dividend is declared. c. there is a legal requirement for a corporation to declare a dividend on preferred stock. d. no dividends are expected by the stockholders.

b. its stockholders may have the right to participate, along with common stockholders, if an extra dividend is declared.

All of the following are reasons for a company to repurchase its previously issued stock, except a. for bonuses to employees. b. to increase the shares outstanding. c. to resell to employees. d. to support the market price of the stock.

b. to increase the shares outstanding.

Cory and Ginger want to buy an airplane. They find one that will cost $200,000. They must pay 10% down and can get the balance financed with a ten year loan at 7% interest and annual payments. What is their annual payment? a. $26,826 b. $24,457 c. $25,626 d. $19,260

c. $25,626

Gaulle Company began the year with a balance of $6,000 in Accounts Receivable and ended the year with $9,000 in the account. Revenues for the period amounted to $38,000. Under the direct method, Gaulle will report cash collected from customers of a. $44,000. b. $47,000. c. $35,000. d. $41,000.

c. $35,000. 38,000-( 9,000-,6000)= 35,000

A company's weekly payroll amounts to $50,000 and payday for the week is every Friday. Employees work five days per week, Monday through Friday. The appropriate journal entry was recorded at the end of the accounting period, Monday, March 31, 2017. What amount is wages expense in April for the payday, Friday, April, 4, 2017? a. $10,000 b. $50,000 c. $40,000 d. $0

c. $40,000 ended on a Monday which is part of the pay period and means that only 4 days of wages are payed out

Mendes Charters reported the following information at December 31, 2017: Preferred stock, $100 par, 500 shares authorized, and outstanding; cumulative; nonparticipating; callable at par value $ 50,000 Common stock, $12 par, 50,000 shares authorized and outstanding 600,000 Additional paid-in capital—common 25,000 Retained earnings 825,000 Mendes' total contributed capital is a. $650,000. b. $625,000. c. $675,000. d. $1,500,000.

c. $675,000. $50,000 + $600,000 + $25,000 = $675,000

Marsh Corporation borrowed $90,000 by issuing a 12%, six-month note payable, all due at the maturity date. After one month, the company's total liability for this loan amounts to a. $90,000. b. $90,450. c. $90,900. d. $91,800.

c. $90,900. 90,000+[90,000*((12%/6)/2)] =90,000+900= 90,900

If you must calculate the present value of an amount at 12% compounded quarterly for two years, then the interest factor used in the calculation is a. 12% for eight periods. b. the interest factor for 12% for two periods divided by 4. c. 3% for eight periods. d. None of these choices are correct.

c. 3% for eight periods. 12%/4 for eight periods

Which of the following items is not a cash equivalent? a. A three-year Treasury note purchased two months before its maturity b. Commercial paper c. A corporate bond investment that has five years until maturity when it is purchased d. Money market funds

c. A corporate bond investment that has five years until maturity when it is purchased

When using the direct method, how is the purchase of equipment for cash shown on the statement of cash flows? a. As a financing activity b. As a noncash investing and financing activity c. As an investing activity d. As an operating activity

c. As an investing activity

When using the direct method, how is the sale of long-term investments for cash reported on the statement of cash flows? a. As a financing activity b. As an operating activity c. As an investing activity d. As a noncash investing and financing activity

c. As an investing activity

Which of the following statements regarding contingencies is true? a. Contingent assets, if probable and estimable, are treated in much the same way as contingent liabilities. b. Contingencies that are not estimable should not be disclosed even if probable. c. Contingencies that are probable and estimable must be recorded before the outcome of future events. d. The accounting principle that determines whether a contingent asset is recorded is that of materiality.

c. Contingencies that are probable and estimable must be recorded before the outcome of future events.

Use the equation presented below to answer the question that follows: Cash = CL + LTL + CS + RE - NCCA - LTA where: CL = Current liabilities LTL = Long-term liabilities CS = Common stock RE = Retained earnings NCCA = Noncash current assets LTA = Long-term assets Which of the following activities results in a cash inflow? a. Decreases in current liabilities (CL) b. Decreases in retained earnings (RE) c. Increases in common stock (CS) d. Increases in noncash current assets (NCCA)

c. Increases in common stock (CS)

Cash interest is computed annually when a bond is issued for other than its face value. For a bond issued at a premium, how will this component change under the effective interest method as the bond approaches maturity? a. Decrease b. Increase c. Remain constant d. Not enough information given to decide

c. Remain constant

When a company declares a stock dividend, which of the following occurs? a. A liability is created. b. Stockholders' equity is decreased. c. Retained earnings is reduced. d. The Financing section of the statement of cash flows is decreased.

c. Retained earnings is reduced.

Presented below is the Operating Activities section of the statement of cash flows for Feline Friends Corp. for 2017: Operating activities: Cash collected from customers $165,000 Cash payments for merchandise (83,000) Cash payments for operating expenses (58,000) Net cash inflow from operating activities $ 24,000 Which method of preparing the Operating Activities section has Feline used? a. Either method b. The indirect method c. The direct method d. Cannot be determined without further information

c. The direct method

For a given single sum invested at 8% for four years, how will the future value be affected if the compounding period is changed from quarterly to annually? a. The future value will stay the same. b. The future value will increase. c. The future value will decrease. d. There is not enough information to determine the impact.

c. The future value will decrease.

If a company borrows money from its bank and the bank deducts the interest in advance, the company would record the amount of the interest deduction as a. a loss. b. an expense. c. a discount. d. prepaid interest.

c. a discount.

Comprehensive income is a. the result of all events and transactions that affect income during the accounting period that are reported on the income statement. b. reporting all items that are not under management's control on the statement of retained earnings. c. an all-inclusive approach to income that includes transactions that affect stockholders' equity with the exception of those transactions that affect owners. d. considered an appropriation of retained earnings when reported in the Stockholders' Equity section of the balance sheet.

c. an all-inclusive approach to income that includes transactions that affect stockholders' equity with the exception of those transactions that affect owners.

Amortization of a bond discount results in a(n) a. decrease in the bonds payable account. b. decrease in the Cash account. c. decrease in stockholders' equity. d. increase in stockholders' equity.

c. decrease in stockholders' equity.

One example of a temporary difference between financial and tax reporting results from a. life insurance proceeds resulting from the death of an executive. b. tax-exempt interest from municipal bonds. c. depreciation of long-term assets. d. rent expense.

c. depreciation of long-term assets.

The primary purpose of the statement of cash flows is to provide information about a. the financial position of the company. b. the profitability of the company. c. the cash inflows and outflows of the company. d. the investing and financing activities of the company.

c. the cash inflows and outflows of the company.

If a company's bonds are callable, a. the investor never knows what the redemption price will be until the bonds are actually called. b. the investor or buyer of the bonds has the right to retire the bonds. c. the issuing company is likely to retire the bonds before maturity if, for example, the bonds are paying 9% interest while the market rate of interest is 6%. d. the bonds are never allowed to remain outstanding until the maturity date.

c. the issuing company is likely to retire the bonds before maturity if, for example, the bonds are paying 9% interest while the market rate of interest is 6%.

Carson City Saloon purchased a $25,000 truck for catering from its restaurant. It made a down payment of one-fourth of the price. What combination of amounts would affect the income statement and statement of cash flows for the purchase of the truck? Income Statement Cash Flow Statement a. $25,000 $0 b. $0 $(25,000) c. $25,000 $(6,250) d. $0 $(6,250)

d. $0 $(6,250)

Pilot Company reported the following information for 2017 and 2018: Prepaid insurance, December 31, 2017 $ 2,400 Prepaid insurance, December 31, 2018 1,500 Insurance expense—2018 14,200 How much cash was paid for insurance during 2018? a. $15,100 b. $14,200 c. $15,700 d. $13,300

d. $13,300 $1,500 - $2,400 + $14,200 = $13,300

Use the information below for Flora Inc. for 2017 and 2018 to answer the following question: Equipment, December 31, 2017 $65,000 Equipment, December 31, 2018 72,000 Accumulated depreciation, December 31, 2017 39,000 Accumulated depreciation, December 31, 2018 30,000 During 2018, Flora Inc. sold equipment with a cost of $30,000 and accumulated depreciation of $25,000. A gain of $3,000 was recognized on the sale of the equipment. This was the only equipment sale during the year. What was depreciation expense for 2018? a. $9,000 b. $21,000 c. $30,000 d. $16,000

d. $16,000 $39,000 beginning of year - $25,000 removed with sale of equipment = $14,000 $30,000 at end of year - $14,000 = $16,000

The Stockholders' Equity section of Deer Lakes Manor's balance sheet on January 1, 2017, appeared as follows: Common stock, $30 par, 20,000 shares issued and outstanding $ 600,000 Additional paid-in capital—common 240,000 Retained earnings 700,000 Total stockholders' equity $1,540,000 On March 1, 2017, Deer Lakes reacquired 4,000 shares of common stock at $50 per share. All common shares were originally sold for $42 each. How much should be reported in the Treasury Stock account on the March 31, 2017, balance sheet? a. $128,000 b. $32,000 c. $168,000 d. $200,000

d. $200,000

On January 1, 2017, Sharpsburg, Inc. issued $400,000, ten-year, 10% bonds for $354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%. What is the carrying value of the bonds at the end of the ten years? a. $480,000 b. $354,200 c. $380,000 d. $400,000

d. $400,000

Kingston inherited $140,000 from an aunt. If Kingston decides not to spend his inheritance but to leave the money in his savings account until he retires in 15 years, how much money will he have assuming an annual interest rate of 8%, compounded semiannually? a. $2,420,884 b. $3,801,295 c. $444,104 d. $454,076

d. $454,076 140,000* [(8%/2) for 30 periods in the table]

If a company issues $5 par value common stock, a. the shareholders will receive $5 in dividends. b. the minimum selling price is $5. c. liabilities are increased as a result of the transaction. d. $5 per share is presented in the Common Stock account on the balance sheet.

d. $5 per share is presented in the Common Stock account on the balance sheet.

A company has $200 in cash, $500 in accounts receivable, and $700 in inventory. If current liabilities are $400, then the quick ratio would be a. 3.00 to 1. b. 3.50 to 1. c. 2.25 to 1. d. 1.75 to 1.

d. 1.75 to 1. 700/400=1.75

A new company issues 2,000 shares of $5 par common stock in exchange for the services of a lawyer during its first month of business. The lawyer's normal fee is $15,000 for similar work. Which of the following would be the impact on the accounting equation if the stock is not currently trading? a. An increase to Common Stock for $15,000 b. A decrease to Common Stock for $10,000 c. A decrease to Additional Paid-In Capital—Common Stock of $5,000 d. An increase to Additional Paid-In Capital—Common Stock of $5,000

d. An increase to Additional Paid-In Capital—Common Stock of $5,000 15,000-10,000=-5,000

When using the indirect method, how would the retirement of bonds payable at their maturity date be shown on the statement of cash flows? a. As an operating activity b. As an investing activity c. As a noncash investing and financing activity d. As a financing activity

d. As a financing activity

Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet? a. Owners' equity b. Contra liability c. Expense d. Liability

d. Liability

Which of the following would appear on the balance sheet as a current liability? a. A loss from an anticipated strike by employees b. The possible loss from a lawsuit c. Potential damages from possible explosions in a fireworks factory d. Premium offers in cereal boxes

d. Premium offers in cereal boxes

Shuttle Master Airlines has leased an aircraft from Streamline Aircraft Company. The annual payments are $1,000,000, and the life of the lease is 18 years. It is estimated that the useful life of the aircraft is 20 years. How would Shuttle Master Airlines record the acquisition of the aircraft? The effective rate of interest is 9%. a. The company would not record the aircraft as an asset but would record rent expense of $1,000,000 per year for 18 years. b. The aircraft would be recorded as an asset with a cost of $9,129,000. c. The company would not record the aircraft as an asset but would record rent expense of $900,000 per year for 20 years. d. The aircraft would be recorded as an asset with a cost of $8,756,000.

d. The aircraft would be recorded as an asset with a cost of $8,756,000.

You are interested in accumulating $10,000 so that you can take a cruise in three years. If you try to solve for the amount that you need to invest each year, earning 6% interest compounded annually, the $10,000 represents a. an annuity. b. the amount to invest. c. a present value. d. a future value.

d. a future value.

All of the following statements are true except a. the lease criteria under IFRS are to be used as guidelines rather than rules. b. IFRS require more accounting judgment than U.S. GAAP in the determination of whether a lease is classified as an operating lease or a capital lease. c. the criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under U.S. GAAP than IFRS. d. the criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under IFRS than U.S. GAAP.

d. the criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under IFRS than U.S. GAAP.

When a company declares a 2-for-1 stock split, a. stockholders' equity is doubled. b. the price of each share will be one-third of what it was before the stock split. c. a shareholder who previously held 100 shares will have 300 shares after the split. d. there is no effect on total stockholders' equity.

d. there is no effect on total stockholders' equity.