Brajcich Accounting Final

What method is normally used to account for treasury stock? (a) Legal value method (b) Stated value method (c) Cost method (d) Par value method

(c)

A company receives $272, of which $25 is for sales tax. The journal entry to record the sale would include a... (a) credit to Sales Taxes Payable for $25. (b) debit to Sales Revenue for $272. (c) debit to Sales Taxes Expense for $25. (d) debit to Cash for $247

(a)

On which date are entries for cash dividends required? (a) Declaration date and the payment date (b) Declaration date and the record date (c) Record date and the payment date (d) Declaration date, record date, and payment date

(a)

Which of the following will increase the paid-in capital section of the balance sheet? (a) Stock dividend (b) Cash dividend (c) Stock split (d) Treasury stock acquisition

(a)

Which one of the following is a major disadvantage of a corporation? (a) Additional taxes (b) Transferable ownership rights (c) Limited liability of stockholders (d) Limited life

(a)

With an interest-bearing note, the amount of assets received upon issuance of the note is generally... (a) equal to the note's face value. (b) less than the note's face value. (c) equal to the note's maturity value. (d) greater than the note's face value.

(a)

As interest is recorded on an interest-bearing note, the Interest Expense account is... (a) increased; the Notes Payable account is decreased. (b) increased; the Interest Payable account is increased. (c) decreased; the Interest Payable account is increased. (d) increased; the Notes Payable account is increased.

(b)

For what reason might a company acquire treasury stock? (a) To increase the number of shares of stock outstanding (b) To reissue the shares to officers and employees under bonus and stock compensation plans (c) To signal to the stock market that management believes the stock is overpriced (d) To increase profit

(b)

If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders' equity be reduced? (a) $7,000 (b) $12,000 (c) $5,000 (d) $0

(b)

Interest expense on an interest-bearing note is... (a) only recorded at the time the note is issued. (b) accrued over the life of the note. (c) only recorded at maturity when the note is paid. (d) always equal to zero.

(b)

The amount of sales tax collected by a retail store when making sales is.. (a) not recorded because it is a tax paid by the customer. (b) a current liability. (c) a miscellaneous revenue for the store. (d) recorded as an operating expense.

(b)

Which of the following is not a stockholder's right? (a) The right to share in dividends. (b) The right to participate in management decisions. (c) The right to vote in the election for the board of directors. (d) The preemptive right.

(b)

Which of the following represents the maximum number of shares a corporation can issue? (a) Treasury shares (b) Authorized shares (c) Issued shares (d) Outstanding shares

(b)

Which one of the following decreases when a corporation purchases treasury stock? (a) Outstanding shares (b) Authorized shares (c) Issued shares (d) Treasury shares

(b)

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $399000, what is the amount of the sales taxes owed to the taxing agency? (a) $380000 (b) $19000 (c) $19950 (d) $399000

(b) ($399000 ÷ 1.05) × 0.05 = $19000 (Sal. Rev. ÷ 1.05) × 5%

A corporation has cumulative preferred stock on which it pays dividends of $20,000 per year. The dividends are in arrears for two years. If the corporation plans to distribute $90,000 as dividends in the current year, how much will the common stockholders receive? (a) $60,000 (b) $20,000 (c) $30,000 (d) $40,000

(c)

Current liabilities are due... (a) and receibavle within one year (b) but not payable for more than one year. (c) and payable within one year. (d) but not receivable for more than one year.

(c)

If a company issues bonds when interest rates are low, what will happen to the value of those bonds when interest rates rise? (a) Their value will rise all else constant. (b) Their value will move in the direction of the interest rates. (c) Their value will drop all else constant. (d) Their value will remain unaffected all else constant.

(c)

Unearned Rent Revenue is... (a) debited when rent is received in advance. (b) a revenue account. (c) reported as a current liability. (d) a contra account to Rent Revenue.

(c)

Which of the following is not a characteristic of a corporation? (a) Ability to acquire capital easily (b) Separate legal existence (c) Unlimited liability for stockholders (d) Easy transfer of ownership interests

(c)

Which of the following is not a current liability on December 31, 2017? (a) A Note Payable due December 31, 2018. (b) An Accounts Payable due January 31, 2018. (c) lawsuit judgment to be decided on January 10, 2018. (d) Accrued salaries payable from 2017.

(c)

Which of these is not a major advantage of a corporation? (a) Transferable ownership rights (b) Continuous life (c) Government regulations (d) Separate legal existence

(c)

Which statement describes the market interest rate? (a) It is the contractual interest rate used to determine the amount of cash interest paid by the borrower. (b) It is the rate stated on the bond certificate that determines the value at which bonds will sell. (c) It is the rate investors demand for loaning funds. (d) It is listed in the bond indenture.

(c)

How are dividends in arrears reported in the financial statements? (a) As an expense (b) As a liability (c) In a footnote (d) As an equity item

(c) *not a liability until board of directors declares the dividend, nor arae they an expense

M-Bot Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2017. No dividends were declared in 2015 or 2016. If M-Bot wants to pay $375,000 of dividends in 2017, how much will common stockholders receive? (a) $295,000 (b) $215,000 (c) $135,000 (d) $0

(c) Before the common stockholders receive any dividends, the preferred dividends should first be distributed for the two years in arrears and the current year. Total dividend = 10,000 × 8% × $100 = $80,000 Preferred dividends in arrears for two years ($80,000 × 2) $160,000 Preferred for current year 80,000 Total dividends to preferred stockholders $240,000 Total dividends available (375,000) Dividends available to common stockholders $135,000

A company receives $380, of which $31 is for sales tax. The journal entry to record the sale would include a... (a) debit to Sales Taxes Payable for $31. (b) debit to Sales Taxes Expense for $31. (c) debit to Sales Revenue for $380. (d) debit to Cash for $380.

(d)

Sales taxes collected by a retailer are recorded by (a) crediting Sales Tax Revenue. (b) debiting Sales Taxes Payable. (c) debiting Sales Tax Expense. (d) crediting Sales Taxes Payable.

(d)

The primary reason given by Berkshire Hathaway for not splitting its shares... (a) is that splitting shares attracts long-term investors. (b) is that not splitting its shares encourages more trading. (c) is that not splitting its shares appeals to small investors. (d) is that splitting shares attracts investors with a short term focus.

(d)

Which one of the following statements is incorrect? (a) Dividends cannot be paid on common stock while any dividend on preferred stock is in arrears. (b) When preferred stock is noncumulative, any dividend passed in a year is lost forever. (c) Dividends in arrears on preferred are not considered a liability. (d) Dividends may be paid on common stock while dividends are in arrears on preferred stock.

(d)

DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance? (a) Credit to Common Stock for $18,000 (b) Debit to Paid-in Capital in Excess of Par Value for $3,000 (c) Debit to Cash for $15,000 (d) Credit to Common Stock for $15,000

(d) "*Sun Inc. issues an additional 1,000 shares of the $1 par value common stock for cash at $5 per share. The amount received above the par value, in this case $4 ($5 - $1), would be credited to Paid-in capital in Excess of Par value." Cash 5,000 Comm. Stock 1,000 Paid-in Capital in _ Excess of Par 4,000

Which statement about stock dividends is true? (a) A stock dividend increases total stockholders' equity for the par value of the stock being distributed. (b) A stock dividend decreases total stockholders' equity. (c) Stock dividends reduce a company's cash balance. (d) A stock dividend has no effect on total stockholders' equity.

(d) *stock divident moves money from retained earnings and paid-in capital