Financial Accounting 2 - Test 2

If Novak Corp. issues 5500 shares of $5 par value common stock for $232500, the account a) Paid-in Capital in Excess of Par Value will be credited for $205000. b) Cash will be debited for $205000. c) Common Stock will be credited for $232500. d) Paid-in Capital in Excess of Par Value will be credited for $27500.

Paid-in Capital in Excess of Par Value will be credited for $205000.

Marigold Corp. does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $36994. If the sales tax rate is 6%, what amount must be remitted to the state for February's sales taxes? a) $2220 b) $2094 c) $2086 d) It cannot be determined.

$2094 ($36994 ÷ 1.06) × 0.06 = $2094 (Tot. rec. ÷ 1.06) × 0.06

Sandhill Co. issued $750000 of 8%, 5-year bonds at 104, which pay interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds? a) $330000 b) $240000 c) $300000 d) $270000

$270000 ($750000 × 0.08 × 5) - ($750000 × 0.04) = $270000 (Face val. × 8% × 5) - [Face val. × (1.04 - 1)]

Cullumber Company received proceeds of $483000 on 10-year, 8% bonds issued on January 1, 2016. The bonds had a face value of $512000, pay interest annually on December 31st, and have a call price of 103. Cullumber uses the straight-line method of amortization. What is the amount of interest Cullumber must pay the bondholders in 2016? a) $38640 b) $43860 c) $38060 d) $40960

$40960 $512000 × 0.08 = $40960 (Bonds face val. × 8%)

On January 1, Teal Mountain Inc. issued $7250000, 9% bonds for $6810000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Blue uses the effective-interest method of amortizing bond discount. At the end of the first year, Teal Mountain should report unamortized bond discount of a) $396000. b) $367500. c) $411500. d) $371900.

$411500. ($6810000 × 0.10) - ($7250000 × 0.09) = $28500; [($7250000 - $6810000) - $28500] = $411500 (Sell. Price × 10%) - (Face val. × 9%) = dis. amort; (Face val. - sell. price) - dis. amort.

Windsor, Inc. has 4600 shares of 6%, $50 par value, cumulative preferred stock and 43000 shares of $1 par value common stock outstanding at December 31, 2016, and December 31, 2017. The board of directors declared and paid an $11000 dividend in 2016. In 2017, $63000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2017? a) $41800. b) $46400. c) $51000. d) $13800.

$46400. 4600 × $50 × 0.06 = $13800; $63000 - ($13800 - $11000) - $13800 = $46400 Pref. sh. × PV/sh. × div. rate = ann. div.; Div. dec. - div. inarr. - ann. div.

The interest charged on a $48000 note payable, at the rate of 6%, on a 60-day note would be (Use 360 days for calculation a) $720. b) $480. c) $2880. d) $1440.

$480 $48000 × 0.06 × 60/360 = $480 (Face val. × 6% × 60/360)

Blossom Company received proceeds of $505500 on 10-year, 6% bonds issued on January 1, 2016. The bonds had a face value of $536000, pay interest annually on December 31st, and have a call price of 102. Blossom uses the straight-line method of amortization. What is the carrying value of the bonds on January 1, 2018? a) $511600 b) $529900 c) $508550 d) $536000

$511600 [($536000 - $505500) ÷ 10] × 2 = $6100; $505500 + $6100 = $511600 [(Face val. - proc.) ÷ 10] × 2 = dis. amort.; (proc. + dis. amort.)

Bonds with a face value of $520000 and a quoted price of 102.25 have a selling price of a) $530413. b) $530530. c) $531700. d) $625170.

$531700 $520000 × $1.0225 = $531700 (Face val. × 102.25%)

Moss County Bank agrees to lend the Wildhorse Co. $470000 on January 1. Wildhorse Co. signs a $470000, 6%, 9-month note. What is the adjusting entry required if Wildhorse Co. prepares financial statements on June 30?

(dr) interest expense for 14100, (cr) interest payable for 1400

Sheridan Company issued 1000 shares of no-par common stock for $17000. Which of the following journal entries would be made if the stock has no stated value?

(dr) cash for 17000, (cr) common stock- n.p.v for 17000

Moss County Bank agrees to lend the Blossom Company $485000 on January 1. Blossom Company signs a $485000, 6%, 9-month note. The entry made by Blossom Company on January 1 to record the proceeds and issuance of the note is

(dr) cash for 485000, (cr) notes payable for 485000

A cash register tape shows cash sales of $8800 and sales taxes of $440. The journal entry to record this information is

(dr) cash for 9240, (cr) sales revenue for 8800, (cr) sales tax payable for 440

Novak Corp. typically sells subscriptions on an annual basis, and publishes 6 times a year. The magazine sells 109800 subscriptions in January at $9 each. What entry is made in January to record the sale of the subscriptions?

(dr) cash for 988200, (cr) unearned subscription revenue for 988200 $109800 × $9 = $988200

Moss County Bank agrees to lend the Sunland Company $605000 on January 1. Sunland Company signs a $605000, 6%, 9-month note. What entry will Sunland Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?

(dr) notes payable for 605000, (dr) interest payable for 27225, (cr) cash for 632225

Cheyenne Corp. had 170000 shares of common stock outstanding before a stock split occurred and 680000 shares outstanding after the stock split. The stock split was a) 4-for-1. b) 3-for-8. c) 8-for-1. d) 1-for-8.

4-for-1

Outstanding stock of the Marigold Corporation included 32000 shares of $5 par common stock and 9000 shares of 5%, $10 par non-cumulative preferred stock. In 2016, Marigold declared and paid dividends of $4800. In 2017, Marigold declared and paid dividends of $16000. How much of the 2017 dividend was distributed to preferred shareholders? a) $9300. b) $13500. c) $4500. d) None of these answer choices are correct.

4500. (9000 × $10) × 0.05 = $4500 (Pref. sh. × Pref. PV) × div. rate

Which of the following represents the largest number of common shares? a) Issued shares. b) Outstanding shares. c) Authorized shares. d) Treasury shares.

Authorized shares.

Which one of the following would not be considered an advantage of the corporate form of organization? a) Government regulation. b) Continuous life. c) Separate legal existence. d) Limited liability of stockholders.

Government Regulation

The effect of the declaration of a cash dividend by the board of directors is to Increase/Decrease a) Liabilities/Assets b) Stockholders' Equity/Assets c) Assets/Liabilities d) Liabilities/Stockholders' Equity

Liabilities/Stockholders' Equity

The effect of a stock dividend is to a) change the composition of stockholders' equity. b) decrease total assets and total liabilities. c) increase the book value per share of common stock. d) decrease total assets and stockholders' equity.

change the composition of stockholders' equity.

Pronghorn Corp issues 5300, 10-year, 8%, $1000 bonds dated January 1, 2017, at 101. The journal entry to record the issuance will show a a) debit to Premium on Bonds Payable for $53000. b) credit to Cash for $5353000. c) credit to Bonds Payable for $5300000. d) debit to Cash of $5300000.

credit to Bonds Payable for $5300000. 5300 × $1000 = $5300000 (Num. of bonds × $1000)

On January 1, Marigold Corp. had 77000 shares of $10 par value common stock outstanding. On March 17 the company declared a 5% stock dividend to stockholders of record on March 20. Market value of the stock was $14 on March 17. The entry to record the transaction of March 17 would include a a) credit to Cash for $53900. b) credit to Common Stock Dividends Distributable for $15400. c) debit to Stock Dividends for $53900. d) credit to Common Stock Dividends Distributable for $53900.

credit to Common Stock Dividends Distributable for $53900 77000 × 0.05 × $14 = $53900 (Sh. out. × div.% × MV/sh.)

Ivanhoe Company issued $4750000 of 6%, 10-year bonds on one of its interest dates for $4102500 to yield an effective annual rate of 8%. The effective-interest method of amortization is to be used. The journal entry on the first interest payment date, to record the payment of interest and amortization of discount will include a a) debit to Bond Interest Expense for $380000. b) credit to Cash for $328201. c) debit to Bond Interest Expense for $285000. d) credit to Discount on Bonds Payable for $43200.

credit to Discount on Bonds Payable for $43200 ($4102500 × 0.08) - ($4750000 × 0.06) = $43200 (sell. Price × 8%) - (face val. × 6%)

Dividends in arrears are dividends on a) common dividends that have been declared but have not yet been paid. b) cumulative preferred stock that have not been declared for a given period of time. c) non-cumulative preferred stock that have not been declared for a given period of time. d) cumulative preferred stock that have been declared but have not been paid.

cumulative preferred stock that have not been declared for a given period of time.

Flint Corporation issues 1000, 10-year, 8%, $1000 bonds dated January 1, 2017, at 95. The journal entry to record the issuance will show a a) debit to Cash of $1000000. b) credit to Discount on Bonds Payable for $50000. c) credit to Bonds Payable for $950000. d) debit to Cash for $950000.

debit to Cash for $950000. (1000 × $1000) × 0.95 = $950000 (Num. of bonds × $1000) × 95%

The following totals for the month of April were taken from the payroll records of Cheyenne Corp.. Salaries $105600 FICA taxes withheld 8080 Income taxes withheld 22000 Medical insurance deductions 4000 Federal unemployment taxes 280 State unemployment taxes 1900 The entry to record accrual of employer's payroll taxes would include a a) credit to FICA Taxes Payable for $16160. b) debit to Payroll Tax Expense for $2180. c) debit to Payroll Tax Expense for $10260. d) credit to Payroll Tax Expense for $2180.

debit to Payroll Tax Expense for $10260.

The following totals for the month of April were taken from the payroll records of Pina Colada Corp.. Salaries $132000 FICA taxes withheld 10100 Income taxes withheld 27500 Medical insurance deductions 5000 Federal unemployment taxes 350 State unemployment taxes 2380 The journal entry to record the monthly payroll on April 30 would include a a) debit to Salaries and Wages Payable for $132000. b) debit to Salaries and Wages Expense for $89400. c) debit to Salaries and Wages Expense for $132000. d) credit to Salaries and Wages Payable for $132000.

debit to Salaries and Wages Expense for $132000.

The acquisition of treasury stock by a corporation a) requires that a gain or loss be recognized on the income statement. b) decreases its total assets and total stockholders' equity. c) has no effect on total assets and total stockholders' equity. d) increases its total assets and total stockholders' equity.

decreases its total assets and total stockholders' equity.

If the market rate of interest is 10%, a $10500, 15%, 10-year bond that pays interest annually would sell at an amount a) less than face value. b) greater than face value. c) that cannot be determined. d) equal to face value.

greater than face value

A stock split will a) increase the total par value of the stock. b) have no effect on the par value per share of stock. c) have no effect on retained earnings. d) increase total paid-in capital.

have no effect on retained earnings

Treasury shares plus outstanding shares equal a) authorized stock. b) issued stock. c) distributable stock. d) unissued stock.

issued stock