ACCOUNTING 210 FINAL QUIZ PROBLEMS

1. On February 16, a company declares a 52¢ dividend to be paid on April 5. There are 2,180,000 shares of common stock issued and outstanding. The entry recorded by the company on February 16 includes a debit to: a. Dividends and a credit to Dividends Payable for $1,133,600. b. Dividends Payable and a credit to Cash for $1,072,240. c. Dividends and a credit to Dividends Payable for $1,072,240. d. Dividends Payable and a credit to Cash for $1,133,600.

A

3. If shares of common stock are issued at a market price greater than par value, the amount in excess of par should be credited to: a. Additional Paid-in Capital. b. Retained Earnings. c. Treasury Stock. d. Common Stock.

A

5. Tidy Limited purchased a new van on January 1, 2016. The van cost $32,000. It has an estimated life of eight years and the estimated residual value is $3,200. Tidy uses the double-declining-balance method to compute depreciation. What is the adjusted balance in the Accumulated Depreciation account at the end of 2017? a. $14,000 b. $2,000 c. $4,000 d. $12,000

A

5. Which of the following is not a reason a company would repurchase stock? a. To increase the total stockholders' equity balance and improve the ROE. b. To have shares of stock to issue when stock options are exercised. c. To give the impression that the stock is worth buying. d. To reduce the number of outstanding shares.

A

8. On January 1, 2016, Xit Company bought a new delivery truck for $30,000. Xit plans to use the truck for 4 years, during which it will be driven 50,000 miles. The truck will be worthless at the end of the 4 years. If the truck was driven 15,000 miles in 2016, Depreciation Expense using units-of-production is: a. $9,000 b. $3,750 c. $7,500 d. $15,000

A

8. Rex Audio buys back 305,000 shares of its stock from investors at $9.00 a share. Two years later, it reissues this stock for $8.50 a share. The stock reissue would be recorded with a debit to Cash for: a. $2,592,500, a debit to Additional Paid-in Capital for $152,500, and a credit to Treasury Stock for $2,745,000. b. $2,745,000, a credit to Treasury Stock for $2,592,500, and a credit to Additional Paid-in Capital for $152,500. c. $2,745,000 and a credit to Treasury Stock for $2,745,000. d. $2,592,500 and a credit to Treasury Stock for $2,592,500.

A

2. A piece of equipment was acquired on January 1, 2015, at a cost of $36,000, with an estimated residual value of $5,000 and an estimated useful life of six years. The company uses the double-declining-balance method. What is its book value at December 31, 2016? a. $25,667 b. $16,000 c. $12,000 d. $10,333

B

4. Cash flows from financing activities include all of the following except: a. payment of long-term debt. b. payment of interest. c. proceeds from stock issuance. d. cash dividends paid.

B

4. Contributed capital totals $20,000, Retained Earnings equals $60,000, Treasury Stock equals $5,000, and Common Stock equals $20,000. If the company does not have any accumulated other comprehensive income (loss), stockholders' equity, what is the total amount of stockholders' equity? a. $105,000 b. $75,000 c. $95,000 d. $55,000

B

7. On January 1, 2017, Ace Electronics bought a new cash register for $2,500. Ace plans to use the cash register for 4 years and then sell it for $200. If Ace uses straight-line depreciation, depreciation expense for the year ended December 31, 2017 equals: a. $1,875 b. $575 c. $625 d. $1,925

B

Net income $7,000 Cash dividends paid to stockholders 2,000 Cash proceeds from sale of land 3,000 Cash proceeds from bank loan 5,000 Cash payment (principal) on bank loan 1,000 Cash paid to purchase equipment 4,000 Use the information above to answer the following question. The company would report net cash provided by (used in) financing activities of: a. $(2,500). b. $2,000. c. $5,000. d. $6,000.

B

1. Which of the statements below is correct when comparing the direct and indirect methods of reporting operating cash flows? a. The direct method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations. b. The indirect method starts with cash collected from customers and details cash inflows and outflows from operations. c. The indirect method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations. d. The net cash provided by or used in operations will be different depending on whether the direct or indirect method is used.

C

3. Which of the following accurately describes the treatment of ordinary and extraordinary repairs? a. Ordinary repairs are expensed as incurred; extraordinary repairs are expensed as incurred b. Ordinary repairs are treated as a capital expenditure; extraordinary repairs are expensed as incurred c. Ordinary repairs are expensed as incurred; extraordinary repairs are treated as a capital expenditure d. Ordinary repairs are treated as a capital expenditure; extraordinary repairs are treated as a capital expenditure

C

4. When a company records depreciation it debits: a. a liability account and credits Depreciation Expense. b. Depreciation Expense and credits Cash. c. Depreciation Expense and credits a contra-asset account. d. a long-lived tangible asset account and credits Depreciation Expense.

C

6. The number of shares outstanding equals the number of shares: a. authorized minus the number of shares issued. b. issued plus the number of shares in treasury. c. issued minus the number of shares in treasury. d. authorized plus the number of shares issued.

C

6. Which of the following represents a cash inflow from financing activities? a. Issuing stock in exchange for another company's stock. b. Paying a bond's face value at maturity. c. Issuing long-term bonds at a discount. d. Receiving interest on promissory notes.

C

7. A company's cash flows from investing activities include cash transactions relating to the purchase and disposal of which types of assets? a. All of a company's assets b. All of a company's assets except inventory c. All of a company's non-current assets d. Property, plant and equipment

C

1. Generally, freight costs incurred when a long-lived asset is purchased should be: a. expensed in the period incurred. b. deducted from the Accumulated Depreciation account. c. not recorded in the accounts. d. added to the cost of the asset.

D

2. A company issues 1 million shares of common stock with a par value of $0.10 for $15.80 a share. The entry to record this transaction includes a debit to Cash for: a. $100,000 and a credit to Common Stock for $100,000. b. $15,800,000 and a credit to Common Stock for $15,800,000. c. $100,000, a debit to Capital Receivable for $15,700,000, a credit to Common Stock for $100,000, and a credit to Additional Paid-in Capital for $15,700,000. d. $15,800,000, a credit to Common Stock for $100,000, and a credit to Additional Paid-in Capital for $15,700,000.

D

2. The Viviana Co. uses the indirect method to determine its cash flow from operations. Which of the following items will be subtracted from net income to find its cash flow from operations? a. Decrease in Supplies b. Increase in Accounts Payable c. Depreciation Expense d. Increase in Accounts Receivable.

D

3. Consider the following information: Net income $20,000 Depreciation 3,000 Increase in accounts receivable 1,000 Decrease in prepaid rent (400) Increase in accrued liabilities 900 Cash paid to purchase office equipment 4,000 What is the net cash provided by operating activities? a. $17,500 b. $18,500 c. $21,500 d. $23,300

D

5. Dover Co.'s comparative balance sheet indicated that the Equipment account increased by $40,000. Upon further investigation of the account changes, it is determined that Dover purchased equipment totaling $70,000 for the year. It also sold equipment with an original cost of $30,000 for $8,000 cash. Assuming these are the only transactions affecting the investing activities, Dover will report net cash flows provided by (used in) investing activities of: a. ($40,000). b. ($70,000). c. ($32,000). d. ($62,000)

D

6. Many companies use accelerated depreciation in computing taxable income because: a. it reports higher net income in the early years as compared to other methods. b. it is required by IFRS. c. it is easier than straight-line deprecation. d. it postpones tax payments until later years because it lowers taxable income in the early years.

D

7. In an IPO on Jan 1, 2007, Pear Co. purchased 1,000 shares of ABC, Inc. for $5,000. On March 30, 2016, Pear Co. sold the 1,000 shares for $8,000 to John Peter. What is the effect of the sale on March 30, 2016? a. ABC Inc. will record a $3,000 loss. b. ABC Inc. will record a $3,000 gain. c. ABC Inc. will record a decrease in Cash of $8,000. d. ABC Inc. will not be directly affected by this transaction.

D