Accounting 7-12

Alto Company issued 7% preferred stock with a $100 par value. This means that:

The amount of the potential dividend is $7 per year per preferred share.

If a company uses a special payroll bank account: .

The company draws one check for the entire payroll on the regular bank account and deposits it in the payroll bank account.

The Discount on Common Stock account reflects:

The difference between the par value of stock and its issue price when the issue price is below par value.

Contingent liabilities must be recorded if:

The future event is probable and the amount owed can be reasonably estimated.

The expense recognition principle, as applied to bad debts, requires:

The use of the allowance method of accounting for bad debts.

Mayan Company had net income of $132,000. The weighted-average common shares outstanding were 80,000. The company has no preferred stock. The company's earnings per share is:

$1.65.

Granite Company purchased a machine costing $120,000, terms 1/10, n/30. The machine was shipped FOB shipping point and freight charges were $2,000. The machine requires special mounting and wiring connections costing $10,000. When installing the machine, $1,300 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.

$130,800.

In preparing a company's statement of cash flows for the most recent year, Jeffers Corp. reported the following information: Repayment of outstanding bonds$107,000Purchase of treasury stock 62,000Issuance of common stock 46,000Payment of cash dividends 15,000 Net cash flows from financing activities for the year were: Multiple Choice

$138,000 of net cash used.

Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 5,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividends Declared & PaidYear 1$2,000Year 2$6,000Year 3$32,000 The total amount of dividends paid to preferred and common shareholders over the three-year period is:

$15,000 preferred; $25,000 common.

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:

$2,500.

Trey Morgan is an employee who is paid monthly. For the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $128,400 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. His net pay for the month is:

$3,510.14

A company has 500 shares of $60 par value preferred stock outstanding. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:

$32.50.

A company issues 9%, 5-year bonds with a par value of $100,000 on January 1 at a price of $106,160, when the market rate of interest was 8%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:

$4,500.

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

$50,000.

A company's Inventory balance at the end of the year was $188,000 and $200,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $84,000 and $80,000 at the beginning of the year, and its cost of goods sold for the year was $720,000. The company's total amount of cash payments for merchandise during the year equals: Multiple Choice

$704,000.

During the first week of January, an employee works 46 hours. For this company, workers earn 150% of their regular rate for hours in excess of 40 per week. Her pay rate is $16 per hour, and her wages are subject to no deductions other than FICA Social Security, FICA Medicare, and federal income taxes. The tax rate for Social Security is 6.2% of the first $128,400 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $80 in federal income taxes withheld. What is the amount of this employee's gross pay for the first week of January?

$784

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000. Compute the cost that should be allocated to the land.

$97,500.

The formula to compute annual straight-line depreciation is:

(Cost minus salvage value) divided by the useful life in years.

A company has earnings per share of $9.60. Its dividend per share is $0.50, its market price per share is $110, and its book value per share is $96. Its price-earnings ratio equals:

11.46.

A company's has interest expense of $52,000, income taxes expense of $121,000, and net income of $281,000. The company's times interest earned ratio equals:

8.73.

A corporation sold 14,000 shares of its $1 par value common stock at a cash price of $13 per share. The entry to record this transaction would include:

A credit to Common Stock for $14,000.

A cash dividend payment to shareholders during the year should be reported on the statement of cash flows as:

A decrease in cash flows from financing activities

The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an): Multiple Choice

Accelerated depreciation method.

A company sold $12,000 worth of bicycles with an extended warranty. The company's experience is that warranty expense averages 2% of sales. The company should:

Recognize warranty expense and liability in the year of the sale.

At the end of the current year, using the aging of receivable method, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Bad Debts Expense15,375 Allowance for Doubtful Accounts 15,375

The contract between the bond issuer and the bondholders identifying the rights and obligations of the parties, is called a(n):

Bond indenture.

A disadvantage of bond financing is:

Bonds pay periodic interest and the repayment of par value at maturity.

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

Cash collections from customers.

The cost of land would not include:

Cost of parking lot lighting.

The direct method for the preparation of the operating activities section of the statement of cash flows:

Separately lists each major item of operating cash receipts and cash payments.

FICA taxes include:

Social Security and Medicare taxes

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Straight-line depreciation.

A corporation issued 2,500 shares of its no par common stock at a cash price of $11 per share. The entry to record this transaction would be:

Debit Cash $27,500; credit Common Stock $27,500.

Giorgio Italian Market bought $4,000 worth of merchandise from Food Suppliers and signed a 90-day, 6% promissory note for the $4,000. Food Supplier's journal entry to record the collection on the maturity date is: (Use 360 days a year.)

Debit Cash $4,060; credit Interest Revenue $60; credit Notes Receivable $4,000

A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share. The issue price was $10 per share. The entry to record this transaction would be:

Debit Cash $50,000; credit Paid-in Capital in Excess of Stated Value, Common Stock $45,000; credit Common Stock $5,000.

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year's depreciation is: Multiple Choice

Debit Depreciation Expense $2,000, credit Accumulated Depreciation $2,000.

Fetzer Company declared a $0.55 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8,000 shares in treasury stock. The journal entry to record the dividend declaration is:

Debit Retained Earnings $100,100; credit Common Dividends Payable $100,100.

To capitalize an expenditure is to:

Debit an asset account.

Times interest earned is calculated by:

Dividing income before interest expense and income taxes by interest expense.

The accounts receivable turnover is calculated by:

Dividing net sales by average accounts receivable.

The Wage and Tax Statement given to each employee annually is:

Form W-2.

Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security. Which of the following is true regarding this transaction: Multiple Choice

Frederick Company's financial statements must disclose the pledging of receivables.

An estimated liability:

Is a known obligation of an uncertain amount that can be reasonably estimated

A 90-day note issued on April 10 matures on:

July 9.

A company paid $150,000, plus a 7% commission and $5,000 in closing costs for a property. The property included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500. What should be the allocation of this property's costs in the company's accounting records?

Land $82,750; Land Improvements, $33,100; Building, $49,650.

The price-earnings ratio is calculated by dividing:

Market value per share by earnings per share.

When the operating activities section of the statement of cash flows is reported using the direct method:

Net income is adjusted for changes in noncurrent assets and noncurrent liabilities.

If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in: Multiple Choice

No effect on the expenses of the current period.

A discount on bonds payable: Multiple Choice

Occurs when a company issues bonds with a contract rate less than the market rate.

Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

Purchase of treasury stock.