Accounting Exam 4

The Surf's Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $18,000 in 2015. Assuming the preferred stock is cumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015? $6,000 to preferred stockholders and $12,000 to common stockholders. $18,000 to preferred stockholders and $0 to common stockholders. $12,000 to preferred stockholders and $6,000 to common stockholders. $9,000 to preferred stockholders and $9,000 to common stockholders.

$12,000 to preferred stockholders and $6,000 to common stockholders.

The ending Retained Earnings balance of Lambert Inc. increased by $1.5 million from the beginning of the year. The company's net income earned during the year is $3.5 million. What is the amount of dividends Lambert Inc. declared and paid? $1.5 million. $3.5 million. $2.0 million. $5.0 million.

$2.0 million

Roberto Designers was organized on January 1, 2015. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2015, Roberto had the following transactions relating to stockholders' equity: Issued 10,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8). What is total stockholders' equity at the end of 2015? $270,000. $300,000. $250,000. $200,000.

$250,000 Issue of stock (10,000 x $7) $70,000 Issue of stock (20,000 x $8) 160,000 Net income 100,000 Dividends (50,000) Treasury Stock (3,000 x $10) (30,000) _________ $250,000

California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $100,000 in 2015. Assuming the preferred stock is noncumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015? $40,000 to preferred stockholders and $60,000 to common stockholders. $80,000 to preferred stockholders and $20,000 to common stockholders. $20,000 to preferred stockholders and $80,000 to common stockholders. $100,000 to preferred stockholders and $0 to common stockholders.

$40,000 to preferred stockholders and $60,000 to common stockholders.

Clothing Emporium was organized on January 1, 2015. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2015, Clothing Emporium had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is the total stockholders' equity at the end of 2015? $420,000. $370,000. $470,000. $250,000.

$420,000 (30,000 x $7) + (20,000 x $8) + $100,000 − $50,000 = $420,000.

The Surf's Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $18,000 in 2015. Assuming the preferred stock is noncumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015? $6,000 to preferred stockholders and $12,000 to common stockholders. $18,000 to preferred stockholders and $0 to common stockholders. $12,000 to preferred stockholders and $6,000 to common stockholders. $9,000 to preferred stockholders and $9,000 to common stockholders.

$6,000 to preferred stockholders and $12,000 to common stockholders.

Over the first four years of the company's life, it earned the following net income (loss): $6,000; $3,000; $6,000, and ($2,000). If the company's ending retained earnings is $10,000 after year 4, what is the average amount of dividends paid per year? $3,000. $7,000. $0. $750.

$750 ($6,000 + $3,000 + $6,000 − $2,000) = $13,000 − $10,000 = $3,000/4 = $750.

California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $100,000 in 2015. Assuming the preferred stock is cumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015? $40,000 to preferred stockholders and $60,000 to common stockholders. $80,000 to preferred stockholders and $20,000 to common stockholders. $20,000 to preferred stockholders and $80,000 to common stockholders. $100,000 to preferred stockholders and $0 to common stockholders.

$80,000 to preferred stockholders and $20,000 to common stockholders.

What is the journal entry and When a company issues 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include: A debit to Cash for $25,000. A debit to Additional Paid-in Capital for $25,000. A credit to Common Stock for $250,000. A credit to Additional Paid-in Capital for $225,000.

A credit to A.P.I.C. for $225,000 Journal Entry: Cash $250,000 C/S $ 25,000 A.P.I.C. $ 225,000

The mixture of liabilities and stockholders' equity a business uses is called its: Bond contract. Carrying value. Capital structure. Accounting equation.

Capital Structure

Bonds payable should be reported as a long-term liability in the balance sheet at: Face Value. Current bond market price. Carrying value. Face value less accrued interest since the last interest payment date.

Carrying value

Interest expense on bonds payable is calculated as the: Face amount times the stated interest rate. Face amount times the market interest rate. Carrying value times the market interest rate. Carrying value times the stated interest rate.

Carrying value times the market interest rate

Which of the following is not a primary source of corporate debt financing? Bonds Payable. Common Stock. Leases. Notes Payable.

Common Stock

Which of the following is the most likely to have voting rights? Common Stock. Preferred Stock. Bonds. They all have similar voting rights.

Common Stock

A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance? Debit Preferred Stock $5,000. Credit Cash $5,000. Credit Preferred Stock $5,000. Credit Additional Paid-In Capital $4,000.

Credit Additional Paid-In Capital $4,000.

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance? Debit Common Stock $10,000. Credit Cash $50,000. Credit Common Stock $50,000. Credit Additional Paid-In Capital $40,000.

Credit Additional Paid-In Capital $40,000.

Jade Jewelers issued 15,000 shares of $1 par value stock for $20 per share. What is true about the journal entry to record the issuance? Credit Common Stock $300,000. Credit Cash $300,000. Credit Common Stock $15,000. Debit Additional Paid-In Capital $285,000.

Credit C/S/ for $15,000

Crossroads Mall had 100,000 outstanding shares of common stock. On June 16, 2015, Crossroads repurchased 20,000 shares of its own stock at $30 per share. On July 23, 2015, Crossroads resold 10,000 shares at $28 per share. What net effect did the repurchase and the resell of common stock have on the accounting equation? Increase in assets and decrease in stockholders' equity. Decrease in assets and increase in stockholders' equity. Increase in assets and increase in stockholders' equity. Decrease in assets and decrease in stockholders' equity.

Decrease in assets and decrease in stockholders' equity.

How would the carrying value of bonds payable change over time for bonds issued at a discount and premium

Discount increases and premium decreases

The cash interest payment each period is calculated as the: Face amount times the stated interest rate. Face amount times the market interest rate. Carrying value times the market interest rate. Carrying value times the stated interest rate.

Face amount times the stated interest rate

Advantages of the corporate form of business include which of the following? I. Double taxation II. Ability to raise capital III. Ability to transfer ownership IV. More paperwork V. Limited liability II. II., III., V. I., II., III. II., IV., V.

II. III. V

When treasury stock is resold at a gain, the difference between its cost and the cash received when resold: Increases net income. Increases stockholders' equity. Has no effect on net income or stockholders' equity. Increases net income but decreases stockholders' equity.

Increase S/E

If a company issues 1,000 shares of $1 par value common stock for $20 per share, what would be the effect on the accounting equation? What is the journal entry? Increase assets and increase liabilities. Increase assets and increase revenue. Increase assets and increase stockholders' equity. Increase assets and decrease stockholders' equity.

Increase assets and increase stockholders' equity. Journal Entry: Cash 20,000 Common Stock 1,000 A.P.I.C. 19,000

Which of the following is not a true statement? Companies that are believed to have high bankruptcy risk generally receive low credit ratings and must pay a higher interest rate for borrowing. As a company's level of debt increases, the risk of bankruptcy increases. Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax-deductible. The mixture of liabilities and stockholders' equity a business uses is called its capital structure.

Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax-deductible.

The advantages of obtaining long-term funds by issuing bonds, rather than issuing additional common stock, include which of the following? Interest payments are tax deductible to the company, while dividends are not. The risk of going bankrupt decreases. Expansion is achieved without surrendering ownership control. Interest payments are tax deductible to the company, while dividends are not; expansion is achieved without surrendering ownership control.

Interest payments are tax deductible to the company, while dividends are not; expansion is achieved without surrendering ownership control

Outstanding common stock refers to the total number of shares: Issued. Issued plus treasury stock. Issued less treasury stock. Authorized.

Issued less treasury stock

A bond issued at a premium indicates that at the date of issue: Its stated rate was lower than the prevailing market rate of interest on similar bonds. Its stated rate was higher than the prevailing market rate of interest on similar bonds. The bonds were issued at a price greater than their face value. The bonds must be non-interest bearing.

Its stated rate was higher than the prevailing market rate of interest on similar bonds.

A bond issued at a discount indicates that at the date of issue: Its stated rate was lower than the prevailing market rate of interest on similar bonds. Its stated rate was higher than the prevailing market rate of interest on similar bonds. The bonds were issued at a price greater than their face value. The bonds must be non-interest bearing.

Its stated rate was lower than the prevailing market rate of interest on similar bonds.

The correct order from the smallest number of shares to the largest number of shares is: Authorized, issued, and outstanding. Outstanding, issued, and authorized. Issued, outstanding, and authorized. Issued, authorized, and outstanding.

Outstanding, Issued, Authorized

When bonds are retired before their maturity date: GAAP has been violated. The issuing company will always report a non-operating gain. The issuing company will always report a non-operating loss. The issuing company will report a non-operating gain or loss.

The issuing company will report a non-operating gain or loss

Preferred stock is called preferred because it usually has two preferences over common stock. These preferences relate to: Dividends and voting rights. Par value and dividends. The preemptive right and voting rights. Dividends and distribution of assets if the corporation is dissolved.

The preemptive right and voting rights. Dividends and distribution of assets if the corporation is dissolved.

Common stockholders usually have all of the following rights except: To receive dividends when declared. To share in the distribution of assets. To elect board of directors. To participate in the day-to-day operations.

To participate in the day-to-day operations