Accounting Final- midterm questions

Identify which of the following items would be reported as additions (A) or deductions (D) in a retained earnings statement 1. net income 2. net loss 3. cash dividends 4. stock dividends

1. A 2. D 3. D 4. D

1. common stock is issued for cash at an amount above par value 2. merchandise inventory increased during the period 3. depreciation expense recorded for the period 4. building was purchased for cash 5. bonds payable were acquired and retired at their carrying value 6. accounts payable decreased during the period 7. prepaid expenses decreased during the period 8. treasury stock was acquired for cash 9. land is sold for cash at an amount equal to book value 10. patent amortization expense recorded for a period

1. cash flows from financial activities 2. cash flows from operating activities- deduct from net income 3. cash flows from operating activities- add to net income 4. cash flows from investing activity 5. cash flows from financial activities 6. cash flows from operating activities- deduct from net income 7. cash flows from operating activities- add to net income 8. cash flows from financial activities 9. cash flows from investing activity 10. cash flows from operating activities- add to net income

Identify at least 6 characteristics of the corporate form of business.

1. limited liability 2. transferability of ownership 3. ability to obtain profit 4. governmental regulations 5. additional taxes 6. unlimited life

Retained Earnings Equation

BOY net income + net income- dividends= EOY net income

EC: Name of high school nemesis

Beth

EC: April 16th

Olivias were born and died on this day

T/F: bonds are a form of interest-bearing notes payable

True

t/f: A stockholder has the right to vote in the election of the board of directors.

True

which one of the following events would not require a formal journal entry on a corporation's books? a. 2 for 1 stock split b. 100% stock dividend c. 2% stock dividend d. $1 per share cash dividend

a. 2 for 1 stock split

investing activities include a. collecting cash on loans made b. obtaining cash from creditors c. obtaining capital from owners d. repaying money previously borrowed

a. collecting cash on loans made

If merril Company issues 9,000 shares of $5 par value common stock for $160,000, the account a. common stock will be credited for $45,000 b. paid-in capital in excess of par will be credited for $45,000 c. Paid-in capital in excess of par will be credited for $160,000 d. cash will be debited for $115,000

a. common stock will be credited for $45,000

each of the following accounts is reported as long-term liabilities except: a. interest payable b. bonds payable c. discount on bonds payable d. premium on bonds payable

a. interest payable

the interest rate investors demand for loaning funds is the a. market interest rate b. stated rate c. contractual interest rate d. bond interest rate

a. market interest rate

Generally, the most important category on the statement of cash flows is cash flows from a. operating activities b. investing activities c. financing activities d. significant non cash activities

a. operating activities

the order of presentation of activities on the statement of cash flows is a. operating, investing, and financing b. operating, financing, and investing c. financing, operating, and investing d. financing, investing, and operating.

a. operating, investing, and financing

bonds that have specific assets of the issuer pledged as collateral are a. secured bonds b. callable bonds c. convertible bonds d. debenture bonds

a. secured bonds

Mize company owns 30% interest in the stock of Late corporation. During the year, lyte pays $20,000 in dividends to Mize, and reports $300,000 in net income. Mize company's investment in Lyte will increase Mize's net income by a. $6,000 b. $90,000 c. $96,000 d. $10,000

b. $90,000

a successful grocery store would probably have a. a low turnover b. a high turnover c. zero profit margin d. low volume

b. a high turnover

which one of the following is not necessary in order for a corporation to pay a cash dividend? a. adequate cash b. approval of stockholders c. declaration of dividends by the board of directors d. retained earnings

b. approval of stockholders

A company would not acquire treasury stock a. in order to reissue shares to officers b. as an asset investment c. in order to increase trading of the company's stock d. to have additional shares available to use in acquisitions of other companies

b. as an asset investment

Ratios are used as tools in financial analysis a. instead of horizontal and vertical analysis b. because they may provide information that is not apparent from inspection of the individual components of the ratio c. because even single ratios by themselves are quite meaningful d. because they are prescribed by GAAP

b. because they may provide information that is not apparent from inspection of the individual components of the ratio

When preferred stock is cumulative, preferred dividends not declared in a period are a. considered a liability b. called dividends in arrears c. distributions of earnings d. never paid

b. called dividends in arrears

On January 1, skills company purchased as a short-term investment a $1,000, 6% bond for $1,000. The bonds pays interest on January 1. The bond is sold on July 1 for $1,200 plus accrued interest, Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceed at the time the bond is sold. a. cash 1,200 debt investments 1,200 b. cash 1,230 debt investments 1,000 gain on sale of debt investments 200 interest revenue 30 c. cash 1,230 debt investments 1,200 interest revenue. 30 d. cash 1,2000 debt investments 1,000 gain on sale. 200p.

b. cash 1,230 debt investments 1,000 gain on sale of debt investments 200 interest revenue 30

When a company owns more than 50% of the common stock of another company a. affiliated financial statements are prepared b. consolidated financial statements are prepared c. controlling financial statements are prepared d. significant financial statements are prepared

b. consolidated financial statements are prepared

Jackson company is a publicly held corporation whose $1 par value stock is actively traded at $64 per share. The company issued 3,000 shares of stock to acquire land recently advertised at $200,000. When recording this transaction, Barton company will a. debit land for $200,000 b. credit common stock for $192,000 c. Debit land for $192,000 d. credit paid-in capital in excess of par for $196,000

b. credit common stock for $192,000

asset turnover measures a. how often a company replaces its assets b. how efficiently a company uses its assets to generate assets c. the portion of the assets that have been financed by creditors d. the overall rate of return on assets.

b. how efficiently a company uses its assets to generate assets

In the financial statements, organization costs appears- a. immediately below retained earnings in the stockholders' equity section b. in the income statement c. as part of paid-in capital in the stockholders' equity section d. as an intangible asset

b. in the income statement

indicate where the purchase of land for cash would appear, if at all, on the indirect statement of cash flows a. operating activities section b. investing activities section c. financing activities section d. does not represent a cash flow

b. investing activities section

the statement of cash flows a. is prepared instead of an income statement under generally accepted accounting principles b. is used to a assess an entity's ability to pay dividends and meet obligations c. is prepared from comparative income statements d. reflects earnings per share figures on a cash basis and on an accrual basis in the body of the statement.

b. is used to a assess an entity's ability to pay dividends and meet obligations

a corporation whose stock is regularly traded on a national securities exchange is a a. privately held corporation b. publicly held corporation c. closely held corporation d. legally held corporation

b. publicly held corporation

the company whose stock is owned by the parent company is usually called the a. controlled company b. subsidiary company c. investee company d. sibling company

b. subsidiary company

for accounting purposes, the method used to account for long-term investments in common stock is determined by a. the amount paid for the stock by the investor b. the extent of an investor's influence on the operating and financial affairs of the investee. c. whether the stock has paid dividends in past years d. whether the acquisition of the stock by the investor was "friendly" or "hostile"

b. the extent of an investor's influence on the operating and financial affairs of the investee.

Which of the following is not a significant date with respect to dividends? a. the declaration date b. the incorporation date c. the record date d. the payment date

b. the incorporation date

the debt to assets ration is computed by dividing a. long-term liabilities by total assets b. total debt by total assets c. total assets by total debt d. total assets by long term liabilities.

b. total debt by total assets

Dakota company issued $700,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year? a. $686,000 b. $683,000 c. $688,800 d. $697,2000

c. $688,800

If Baylor company issues 8,000 shares of $5 par value common stock for $280,000. a. Common stock will be credited $280,000 b. Paid-in capital in excess of par will credited for $40,000 c. Paid-in capital in excess of par will be credited for $240,000 d. Cash will be debited for $240,000

c. Paid-in capital in excess of par will be credited for $240,000

dividends are predominately paid in a. earnings b. property c. cash d. stock

c. cash

Four thousand bonds with a face value of $1,000 each, are sold at 105. The entry to record the issuance is a. cash 4,200,000 bonds payable 4,200,000 b. cash. 4,000,000 premium on bonds payable 200,000 bonds payable 4,200,000 c. cash. 4,200,000 Premium on bonds payable 200,000 bonds payable 4,000,000 d. cash 4,200,000 discount on bonds payable 200,000 bonds payable 4,00,000

c. cash. 4,200,000 Premium on bonds payable 200,000 bonds payable 4,000,000

Bonds that may be exchanged for common stock at the option of the bondholders are called a. options b. stock bonds c. convertible bonds d. callable bonds

c. convertible bonds

accounting for treasury stock is done by the a. market method b. LIFO method c. cost method d. lower of cost or market method

c. cost method

dividends payable is classified as a: a. long-term liability b. contra stockholders' equity account to retained earnings c. current liability d. stockholders' equity account

c. current liability

A corporation purchases 60,000 shares of its own $30 par common stock for $45 per share, recording it at cost. What will be the effect on total stockholders equity? a. increase by 2,700,000 b. decrease by $1,800,000 c. decrease by $2,700,000 d. increase by $1,800,000

c. decrease by $2,700,000

indicate where the issuance of common stock issued for cash would appear, if at all, on the indirect statement of cash flows a. operating activities section b. investing activities section c. financing activities section d. does not represent a cash flow

c. financing activities section

vertical analysis is a technique which expresses each item within a financial statement a. in dollars and cents b. in terms of a percentage of the item in the previous year c. in terms of a percent of a base amount d. starting with the highest value down to the lowest value

c. in terms of a percent of a base amount

income statements for corporations are the same as the statements for proprietorships except for the reporting of a. gross profit b. income from operations c. income tax expense d. other revenues and gains.

c. income tax expense

on January 1, 2017, Brenner company purchased at face value , a $1,000, 8% bond that pays interest on January 1. Brenner company has a calendar year end. The adjusting entry on December 31, 2017, is a. not required b. cash. 80 interest revenue 80 c. interest receivable. 80 interest revenue 80 d. interest receivable 80 debt investments.80

c. interest receivable. 80 interest revenue 80

Comparisons of data within a company are an example of the following comparative basis: a. industry averages b. intercompany c. intracompany d. interregional

c. intracompany

If a common stock investment is sold at a gain, the gain a. is reported as operating revenue b. is reported under a special section, "discontinued investments", on the income statement c. is reported in the other revenue and gains section of the income statement d. contributes to gross profit on the income statement

c. is reported in the other revenue and gains section of the income statement

financing activities involve a. lending money b. acquiring investments c. issuing debt d. acquiring long-lived assets

c. issuing debt

If an investor owns less than 20% of the common stock of another corporation as a long-term investment, a. the equity method of accounting for the investment should be employed b. no dividends can be expected c. it is presumed that the investor has relatively little influence on the investee d. it is presumed that the investor has significant influence on the investee.

c. it is presumed that the investor has relatively little influence on the investee

If common stock is issued for an amount greater than par value, the excess should be credited to a. cash b. retained earnings c. paid-in capital in excess of par d. legal capital

c. paid-in capital in excess of par

which of the following would not be needed to determine net cash provided by operating activities? a. depreciation expense b. change in accounts receivable c. payment of cash dividends d. change in prepaid expenses.

c. payment of cash dividends

39. Under the corporate form of business organization a. a stockholder is personally liable for the debts of the corporation. b. stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation. c. the corporation's life is stipulated in its charter. d. stockholders wishing to sell their corporation shares must get the approval of other stockholders.

c. the corporation's life is stipulated in its charter.

EC: if you say "yee-haa," I say

court day

Gayton Corporation purchased 1,000 shares of Smart common stock ($50 par) at $80 per share as a short-term investment. The shares were subsequently sold at $78 per share. The cost of the securities purchased and gain or loss on the sale were cost gain or loss a. $50,000 $2,0000 gain b. $50,000 $2,0000 loss c. $80,000 $2,000 gain d. $80,000. $2,000 loss

d. $80,000 $2,000 loss

treasury stock is a. stock issued by the US treasury department b. stock purchased by a corporation and held as an investment in its treasury c. corporate stock issued by the treasurer of a company d. a corporation's own stock which has been issued and subsequently reacquired but not retired.

d. a corporation's own stock which has been issued and subsequently reacquired but not retired.

a stockholder is interested in the ability of a firm to a. pay consistent dividends b. appreciate in share price c. survive over a long period d. all of these answer choices are correct.

d. all of these answer choices are correct.

treasury stock is a(n) a. contra asset account b. retained earnings account c. asset account d. contra stockholders' equity account

d. contra stockholders' equity account

the cumulative effect of the declaration and payment of a cash dividend on a company's balance sheet is to: a. decrease current liabilities and stockholders' equity b. increase total assets and stockholders' equity c. increase current liabilities and stockholders' equity d. decrease stockholders' equity and total assets

d. decrease stockholders' equity and total assets

Which of the following steps in NOT required in preparing the statement of cash flows? a. determine the net change in cash b. determine the net cash provided by operating activities c. determine cash from investing and operating activities d. determine the change in current assets

d. determine the change in current assets

The disposal of a significant component of a business is called a. other comprehensive income b. unrealized gain or loss c. an other expense d. discontinued operations

d. discontinued operations

in accounting for stock investments between 20% and 50%, the _______ method is used. a. consolidated statements b. controlling interest c. cost d. equity

d. equity

Each of the following is reported for common stock except the a. par value b. shares issued c. shares outstanding d. liquidation value

d. liquidation value

What type of ratios best measure the short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash a. leverage b. solvency c. profitability d. liquidity

d. liquidity

horizontal analysis is appropriately performed a. only on the income statement b. only on the balance sheet c. only on the statement of retained earnings d. on all three of these statements.

d. on all three of these statements.

Which one of the following affects cash during a period a. recording depreciation expense b. declaration of a cash dividend c. write-off of an uncollectible account receivable d. payment of an accounts payable

d. payment of an accounts payable

regular dividends are declared out of a. paid-in capital in excess of par b. treasury stock c. common stock d. retained earnings

d. retained earnings

if a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is: a. common stock dividends distributable b. common stock c. paid-in capital in excess of par d. stock dividends

d. stock dividends

Which of the following is not a true statement about the accounting for debt investments? a. at acquisition, the historical cost principle applies b. the cost includes any brokerage fees c. debt investments include investments in government and corporation bonds d. the cost includes any accrued interest.

d. the cost includes any accrued interest.

a corporation is not an entity which is separate and distinct from its owners

false

t/f: As soon as a corporation is authorized to issue stock, an accounting journal entry should be made recording the total value of the shares authorized

false

variable cost

grocery

Would a successful grocery store have low or high inventory turnover

high

fixed cost

insurance

EC: what state did she grow up

kentucky

EC: what kind of dentists does a whale go to?

orcadontist

mixed cost

rental car

the stockholders' equity section of a corporation's balance sheet is generally divided into two major sections:

retained earnings and paid in capital

characteristics of corporation

separate legal existence, limited liability of stockholders, transferable ownership rights, ability to acquire capital, continuous life, corporation management, government regulations, additional taxes

T/F: Cash dividends are not a liability of the corporation until they are declared by the board of directors

true

T/F: a debit balance in the retained earnings account is identified as a deficit/ loss

true

T/F: earnings per share indicates the net income earned by each share of outstanding common stock

true

T/F: swathe information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations

true

a corporation can be organized for the purpose of making a profit or it may be not-for-profit

true

dividends are declared out of retained earnings

true

EC: what color did she paint the inside of her house

yellow