Chapter 1, Chapter 8 study guide, Chapter 9 study guide, Accounting Ch. 1-2 post test review, EXAM 5 CH. 10 & 11, Chapter 11., Chapter 10, Chapter 10 financial accounting

Dividend rate formula

# of shares x rate (%) x par

Which of the following is a characteristic of a corporation?

- Limited liability of stockholders - Mutual agency (the authority given to a person doing business on behalf of the company, usually a business owner or partner)

Which of the following is considered to be an advantage of a corporation?

- Limited liability of stockholders for the corporation's debts - Continuous Life - Ability to raise more capital than a partnership or proprietorship

Preferred stock is least likely to have which of the following characteristics?

- Preference as to voting LIKELY: - Preference as to assets on liquidation of the corporation - The right of the holder to convert the shares to common stock - Preference as to dividends

Which of the following statements is true about a 3-for-1 stock split?

- Total stockholders' equity increases. ----- - Retained Earnings remains the same. - The market price of each share of stock will decrease. - Par value is reduced to one-third of what it was before the split.

How to calculate stock dividends

1) Common stock outstanding / par value 2) Get total number of shares 3) Add any additional shares 4) Multiply by the rate = total shares 5) Total shares x market value = stock dividends

Which is the correct sequence for recording transactions and preparing financial​ statements?

1. Journal 2. Ledger 3. Trial​ balance 4. Financial statements

Accounts Receivable will appear on which of the following financial​ statements?

Balance Sheet

Given the information below, which bond(s) will be issued at a discount?

Bonds 1 and 2 because the market rate is higher than the stated rate

Given the information below, which bond(s) will be issued at a premium?

Bonds 2 and 4 because the interest rate (stated rate) is higher than the market rate

Equity effect: A 5​% stock dividend. Before the​ dividend, 70 million shares of $ 3.00 par common stock were​ outstanding; the market value was $ 17.62 at the time of the dividend.

No Effect

Equity effect: Payment of the cash dividend

No Effect

Equity effect:A 50​% stock dividend. Before the​ dividend, 70 million shares of $ 3.00 par common stock were​ outstanding; the market value was $ 15.50 at the time of the dividend.

No Effect

Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will the purchase of inventory with cash affect each ratio?

No change to the current ratio and decrease the acid-test ratio.

Assuming a current ratio of 1.0 and an acid-test ratio of 0.80, how will the borrowing of cash by issuing a six-month note payable affect each ratio?

No change to the current ratio and increase the acid-test ratio.

For cash​ dividends, the journal entry on the date of record

No journal entry is required on the date of record.

For cash dividends, the journal entry on the date of record

No journal entry is required on the date of record; There is no journal entry because at this date you are just recording all of the people who own stock as of that date - they'll be the ones to receive the dividends

Hoot Enterprises buys a warehouse for $590,000 to use for its East Coast distribution operations. On the date of the purchase, a professional appraisal shows a value of $650,000 for the warehouse. The seller had originally purchased the building for $480,000. Hoot has a similar warehouse on the West Coast that has a book value of $603,000. Under the historical cost principle, Hoot should record the building for a. $650,000. b. $480,000. c. $590,000. d. $603,000.

c. $590,000

On an indirect method statement of cash flows, an increase in accounts payable is

added to net income in the operating activities section - In increase in accounts payable means that you had a expense that you haven't used cash for yet, but that expense was deducted from net income. So you have to add that back into net income to show that you have not yet used cash for it.

If the indirect method is used to calculate net cash provided by operating activities, a decrease in accounts receivable is

added to net income; decreases in current assets are added to net income: If there is a decrease in A/R, that means you must have collected cash that was from a previous period and that would not already be included in net income - so you must include it

During the year, ChemClean Corporation has $280,000 in revenues, $130,000 in expenses, and $10,000 in dividend declarations and payments. Net income for the year was: a. $140,000. b. $150,000. c. $160,000. d. $280,000.

b. $150,000 ($280,000 - $130,000 = $150,000)

Dynasty Company has current assets of $50,000 and long-term assets of $45,000. Its total liabilities equal $35,000. Stockholders' equity is: a. $95,000. b. $60,000. c. $130,000. d. $80,000.

b. $60,000 ($60,000 = $50,000 + $45,000 - $35,000)

Which financial statement would show how well a company performed over the past year? a. Balance sheet b. Income statement c. Statement of cash flows d. Statement of retained earnings

b. Income statement

On which financial statement would the ending balance of the account​ "accounts receivable" be​ found?

balance sheet

Stockholders of a corporation directly elect the

board of directors

Stockholders of a corporation directly elect the

board of directors.

Sandusky Corporation purchased 3,000 shares of its own $1 par value common stock for $143,000. As a result of this transaction, the company's stockholders' equity

decreased by $143,000; when you purchase your own stock, you are increasing Treasury Stock - which decreases your owner's equity

Surfside Corporation purchased 2500 shares its own $1.60 par value common stock for $155,000. As results of this transaction, the company's stockholder's equity

decreased by $155,000

On an indirect method statement of cash flows, an increase in prepaid insurance is

deducted from net income

On an indirect method statement of cash flows, a gain on the sale of plant assets is

deducted from net income in the operating activities section

The​ ____________ per share is the amount of income attributable to each share of common stock.

earnings

The _____ per share is the amount of income attributable to each share of common stock.

earnings; Net income / Shares Outstanding

Cash received from the issuance of common stock is reported on a statement of cash flows under

financing activities; issuance of common stock affect stockholder's equity and therefore is a financing activity

Paying off bonds payable is reported on the statement of cash flows under

financing activities; long-term liability

The issuance of stock for cash is reported on the statement of cash flows under

financing activities; owner's equity

Under an operating lease, leasing improves the balance sheet by reducing:

Long-term debt.

Advantages of the corporate form that have led to the growth of this form of business ownership include all of the following except:

Low government regulation.

Large stock dividends and stock splits are issued primarily to:

Lower the trading price of the stock per share.

The par value of a share of common stock

is stated in the charter.

The par value of a share of common stock

is stated in the charter; stated as soon as the corporation incorporates

What item flows from the statement of retained earnings to the balance​ sheet?

Retained Earnings

When treasury stock is sold for less than its​ cost, the entry should include a debit to

Retained Earnings.

A $500,000 bond issue sold for $490,000. Therefore, the bonds:

Sold at a discount because the market interest rate was higher than the stated rate.

Issuing 1,000 shares of $5 par-value stock at $12 increases contributed capital by $12,000.

t

United Supply has a $5 million liability at December 31, 2018, of which $1 million is payable in each of the next five years. United Supply reports the liability on the balance sheet as a:

$1 million current liability and a $4 million long-term liability.

Accounts Payable had a normal beginning balance of $1,200. During the​ period, there were debit postings of $200 and credit postings of $800. What was the ending​ balance?

$1,800 credit balance

Region Jet has a $50 million liability at December 31, 2018, of which $10 million is payable in 2019. In its December 31, 2018 balance sheet, the company reports the $50 million debt as a:

$10 million current liability and a $40 million long-term liability on the balance sheet.

The Surf's Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $18,000 in 2018. 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 2018?

$12,000 to preferred stockholders and $6,000 to common stockholders. Preferred dividends in arrears from 2017 = $6,000 Preferred dividends for 2018 (1,000 shares × 6% × $100 par value) = 6,000 Remaining dividends to common stockholders = 6,000 Total dividends = $18,000

Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2018. If the monthly payment is $2,416.60, by how much will the carrying value decrease when the first payment is made on January 31, 2018?

$125,000 × 6% × 1/12 = $625.00 interest expense $2,416.60 - $625.00 = $1,791.60

PhotoEase Camera Co. sold equipment with a cost of $19,000 and accumulated depreciation of $7,000 for an amount that resulted in a gain of $1,000. What amount should PhotoEase report on the statement of cash flows as "proceeds from sale of plant assets"?

$13,000 - The gain on sale is the extra cash gotten over the book value of equipment, therefore the amount of cash (proceeds) on this sale is: (19,000 - 7,000) + 1,000 = 13,000

During the​ year, ChemClean Corporation has $280,000 in​ revenues, $130,000 in​ expenses, and $10,000 in dividend declarations and payments. Net income for the year​ was:

$150,000*** 280,000 - 130,000

At the beginning of 2018, Angel Corporation began offering a 1-year warranty on its products. The warranty program was expected to cost Angel 4% of net sales. Net sales made under warranty in 2018 were $180 million. Five percent of the units sold were returned in 2018 and repaired or replaced at a cost of $5.3 million. The amount of warranty expense on Angel's 2018 income statement is

$180 million × 4% = $7.2 million.

Fashion, Inc. had a Retained Earnings balance of $12,000 at December 31, 2018. The company had an average annual income of $7,500 over the next 3 years, and an ending Retained Earnings balance of $15,000 at December 31, 2021. What was the total amount of dividends paid over the last three years?

$19,500. Beginning RE + Net income - Dividends = Ending RE. $12,000 + 22,500 ($7,500 × 3) - Dividends = $15,000. Dividends = $19,500.

Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2018. THA's accountant has projected the following amortization schedule from issuance until maturity:

$194,758. (carrying value on 1/1/2018)

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?

$2.0 million. Net income minus dividends equals the change in retained earnings.

The Pita Pit borrowed $100,000 on November 1, 2018, and signed a six-month note bearing interest at 12%. Principal and interest are payable in full at maturity on May 1, 2019. In connection with this note, The Pita Pit should report interest expense at December 31, 2018, in the amount of:

$2000 [$100,000 x .12] x (2/12)

Roberto Designers was organized on January 1, 2018. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2018, 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 2018?

$250,000. Issue of stock (10,000 × $7) = $70,000 Issue of stock (20,000 × $8) = 160,000 Net income = 100,000 Dividends = (50,000) Treasury stock (3,000 × $10) = (30,000) = $250,000

Prowler reports net income of $250,000. The return on assets for the year is 20%. What is Prowler's average total assets for the year?

$250,000/X = 20%, therefore X = ($250,000/20%) = $1,250,000.

A​ company's beginning Cash balance was $8,000. At the end of the​ period, the balance was $6,000. If total cash paid out during the period was $28,000​, the amount of cash receipts was

$26,000 28,000 + 6,000 - 8,000

Roberto Designers was organized on January 1, 2018. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2018, 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 the balance in the Treasury Stock account at the end of 2018?

$30,000.

Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2018. THA's accountant has projected the following amortization schedule from issuance until maturity: THA buys back the bonds for $196,000 immediately after the interest payment on 12/31/2018 and retires them. What gain or loss, if any, would THA record on this date?

$370 gain.

A corporation has 100,000 shares of 4% preferred stock outstanding. Also, there are 100,000 shares of common stock outstanding. Par value for each is $100. If a $825,000 dividends is paid, what is the amount of dividends per share on common stock?

$4.25 - $400,000 to preferred, leaving $425,000 for common. $425,000 / 100,000 shares = $4.25 per share

California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $100,000 in 2018. 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 2018?

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

Cramer's net cash provided by operating activities during 2018 was

$44,000 Net Income + 35,500 Gain on Sale of Equipment - 10,000 Depreciation + 7,500 Decrease in A/R + 5,000 Increase in Inventory - 1,000 Decrease in Accounts Payable - 1,000 Increase in Accrued Liabilities + 8,000

In 2018, Jubilee Company repurchased its own stock at a cost of $55,000. During the year, the company purchased land with cash for $120,000 and issued bonds payable for $500,000. Net cash provided by financing activities for the year would have been

$445,000 - First - identify financing activities (Repurchased stock, Issued Bonds Payable) - Second - Total (add cash inflows, subtract cash outflows)

Universal Travel, Inc. borrowed $500,000 on November 1, 2018, and signed a twelve-month note bearing interest at 6%. Principal and interest are payable in full at maturity on October 31, 2019. In connection with this note, Universal Travel, Inc. should report interest payable at December 31, 2018, in the amount of:

$5,000. [$500,000 x .06] x (2/12)

Clothing Emporium was organized on January 1, 2018. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2018, 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 ending balance in the Retained Earnings account at the end of 2018?

$50,000.

Union Apparel has sales including sales taxes for the month of $551,200. If the sales tax rate is 6%, what are Union Apparel's sales for the month?

$520,000. $551,200/1.06 = $520,000.

In the current year, BOGO Company sold land for $80,000 cash, purchased a delivery van for $25,000 cash, and issued common stock for $100,000 cash. The net cash provided by investing activities is

$55,000 - First - identify investing activities (Sold Land, Purchased Delivery Van) - Second - Total (add cash inflows, subtract cash outflows)

Assume Cramer uses the direct method to prepare the statement of cash flows. Income tax payable was $6,500 at the end of the year, and $3,100 at the beginning of the year. Income tax expense for the year totaled $58,900. What amount of cash did the company pay for income taxes during the year?

$55,500 - 3,100 + 58,900 - 6,500

Hoot Enterprises buys a warehouse for $550,000 to use for its East Coast distribution operations. On the date of the​ purchase, a professional appraisal shows a value of $590,000 for the warehouse. The seller had originally purchased the building for $510,000. Hoot has a similar warehouse on the West Coast that has a book value of $565,000. Under the historical cost​ principle, Hoot should record the building for

$550,000*** The historical cost principle states that assets should be recorded at their actual​ cost, measured on the date of purchase as the amount of cash paid plus the fair market value of all non-cash considerations​ (other assets,​ privileges, or​ rights) also given in exchange. The historical cost principle and the continuity assumption also maintain that a​ company's accounting records should continue to use historical cost to value the asset for as long as the business holds it.​ Why? Because cost is a verifiable measure that is relatively free from bias.

The Surf's Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $18,000 in 2018. 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 2018?

$6,000 to preferred stockholders and $12,000 to common stockholders. Preferred dividends in arrears from 2017 are lost = $0 Preferred dividends for 2018 (1,000 shares × 6% × $100 par value) = 6,000 Remaining dividends to common stockholders = 12,000 Total dividends = $18,000

Dynasty Company has current assets of $50,000 and​ long-term assets of $45,000. Its total liabilities equal $35,000. ​Stockholders' equity​ is:

$60,000 50,000 + 45,000 = 35,000

Suppose you buy lunch for $8.39 that includes a 5% sales tax. How much did the restaurant charge you for the lunch (excluding any tax) and how much do they owe for sales tax?

$7.99 for lunch and $0.40 for sales tax. $8.39/1.05 = $7.99

Assume Cramer uses the direct method to prepare the statement of cash flows. Credit sales totaled $750,000, accounts receivable increased by $40,000, and accounts payable decreased by $25,000. How much cash did the company collect from customers?

$710,000 - Use a T-account: Credit Sales were $750,000 meaning A/R increased by $750,000, but it says that it only increased by $40,000 which means that you must have collected (750,000 - 40,000 = 710,000)

California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $100,000 in 2018. 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 2018?

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

Discount Travel has the following current assets: cash, $102 million; receivables, $94 million; inventory, $182 million; and other current assets, $18 million. Discount Travel also has the following liabilities: accounts payable, $98 million; current portion of long-term debt, $35 million; and long-term debt, $23 million. Based on these amounts, what is the current ratio?

($102 + $94 + $182 + $18)/($98 + $35) = 2.98 (rounded). Current Ratio: current assets/current liabilities

Discount Travel has the following current assets: cash, $102 million; receivables, $94 million; inventory, $182 million; and other current assets, $18 million. Discount Travel also has the following liabilities: accounts payable, $98 million; current portion of long-term debt, $35 million; and long-term debt, $23 million. Based on these amounts, what is the acid-test ratio?

($102 + $94)/($98 + $35) = 1.47 (rounded). Acid Test Ratio: Quick assets/current liabilities

Selected financial data for Company A is provided below: What is the times interest earned ratio for Company A?

($2,620 + $676 + $1,362)/$676 = 6.9 times (rounded). (Net income plus Tax expense and interest expense divided by the interest expense)

Over the first four years of the company's life, the company 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?

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

A company might purchase treasury stock for all of the following reasons

- it wants to increase its net assets by buying its stock low and reselling it at a higher price - management wants to avoid a takeover by an outside party - the company needs the stock to distribute to employees as part of its employee stock purchase plans

The statement of cash flows is designed for all of the following purposes

- to determine a company's ability to pay dividends and interest - to predict future cash flows - to provide information about cash receipts and cash payments during a period

Amir Company's net income and net sales are $18,000 and $1,100,000, respectively, and average total assets are $100,000. What is Amir's return on assets?

18.0% - $18,000 / $100,000 - Net Income / Average Total Assets

A corporation has 100,000 shares of 4% preferred stock outstanding. Also, there are 100,000 shares of common stock outstanding. Par value for each is $100. If a $825,000 dividends is paid, how much goes to the preferred stockholders?

400,000 - Par Value * % * Number of Shares - $100 * 4% * 100,000

Graves Corporation issued 50,000 shares of $1 par value common stock. Later that year, Graves purchased 12,000 shares of its own common stock. Two months later, it reissued 2,000 shares. How many shares are issued and outstanding?

50,000 issued and 40,000 outstanding; Outstanding means owned by outsiders - so 50000 - 12,000 + 2,000 Issued just means that they have in the past been issued, so only the original 50,000 need be considered

Discount-Mart issues $10 million in bonds on January 1, 2018. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond

6% - ($300,000/$10,000,000) × 2 payments per year = 6%.

Which of the following leases is essentially the purchase of an asset with debt financing?

A capital lease

The Viper retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million. The entry to record the retirement will include:

A credit of $6 million to a gain account. Carrying value, $42 million, less cash paid to retire the bonds of $36 million = $6 million gain.

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 credit to Additional Paid-in Capital for $225,000.

Which of the following is not a current liability?

A note payable due in 2 years.

All of the following events at a sandwich shop are transactions except

A representative from the local university contacts the manager of the shop to get a list of catering services.

Which of the following transactions does not affect cash during a period?

A write-off of an uncollectible account; You write it off because you couldn't collect the cash

The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares held as treasury stock. What is the entry when the dividends are declared?

A. Dividends 9,000 Dividends Payable 9,000 Dividends [(20,000 - 5,000) × $.60] = 9,000 Dividends Payable = 9,000

Financial statements can be used by which of the following​ groups?

A. Regulatory bodies B. Investors and creditors C. Individuals D. All of the above****

Amounts owed to a company by its customers would​ be:

Accounts Receivable

How to calculate cash dividends and dividends payable:

Add dividends x dividend per share

The disadvantages of the corporate form of business include

Additional taxes.

Leasing transfers the title to the lessee at the beginning of the lease.

All of the above: Leasing may allow you to borrow with little or no down payment. Leasing can improve the balance sheet by reducing long-term debt. Leasing can lower income taxes.

Which of the following leases is just like a rental?

An operating lease.

Which of the following is not a liability?

An unused line of credit.

For a five-year installment note signed on January 1, 2016, at which of the following dates would the carrying value be the lowest?

April 30, 2020

The following accounts have normal debit​ balances:

Assets

The accounting equation can be expressed as

Assets - Liabilities = Equity

X2 issued callable bonds on January 1, 2018. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity: X2 issued the bonds:

At a premium.

For a five-year installment note signed on January 1, 2016, at which of the following dates would the carrying value be the highest?

August 1, 2016

Which of the following classifications represents the most shares of common stock?

Authorized Shares; All shares must be authorized before they can be issued

Which of the following classifications represents the most shares of common​ stock?

Authorized shares

On the statement of cash flows, which of the following items is classified as a financing activity?

Borrowing cash by signing a long-term note - Financing activities affect long-term liabilities and owner's equity

Which of the following is not true regarding callable bonds?

Callable bonds benefit the bond investor

The mixture of liabilities and stockholders' equity a business uses is called its:

Capital structure

On December 2, Coley Corp. acquired 1,000 shares of its $2 par value common stock for $27 each. On December 20, Coley Corp. reissued 400 shares for $15 each. Which of the following is correct regarding the journal entry for the reissued shares?

Cash (400 × $15) = 6,000 Additional Paid-in Capital = 4,800 Treasury Stock (400 × $27) = 10,800

Payout ratio

Cash dividends declared on common stock / net income

On the statement of cash flows, which of the following items is classified as an investing activity?

Collecting cash on a long-term loan - Investing activities affect long-term assets. In this case, you are decreasing a long-term assets and increasing a current asset.

Which of the following is not a primary source of corporate debt financing?

Common Stock

Which of the following is the primary source of corporate equity financing?

Common Stock

Total stockholders' equity is calculated by

Common Stock - Treasury Stock + Paid in Capital in Excess + Preferred Stock + Retained Earnings

The par value of shares issued is normally recorded in the:

Common Stock account.

If a corporation issues 1,000 shares of $1 par value common stock for $12,000, the journal entry would include a credit to

Common Stock for $1,000 Full Journal Entry: DR Cash $12,000 CR Common Stock $1,000 CR Paid-in Capital $11,000

Paid in capital equation

Common stock + Paid-in capital in excess of par-Common = Total paid-in capital or Common Stock + Preferred Stock+ Paid in capital= Total Paid-in Capital

Corporation issues $2.60 par value common stock for $25,600, the journal entry would include a credit to...

Common stock for $8,320

Nicholas is a software engineer and is starting a consulting practice. What form of business organization limits his liability to the amount he has invested in the​ business?

Corporation

On February 22, Brett Corporation acquired 200 shares of its $5 par value common stock for $25 each. On March 15, the company reissued 70 shares for $30 each. What is true of the entry for reissuing the shares?

Credit Additional Paid in Capital $350. Cash (70 × $30) = 2,100 Treasury Stock (70 × $25) = 1,750 Additional Paid-in Capital = 350

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?

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?

Credit Additional Paid-In Capital $40,000.

Which of the following is not a reason why some companies lease rather than buy?

Leasing transfers the title to the lessee at the beginning of the lease.

Spirit World, Inc., issued 250,000 shares of no-par common stock for $5 per share. The journal entry to record the issuance would be

DR Cash 1,250,000 CR Common Stock 1,250,000 - because there is no par, all of it would go into common stock.

When treasury stock is sold for less than its cost, the entry would include a debit to

DR Paid-in Capital to decrease it to represent the lost capital from selling at a loss

Marvin's Foods has outstanding 400 shares of 2% preferred stock, $100 par value; and 1,500 shares of common stock, $15 par value. Marvin's declares dividends of $13,800. Which of the following is the correct entry?

DR Retained Earnings 13,800 CR Dividends Payable, Preferred 800 CR Dividends Payable. Common 13000 - preferred: 2% * $100 * 400 shares = $800

Quill Corporation paid $28 per share to purchase 900 shares of its common stock as treasury stock. The stock was originally issued at $12 per share. Which of the following would be the journal entry that Quill would make to record the purchase of the treasury stock?

DR Treasury Stock 25,200 CR Cash 25,200

In December 2017, Quebecor Printing received magazine subscriptions for 2018 from a customer, who paid $500 in cash. What would be the appropriate journal entry for this event?

Debit Cash, $500; credit Deferred Revenue, $500.

On November 1, 2018, New Morning Bakery signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. New Morning Bakery should record which of the following adjusting entries at December 31, 2018?

Debit Interest Expense and credit Interest Payable, $2,000. [($200,000 × 6%) × 2/12] = $2,000.

A doctor purchases medical supplies of $640 and pays​ $290 cash with the remainder on the account. The journal entry for this transaction would be which of the​ following?

Debit Supplies Credit Accounts Payable Credit Cash

The entry to record a large stock dividend would include a:

Debit to Stock Dividends

When there is no-par value, you..?

Debit: Cash Credit: Common stock

On June 1, Kingbird, Inc. issues 3,200 shares of no-par common stock at a cash price of $6 per share.

Debit: Cash (19200) Credit: Common stock (19200)

On May 10, Bramble Corp. issues 3,400 shares of $6 par value common stock for cash at $15 per share.

Debit: Cash (51000) Credit: Common stock (20400) Credit: Paid-in Capital in Excess of Par Value-Common Stock (30600)

Metlock, Inc. issues 7,800 shares of $103 par value preferred stock for cash at $110 per share.

Debit: Cash (858000) Credit: Preferred stock (803400) Credit: Paid-in Capital in Excess of Par Value-Preferred Stock (54600)

An attorney performs services of​ $1,100 for a client and receives​ $400 cash with the remainder on account. The journal entry for this transaction would

Debit​ Cash Debit Accounts​ Receivable Credit Service Revenue.

Riverbed Corp has 8,400 shares of common stock outstanding. It declares a $5 per share cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on December 31.

Declaration date: Debit: Cash Dividends (42000) Credit: Dividends payable (42000) Payment date: Debit: Cash dividends (42000) Credit: Cash (42000)

Equity effect: Purchase of 2, 100 shares of treasury stock​ (par value $ 3.00​) at $ 13.00 per share.

Decrease

Equity effect: Declaration of cash dividends of $ 80 million.

Decrease 80 mil

If the indirect method is used, which of the following items appears on a statement of cash flows?

Depreciation Expense; Added to net income

Which of the following statements regarding the corporate form of business is correct?

Disadvantages are that the business is subject to government regulations and double taxation on its income.

To find the stated value of the common stock you..?

Dollar amount / shares issued

To find the par value of the preferred stock you...?

Dollar amount / shares issued and outstanding

Which of the following is not considered to be an advantage of a​ corporation?

Double taxation

Which of the following are included in an employer's payroll tax expense?

Employer portion of FICA taxes. Federal unemployment taxes. State unemployment taxes. All of these.

A bond issue with a face amount of $500,000 bears interest at the rate of 10%. The current market rate of interest is also 10%. These bonds will sell at a price that is:

Equal to $500,000. (Face Value)

Which of the following is the most accurate statement regarding ethics as applied to decision making in accounting?

Ethics involves making difficult choices under pressure and should be kept in mind in making every decision, including those involving accounting.

The costs of doing business are classified​ as:

Expenses

Issuing no-par value stock with a stated value is fundamentally different from issuing par-value stock.

F

Par-value stock is worth more than no-par value stock.

F

Preferred stock is a riskier investment than common stock.

F

The owner of 100 shares of preferred stock has greater voting rights than the owner of 100 shares of common stock.

F

Which of the following is true regarding FICA taxes?

FICA taxes are paid in equal amounts by the employee and the employer.

Which of the following is not an employer payroll cost?

Federal and state income taxes.

Which of the following is not withheld from an employee's salary?

Federal and state unemployment taxes.

The advantages of obtaining long-term funds by issuing bonds, rather than issuing additional common stock, include which of the following?

Funds are obtained without surrendering ownership control, as well as, interest expense is tax-deductible.

Which of the following are employer payroll costs? I. FICA taxes. II. Federal and state unemployment taxes. III. Federal and state income taxes. IV. Employer contributions to a retirement plan.

I, II, and IV

Which of the following are withheld from an employee's salary? I. FICA taxes. II. Federal and state unemployment taxes. III. Federal and state income taxes. IV. Employee portion of health insurance.

I, III, and IV

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., III., V.

Which financial statement would show how well a company performed over the past​ year?

Income Statement

Equity effect: Sale of 500 shares of the treasury stock for $ 19.00 per share. Cost of the treasury stock was $ 13.00 per share.

Increase

A credit entry to an account will

Increase Liabilities

How would the issuance of common stock for cash affect the accounting​ equation?

Increase assets and increase​ stockholders' equity

Adam Corporation issues stock to Cara Riley in exchange for​ $24,000 cash. The impact on Adam​ Corporation's assets from this transaction

Increases Assets

The entry to record a monthly payment on an installment note such as a car loan:

Increases expense, decreases liabilities, and decreases assets.

Which of the following debit and credit rules is​ correct?

Increases in liabilities and​ stockholders' equity are credited.

Which of the following is not a true statement?

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

Which of the following is a characteristic of a​ corporation?

Limited liability of stockholders

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. Also, expansion is achieved without surrendering ownership control.

Identify the asset from the following list of​ accounts:

Inventory A. Notes Payable B. Common Stock C. Retained Earnings D. Inventory****

Outstanding common stock refers to the total number of shares:

Issued less treasury stock.

How does the declaration of a cash dividend affect a company's assets, liabilities, and equity?

It results in an increase to liabilities and a decrease to stockholders' equity, while assets remain the same. - Journal Entry: DR Retained Earnings CR Dividends Payable

The issuer of a 5% common stock dividend (small stock dividend) to common stockholders should credit common stock for an amount equal to the

Market value of the shares issued.

The issuer of a 5% common stock dividend (small stock dividend) to common stockholders should debit stock dividends for an amount equal to the

Market value of the shares issued.

How do you find cash?

Multiple shares x cash per share

How do you find common stock and preferred stock?

Multiple shares x par value common stock

What item flows from the income statement to the statement of retained​ earnings?

Net Income

A company's return on assets is calculated by

Net Income (Return) / Average Total Assets (on Assets)

Which items enter the computation of net cash provided by operating activities?

Net Income, Gain on Sale of Equipment, Depreciation, Accounts Receivable, Inventory, Accounts Payable, Accrued Liabilities

Return on common stockholder's equity ratio

Net income - preferred dividends / average common stockholders equity

Return on stockholders' equity is calculated by

Net income / Average Common Stockholder's Equity

The balance sheet of Sub America reports total assets of $400,000 and $450,000 at the beginning and end of the year, respectively. The return on assets for the year is 10%. What is Sub America's net income for the year?

Net income divided by average total assets equals 10%. Average total assets equal $425,000 [($400,000 + $450,000)/2]; therefore, net income must be $42,500 ($425,000 × 10%).

ROA

Net income-preferred dividend/ average total asset

Which of the three types of activities reported on the statement of cash flows is the most important to evaluate when analyzing a company's long-term survival?

Operating activities; Long-term survival is based off what a company does day-to-day to achieve their goals

Issued stock refers to the number of shares:

Outstanding plus treasury shares.

The issuer of a 100% common stock dividend (large stock dividend) to common stockholders should credit common stock for an amount equal to the

Par value of the shares issued.

The issuer of a 100% common stock dividend (large stock dividend) to common stockholders should debit stock dividends for an amount equal to the

Par value of the shares issued.

Preferred stock is least likely to have which of the following​ characteristics?

Preference as to voting

Convertible bonds:

Provide potential benefits to both the issuer and the investor.

To be​ useful, information must have which of the following fundamental qualitative​ characteristics?

Relevance and faithful representation

Liabilities are defined as:

Resources owed by an entity as a result of past transactions.

A home loan with fixed monthly payments and the house as collateral most closely represents which of the following bond characteristics?

Secured and serial.

To find Common stock outstanding you..?

Shares issued - treasury stocks

Which of the following are not included in an employer's payroll tax expense?

State income taxes.

Outstanding common stock specifically refers to:

Stock in the hands of stockholders.

A corporation issues its preferred stock in exchange for land and a building with a combined market value of $200,000. This transaction increases the corporation's stockholders' equity by $200,000 regardless of the assets' prior book values.

T

The policy-making body in a corporation is called the board of directors.

T

How do you find Paid-in Capital in Excess of Par Value-Common Stock and the Paid-in Capital in Excess of Par Value-Preferred Stock?

Take the difference between cash per share and par value common stock and times that by number of shares to get your total number.

Authorized common stock refers to the total number of shares:

That can be issued.

All publicly held corporations are regulated by what government organization?

The Securities and Exchange Commission.

In each succeeding payment on an installment note:

The amount of interest expense decreases.

In each succeeding payment on an installment note

The amount that goes to decreasing the carrying value of the note increases.

Which of the following is true regarding the relationship between the current ratio and the acid-test ratio?

The current ratio will always be equal to or larger than the acid-test ratio for a specific company.

How to calculate Paid-in Capital in Excess of Par Value-Common Stock

The difference between stock dividends and common Stock Dividends Distributive

The preferred stock is cumulative, and the company did not pay a dividend in each of the two previous years.

The dividend paid to preferred stockholders : (Total shares x $102 par value preferred stock outstanding x 0.09) x 3 The dividend paid to common stockholders : 120000-71604 = 48396 (The dividend paid to common stockholders)

The preferred stock is noncumulative, and the company has not missed any dividends in previous years.

The dividend paid to preferred stockholders: (Total shares x $102 par value preferred stock outstanding x 0.09) The dividend paid to common stockholders : $120,000 cash dividend - The dividend paid to preferred stockholders = 96132 (The dividend paid to common stockholders)

How does the amortization schedule for an installment note such as a car loan differ from an amortization schedule for bonds?

The final carrying value is zero in an amortization schedule for an installment note.

In a​ double-entry accounting​ system,

a debit entry is recorded on the left side of a​ T-account.

The par value of common stock represents:

The legal capital per share of stock assigned when the corporation was first established.

The Common Stock account on a company's balance sheet is measured as:

The number of common shares issued × the stock's par value per share.

How does the stockholders' equity section in the balance sheet differ from the statement of stockholders' equity?

The stockholders' equity section shows balances at a point in time, whereas the statement of stockholders' equity shows activity over a period of time.

Which of the following is a true statement about International Financial Reporting​ Standards?

They are converging gradually with U.S. standards.

How do Cramer's accrued liabilities affect the company's statement of cash flows for 2018?

They increase cash provided by operating activities

How do accounts receivable affect Cramer's cash flows from operating activities for 2018?

They increase cash provided by operating activities - Decreases in current assets are added in the operating section

Common stockholders usually have all of the following rights except:

To participate in the day-to-day operations.

Alliance Corporation holds cash of $8,000 and owes $27,000 on accounts payable. Alliance has accounts receivable of $47,000, inventory of $20,000, and land that cost $60,000. How much are Alliance's total assets and liabilities? Total Assets Liabilities a. $75,000 $87,000 b. $135,000 $27,000 c. $135,000 $47,000 d. $115,000 $47,000

Total Assets Liabilities b. $135,000 $27,000 [Total assets = $135,000 ($8,000 + $47,000 + $60,000 + $20,000). Liabilities = $27,000]

Rock Adventures has 15 employees each working 40 hours per week and earning $30 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January?

Total Salaries Expense [((15 × 40 hours) × $30)] = $18,000 Less: Withholdings Federal Income Taxes ($18,000 × .15) = $2,700 State Income Taxes ($18,000 × .06) = 1,080 FICA Taxes ($18,000 × .0765) = 1,377 Total Withholdings = 5,157 Actual Direct Deposit = $12,843

Action Travel has 10 employees each working 40 hours per week and earning $20 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January?

Total Salaries Expense [(10 × 40 hours) × $20] = $8,000 Less: Withholdings Federal Income Taxes ($8,000 × .15) = $1,200 State Income Taxes ($8,000 × .06) = 480 FICA Taxes ($8,000 × .0765) = 612 Total Withholdings = 2,292 Actual Direct Deposit = $5,708

Alliance Corporation holds cash of $8,000 and owes $27,000 on accounts payable. Alliance has accounts receivable of $47,000 comma inventory of $20,000​, and land that cost $60,000. How much are Alliance​'s total assets and​ liabilities?

Total assets = $135,000 Total Liabilities = $27,000

How to calculate Common Stock Dividends Distributive

Total number of shares x par

Greger Peterson is a senior manager at a public accounting firm making a base salary of $180,000 a year ($15,000 per month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum. Assuming the Social Security maximum base amount is $118,500, how much will be withheld during the year for Greger's Social Security and Medicare.

Total withheld for: Social Security $118,500 × .062 = 7,347 Medicare $180,000 × .0145 = 2,610 Total $9,957

Mike Gundy is a college football coach making a base salary of $2,400,000 a year ($200,000 per month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum. Assuming the Social Security maximum base amount is $118,500, how much will be withheld during the year for the coach's Social Security and Medicare.

Total withheld for: Social Security $118,500 × .062 = 7,347 Medicare $2,400,000 × .0145 = 34,800 Total $42,147

Which of the following statements is not true about a​ 3-for-1 stock​ split?

Total​ stockholders' equity increases.

Funds are obtained without surrendering ownership control, as well as, interest expense is tax-deductible.

Unsecured and term.

Strikers, Inc. sells soccer goals to customers over the Internet. History has shown that 2% of Strikers' goals will need repair under the warranty program. For the year, Strikers has sold 4,000 goals and 45 have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty expense for the year

[(4,000 goals × 2%) × $200] = $16,000.

The balance sheet of Gatekeeper reports stockholders' equity of $800,000. The debt to equity ratio is 2.5. What is Gatekeeper's total liabilities?

X/$800,000 = 2.5, therefore X = ($800,000 × 2.5) = $2,000,000.

X2 issued callable bonds on January 1, 2018. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity: X2 buys back the bonds for $103,000 immediately after the interest payment on 12/31/2019 and retires them. What gain or loss, if any, would X2 record on this date?

X2 paid $103,000 to remove a liability with a carrying value of $102,673. The difference is a loss of $327.

Is stated value the same thing as par value?

Yes, calculate it the same way as well. You will get the same answer

The balance sheet of Montezuma reports total assets of $900,000 and $1,100,000 at the beginning and end of the year, respectively. The net income for the year is $100,000. What is Montezuma's return on assets?

[$100,000/($900,000 + $1,100,000)/2] = 10%

On September 1, 2018, Daylight Donuts signed a $100,000, 9%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2019. Daylight Donuts should report interest payable at December 31, 2018, in the amount of:

[($100,000 × 9%) × 4/12] = $3,000.

The basic form of capital stock is

a share of common stock

The basic form of capital stock is

a share of common stock.

Which of the following is the most accurate statement regarding ethics as applied to decision making in accounting? a. Ethics involves making difficult choices under pressure and should be kept in mind in making every decision, including those involving accounting. b. Ethics has no place in accounting because accounting deals purely with numbers. c. It is impossible to learn ethical decision making because it is just something you decide to do or not to do. d. Ethics is becoming less and less important as a field of study in business

a. Ethics involves making difficult choices under pressure and should be kept in mind in making every decision, including those involving accounting.

How would the issuance of common stock for cash affect the accounting equation? a. Increase assets and increase stockholders' equity b. Increase liabilities and decrease stockholders' equity c. Increase assets and increase liabilities d. Decrease assets and decrease liabilities

a. Increase assets and increase stockholders' equity

To be useful, information must have which of the following fundamental qualitative characteristics? a. Relevance and faithful representation b. Timeliness and affordability c. Expediency and relevance d. Faithful representation and diversity

a. Relevance and faithful representation

The accounting equation can be expressed as a. Assets = Liabilities − Equity. b. Assets + Liabilities = Equity. c. Assets − Liabilities = Equity. d. Equity − Assets = Liabilities.

c. Assets − Liabilities = Equity. [This is not the typical way the accounting equation is expressed (Assets - Liabilities = Equity), but it may be rearranged this way.]

On which financial statement would the ending balance of the account "accounts receivable" be found? a. Income statement b. Statement of retained earnings c. Balance sheet d. Statement of cash flows

c. Balance sheet

Nicholas is a software engineer and is starting a consulting practice. What form of business organization limits his liability to the amount he has invested in the business? a. Proprietorship b. Partnership c. Corporation d. None of the above

c. Corporation

What item flows from the income statement to the statement of retained earnings? a. Cash b. Dividends c. Net income d. Inventory

c. Net income

Which of the following is a true statement about International Financial Reporting Standards? a. They are considered to be the single strongest set of accounting standards in the world. b. They are more exact (contain more rules) than U.S. generally accepted accounting principles. c. They are converging gradually with U.S. standards. d. They are not being applied anywhere in the world yet, but soon they will be.

c. They are converging gradually with U.S. standards.

When using the direct method of preparing the statement of cash flows, cash receipts from operating activities do not include

collection of a long-term note receivable - only Current assets and liabilities are included in operating activities

Total paid-in capital is calculated by

common stock + paid in capital in excess + preferred stock

Financial statements can be used by which of the following groups? a. Individuals b. Investors and creditors c. Regulatory bodies d. All of the above

d. All of the above

What item flows from the statement of retained earnings to the balance sheet? a. Cash b. Dividends c. Net income d. Retained earnings

d. Retained earnings

The costs of doing business are classified as: a. assets. b. liabilities. c. revenues. d. expenses

d. expenses

A stock split

has no effect on total stockholders' equity; you are just tearing a piece of paper in half - making on share of stock two, with it's value cut in half

A stock split

has no effect on total​ stockholders' equity.

Thorpe Corporation purchases a new delivery truck and signs a note payable at the truck dealership for the total cost. The impact of this transaction on Thorpe Corporation

increases assets and increases liabilities.

Blake Company completed a consulting job and billed the customer​ $5,000. The impact on Blake Company from this transaction

increases assets and increases​ stockholders' equity.

On the statement of cash flows, increases and decreases in long-term assets resulting from cash transactions are reported as

investing activitIes - Increases in LONG-TERM ASSETS long-term = not operating assets = investing

Selling equipment for cash is reported on the statement of cash flows under

investing activities; selling a long-term asset

Return on equity

is a measure used to compare companies of different sizes.

Return on equity

is a measure used to compare companies of different sizes; calculated by net income - preferred dividends / average common stockholder's equity

A company might purchase treasury stock for all of the following reasons except

management wants to decrease the earnings per share of common stock.

When using the indirect method of preparing the statement of cash flows, the starting point to determine net cash provided by operating activities is

net income

Equity effect: A 3​-for-1 stock split. Prior to the​ split, 70 million shares of $ 3.00 par common stock were outstanding.

no effect

In most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now.

one; one

The major difference between the way a statement of cash flows is prepared using the indirect method and the way the same statement is prepared using the direct method is how _____ are reported.

operating activities

Stockholders are eligible for a dividend if they own the stock on the date of

record

How does the declaration of a cash dividend affect a​ company's assets,​ liabilities, and​ equity?

results in an increase to liabilities and a decrease to​ stockholders' equity, while assets remain the same

The two main categories of stockholders' equity are

retained earnings and paid-in capital

The two main categories of​ stockholders' equity are

retained earnings and​ paid-in capital.

The statement of cash flows does not report

revenues and expenses for the current year DOES REPORT: - cash payments in the current year - noncash investing and financing activities in the current year - cash receipts in the current year

Profits generated by the company are a(n):

source of internal financing

A company declares a​ 5% stock dividend. The debit to Retained Earnings is an amount equal to

the market value of the shares to be issued.