ACC 131 Final Exam

Which internal control is violated when he cashier at a cash register in a retail store also records the daily receipts in a journal?

Segregation of duties

DAE Parts Shop began business on January 1, 2019. The corporate charter authorized issuance of 20,000 shares of $5 par value common stock and 5,000 shares of $10 par value, 5% cumulative preferred stock. DAE issued 12,000 shares of common stock at $25 per share on January 2, 2019. What effect does the entry to record the issuance of stock have on total stockholders' equity?

increase of $300,000

A company would repurchase its own stock for all of the following reasons except:

it believes the stock is overvalued.

With regard to preferred stock,

its stockholders may have the right to participate, along with common stockholders, if an extra dividend is declared.

Authorized stock represents the:

maximum number of shares that can be issued.

Which of the following should be considered when a company decides to declare a cash dividend on common stock?

the cash available and the retained earnings balance

Blurry Corp. Issued 10-year, 9%, %100,000 bonds paying interest on an annual basis, at a $6,200 premium. Which one of the following statements is true?

Blurry's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year

Accumulated depreciation is classified as an

Contra-asset account

The sales discount account is a(n):

Contra-revenue account

Using the perpetual inventory system, which h of the following entries would record the cost of merchandise sold on credit?

Debit: Cost of goods sold Credit: Inventory

the adjustment fort he expiration of prepaid issuance original recorded as an asset, consists of a debit to:

Insurance expense and a credit to prepaid insurance

On October 1st, Hillsmith Company borrowed $60,000 from Eight National Bank, on a 1-year, 7% note. If the company's fiscal year ends on December 31st, Hillsmith should make a year-end adjusting entry to increase:

Interest Payable $1,050

When a company declares a 3-for-1 stock split, the number of outstanding shares:

triples.

The account called Accounts Receivable is used:

When money is due the company from another business or individual general from selling to a customer on credit

The accrual refers to an event:

Where the expense or revenue is recorded before the cash settlement

If a company purchases treasury stock for $6,000 and then reissues it for $5,000, the difference of $1,000 is:

a decrease in stockholders' equity.

As a result of a stock split,

the par value of the stock is changed in the reverse proportion as the stock split.

A 10,000 bond quotes at 103.5 is selling for:

$10,350

Petry Corp. issues 20,000 shares of $.50 per common stock per share. The account for additional paid-in capital will increase by:

$110,000

Given the following date: COGS? Sales revenue: $1,850,000 Beginning Inventory $390,000 Ending Inventory $310,000 Purchases made $1,100,000

$1,180,000

Sanchez Corp. Dec. 31, 2011 Preferred stock $30,000 Common Stock $60,000 Additional Paid-In Capital Preferred Stock $7,000 Additional Paid-In Capital Common Stock $18,000 Retained Earnings $40,000 A balance sheet prepared on Dec. 31st 2011 would report total paid-in capital of:

$115,000

Shea Company has 100,000 shares of 6%, $50 par value, cumulative preferred stock. In 2018, no dividends were declared on preferred stock. In 2019, Shea had a profitable year and decided to pay dividends to stockholders of both preferred and common stock. If they have $750,000 available for dividends in 2019, how much could it pay to the common stockholders?

$150,000

Sanchez Corp. Dec. 31, 2011 Preferred stock $30,000 Common Stock $60,000 Additional Paid-In Capital Preferred Stock $7,000 Additional Paid-In Capital Common Stock $18,000 Retained Earnings $40,000 A balance sheer on Dec 31st 2011 would report a total stockholder's equity of:

$155,000

The stockholder's equity accounts of Jamison Corp. include $7,500 shares of common stock with a state value of $.50 & 5,000 shares of treasury stock with a total cost of $25,000. The total number of shares outstanding for Jamison Corporation is:

$32,500

RVR Enterprises shows net income of $100,000 for 2019 and retained earnings of $500,000 on its December 31, 2019 balance sheet. During the year, RVR declared and paid $60,000 in dividends. What was RVR's retained earnings balance at December 31, 2018?

$460,000

The account that shows the amount of accounts receivable that the business does not except to collect is:

Allowance for Doubtful Accounts

the interest on a $50,000 note @ 12% for 2 months is:

1,000

A company has a discount policy, which states that, if a customer pays within ten days of the invoice, the customer can take a 2% discount; otherwise the full amount is due in 30 days from the date of the invoice. Which of the following abbreviations are used in business to reflect this discount policy?

2/10, n/30

Which of the following does not require a journal entry for a bank reconciliation?

Collection by the bank of a note receivable

Lincoln Corp. issued $10,000,000 in bonds. The bonds were sold at a price of $97. The journal entry to record the issuance is:

Debit Cash: 9,700,000 Debit discount on bonds payable: 300,000 Credit Bonds Payable: 10,000,000

Thornwood Partners began business on January 1, 2019. The corporate charter authorized issuance of 75,000 shares of $1 par value common stock and 8,000 shares of $3 par value, 10% cumulative preferred stock. On July 1, Thornwood issued 20,000 shares of common stock in exchange for 2 years' rent on a retail location. The cash rental price is $3,000 per month, and the rental period begins on July 1. What is the correct entry to record the July 1 transaction?

Debit to Prepaid Rent, $72,000; credit to Common Stock, $20,000; credit to Additional Paid-In Capital—Common Stock, $52,000

Accrued interest on a short-term note payable is recorded by

Debiting interest expense and crediting interest payable

Which inventory cost flow method assigns the cost of the most recent items purchased to cost of goods sold?

LIFO

Which of the following assets is not subject to depreciation?

Land

When a company declares a cash dividend, which of the following is true?

Liabilities are increased.

The matching principle:

all of the above (lol)

The normal balance of an expense account is a _________ while the normal balance of a revenue account is a ___________

debit, credit

When a company retires its own common stock, the company must:

decrease the Common Stock account balances by the original issue price.

Which of the following accounts has a normal debit balance

dividends

Which of the following is not a component of stockholders' equity?

dividends payable

Which of the following is an example of an accrual?

Interest earned but not yet received

Market conditions may force a company to issue its bonds at less than the face value on the bonds. The discount on bonds payable account is used in this situation. This account:

Is a contra asset account

What is the effect of a stock dividend on stockholders' equity?

Total stockholders' equity stays the same.

A repair to an appliance under warranty occurs within the warranty period. What adjustment is made on the seller's accounting records?

Warrant Liability credited

All of the following with affect retained earnings except

Investments by owners

Which of the following is the appropriate entry to record the declaration of cash dividends?

Dividends Dividends Payable

Ames Corporation repurchases 10,000 shares of its common stock for $12 per share. The shares were originally issued at an average price of $10 per share. Later it resells 6,000 of the shares for $15 per share and the remaining 4,000 shares for $17 per share. How much gain or loss should Ames report on its income statement as a result of these transactions?

0

McKean Corporation authorized 500,000 shares of common stock in its articles of incorporation. On May 1, 2019, 100,000 shares were sold to the company's founders. However, on October 15, 2019, McKean repurchased 20,000 shares to settle a dispute among the founders. At this date, how many shares were issued and outstanding, respectively?

100,000 and 80,000

Wilsonwear uses a perpetual inventory system and the FIFO costing method. The following information is available for the month of March 1 On hand, 10 units @$2 each $20 4 Sold 8 unites for sales prices of $10 $80 22 Purchased 50 unites at $4 each $200 26 Sold 48 units for sales price of $10 each $480 How much is ending inventory at March 31

16?

Harvey Corporation shows the following in the stockholders' equity section of its balance sheet: The par value of its common stock is $0.25 and the total balance in the Common Stock account is $50,000. Also noted is that 15,000 shares are currently designated as treasury stock. The number of shares outstanding is:

185,000

A company purchases a truck at a cost of $12,000. The truck estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. If the company uses the straight-line method of depreciation, w hat is the amount of depreciation expense for 2012?

2,000

In 2010, ABC Plumbing Co. sold 400 water heaters at $375 each. The water heaters carry a two-year warranty for repairs. ABC estimates that repair costs will average 2% of the total selling price. How much is ABC's warranty expense for 2010?

3,000

Wilsonwear uses a perpetual inventory system and the FIFO costing method. The following information is available for the month of March 1 On hand, 10 units @$2 each $20 4 Sold 8 unites for sales prices of $10 $80 22 Purchased 50 unites at $4 each $200 26 Sold 48 units for sales price of $10 each $480 How much is cost of goods sold for March?

560?

If ABC Corp. has 120,000 shares of common stock authorized, has 75,000 shares of common stock issued and holds 6,000 shares of common stock as treasury stock, the total number of outstanding shares of ABC Corp. amounts to:

69,000

Lock Corp. sold 2,000,000, 6%, 10 year bonds on January 1, 2010. The bonds were dated January 1, 2010 and pay interest January 1. Lark uses the straight-line method to amortize bond premium or discount. The journal entry to record the issuance of the bonds, assuming that the bonds sold at 103, would include:

A credit to cash for 2,060,000

The closing entry for utilities expense would include:

A debit to Income Summary and a credit to Utilities Expense

Net realizable account receivable is calculated as:

Accounts receivable less allowance for doubtful accounts

Which of the following accounts is not involved in closing entries

Accumulated depreciation-equipment

The carrying value of bonds issued at a premium is calculated by:

Adding the remaining balance of premium on Bonds Payable to Bonds Payable

The process of allocating a property, plant and equipment asset's cost to expense over the period the asset is used is called

Amortization

Which of the following is a correct fundamental accounting equation?

Assets=Liabilities+Stockholder's Equity

The ending balance in a retained earnings appears on the

Balance sheet and statement of retained earnings

The issuance of no-par common stock requires a:

Credit to Common Stock

The issuance of common stock above par value requires a:

Credit to additional paid-in capital (APIC)

The entry to record the issuance of 8,000 shares of $5 par value common stock at $9 per share includes a:

Credit to common stock for 40,000

Jenses Distribution Company's sales for the day totaled $10,552. Jenkins collected an additional 7.5% in sales tax. The entry to record the day's sales includes a:

Credit to sales tax payable

Under the allowance method, the entry to record the bad debts estimate includes a:

Debit to bad debt expense

Receiving a check from a customer on account would include a:

Debit to cash and a credit to Accounts Receivable

Cash collected and recorded by a company but not yet reflected in a bank statement are known as:

Deposits in Transit

There are some liabilities, such as income taxes payable and the estimated warranty liability, for which the amounts must be estimated so they can be recorded in the same period as the related revenues. Failure to record these accounts in the same period as the related revenues is a violation of the:

Matching principle

A check returned by a bank because the issuer's cash account balance count not cover the check is called a(n):

NSF Check

Which of the following accounts is decreased with a debit

Notes Payable

All amounts paid to acquire a property, plant, and equipment asset and to get it ready for its intended use are referred to as:

Operating expenses

The book value of a depreciable asset equals:

Original cost - accumulated depreciation

Treasury stock causes a:

Outstanding shares to be less than issued shares

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would:

Record a decrease in inventory and an increase in cost of good sold for the cost of the merchandise sold

The best definition of assets is the:

Resources belonging to a company having future benefits to the company

Accounts which are closed at the end of an accounting period include:

Revenues expenses and dividends

Which internal control activity is followed when inventory storage areas are secured with limited access?

Safeguard of assets and records

The adjusting entry to record salaries owed to employees but not paid until the next accounting period involves a credit to:

Salaries payable

A gain in recorded on the sale of property, plant and equipment asset when:

The asset is sold for a price greater than the asset's book value

Which of the following best describes the term expenses?

The cost of assets used, or the liabilities created, in the operations of a business

When a company purchases treasury stock, which of the following statements is true?

The cost of the treasury stock reduces stockholders' equity.

The balance of the $2.50 par value Common Stock account for Patriot Company was $240,000,000 before its recent 2-for-1 stock split. The market price of the stock was $50 per share before the stock split. What occurred as a result of the stock split?

The market price of the stock dropped to approximately $25 per share.

Which of the following statements is true?

The shares that are in the hands of the stockholders are said to be outstanding.