Accounting 115 Final

*** Refer to packet for info*** Assuming there are no dividends in arrears, the book value per share of common stock is: A. $26.25 B. $25.00 C. $16.25 D. $5.00

A

The valuation principle of "mark-to-market" applied to investments classified as available for sale securities: A. Affects the current period income statement, but not the balance sheet B. Enhances usefulness of the balance sheet in evaluating solvency of a business C. Applies to marketable securities and inventories D. Requires a corporation to adjust its capital stock account to reflect current market value of its outstanding capital stock

B

When a corporation has a right to redeem bonds in advance of the maturity date, it is known as: A. Convertible B. Callable C. Junk bonds D. Debentures

B

When treasury stock is reissued at a price above cost: A. The corporation recognizes a gain to be recorded on the income statement B. Total paid-in capital is increased C. The resistance is treated as an extraordinary item in the corporations income statement D. Retained earnings is increased

B

***Refer to packet for info*** Assume that in its financial statements, Phoenix Products uses straight-line depreciation and rounds depreciation for fractional years to the nearest month. Depreciation expense recognized on this machinery in 2005 and 2006 will be: A. $3,250 in 2005 and $13,000 in 2006 B. $3,800 in 2005 and $14,000 in 2006 C. $8,000 in 2005 and $12,000 in 2006 D. $4,000 in 2005 and $126,000 in 2006

C

Which of the statement is true about a stock split? A. Total shareholders' equity increases B. Total shareholders' equity decreases C. Total shareholders' equity remains the same D. A change in total stockholders' equity depends upon whether it is a 2-for1- split or a 1-for-2 split

C

*** Refer to packet for into*** Employees' annually; "take-home-pay," totals approximately: A. $765,000 B. $722,500 C. $784,975 D. $699,975

D

***Refer to packet for info*** Assume that i its financial statements, Phoenix Products uses the 150%-declining-balance method and the half-year convention. Depreciation expense in 2005 and 2006 will be: A. $9,900 in 2005 and $16,830 in 2006 B. $9,000 in 2005 and $15,300 in 2006 C. $9,000 in 2005 and $16,700 in 2006 D. $9,750 in 2005 and $16,575 in 2006

A

***Refer to packet for info*** Assume that in its financial statements, Phoenix Products uses the 200%-declining-balance method and the half-year convention. Depreciation expense in 2005 and 2006 will be: A. $13,200 in 2005 and $21,120 in 2006 B. $13,000 in 2005 and $26,000 in 2006 C. $13,000 in 2005 and $20,800 in 2006 D. $12,000 in 2005 and $19,200 in 2006

A

***Refer to packet for info*** In the year 2009, Phoenix Products sells this machinery for $3,000. At the date of the sale, the machinery had been depreciated by Phoenix Products to estimate residual value of $6,000. This sale results in: A. A $3,000 loss in both the company's financial statements and income tax returns B. No gain or loss in either the financial statements or income tax return C. A $3,000 loss in the financial statements, a $3,000 gain in the income tax return D. A $3,000 loss in the financial statements, but no gain or loss in the income tax return

A

At year-end, Kwan restates the carrying value of its inventory using periodic LIFO costing procedures. Under periodic costing procedures, the LIFO cost of the inventory is: A. $9,800 B. $10,600 C. $10,800 D. Some other amount

A

If a corporation has issued a single class of stock, it must be: A. Common B. Preferred C. Par-value D. Cumulative preferred

A

In order to list the use of a shell company, the SEC has proposed: A. Greater financial disclosures B. Eliminating this type of company C. Arresting promoters of shell companies for fraud D. That its stock only be sold in foreign countries

A

Responsibility for selection of the depreciation methods used in financial reporting rests with: A. Company management B. The FASB C. The IRS D. The CPA firm that audits the company's financial statements

A

Which depreciation method is most commonly used among publicly owned corporations? A. Straight-line B. Double-declining balance C. Units-of-output D. All three of the above are equally employed

A

Which of the following is not an accurate statement regarding the distinction between debt and equity? A. Only equity is considered a source of financing for operations of the business, since debt must be repaid at a specific maturity date B. If a business ceases operations and liquidates, claims of all credits have legal priority over claims of the stockholders C. Most debt requires the borrower to pay interest annually; equity financing does not obligate the company to make a specified annual payment D. The providers of equity are owners of the business; the providers of borrowed funds are creditors

A

Which of the following will cause net income to be overstated for the following year? A. Current year's ending inventory is understated B. Current year's ending inventory is overstated C. Next year's beginning inventory is overstated D. Next year's ending inventory is understated

A

With respect to the valuation of inventory and measurement of the cost of goods sold, the principle of consistency means that the same method should be applied: A. In successive accounting periods B. By all companies in a given industry C. To all products in the inventory D. In financial statements and income tax returns

A

*** Refer to packet for info*** The company's annual payroll-related expenses amount to approximately: A. $914,800 B. $1,081,825 C. $1,146,850 D. Some other amount

B

***Refer to packet for problem*** Assuming the LIFO flow assumption is in use, the perpetual inventory records will indicate an ending inventory of this product of: A. $9,800 B. $10,600 C. $10,800 D. Some other amount

B

If a company uses a percentage of net sales in computing the amount of uncollectible accounts expense: A. No valuation allowance will be required B. The relationship between revenue and expenses is being stressed more than the valuation of receivables at the balance sheet date C. The existing balance in the Allowance for Doubtful Accounts all be increased sufficiently to equal the probable loss indicated by the percentage of net sales computation D. Any past-due accounts will be listed as a separate item in the balance sheet

B

Marketable securities are classified into three types: which one is not one of the three types? A. Available-for-Sale B. Mark-to-Market C. Trading D. Held-to-Maturity

B

On December 1, Inventive Corporation borrowed $55,000 from a bank and signed a 12%, 90-day note payable in the amount of $55,000. The December 31 adjusting entry will be: A. Debit interest expense $550 and credit notes payable $550 B. Debit interest expense $550 and credit interest payable $550 C. Debit discount on notes payable $1100 and credit interest payable $1100 D. Debit interest expense $550 and credit cash $550

B

On November 1 of the current year, Century Company borrowed $60,000 by issuing a 12% six-month note payable, all due at maturity date. Interest expense on this note to be recognized during the current amounts to: A. $600 B. $1,200 C. $1,800 D. $4,800

B

On Saturday, June 30, PK Pool Supplies sold merchandise to John Krock on account. The sales price was $5,300, and the cost of goods sold was $4,200. The sales revenue was recorded immediately, but the entry recording the cost of goods sold was dated Monday, July 2. As a result, net income for June was: A. Overstated by $5,300 B. Overstated by $4,200 C. Overstated by $1,100 D. Not affected, but the net income for July is understated

B

Signma corporation is authorized to issue 4,000,000 shares of $2 par value capital stock. The corporation issued half the stock for cash at $4 per share, earned $280,000 during the first three months of operation. and declared a cash dividend of $40,000. The total pain-in capital of Sigma Corporation after three months of operation is: A. $7,960,000 B. $8,000,000 C. $8,250,000 D. $8,280,000

B

***Refer to packet for info*** Assume that in its financial statement, Phoenix Products uses straight-line depreciation and the half-year convention. Depreciation expense recognized on this machinery in 2005 and 2006 will be: A. $7,500 in 2005, and $13,000 in 2006 B. $8,000 in 2005, and $16,000 in 2006 C. $6,000 in 2005 and $12,000 in 2006 D. $5,000 in 2005 and $10,000 in 2006

C

A bank reconciliation explains the differences between: A. Cash receipts and cash disbursements for the period B. The balance of cash in the bank and the budgeted expenditures for the upcoming accounting period C. The balance per bank statement and the cash balance per the accounting records of the depositors D. The balance per bank statement and cash expected to be on hand according to the cash forecast

C

A capital lease is recorded in the accounting records of the lessee by an entry: A. Debiting rent Expense and crediting cash each time a lease payment is made B. Debiting cash and crediting rental revenue each time a lease payment is received C. Debiting an asset account and crediting a liability account for the present value of the future lease payments D. Debiting an asset accounts and crediting sales for the present value of the future lease payments

C

After March, 2004 international standards required that goodwill: A. Be capitalized and amortized over 20 years or less B. Be capitalized and amortized over 40 years or less C. Be capitalized and reviewed annually and its value should be adjusted if impaired D. Be expensed immediately

C

All the following steps are included in the preparation of a bank reconciliation except: A. Comparing deposits listed on the bank statement with the deposits shown in the accounting records B. Arranging checks by serial numbers and comparing with those listed in the accounting records C. Deducting any debit memoranda from the balance on the bank statement D. Preparing journal entries for any adjustments to the depositors records

C

On September 1, 005, Saturn Corporation's common stock was selling at a market price of $300 per share. On that date, Saturn announced a 3 for 2 stock split. At what price would you expect the stock to trade immediately after the split foes into effect? A. $150 B. $450 C. $200 D. $300

C

Royal Corp. has total stockholders' equity of $5,100,000. The company's outstanding capital stock includes 100,000 shares of $10 par value common stock and 20,000 shares of 6%, $100 par value preferred stock. (No dividend are in arrears.) The book value per share of common stock is: A. $19 B. $29 C. $31 D. $51

C

The current portion of long-term debt should be reported: A. Separately in the long-term liabilities section of the balance sheet B. In the long-term liabilities section of the balance sheet, along with the other long-term debt C. In the current liabilities section of the balance sheet D. In a seperat section of the balance sheet, between long-term liabilities and shareholders' equity

C

Under the allowance method, when a receivable that had been previously written off is collected: A. Net income is increased B. Net assets are increased C. Net income and net assets are not affected D. Net assets and net income are both increased

C

Which of the following does not affect the market prices of an outstanding bond issue? A. Fluctuations in the current market rate of interest B. The credit rating of the issuing corporation C. The price at which the bonds were originally issued D. The length of time remaining until the bonds' maturity date

C

Which of the following is not a basic means of achieving internal control over cash receipts? A. Separate the functions of cash handling and maintenance of accounting records B. Prepare a daily listing of cash receivable through the mail C. Deposit all cash receipts daily in the petty cash fund D. Use cash registers or renumbered sales tickets to record cash sales

C

Which of the following is not a characteristic of the corporate form of organizations? A. The owners of a corporation cannot lose more than the amount of their investment B. Shares of stock in a corporation are more readily transferable than in an interest in a partnership C. Stockholders have authority to decide by majority vote the amount of dividends to be paid D. The corporation is a very efficient vehicle for obtaining large amounts of capital required for large-scale production

C

Which of the following results in the inventory being stated at the most current acquisition costs? A. Specific identification B. LIFO C. FIFO D. Average cost

C

Which of the following situations is impossible? A. Book value is greater than residual value B. Book value is equal to the residual value C. Book value is less than residual value D. Book value is less than the original cost

C

Adam Corporation's inventory of a particular product includes 200 units purchased at a per-unit cost of $40, and another 100 units purchased at a unit cost of $50. If Adam sells 10 units of his product, the cost of goods sold will be: A. $400 B. $450 C. $500 D. The answer will depend upon the inventory flow assumption in use

D

Employers are required to pay all of the following on the wages paid to each employee except: A. Social security taxes B. Worker's compensation insurance C. Medicare taxes D. Health insurance benefits

D

For the Financial Statements of publicly traded companies, MACRS: A. Is recommended B. Is required C. Is optional D. Is not considered to be in conformity with GAAP

D

For the last several years Greenleaf Corporation has operated with a gross profit rate of 30%. On January 1 of the current year the company had on hand inventory with a cost of $400,000. Purchases of merchandise during January amounted to $125,000, and sales for the month were $260,000. With the gross profit method, the estimated inventory at January 31 is: A. $100,000 B. $195,000 C. $265,000 D. $343,000

D

In a period of rising prices, a company is most likely to use the FIFO method of pricing inventory if: A. Each item in the inventory is unique B. Management wants the same unit cost assigned to items sold and items remaining in inventory C. Management's primary objective is to minimize income taxes D. Management wants the company's income statement to indicate the highest possible amounts of gross profit and net income

D

Roberts Corporation has net assets of $1,872,000 and paid-in capital of $700,000. The only stock issue consists of 72,000 outstanding shares of common stock. From this information, it can be deducted that the company has: A. Retained earnings of $1,872,000 B. A deficit of $1,172,000 C. A book value of $10 per share of common stock D. A book value of $26 per share of common stock

D

The lower of cost or market rule may be applied by comparing the market value of the inventory to the cost of the inventory based on A. Individual inventory items B. Major inventory categories C. The entire inventory D. All of the above

D

The overall effect of declaring and distributing a cash dividend includes each of the following except: A. Reducing total assets B. Reducing stockholders' equity C. Reducing the balance of the retained earning amount D. Reducing net income for the period

D

The term "junk bond" describes bonds with: A. Low interest rates B. Indefinite maturity dates C. Low maturity values D. High risk

D

When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the depositor's records are: A. To correct errors made by the bank in recording the dollar amount of cash transactions during the period B. To reconcile items that explain the difference between the balance per the books and the balance per the bank statement C. To record outstanding checks and bank service charges D. To record items that explain the difference between the balance per the accounting records and the adjusted cash balance

D

When preparing a bank reconciliation, checks outstanding will: A. Increase the balance per depositor's records B. Decrease the balance per depositor's records C. Increase the balance per the bank statement D. Decrease the balance per the bank statement

D

Which of the following would not be considered part of the cost of equipment recently purchased? A. Sales Tax B. Transportation charges C. Installation and setup charges D. All three capitalized costs

D

With available-for-sales securities, unrealized holding gains and losses are: A. Not reported until recognized B. Reported on the income statement C. Reported as an unearned revenue on the balance sheet D. Reported in the stockholders' equity section of the balance sheet

D