Accounting Module 6

Just In Thyme, Inc., has the following year-end shareholders' equity balances: Common Stock of $20,000; Additional Paid-in Capital of $30,000; and Retained Earnings of $50,000. If Just In Thyme repurchases $10,000 of its stock, the total shareholders' equity balance would equal ______.

$90,000 (30,000+10,000+50,000=90,000)

Treasury Stock represents ______. (Select all that apply.) -the amount paid for stock reacquired and currently held in its treasury -a contra-equity account -stock sold in excess of par value -stock issued in exchange for treasury bills -stock issued in exchange for U.S. treasury stock

-the amount paid for stock reacquired and currently held in its treasury -a contra-equity account

On January 1, Year 1, Brewed Awakening, Inc., borrowed $380,000 at 4% interest. The loan will be repaid with equal annual installment payments of $70,000 made on the last day of each year. The entry to record the second year's payment includes a debit to Interest Expense of $______.

13008 (380,000*.04=15,200---380,000-(70,000-15,200)=325,200*.04=13,008)

On November 1, Year 1, Pans on Fire, Inc., borrowed $100,000 cash on an 1-year, 6% note payable that requires Pan's on Fire to pay both principal and interest on October 31, Year 2. The last adjusting journal entry was made on December 31, Year 1, its year end. The entry to record the payment on October 31, Year 2 would include a ______. (Select all that apply.) -credit to Interest Payable of $6,000 -credit to Note Payable of $106,000 -credit to Cash of $106,000 -debit to Interest Expense of $5,000 -debit to Note Payable of $100,000 -debit to Interest Expense of $6,000 -debit to Interest Payable of $1,000

debit to Interest Expense of $5,000 debit to Note Payable of $100,000 debit to Interest Payable of $1,000 credit to Cash of $106,000

Ima Rich purchased 100 shares of Stockits, Inc.'s $1 par value common stock for $5 per share. Which statements are true regarding the effect of this transaction on Stockits' financial statements? (Select all that apply.) -A gain on will be reported on the income statement. -Stockholders' equity on the balance sheet decreases. -Shareholders' equity on the balance sheet increases. -The financing activities section of the statement of cash flows increases. -The investing activities section of the statement of cash flows increases.

-The financing activities section on the statement of cash flows increases -Stockholders' equity on the balance sheet increases

The purchase of treasury stock ______. -decreases total assets and decreases shareholders' equity -increases one asset and decreases another asset -increases total assets and increases total shareholders' equity -decreases total assets and increases total shareholders' equity -has no effect on total assets, total liabilities, or total shareholders' equity

decreases total assets and decreases shareholders' equity

On January 1, Year 1, Faux Sure, Inc., borrowed $40,000 on a five-year, 7% note. The loan will be repaid in 5 equal installments of $9,756 each year, beginning on December 31, Year 1. Notes Payable at December 31, Year 2, will be _____ Notes Payable at December 31, Year 1.

lower than

Diva, Inc., declared and paid $10,000 of dividends during the year. Dividends of $10,000 may be found on the ______.

statement of shareholder's equity

Identify each as a Current Liability, Long-term Liability or Neither. 1.10-Year Bonds Payable 2.Common Stock 3.3-Month Notes Payable 4.Accounts Payable 5.Accounts Receivable

1. Long-term liability 2. Neither 3. Current liability 4. Current liability 5. Neither

Select those statements below that are true about cash dividends. (Select all that apply.) a. on the declaration date, liabilities are increased b. on the payment date, retained earnings are decreased c. on the date of record, retained earnings are decreased d. on the payment date, current assets are decreased

A and D

On November 1, Year 1, Needham, Inc., issued a 5-month, 6%, $10,000 note. Record the adjusting journal entry for the interest incurred for the year ended December 31, Year 1.

DR: Interest Expense $100 CR: Interest Payable $100

Booked Solid Co. received $1,000,000 for the issuance of its stock on January 1. The credit to the Common Stock account was $100,000. Which of the following is true? -Treasury Stock is credited for $900,000. -Additional Paid-in Capital is credited for $900,000. -A loss of $900,000 is recorded. -A profit of $900,000 is recorded. -None of these is correct.

Additional Paid-in Capital is credited for $900,000

Tissues, Inc., issued 1,000 shares of its $0.50 par value common stock for $10 per share. Show the effect of issuing the common stock on the accounting equation: A. 0 No Effect B. 10,000 Common Stock C. 500 Common Stock D. (10,000) Common Stock E. 10,000 Cash F. 500 Cash G. (10,000) Cash H. 9,500 Common Stock; 500 Paid-in Capital in Excess of Par I. 500 Common Stock; 9,500 Paid-in Capital in Excess of Par J. (500) Common Stock; (9,500) Paid-in Capital in Excess of Par K. (9,500) Common Stock; (500) Paid-in Capital in Excess of Par

Assets- E Liabilities- A SE- I

Drain Surgeons, Inc., needed some long-term financing and arranged for a 10-year, $100,000, 7% mortgage loan on January 1, Year 1. Annual payments of $14,238 will be made on December 31 each year. Show the effect on the accounting equation of the first annual payment. Round to the nearest dollar.

Assets: (14,238) CashLiabilities: (7,238) Notes PayableSE: (7,000) Interest Expense

On January 1, Year 1, Needham, Inc., borrowed $10,000 at 6% for four years. On December 31, Year 1, Needham made its first installment payment of $2,886. Show the effect of the first installment payment on the accounting equation. Round the amounts to the nearest dollar.

Assets:(2,886) Cash Liabilities:(2,286) Notes Payable SE: (600) Interest Expense

Common stock's par value is ______. a. the common stock's average price b. a minimal amount specified in the corporate charter c. the same as the common stock's market price d. the same as a bond's par value

B

On November 1, Year 1, The Yacht Doc, Inc., borrowed $10,000 at 6% due in eight months. Record the adjusting journal entry for the interest incurred for the year ended December 31, Year 1.

DR: Interest Expense $100 CR: Interest Payable $100

Central Perk, Inc. issued 10,000 shares of no-par value common stock at $10 per share. The proper entry to record this issuance of shares is to debit _______.

Cash and credit Common Stock for $100,000

On September 1, Jurasic Pork Company borrowed $50,000 on a 6%, 6-month note payable to XYZ National Bank. Jurasic Pork recorded an adjusting entry at December 31, its year end. On March 1, the due date, Jurasic Pork recorded its payment of the note and interest. This entry includes a ______.

DR: Interest Expense $500 DR: Interest Payable $1,000 DR: Notes Payable $50,000 CR: Cash $51,500

_____ bonds are retired when the bondholder exchanges them for the issuing company's stock.

convertible

______ bonds are retired when the bondholder exchanges them for the issuing company's stock.

convertible

The line item Repurchase of Treasury Stock is reported in the ______.

financing activites section of the statement of cash flows

In Year 1, Stock to the Hand, Inc., issued 100,000 shares of the 1,500,000 shares of $0.60 par value common stock it is allowed to sell. The total received from issuing its common stock is $500,000. Stock to the Hand bought back 5,000 shares of its stock at a cost of $7 each. The entry to record the purchase of its stock includes a ______. (Select all that apply.) -debit Treasury Stock $35,000 -debit Common Stock $35,000 -credit Treasury Stock $35,000 -debit Cash $35,000 -credit Common Stock $35,000 -credit Cash $35,000 -debit Additional Paid-in Capital $35,000

-credit cash $35,000 -debit treasury stock $35,000

Which of the following accounts are closed into Retained Earnings at yearend? (Select all that apply.) -Additional Paid-in Capital -Common Stock -Dividends -Revenue accounts -Expense accounts -Dividends Payable

-dividends -revenue accounts -expense accounts

Retained Earnings is ______. (Select all that apply.) -equal to cash -decreased by purchases of land -decreased by dividends -increased by net income -all of the company's earnings kept rather than distributed to shareholders

-increased by net income -all of the company's earning kept rather than distributed to shareholders -decreased by dividends

AnuU, Inc., sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals ______ shares.

100,000

A bond's stated interest rate is ______. (Select all that apply.) -always expressed as an annual interest rate -affected by the price investors pay for the bond -used to determine Interest Expense -increased when the market price of the bond falls -used to calculate interest payments

-always expressed as an annual interest rate -used to calculate interest payments

Squid Roe, Inc., is authorized to sell 1,000,000, $2 par value common stock. On May 3, it sold 40,000 at $10 each. The journal entry to record the issuance of this stock includes a ______. (Select all that apply.) -debit Common Stock $10,000,000 -credit Additional Paid-in Capital $320,000 -credit Common Stock $80,000 -credit Common Stock $400,000 -credit Cash $400,000 -debit Cash $10,000,000 -debit Cash $400,000 -credit Common Stock $10,000,000

-credit additional paid-in capital $320,000 -credit common stock $80,000 -debit cash $400,000

Investors earn a return on stock investments by ______. (Select all that apply.) -receiving a principal amount that is greater than cost -receiving interest -receiving dividends -selling the stock for more than its cost -buying the stock at the lower of cost or market

-selling the stock for more than its cost -receiving dividends

Which of the following statements is FALSE? -Notes Payable is found on the Balance Sheet -Sales is found on the Income Statement -Inventory is found on the Balance Sheet -Additional Paid-in-Capital found on the Statement of Cash Flows

additional paid-in-capital found on the statement of cash flows