CZC1 Accounting II Multiple Attempt Part 2

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Unsecured bonds A) represent a safer investment than secured bonds. B) are called debentures. C) are backed by the issuer's bank. D) are the same as sinking bonds.

Using the indirect method to calculate net cash provided by operating activities, a decrease in prepaid expenses is A) subtracted from net income. B) added to net income. C) ignored since it does not affect expenses. D) ignored since it does not affect net income.

Investing activities include A) purchases of merchandise for cash. B) increase in accounts receivable. C) purchases of prepaid expense items such as supplies and insurance for cash. D) purchases of plant and equipment for cash.

Using the indirect method of preparing the statement of cash flows, which of the following would be added to net income A) depletion expense. B) an increase in accounts receivable. C) a decrease in accounts payable. D) gain on the sale of property. Answer: A

A bond will sell at a premium when A) the coupon rate is equal to the effective rate. B) the coupon rate is greater than the effective rate. C) the coupon rate is less than the effective rate. D) the stated rate is less than the market rate of interest.

A bond sinking fund investment is started on January 5, 2019, by transferring $10,000 in cash to the fund. This $10,000 is invested and earns $1,100 during 2019. The entry to record the earnings made on the sinking fund investment includes A) a debit to cash for $1,100 and a credit to income from sinking fund investment for $1,100. B) a debit to cash for $1,100 and a credit to bond sinking fund investment for $1,100. C) a debit to bond sinking fund investment for $1,100 and a credit to income from sinking fund investment for $1,100. D) a debit to cash for $1,100 and a credit to interest income for $1,100.

A bond that trades at 105 1⁄2 means that A) the bond pays 5 1⁄2% interest. B) the market rate of interest is 5 1⁄2%. C) the bond traded at $1,055 per $1,000 bond. D) the market rate of interest is 5 1⁄2% higher than the contract rate.

Treasury stock is classified as a(n) A) asset. B) contra-asset. C) stockholders' equity account. D) contra-stockholders' equity account

Cash, short-term investments, and net receivables are the numerator for Acid-Test Ratio Current Ratio A) Yes No B) Yes Yes C) No No D) No Yes

Dividing net sales on account by the average amount of net accounts receivable is the calculation for the A) accounts receivable turnover. B) working capital turnover. C) merchandise inventory turnover. D) plant and equipment turnover.

Dividing quick assets by current liabilities is the calculation for the A) current ratio. B) return on investment. C) acid-test ratio. D) ratio of liabilities to stockholders' equity.

Dividing the net income for the year by the average assets for the year is the calculation for the A) return on assets. B) earnings per share. C) book value per share. D) quick or acid-test ratio.

Dividing the total stockholders' equity by the average number of shares outstanding at the end of the year (if only common stock is outstanding) is the calculation for A) book value per share. B) earnings per share. C) return on equity. D) the times interest earned ratio.

Financial statement ratio analysis may be undertaken to study liquidity, turnover, profitability, and other indicators. To which does the current ratio most relate A) liquidity. B) turnover. C) profitability. D) other indicator.

Financing activities include all of the following except A) purchases of plant and equipment for cash. B) payment of dividends to shareholders. C) receipt of cash upon the issuance of bonds. D) repurchase of company stock.

Given the following data: Net sales $140,000 Cost of goods sold $90,000 Gross profit $50,000 Operating expenses $40,000 Net income $10,000 In vertical analysis, net income would be expressed as: (Round your final answer to the nearest whole percent) A) 7%. B) 36%. C) 64%. D) 29%.

Horizontal analysis is most closely related to A) trend analysis. B) current ratio. C) vertical analysis. D) benchmarking.

How does the declaration of a cash dividend affect the accounting equation (A= L + SE) A) increase to liabilities and a decrease to stockholders' equity. B) increase to liabilities and a decrease to assets. C) increase to assets and a decrease to liabilities. D) increase to stockholders' equity and a decrease to assets.

If bonds are issued at a discount, it means that the A) market interest rate is higher than the stated interest rate. B) market interest rate is lower than the stated interest rate. C) financial strength of the issuer is weak. D) bond is convertible.

If bonds have been issued at a premium, over the life of the bonds, the A) carrying value of the bonds will decrease. B) carrying value of the bonds will increase. C) interest expense will increase. D) interest payment will increase.

If the comparative balance sheet shows the amount and percentage of decrease in merchandise inventory from 2019 to 2020, the firm used A) horizontal analysis. B) vertical analysis. C) common-size analysis. D) trend analysis.

If the market rate of interest is higher than the contract rate of interest offered on the bonds being sold, they will be sold at A) a discount. B) a premium. C) face value. D) a loss.

In 2019, a company purchased treasury stock with a cost of $49,000. During the year, the company declared and paid dividends of $8,000 and issued bonds payable for $1,100,000. Net cash provided by financing activities for 2019 is A) $1,043,000 B) $1,051,000 C) $1,092,000 D) $1,100,000

In 2019, a company sold land for $130,000 cash, purchased equipment for $19,000 cash and issued bonds for $100,000 cash. The Net cash provided by investing activities is A) $111,000 B) $149,000 C) $211,000 D) $230,000

In order to know the percentage of assets financed by creditors, which of the following ratio is calculated A) debt ratio. B) equity ratio. C) operating credit ratio. D) quick ratio

In performing vertical analysis, the base for income tax expense is A) net sales. B) gross revenues. C) net income. D) gross profit.

In performing vertical analysis, the base for operating expenses is: A) net sales. B) gross profit. C) net income. D) operating income.

Increases and decreases in the long-term assets are reported on the statement of cash flows as A) operating activities. B) investing activities. C) financing activities. D) noncash activities.

Information from a company's income statement is as follows: net income $32,000, depreciation expense $5,200; loss on sale of plant assets $1,600; gain on retirement of bonds $10,000; an increase in accounts receivable of $4,200 and dividend payments of $4,400. The net cash provided by operating activities is A) $24,600 B) $20,200 C) $49,800 D) $41,400

On December 31, 2019, a company issued $180,000 face value, 8 percent bonds that mature 10 years from the date of issue. The issue price was 104. If the firm uses the straight-line method of amortization, interest expense for 2020 will be reported at A) $13,680 B) $15,120 C) $14,400 D) $7,200

On January 1, 2018, a bond was issued at a discount. The entry to record the semiannual interest payment on July 1, 2018 would include a A) debit to interest expense, a credit to discount on bonds payable and a credit to cash. B) debit to interest expense, a debit to discount on bonds payable and a credit to cash. C) debit to interest expense, a debit to cash and a credit to discount on bonds payable. D) debit to discount on bonds payable and a credit to cash.

On January 1, 2019, a company issued $600,000 of 6%, 5-year bonds at 99, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds on January 1, 2019 (Round your final answer to the nearest dollar.) A) $594,000 B) $606,061 C) $595,200 D) $636,000

Vertical analysis of income statement data most often involves a comparison of each income statement item with A) net sales. B) gross profit on sales. C) net income before taxes. D) net income after taxes.

What is a ratio that measures financial strength A) ratio of stockholders' equity to total liabilities. B) current ratio. C) working capital. D) rate of return on sales .

If current assets are $15.6 million, current liabilities $11.2 million and inventories $1.8 million, what is the acid test ratio A) 1.39. B) 1.23. C) 1.65. D) 0.89.

A company reported net income of $75,000 and a loss on the sale of plant assets of $17,000. The cash received from the sale of the plant assets was $52,000. The company also issued additional shares of stock for $25,000 and paid dividends of $6,200. Calculate the net cash provided or used by investing activities. A) $35,000 net cash provided. B) $52,000 net cash provided. C) $69,000 net cash used. D) $20,800 net cash used.

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at A) a premium. B) a discount. C) par. D) either a discount or premium.

) During the year, a company's Treasury Stock account increased $46,000 due to a cash purchase, cash dividends of $42,000 were paid and the company reported net income of $200,000. On the statement of cash flows (indirect method), Net cash used by financing activities is A) ($88,000) B) ($112,000) C) ($154,000) D) ($158,000)

A $4,000, 6% bond is sold at 93. When the bond is issued, the cash account will be increased by A) $3,720 B) $4,000 C) $3,960 D) $4,280

A bond issued and supported only by the general credit standing of the issuing corporation is called a(an) A) debenture. B) indenture. C) term bond. D) serial bond.

A bond sinking fund investment is started on January 5, 2019, by transferring $12,000 in cash to the fund. The company intends to accumulate $12,000 each year in the fund. This $12,000 is invested and earns $1,500 during 2019. On January 5, 2020, the amount of cash transferred to the sinking fund investment will be A) $10,500 B) $12,000 C) $13,500 D) $1,500

A company had 10,000 shares issued and outstanding of its $1 par value common stock. At December 31, common stock equaled $10,000, retained earnings equaled $20,000 and total stockholders' equity equaled $50,000 prior to a 2-for-1 stock split. As a result of a 2-for-1 stock split A) par value equals $0.50. B) the number of shares outstanding equals 5,000. C) the common stock equals $20,000 D) retained earnings equals $40,000.

A company had retained earnings of $130,000 in 2019 and $168,000 in 2020. The increase in retained earnings from 2019 to 2020 is A) 29.2 percent. B) 22.6 percent. C) 38 percent. D) 129 percent.

A company has cash, $85,000; temporary investments, $30,000; net receivables, $60,000; and inventory, $350,000. Current liabilities are $300,000. The current ratio is A) 0.58 to 1. B) 0.74 to 1. C) 1.75 to 1. D) 1.86 to 1.

A company has current assets of $60,000, current liabilities of $35,000 and prepaid expenses of $5,000. Calculate the quick ratio of the company A) 1.57. B) 1.71. C) 1.86. D) 0.58.

A company issued $900,000 of 8%, 5-year bonds dated January 1, 2019, for $916,000. Interest is paid on January 1 and July 1. What is the total amount of interest expense for the bonds for 2019, using the straight-line method of amortization A) $68,800 B) $72,000 C) $56,000 D) $75,200

A company issued 10-year, 8% bonds with a par value of $1,000,000. The company received $980,000 upon issuance. Using the straight-line method, the amount of interest expense for the first semi-annual interest period is A) $41,000 B) $42,000 ] C) $40,000 D) $39,000

A company issued common stock for $480,000 cash. The company declared and paid cash dividends of $52,000 and purchased treasury stock at a cost of $23,000. The financing section of the statement of cash flows will report Net cash provided by financing activities of A) $405,000 B) $428,000 C) $480,000 D) $503,000

A company received $89,000 in cash from the sale of common stock and used the proceeds to pay $72,000 in bonds payable. As a result, the statement of cash flows would report A) $17,000 as the net cash provided by financing activities. B) $17,000 as the net cash provided by investing activities. C) $72,000 as the net cash used in investing activities. D) $89,000 as the net cash provided by financing activities.

A company sold equipment that cost $45,600 for $12,450. Depreciation on the equipment from purchase to date of sale amounted to $35,000. What amount is reported in the Cash Flows from Investing Activities section of the Statement of Cash Flows A) $12,450 B) $0 C) $1,850 D) $10,600

A company's comparative balance sheet show total assets of $990,000 and $900,000, for the current and prior years, respectively. The percentage change to be reported in the horizontal analysis is an increase of A) 10%. B) 9%. C) 5%. D) 4%.

A company's sales are $285,000 and $200,000 during the current and prior years, respectively. The percentage change is A) 42.5%. B) 70%. C) 29.8%. D) 130%.

A corporation's common stock dividends is A) debited to retained earnings. B) credited to retained earnings. C) debited to paid-in capital. D) credited to paid-in capital.

A decrease in accounts payable from $86,000 to $72,000 will be reported on the statement of cash flows as a A) $14,000 use of operating activity funds. B) $14,000 source of operating activity funds. C) $14,000 source of investing activity funds. D) $14,000 use of investing activity funds.

A horizontal analysis of balance sheet data involves a comparison of a balance sheet amount on a given date with A) the amount for the same balance sheet item on a previous date. B) the net sales from the income statement for the period ending on that date. C) the total stockholders' equity on the balance sheet for that date. D) the total of the assets on the balance sheet for that date.

A measure of a company's ability to collect cash from credit customers is the: A) accounts receivable turnover. B) days' payable outstanding. C) inventory turnover. D) cash conversion cycle.

All of the following may appear as an adjustment of net income when preparing the statement of cash flows using the indirect method EXCEPT A) payment of cash dividends. B) depreciation expense. C) loss on sale of long-term assets. D) an increase in accounts payable.

An expression of the amount of each item in a statement as a percentage of some designated total for comparative purposes is called A) vertical analysis. B) return on total assets. C) earnings per share. D) horizontal analysis.

Bonds in a particular issue which mature in installments over a period of time are called A) serial bonds. B) term bonds. C) callable bonds. D) convertible bonds.

Bonds with a face value of $450,000 were issued at 97. The entry to record the issuance will include a debit to the discount on bonds payable account for A) $13,500 B) $9,000 C) $18,000 D) $4,500

Bonds with a face value of $500,000 and a quoted price of 971⁄4 have a selling price of A) $486,250 B) $485,125 C) $485,013 D) $487,500

On a statement of cash flows prepared using the indirect method, an increase in accounts payable during the period is A) added to net income to determine net cash provided by operating activities. B) deducted from net income to determine net cash provided by operating activities. C) shown as a cash inflow in the investing activities section. D) shown as a cash inflow in the financing activities section.

On a statement of cash flows, an increase in a prepaid expense A) is included in computing cash flows from operating activities. B) is included in computing cash flows from investing activities. C) is included in computing cash flows from financing activities. D) is not used in computing cash flows.

Operating activities include A) changes in accounts receivable. B) purchases of plant and equipment for cash. C) issuance of common stock. D) payment of dividends to shareholders.

Retained earnings are often appropriated while the bonds are outstanding. Which of the following is a reason for the appropriation A) corporation management wants to protect the bondholders. B) the bond underwriters always require it. C) tax law requires it. D) the buyers require it.

The amortization of the bond discount the carrying value of the bond, while the amortization of the bond premium the carrying value of the bond. A) increases; decreases. B) decreases; increases. C) increases; increases. D) decreases; decreases.

The carrying amount of bonds issued at a discount is calculated by A) subtracting discount on bonds payable from bonds payable. B) subtracting the sum of discount on bonds payable and interest payable from bonds payable. C) subtracting interest payable from bonds payable. D) subtracting interest expense from bonds payable.

The changes in the financial statement items from a base year to following years are often expressed as which of the following A) trend percentages. B) component percentages. C) common percentages. D) both trend and component percentages.

The primary focus of horizontal analysis is A) percentage changes in line items from comparative financial statements. B) the balance sheet only. C) the amount of individual financial statement line items as a percentage of some related total, such as total assets. D) the income statement only.

The purchase of treasury stock would be reported on a statement of cash flows as a A) cash outflow under the financing activities. B) cash inflow under the investing activities. C) cash inflow under the operating activities. D) cash outflow under the investing activities.

The three types of activities reported on the statement of cash flows are presented in the following order A) operating, investing, and financing. B) financing, operating, and investing. C) investing, operating, and financing. D) financing, investing, and operating.

Treasury stock has a A) debit balance, the opposite of other stockholders' equity accounts. B) credit balance, the same as other stockholders' equity accounts. C) credit balance, the opposite of other stockholders' equity accounts. D) debit balance, the same as other stockholders' equity accounts.

Under the indirect method of preparing the statement of cash flows, a gain on the sale of equipment is A) subtracted from net income in the operating activities section. B) added to net income in the operating activities section. C) subtracted from the book value of the equipment in the financing activities section. D) ignored since this transaction does not affect cash.

What is the effect of the purchase of treasury stock A) decreases the number of shares outstanding. B) decreases the number of shares issued. C) increases the number of shares issued. D) both A and B are correct.

When bonds mature, a corporation will pay the bondholders A) the face amount of the bonds. B) the face amount plus the original premium or minus the original discount. C) the face amount plus the interest accrued since the date the bonds were issued. D) the current market value of the bonds.

When converting net income to net cash provided by operating activities on the statement of cash flows, indirect method, which of the following is NOT added to net income A) gain on sale of land. B) decrease in inventory. C) decrease in accounts receivable. D) depreciation expense.

When the balance in the income summary account is a debit, the company has A) incurred a net loss. B) incurred a net income. C) had more revenue than expenses. D) made an error in their closing entries.

When the balance of the income summary account is a debit, the entry to close this account is A) debit retained earnings; credit income summary. B) debit income summary; credit expense. C) debit expenses; credit income summary. D) debit income summary; credit retained earnings.

Which of the following is not true of vertical analysis A) each item on the balance sheet is expressed as a percentage of total liabilities. B) the percentages can be added and subtracted from top to bottom. C) each item in the income statement is expressed as a percentage of net sales. D) each item on the balance sheet is expressed as a percentage of total assets.

Which of the following options indicate how quickly accounts receivables are converted into cash A) accounts receivable turnover. B) days to collect accounts receivable. C) working capital. D) total assets turnover.

Which of the following ratio is calculated in order to know the liquidity of the accounts receivables A) accounts receivables turnover. B) accounts receivables turnover in days. C) operating cycle. D) activity ratios.

Which of the following would be classified as an investing activity A) purchasing an investment in bonds. B) payment of a dividend. C) issuing common stock. D) payment of interest.

Which type of bond gives the issuing corporation the option of retiring the bond, at a predetermined price, prior to the maturity date of the bond A) callable bond. B) convertible bond. C) serial bond. D) secured bond.

If the market interest rate is greater than the stated interest rate on bonds, the bonds will sell A) at face value. B) at a discount. C) at a premium. D) at the stated interest rate.

In a corporation, the capital resulting from the retention of earnings is entered in the A) cash account. B) retained earnings account. C) paid-in capital account. D) income summary account.

Which statement accurately describes bonds (choose two) A) bonds pay interest periodically. B) bonds have a stated interest rate. C) they are non-interest bearing. D) bonds do not have a definite maturity date.

A,B

In a vertical analysis of the income statement data, the cost of goods sold most likely would be expressed as a percentage of A) net income. B) net sales. C) gross profit on sales. D) total expenses.

A company declared a $0.80 per share cash dividend. The company has 100,000 shares authorized, 45,000 shares issued, and 42,000 shares of common stock outstanding. What is the entry to record the dividend declaration A) debit retained earnings and credit dividends payable for $36,000. B) debit retained earnings and credit dividends payable for $33,600. C) debit dividends payable and credit cash for $36,000. D) debit dividends payable and credit cash for $80,000.

A company has liabilities of $72,000 and stockholders' equity of $228,000. The percentage of total liabilities to total assets is A) 25 percent. B) 24 percent. C) 32 percent. D) 76 percent.

A company has net sales on account of $1,750,000. Net accounts receivable at the beginning of the year are $147,000 and net accounts receivable at the end of the year are $153,000. The accounts receivable turnover is A) 11.9. B) 11.7. C) 11.4. D) 1.0.

A company issued a $24,000, 10-year, 11% bond dated January 1, at 102. The entry to record the issuance of the bond will include a A) debit to cash for $24,000. B) debit to cash for $24,480. C) credit to bonds payable for $24,480. D) debit to discount on bonds payable for $480.

In computing net cash provided by operating activities using the indirect method, each of the following is added to net income EXCEPT A) an increase in accrued expenses payable. B) a gain on sale of equipment. C) depreciation expense. D) a decrease in inventory.

In order to know the percentage of assets financed by stockholders, which of the following ratio is calculated A) debt ratio. B) equity ratio. C) operating credit ratio. D) quick ratio.

A company uses the indirect method to prepare its statement of cash flows. The company's Accumulated Depreciation - Trucks account increased during the period. The company did not purchase or sell trucks during the period. The increase in Accumulated Depreciation - Trucks is A) subtracted from net income to determine net cash provided by operating activities. B) added to net income to determine net cash provided by operating activities. C) shown as a cash outflow on the investing activities section. D) shown as a cash outflow on the financing activities section.

A company's January 1 balance in Merchandise Inventory is $51,000. The December 31 balance is $43,000. Cost of goods sold is $232,000. The company's inventory turnover is A) 4.55 to 1. B) 4.94 to 1. C) 5.40 to 1. D) 10.8 to 1.

A corporation has the following information reported on the balance sheet as of December 31 of the current year: Common Stock, $10 par value (authorized 20,000 shares) $60,000 Treasury Stock (1000 shares) $30,000 Based on the information above, how many shares of common stock have been issued A) 7,000 shares. B) 6,000 shares. C) 5,000 shares. D) 1,000 shares.

A decrease in merchandise inventory is A) a use of cash under operating activities. B) a source of cash under operating activities. C) not reported on the statement of cash flows. D) a source of cash under investing activities.

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a A) benchmarking. B) common-size statement. C) horizontal analysis. D) financial ratio analysis.

A vertical analysis is primarily concerned with A) the dollar amount of the change in various financial statement line items from year to year. B) individual financial statement line items expressed as a percentage of a base (which represents 100%). C) percentage changes in the balances of line items from comparative financial statements. D) the change in key financial statement ratios over a specified period of time.

An example of a financing activity is A) the sale of merchandise for cash. B) the issue of stock for cash. C) the sale of used equipment for cash. D) the purchase of a building

Bonds that are secured by real estate are called A) term bonds. B) secured bonds. C) mortgage bonds. D) coupon bonds.

Bonds with a 6% interest rate were issued when the market rate of interest was 7%. The quoted bond price will be A) greater than 100. B) less than 100. C) 100. D) greater than 1000.

Bonds with a 7% stated interest rate were issued when the market rate of interest was 6%. This bond was issued at A) par value. B) a premium. C) a discount. D) face value.

Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000. It is apparent that the bonds had a A) stated interest rate less than the market rate. B) stated interest rate greater than the market rate. C) effective interest rate less than the stated rate. D) effective interest rate greater than the market rate.

Bonds with a face value of $400,000 were issued at 100. The entry to record the issuance will include a debit to the cash account for A) $392,000 B) $400,000 C) $408,000 D) $402,000

Bonds with a face value of $400,000 were issued at 98. The entry to record the issuance will include a credit to the bonds payable account for A) $408,000 B) $400,000 C) $398,000 D) $392,000

Cash received from the issuance of bonds would be reported on a statement of cash flows under A) investing activities. B) financing activities C) operating activities. D) noncash activities.

Comparing the amount of a balance sheet item in one year to the amount for the same item in a prior year is called A) common-size analysis. B) horizontal analysis. C) vertical analysis. D) trend analysis.

Given the following data: Current liabilities $700,000 Noncurrent liabilities 200,000 Stockholders' equity 900,000 Net sales 2,000,000 Gross sales 2,050,000 In vertical analysis, current liabilities would be expressed as: (Round your final answer to the nearest whole percent.) A) 35%. B) 39%. C) 34%. D) 50%.

In performing vertical analysis, the base for inventory is: A) total stockholders' equity. B) total assets. C) total cash and cash equivalents. D) total current assets.

If $380,000 of bonds are issued during the year and $130,000 of bonds are retired during the year, the statement of cash flows (indirect method) will show a(n) A) net gain on retirement of bonds of $250,000 in the financing activities section. B) increase in cash of $380,000 in the financing activities section and a decrease in cash of $130,000 in the financing activities section. C) net increase in cash of $250,000 in the operating activities section. D) net decrease in cash of $250,000 in the operating activities section.

In vertical analysis: A) a base amount is optional. B) a base amount is required. C) line items from balance sheets are examined only. D) line items from income statements are examined only.

Investing activities include A) Purchases of merchandise for cash. B) Purchases of plant and equipment for cash. C) Purchases of prepaid expense items such as supplies and insurance for cash. D) Increase in accounts receivable.

On January 1, 2019, a company issues $2,800,000, 5-year, 11% bonds for $2,720,000. Interest is paid semiannually on January 1 and July 1. The company uses the straight-line method of amortization. The company's fiscal year ends on December 31. The amount of discount amortized on July 1, 2019 is A) $4,000 B) $8,000 C) $16,000 D) $80,000

On a statement of cash flows prepared with the indirect method, financing activities do NOT include A) payment of principal amounts of long-term debt. B) payment of interest on long-term debt. C) payment of dividends. D) sale of treasury stock.

On a statement of cash flows prepared with the indirect method, investing activities do NOT include A) sale of investments that are not cash equivalents. B) receipt of interest on investments. C) collection of note receivable. D) lending money to an employee.

On a statement of cash flows, activities that affect long-term assets are classified as A) operating activities. B) investing activities. C) financing activities. D) stockholders' equity activities.

On a statement of cash flows, depreciation expense is A) subtracted from net income in the computation of the net cash provided by operating activities. B) added to net income in the computation of the net cash provided by operating activities. C) treated as a cash outflow in the computation of the net cash used in investing activities. D) treated as a cash inflow in the computation of the net cash used in investing activities.

On the statement of cash flows, in which section would the purchase of land with cash appear A) operating activities. B) investing activities. C) financing activities. D) noncash investing and financing activities.

Retained earnings appropriated for bond retirement appears as a separate line item A) on the income statement. B) on the balance sheet. C) on the bond interest reconciliation schedule. D) on the statement of cash flows. Answer:

The amortization of the bond discount ________ the carrying value of the bond, while the amortization of the bond premium ________ the carrying value of the bond. A) decreases, increases. B) increases, decreases. C) increases, increases. D) decreases, decreases.

The carrying value of bonds at maturity always equals A) the amount of cash originally received in exchange for the bonds. B) the par value of the bond. C) the amount of discount or premium. D) the amount of cash originally received in exchange for the bonds plus any unamortized discount or less any premium

The cash flow from investing activities shows the cash effects of which of the following A) income statement items. B) long term assets items. C) long term liability & stockholder's equity. D) long term liability and long term assets.

The cost of goods sold for a company for the year was $1,900,000. Merchandise inventory at the beginning of the year was $125,000 and merchandise inventory at the end of the year was $133,000. The merchandise inventory turnover for the year was A) 0.1. B) 14.7. C) 33.8. D) 65.5.

The date on which a cash dividend becomes a legal obligation is the A) date of record. B) declaration date. C) last day of the fiscal year. D) payment date.

The difference between the face value and the selling price of a 10-year discounted bond issued two years after authorization, is amortized for A) 10 years. B) 8 years. C) 2 years. D) The difference is not amortized, only interest is amortized.

The entry to record a semiannual interest payment on a bond payable issued at par A) debits interest expense and credits bonds payable. B) debits interest expense and credits cash. C) debits cash and credits interest payable. D) debits cash and credits interest expense.

The entry to record the issuance of bonds at face value includes A) a credit to bond interest payable. B) a credit to bond payable. C) a debit to bond interest expense. D) a debit to bond interest payable.

The formula for the percentage change in a financial statement line item is the current year amount A) divided by the base year amount. B) minus the base year amount divided by the base year amount. C) minus the base year amount divided by current year amount. D) added to the base year amount divided by the base year amount.

The interest rate that investors demand for loaning their money is referred to as A) the coupon rate of interest. B) the market rate of interest. C) the stated rate of interest. D) the debenture rate of interest.

The net income for a company was $315,000 last year and is $270,000 this year. The percent of increase or decrease was A) 16.7%. B) 14.3%. C) 26.4%. D) 86.0%.

The percentage change in any individual item shown on comparative financial statements is calculated by dividing the dollar amount of the change from the base period to the current period by A) the amount shown for the current period. B) the base-period amount. C) the average of the amounts shown for the base and the current periods. D) the amount estimated for the future period.

The ratio that measures a company's success in using its assets to earn income A) leverage. B) rate of return on total assets. C) debt ratio. D) times-interest-earned ratio.

Total liabilities divided by total stockholders' equity is the calculation for the A) current ratio. B) ratio of liabilities to stockholders' equity. C) return on equity ratio. D) times interest earned ratio.

Trend analysis looks at A) two or more companies for comparison. B) two years of information for comparison. C) selected ratios and percentages over a period of time. D) profitability by industry.

Twenty-year, 6% bonds with a face value of $550,000 are issued at 102 on January 1 of the current year. How much of the premium will be amortized under the straight-line method in the first semi- annual interest period A) $550 B) $275 C) $825 D) $1,650

Usually, the most important category on the statement of cash flows is cash flows from A) operating activities. B) investing activities. C) financing activities. D) noncash activities.

When preparing the statement of cash flows using the indirect method, which statement is INCORRECT A) gains on the sale of long-term assets are subtracted from net income. B) losses on the sale of long-term assets are subtracted from net income. C) depreciation expense is added to net income. D) increases in current liabilities are added to net income.

When the balance in the income summary account is a credit, the company has A) incurred a net loss. B) incurred a net income. C) had more expenses than revenue. D) made an error in their closing entries.

When the issuing company has the right to require the owners to surrender the bonds for payment before the maturity date of the bonds, the bonds are referred to as A) serial bonds. B) callable bonds. C) registered bonds. D) convertible bonds.

Which of the following accurately describes a debenture A) A bond with specific assets pledged as collateral. B) A type of bond which is not collateralized but backed only by the issuer's general credit standing. C) A type of bond which requires the bond issuer to create a sinking fund of assets set aside at specified amounts and dates to repay the bonds. D) A type of bond that can be exchanged for a fixed number of shares of the issuing corporation's common stock.

Which of the following is reported on the statement of cash flows as a financing activity A) declaration of a cash dividend. B) payment of a cash dividend. C) issuance of a stock dividend. D) stock split.

Which of the following transactions does NOT affect cash during a period A) sale of treasury stock B) write-off of an uncollectible account C) purchase of property with cash D) payment of an accounts payable

Which of the following would be considered as cash flow from investing activities A) proceeds from issuance of long-term debt. B) expenditure for sale of plant and equipment. C) payments to suppliers. D) receipts from sale of goods or services.

Which of the following would be reported as an investing activity on the statement of cash flows A) the issue of preferred stock. B) the purchase of equipment for cash. C) the issue of bonds and notes payable. D) the resale of treasury stock.

Which of the three types of activities reported on the statement of cash flows is the MOST critical for a company's long-term survival A) investing activities. B) operating activities. C) financing activities. D) noncash investing and financing activities.

Which statement about the statement of cash flows is FALSE A) The statement of cash flows is based on information from several financial statements. B) The statement of cash flows is based on information from a company's income statement only. C) The change in the Cash account on the comparative balance sheets is the check figure for the statement of cash flows. D) The indirect method of preparing the statement of cash flows is used by the vast majority of companies in the United States.

Year to year percentage changes in line items from comparative financial statements is called A) benchmarking. B) horizontal analysis. C) vertical analysis. D) common-size financial statements.

A company has total assets of $158,000, current assets of $92,000, total liabilities of $68,000, and current liabilities of $36,000. What is the current ratio A) 1.4 to 1. B) 2.3 to 1. C) 2.6 to 1. D) 2.1 to 1.

A company had the following transactions: Cash proceeds on sale of land $430,000 Cash proceeds on sale of equipment 140,000 Purchase of treasury stock with cash 53,000 Purchase of equipment with cash 48,000 Issuance of common stock for cash 70,000 On a statement of cash flows prepared under the indirect method, Net cash provided by investing activities is A) $469,000 B) $539,000 C) $522,000 D) $570,000

A bond was issued at par. The journal entry to record payment of this bond payable at maturity will include a A) debit to bonds payable, credit to discount on bonds payable and a credit to cash. B) debit to cash and a credit to bonds payable. C) debit to bonds payable and a credit to cash. D) debit to bonds payable, debit to discount on bonds payable and a credit to cash.

A bond with a face value of $80,000 and a quoted price of 104 has a selling price of: (Round your final answer to the nearest dollar.) A) $76,923 B) $80,000 C) $83,200 D) $88,000

A company has current liabilities of $60,000, stockholders' equity of $180,000 and total assets of $300,000. The percentage of total liabilities to total assets is A) 80 percent. B) 60 percent. C) 40 percent. D) 20 percent.

On a common-size income statement, income taxes expense is expressed as a percentage of A) net income. B) total stockholders' equity. C) total assets. D) net sales.

A company is adjusting net income to determine Net cash provided by operating activities for the statement of cash flows. The indirect method is used. Which statement is INCORRECT A) An increase in a noncash current asset is subtracted from net income. B) A decrease in a noncash current asset is added to net income. C) A decrease in a current liability is added to net income. D) An increase in a current liability is added to net income.

A company issued $610,000, 8%, 5-year bonds for 107, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year A) $652,700 B) $610,000 C) $644,160 D) $658,800

A company issued 10-year, 5% bonds with a par value of $1,000,000. The company received $1,040,000 upon issuance. Using the straight-line method, the amount of interest expense for the first semi-annual interest period is A) $25,000 B) $26,000 C) $23,000 D) $21,000

A company issues $450,000, 12%, 5-year bonds on January 1, 2019 for $439,000. Interest is paid semiannually on January 1 and July 1. If the company uses the straight-line method of amortization of bond discount, the amount of bond interest expense on July 1, 2019 is A) $25,900 B) $27,000 C) $28,100 D) $55,100

A company issues 9%, 20-year bonds with a face value of $400,000. The current market rate of interest is 8%. The amount of interest owed to the bondholders for each semiannual interest payment is A) $36,000 B) $32,000 C) $18,000 D) $16,000

A company must maintain a subsidiary ledger showing who owns the bonds and is entitled to receive interest payments if the bonds are A) coupon bonds. B) bearer bonds. C) registered bonds. D) unregistered bonds.

A company paid $10.6 billion to acquire other companies. The company also paid $33 billion to purchase long-term securities. How are these cash outflows classified on the statement of cash flows A) financing activities. B) operating activities. C) investing activities. D) noncash investing and financing activities.

A company paid $103,000 to retire bonds with a face value of $100,000 and an unamortized discount balance of $2,500. The entry to record the early retirement of the bonds will include the recognition of a loss of A) $0 B) $500 C) $5,500 D) $3,000

A company received $130,000 in cash from the sale of a building and paid $68,000 in cash for the purchase of some new machinery. As a result, the statement of cash flows would report A) $68,000 as the net cash used in financing activities. B) $130,000 as the net cash provided by investing activities. C) $62,000 as the net cash provided by investing activities. D) $130,000 as the net cash provided by financing activities.

A company received $50,000 in cash when it sold a building and paid $90,000 in cash when it purchased some new machinery. As a result, the statement of cash flows would report A) $40,000 as the net cash used in financing activities. B) $40,000 as the net cash provided by investing activities. C) $40,000 as the net cash used in investing activities. D) $40,000 as the net cash provided by financing activities.

A company reported net income of $150,000 and a $5,000 gain on the sale of equipment. The cash received from the sale of equipment was $27,000. The company issued additional shares of stock for $237,000, paid off a $196,000 bond issue recorded at par and paid $51,000 in dividends during the year. Calculate the net cash provided or (used) by financing activities. A) ($5,000) B) $17,000 C) ($10,000) D) $162,000

A company reported that its bonds with a par value of $500,000 and a carrying value of $545,000 were retired for $525,000 resulting in a gain of $20,000. The amounts to be reported on the statement of cash flows include A) a $45,000 decrease in cash for financing activities. B) a $525,000 decrease in cash for investing activities and a $45,000 increase in financing activities. C) a $20,000 decrease in cash from operating activities and a $525,000 decrease in cash for financing activities. D) $20,000 increase in cash from operating activities and a $545,000 decrease in cash used for financing activities.

A company reports the following data: Net sales $270,000 Cost of goods sold 170,000 Gross profit $100,000 In vertical analysis, the cost of goods sold percentage is closest to: (Round your final answer to the nearest whole percentage) A) 37%. B) 59%. C) 63%. D) 170%.

A corporation has the following information reported on the balance sheet as of December 31 of the current year Common Stock, $10 par value (authorized 20,000 shares) $50,000 Treasury Stock (2000 shares) $30,000 Based on the information above, how many shares of common stock are outstanding A) 20,000 shares. B) 5,000 shares. C) 3,000 shares. D) 2,000 shares.

A corporation incorporated on January 2 of the current year. During the year, the company had the following transactions: • issued 60,000 shares of common stock at $45 per share. The par value per share is $1. • purchased 4000 shares of treasury stock at $27 per share. • had net income of $400,000. What is the total amount of stockholders' equity as of December 31 of the current year A) $2,808,000 B) $2,700,000 C) $2,992,000 D) $3,100,000

A corporation issues $2,700,000, 10-year, 8% bonds dated January 1 at 101. The entry to record the issuance will include a A) credit to cash for $2,727,000. B) debit to cash for $2,700,000. C) credit to premium on bonds payable for $27,000. D) credit to bonds payable for $2,727,000.

A corporation purchased 1000 shares of its own $3 par value common stock for $92,000. As a result of this transaction A) the corporation's stockholders' equity increased $89,000. B) the corporation's stockholders' equity increased $3000. C) the corporation's stockholders' equity decreased $92,000. D) the corporation's stockholders' equity increased $92,000.

A decrease in current liabilities is A) a source of cash under operating activities. B) not reported on the statement of cash flows. C) a use of cash under operating activities. D) a use of cash under investing activities.

A financial statement line item expressed as a percentage of a base amount is a result of A) horizontal analysis. B) economic value added. C) vertical analysis. D) comparative analysis.

A statement of cash flows accomplishes all of the following EXCEPT A) determines the ability of the company to pay dividends and interest. B) provides information about the cash receipts and cash payments during a period. C) lists revenues and expenses. D) predicts future cash flows.

All of the following users are very much concerned with the ratio analysis EXCEPT A) credit analyst, including banks who want to know the credibility of company. B) bond rating companies, who analyze ratios to help ascertain a company's ability to pay its debts. C) customers, who want to know the designs and quality of the products offered. D) managers, to analyze, control, and thus improve their working operations.

An increase in accounts payable is A) added to the cash flows from investing activities. B) subtracted from the net income when determining the net cash provided by operating activities. C) added to the net income when determining the net cash provided by operating activities. D) not used to calculate the net cash provided by operating activities.

Bonds issued at a discount are A) traded for stock. B) sold at face value. C) sold at less than face value. D) sold for more than face value.

Bonds issued at a premium are A) traded for stock. B) sold at face value. C) sold for more than face value. D) sold at less than face value.

Bonds payable has a balance of $900,000 and premium on bonds payable has a balance of $10,000. If the issuing corporation redeems the bonds at 98, what is the amount of gain or loss on the redemption of the bonds A) $10,000 loss. B) $10,000 gain. C) $28,000 gain. D) $28,000 loss.

Bonds that may be exchanged for common stock at the option of the bondholders are called A) options. B) stock bonds. C) convertible bonds. D) callable bonds.

Bonds which are backed only by the good faith of the borrower are referred to as A) junk bonds. B) uncertified bonds. C) debenture bonds. D) callable bonds.

Bonds with a face value of $200,000 were issued at 103. The entry to record the issuance will include a credit to the bonds payable account for A) $206,000 B) $103,000 C) $200,000 D) $230,000

Bonds with a face value of $400,000 were issued at 102. The entry to record the issuance will include a debit to the cash account for A) $392,000 B) $400,000 C) $408,000 D) $402,000

Book value per share of common stock is calculated by dividing the A) number of common shares outstanding at year end by the common stockholders' equity. B) net income available to common stockholders by the average number of common shares outstanding. C) common stockholders' equity by the number of common shares outstanding at year end. D) total liabilities by the total stockholders' equity.

Dividing cost of goods sold by the average of merchandise inventory is the calculation for the A) accounts receivable turnover. B) working capital turnover. C) merchandise inventory turnover. D) plant and equipment turnover.

Dividing quick assets by total current liabilities is the calculation for the A) current ratio. B) return on investment. C) quick or acid-test ratio. R) ratio of liabilities to owner's equity.

Dividing the net income for the year by the average number of common shares outstanding during the year (if only common stock is outstanding) is the calculation for the A) return on stockholders' equity. B) return on assets. C) earnings per share. D) book value per share.

Gains on the retirement of bonds are deducted from net income because A) they represent cash flows which increase net income. B) they represent cash flows which decrease net income. C) they are not cash flows but increase net income. D) they are not cash flows but decrease net income.

Given the following data: Accounts receivable, net $200,000 Current assets 900,000 Total assets 2,000,000 Net sales 6,000,000 In vertical analysis, Accounts Receivable, net would be expressed as: (Round your final answer to the nearest whole percent) A) 3%. B) 33%. C) 10%. D) 22%.

Horizontal analysis involves A) comparing individual financial statement line items with each other to understand the relationships between line items. B) comparing individual financial statement line items to some benchmark, typically similar competitors' financial statement line items. C) comparing individual financial statement line items over time. D) comparing individual financial statement line items that have been arranged horizontally from highest to lowest dollar amounts.

How is a revenue account closed A) debit retained earnings; credit revenue. B) credit retained earnings; debit revenue. C) credit income summary; debit revenue. D) debit income summary; credit revenue.

If a company plans to issue $4,000,000 of 5% bonds at a time when the market rate of interest for similar bonds is 6%, the bonds will sell at A) their face value. B) a premium. C) discount. D) their maturity value.

If a corporation declares a $100,000 cash dividend, the account to be debited on the date of declaration is A) common stock. B) dividends payable. C) retained earnings. D) paid-in capital in excess of par.

If an analyst wants to examine a company's current ability to generate income, which of the following would best be considered A) liquidity. B) market share. C) profitability. D) solvency.

If bonds are issued for a price below their face value, the bond discount should be A) charged to expense on the date the bonds are issued. B) shown as an addition to Bonds Payable in the Long-Term Liabilities section of the balance sheet. C) amortized over the life of the bond issue. D) shown as a current liability on the balance sheet.

If current assets are $90,000 and total assets are $360,000, what percentage of total assets are the current assets A) 3.5 percent. B) 30 percent. C) 25 percent. D) 33 percent.

If long-term liabilities are $62,000 and total assets are $480,000, what percentage of total assets are long-term liabilities A) 4.8 percent. B) 14.8 percent. C) 12.9 percent. D) 14.3 percent.

If the market interest rate is 6%, a $10,000, 7%, 5-year bond, that pays interest semiannually would sell at an amount A) less than face value. B) equal to face value. C) greater than face value. D) less than the maturity value.

If total merchandise available for sale is 68 percent of net sales and cost of goods sold is 56 percent of net sales, gross profit on sales is A) 32 percent of net sales. B) 68 percent of net sales. C) 44 percent of net sales. D) 56 percent of net sales.

In 2019, a company purchases $100,000 of equipment with cash. This purchase would be reported on the company's 2019 statement of cash flows as A) a financing activity. B) an operating activity. C) an investing activity. D) none of the above.

Increases and decreases in the long-term liability accounts are reported on the statement of cash flows as: A) operating activities. B) investing activities. C) financing activities. D) noncash activities.

Information from a company's income statement is as follows: net income $15,600, depreciation expense $11,800; gain on sale of equipment $3,000; proceeds from the sale of land $22,000. The net cash provided by operating activities is A) $46,400 B) $15,600 C) $24,400 D) $6,800

On April 1, a company repurchased its $100,000 10-year, 9% bonds on the open market at 107. The bond's carrying value after accruing interest was $98,000 at the time of repurchase. The gain/loss on early retirement of the bonds is A) $2,000 gain. B) $9,000 gain. C) $9,000 loss. D) $7,000 loss.

On January 1, 2019, a company issued $1,000,000 of 6%, 5-year bonds at 98, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds one year later on January 1, 2020 (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.) A) $980,000 B) $992,000 C) $984,000 D) $1,016,408

On July 1, 2019, a company issues $1,200,000 of 10-year, 9% bonds dated July 1, 2019 at 88. The company uses the straight-line method of amortization. Interest is paid each July 1 and January 1. The company's fiscal year end is June 30. The interest expense recognized for the first semiannual interest payment on January 1, 2020 is A) $46,800 B) $54,000 C) $61,200 D) $108,000

On a common-size balance sheet, each line item is expressed as a percentage of A) current assets. B) operating income. C) total assets. D) net income.

On the statement of cash flows prepared under the indirect method, activities that affect stockholders' equity and long-term debt are classified as A) operating activities. B) investing activities. C) financing activities. D) free cash flows.

On the statement of cash flows, cash used for financing activities include A) issuing stock for property. B) sale of treasury stock. C) payment of notes payable. D) purchase of plant assets.

Operating activities include all except A) a decrease in accounts receivable. B) an increase in wages payable. C) the payment of dividends to shareholders. D) a decrease in accounts payable.

Over the term of the bonds, the balance in the premium on bonds payable account will A) increase or decrease if the market is unstable. B) increase. C) decrease. D) not change until the bonds mature.

Premium on bonds payable A) has a debit balance. B) is a contra account to bonds payable. C) has a credit balance. D) is deducted from bonds payable on the balance sheet.

Purchases of treasury stock would be reported on a statement of cash flows as A) operating activities. B) investing activities. C) financing activities. D) noncash investing and financing activities.

Ratios that test liquidity include all of the following EXCEPT: A) acid-test ratio. B) current ratio. C) return on assets. D) inventory turnover.

The amount of a company's net income earned for each share of its outstanding common stock is termed the A) return on equity. B) price/earnings ratio. C) earnings per share. D) dividend yield.

The calculation of the times interest earned involves dividing A) net income by annual interest expense. B) net income plus income taxes by annual interest expense. C) net income plus income taxes and interest expense by annual interest expense. D) none of these answers are correct.

The entry to record the adjustment for accrued bond interest includes A) a debit to bond interest expense and a credit to cash. B) a debit to bond interest payable and a credit to the bond interest expense. C) a debit to bond Interest expense and a credit to bond interest payable. D) a debit to bond interest expense and a credit to bonds payable.

The financial statement that reports cash receipts and cash payments classified according to the company's operating, investing, and financing activities is the A) income statement. B) balance sheet. C) statement of cash flows. D) statement of stockholders' equity.

The market interest rate is also referred to as the A) contractual rate. B) coupon rate. C) effective rate. D) stated rate.

The method most often used by companies to prepare the statement of cash flows is the A) accrual method. B) direct method. C) indirect method. D) deferral method.

The method of preparing the statement of cash flows that starts with net income and adjusts it for items that affect net income, but do NOT affect cash is called the A) net income method. B) direct method. C) indirect method. D) non-cash method.

The net cash provided by operating activities is affected by A) the issue of bonds payable for cash. B) a purchase of land for cash. C) a change in merchandise inventory. D) proceeds of cash investments by stockholders.

The premium on bonds payable account is shown A) in the current assets section of the balance sheet. B) in the current liabilities section of the balance sheet. C) in the long-term liabilities section of the balance sheet. D) in the revenue section of the income statement.

The three types of activities reported on the statement of cash flows are A) operating, investments, and financing. B) operating, investing, and free flow. C) operating, investing, and financing. D) operating, indirect, and direct.

Treasury stock accounts for the difference between the number of A) issued shares and authorized shares. B) issued shares and preferred shares. C) outstanding shares and issued shares. D) authorized shares and outstanding shares.

Under the indirect method of preparing the statement of cash flows, the starting point to determine Net cash provided by operating activities is A) the beginning cash balance. B) the ending cash balance. C) net income. D) sales.

Unsecured bonds are called ________. A) convertible bond. B) term bonds. C) debentures. D) regular bonds.

Using the indirect method to prepare the statement of cash flows, dividends paid during the year are A) subtracted from net income in the operating activities section. B) added to net income in the operating activities section. C) shown as a cash outflow in the financing activities section. D) shown as a cash outflow in the investing activities section.

When bonds are issued at a premium, the bond premium A) does not change the amount of interest expense over the life of the bonds. B) increases the amount of interest expense over the life of the bonds. C) reduces the amount of interest expense over the life of the bonds. D) is charged to interest expense when the bonds are issued.

When calculating the net cash provided by operating activities, a gain on the sale of equipment should A) not be used in the calculation. B) be added to the net income. C) be subtracted from the net income. D) be reported in the cash flows from financing activities section.

When calculating the net cash provided by operating activities, an increase in income taxes payable is A) subtracted from the net cash amount after other calculations have been made. B) subtracted from the net income. C) added to the net income. D) not used in the calculation.

When computing trend percentages A) the current year is always equal to 100%. B) the base year is always the current year. C) the base year is always equal to 100%. D) the base year is equal to the current year plus the previous year divided by two.

When treasury stock is purchased, accountants record treasury stock at A) the stock's par value. B) the stock's original selling price. C) the stock's cost which is current market value. D) the difference between the original selling price and the par value.

Which account is the balance of the income summary account of a corporation transferred to A) expenses. B) revenues. C) retained earnings. D) net income.

Which of the following are the ratios that are used to determine an entity's short-term debt paying ability A) times interest earned, inventory turnover, current ratio, and receivables turnover. B) times interest earned, acid-test ratio, current ratio, and inventory turnover. C) current ratio, acid-test ratio, receivables turnover, and inventory turnover. D) asset turnover, times interest earned, current ratio, and receivables turnover.

Which of the following information cannot be found in a bond's indenture A) the coupon rate. B) the maturity of the bond. C) the price of the bond. D) none of the above.

Which of the following is true of horizontal analysis A) the percentages of change can be added or subtracted from top to bottom. B) the current year is always the base year. C) the amounts of increase or decrease can be added or subtracted in the column from top to bottom and will give correct subtotals at each point. D) the amounts and percentages of increase or decrease can be added and subtracted vertically in a column.

Which of the following is typically used as the base in a vertical analysis of a balance sheet A) total liabilities. B) total stockholders' equity. C) total assets. D) net sales.

Which of the following ratios measures long-term solvency A) acid-test ratio. B) accounts receivable turnover. C) debt to assets. D) current ratio.

Which of the following would be reported on a statement of cash flows as an investing activity A) depreciation expense. B) purchase of treasury stock. C) sale of equipment for cash. D) payment of cash dividends.

A type of analysis that indicates the direction a business is taking is A) benchmarking. B) current ratio. C) vertical analysis. D) trend percentages.

On September 30, 2019, a company issued $2,500,000 of 10-year, 12% bonds at 97. What is the amount of discount or premium A) $30,000 premium. B) $75,000 premium. C) $30,000 discount. D) $75,000 discount.

A company had accounts receivable of $320,000 in 2019, and $358,000 in 2020. Net sales for 2020 were $3,160,000, and gross profit was $1,600,000. The accounts receivable turnover for 2020 was A) 8.83 times. B) 9.88 times. C) 4.6 times. D) 9.32 times.

A company had income of $136,000 in 2019 and $210,000 in 2020. The increase in net income from 2019 to 2020 is A) 64.8 percent. B) 35.2 percent. C) 25 percent. D) 54.4 percent.

A company had net income of $100,000, paid income taxes of $30,000, and had interest expense of $8,000. What is the company's times interest earned ratio A) 12.50. B) 16.25. C) 17.25. D) 17.85.

A company has total assets of $120,000, current assets of $63,000, total liabilities of $50,000, and current liabilities of $36,000. What amount of working capital is available to meet its obligations A) $13,000 B) $43,000 C) $70,000 D) $27,000

A company issued $900,000 of 8%, 5-year bonds dated January 1, 2019, for $891,000. Interest is paid on January 1 and July 1. What is the total amount of interest expense for the bonds for 2019, using the straight-line method of amortization A) $72,000 B) $71,280 C) $70,200 D) $73,800

A company issues $1,800,000, 10-year, 6% bonds payable at a price of 95. The entry to record the issuance will include a A) debit to cash of $1,800,000. B) credit to discount on bonds payable for $90,000. C) credit to bonds payable for $1,710,000. D) debit to cash for $1,710,000.

A company issues $550,000, 10%, 5-year bonds on January 1, 2019 for $489,000. Interest is paid annually on January 1. If the company uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at December 31, 2019 would be A) $61,000 B) $42,800 C) $55,000 D) $67,200

A company paid $104,000 to retire bonds with a face value of $100,000 and an unamortized premium balance of $3,000. The entry to record the early retirement of the bonds will include the recognition of a loss of A) $7,000 B) $4,000 C) $3,000 D) $1,000

A company received $45,000 in cash from the sale of a building and paid $96,000 in cash for the purchase of new machinery. As a result, the statement of cash flows would report A) $45,000 as the net cash used in financing activities. B) $45,000 as the net cash provided by investing activities. C) $96,000 as the net cash used in investing activities. D) $51,000 as the net cash used by investing activities.

A comparison of the amounts for the same item in financial statements of two or more periods is called A) vertical analysis. B) competitive analysis. C) earnings per share. D) horizontal analysis.

A corporation has $1 par value common stock with 100,000 shares authorized and 25,000 shares issued. The entry to record the corporation's purchase of 10,000 shares of common stock at $4 per share would be A) debit common stock for $10,000, debit paid-in capital in excess of par - common for $30,000 and credit cash for $40,000. B) debit common stock for $40,000 and credit cash for $40,000. C) debit cash for $40,000, credit common stock for $10,000 and credit paid-in capital in excess of par - common for $30,000. D) debit treasury stock for $40,000 and credit cash for $40,000.

A corporation purchases 4,000 shares of its $10 par common stock for $16 per share. The debit part of the journal entry for this transaction would be to A) cash $64,000. B) common stock $40,000. C) common treasury stock $40,000. D) common treasury stock $64,000.

A corporation purchases 40,000 shares of its own $20 par value common stock for $80 per share. What will be the effect on stockholders' equity A) increase $800,000. B) increase $3,200,000. C) decrease $800,000. D) decrease $3,200,000.

All of the following are characteristics of the stockholders' equity presentation on the balance sheet except A) stockholders' equity is separated by source. B) paid-in capital is separated by source. C) preferred stock is listed before common stock. D) retained earnings is listed before all paid-in capital.

An example of a financing activity is A) the sale of merchandise for cash. B) the purchase of a building. C) the sale of used equipment for cash. D) the issue of stock for cash.

Bonds issued at a premium are A) traded for stock. B) sold at face value. C) sold at less than face value. D) sold for more than face value.

Bonds that mature on a single date are called ________. Bonds that mature on multiple dates are called ________. A) mortgage bonds; serial bonds. B) serial bonds; mortgage bonds. C) debentures; special bonds. D) term bonds; serial bonds.

Bonds with a face value of $400,000 were issued at 98. The entry to record the issuance will include a debit to the cash account for A) $408,000 B) $400,000 C) $398,000 D) $392,000

Bonds with a face value of $500,000 and a quoted price of 1021⁄4 have a selling price of A) $601,125 B) $510,125 C) $510,013 D) $511,250

Cash and cash equivalents, as used on the statement of cash flows, consist of A) only currency and bank accounts. B) only bank accounts. C) currency, bank accounts, and all investments. D) currency, bank accounts and short-term, highly liquid investments.

Depreciation expense is added to net income when reconciling net income to net cash provided by operating activities because it A) represents a cash inflow. B) is a tax deduction that reduces the payment of taxes. C) conserves cash outflows for taxes. D) reduces net income but has no effect on cash, so we add depreciation expense to net income to cancel the deduction.

Examples of financing activities on a statement of cash flows do NOT include A) issuing stock. B) borrowing money. C) buying treasury stock. D) declaring stock dividends.

Expressing cash and cash equivalents as a percentage of total assets is an example of A) horizontal analysis. B) current ratio. C) ratio analysis. D) vertical analysis.

Financing activities on a statement of cash flows relate to A) current liabilities and long-term liabilities. B) current assets and long-term assets. C) long-term assets. D) long-term liabilities and stockholders' equity.

How is an expense account closed A) debit retained earnings; credit expense. B) credit retained earnings; debit expense. C) credit income summary; debit expense. D) debit income summary; credit expense.

If a bond is a registered bond, it can NOT be a bond. A) discount. B) callable. C) convertible. D) coupon.

If current liabilities are $90,000, long-term liabilities are $360,000, and total assets are $600,000, what is the percentage of total liabilities to total assets A) 15 percent. B) 45 percent. C) 60 percent. D) 75 percent.

If liabilities are $75,000, two-thirds of which represent current liabilities, and total assets are $500,000, what is the ratio of Stockholders' Equity to Total Equities A) 10 percent. B) 6.7 percent. C) 12.5 percent. D) 85 percent.

If total merchandise available for sale is 80 percent of net sales and ending inventory is 26 percent of net sales, gross profit on sales is A) 20 percent of net sales. B) 74 percent of net sales. C) 26 percent of net sales. D) 46 percent of net sales.

In a statement of cash flows, the acquisition of land by issuing capital stock A) is not shown at all, since no cash was received or disbursed. B) is shown as an investing activity. C) is shown as a financing activity. D) is shown in a supplementary schedule as a non-cash investing and financing transaction.

In performing vertical analysis, the base for income before taxes is A) net income. B) gross sales. C) gross profit. D) net sales.

In the balance sheet, the account, premium on bonds payable, is A) added to bonds payable. B) deducted from bonds payable. C) classified as a liability account. D) A and C.

In vertical analysis of the balance sheet, each item is expressed as a percentage of A) current liabilities. B) current assets. C) long-term liabilities. D) total assets.

Land was purchased by issuing common stock. This transaction would be reported on the statement of cash flows as a(n) A) operating activity. B) investing activity. C) financing activity. D) noncash investing and financing activity.

Merchandise inventory turnover measures the relationship between A) assets and current liabilities. B) merchandise inventory and current liabilities. C) expenses and merchandise inventory. D) cost of goods sold and merchandise inventory.

On December 31, 2019, a company issued $180,000 face value, 8 percent bonds that mature 10 years from the date of issue. The issue price was 98. If the firm uses the straight-line method of amortization, interest expense for 2020 will be reported at A) $18,000 B) $24,000 C) $14,040 D) $14,760

On January 1, a company issued $2,300,000, 10-year, 9% bonds at 103. The entry to record this transaction would include a: A) credit to bonds payable $2,369,000. B) debit to discount on bonds payable $69,000. C) debit to cash $2,300,000. D) credit to premium on bonds payable $69,000.

On a statement of cash flows prepared with the indirect method, adjustments to reconcile net income to net cash provided by operating activities do NOT include A) gain on sale of equipment. B) patent amortization expense. C) depletion expense. D) changes in all of the current assets.

On the statement of cash flows, financing activities involve A) purchasing investments. B) acquiring long-term assets. C) lending money. D) borrowing by signing a long-term note.

On the statement of cash flows, investing activities include A) obtaining cash from creditors. B) collecting cash on long-term loans. C) selling stock to stockholders. D) repaying borrowed money.

Previously issued stock that a corporation purchases from shareholders is called A) outstanding stock. B) authorized stock. C) issued stock. D) treasury stock.

Ratios can be classified into all of the following categories except A) financial strength. B) profitability. C) liquidity. D) marketability.

Ten-year bonds with a face value of $600,000 were issued at 96 on January 1, 2019. The carrying value of the bond on December 31, 2020, after two years of interest payments and straight-line amortization is A) $619,200 B) $624,000 C) $576,000 D) $580,800

The contractual interest rate on a bond is often referred to as the A) callable rate. B) the maturity rate. C) market rate. D) stated rate.

The income statement reports a loss of $5,000 from the sale of equipment. As a result, the statement of cash flows would report a A) $5,000 increase in investing activities. B) $5,000 decrease in investing activities. C) $5,000 decrease in operating activities. D) $5,000 increase in operating activities.

The most important type of cash flows on the statement of cash flows is ________. The least important type of cash flows on the statement of cash flows is ________. A) operating activities; investing activities. B) investing activities; financing activities. C) financing activities; investing activities. D) operating activities; financing activities.

The net income for the year ended was $720,000; total assets at the beginning of the year was $2,100,000; and total assets at the end of the was $2,300,000. The return on total assets would be A) 1.1%. B) 3.1%. C) 11.2%. D) 32.7%.

The net income of a company for the year just ended is $230,000. Income tax is $80,500 and interest expense is $20,000. The number of times interest was earned would be A) 0.05. B) 10.5. C) 11.5. D) 16.5.

The purchase of treasury stock returns ________ to the stockholders but also ________. A) stock; increases their ownership of the company. B) stock; decreases their ownership of the company. C) cash; increases their ownership of the company. D) cash; decreases their ownership of the company.

The ratio that measures the number of times that operating income can cover interest expense is the A) leverage. B) rate of return on total assets. C) debt ratio. D) times-interest-earned ratio.

The statement of cash flows does NOT report A) cash payments in the current year. B) cash receipts in the current year. C) noncash investing and financing activities. D) revenues and expenses for the current year.

The statement of cash flows provides information about A) a company's ability to pay interest and dividends. B) a company's future cash flows. C) decisions made by a company's management. D) all of the above.

Under the indirect method of preparing a statement of cash flows, amortization expense for the current period is A) added in the investing activities section. B) subtracted in the investing activities section. C) added in the financing activities section. D) added in the operating activities section.

Using borrowed funds to earn a profit higher than the interest charged for borrowing is called A) secured borrowing. B) amortizing. C) investing. D) leveraging.

When bonds mature, a corporation will pay the bondholders A) the current market value of the bonds. B) the face amount plus the original premium or minus the original discount. C) the face amount plus the interest accrued since the date the bonds were issued. D) the face amount of the bonds.

Which is not true of bonds sold at a discount A) the bond carrying amount gets larger each year. B) the discount on bonds payable account gets smaller each year. C) at maturity, the face value and carrying amount will be equal. D) the balance of bonds payable account will get larger each year.

Which of the following is NOT a goal of analysis of financial statement A) assess the past performance. B) asses the current financial position. C) predict the future performance of the company. D) asses the working of management in the future.

Which of the following is not a disadvantage of raising capital through the issue of bonds payable A) the bonds are classified as a long-term liability B) interest must be paid even if the firm suffers a loss C) the face amount must be repaid at maturity D) interest is deductible for income tax purposes

Which of the following is typically used as the base in a vertical analysis of an income statement A) gross profit. B) operating income. C) net income. D) net sales.

Which of the following ratios is(are) useful in assessing a company's ability to meet current maturing or short-term obligations Acid-Test Ratio Debt to Assets Ratio A) No No B) No Yes C) Yes Yes D) Yes No

Which of the following statements is not true A) every bond has a face amount. B) every bond has a maturity date. C) every bond has a bond rate of interest. D) every bond is a coupon bond.

Which of the following would be most helpful in the comparison of different size companies A) horizontal analysis. B) comparison of their net incomes. C) comparison of their working capital balances. D) preparation of common-size financial statements.

Which of the following would be reported on a statement of cash flows as a financing activity A) sale of equipment. B) amortization expense. C) collection of notes receivable. D) purchase of treasury stock.

Which one of the following statement indicates the Inventory turnover ratio A) how quickly company prepared its inventory. B) how quickly company converts its inventory into cash. C) how quickly company purchases its inventory. D) how quickly company sells its inventory.

A corporation declared and distributed a 10 percent stock dividend on its $3 par common stock in November. At the time of the declaration of the stock dividend there were 10,000 shares of common authorized and 8,000 issued and outstanding. The market value on the date of declaration was $14 per share. The amount credited to paid-in-capital in excess of par value - common stock is A) $8,800 B) $2,400 C) $11,200 D) $11,000

A corporation has 11,000 shares of $2 par common stock outstanding. On August 22, 2019, a 3% stock dividend was declared to be distributed on September 30, 2019. The market value of the stock on August 22 was $21; the market value on September 30 was $18. What is the amount to be credited to the common stock account on September 30 A) $660 B) $990 C) $5,940 D) $6,930

A corporation has 11,000 shares of $2 par common stock outstanding. On August 22, 2019, a 3% stock dividend was declared to be distributed on September 30, 2019. The market value of the stock on August 22 was $21; the market value on September 30 was $18. What is the amount to be credited to the paid-in capital in excess of par - commons stock on August 22 A) $6,270 B) $990 C) $5,940 D) $6,930

A corporation may issue a stock dividend for which of the following reasons A) it may be short of cash and unable to pay a cash dividend. B) it may want to increase the marketability of its stock by raising the price per share. C) it may have a large debit balance in retained earnings and the directors may want to transfer part of this balance to the common stock account. D) it may want to increase the stockholders' ownership in the corporation.

A corporation reacquired 450 shares of its $100 par-value common stock for $112 a share. The entry to record this transaction includes a A) debit to treasury stock - common for $50,400. B) debit to treasury stock - common for $45,000. C) credit to paid-in capital for treasury stock transactions - common for $45,000. D) credit to treasury stock - common for $50,400.

A corporation reported a net income of $135,000 for the current fiscal year and declared and paid cash dividends of $58,000 and declared and distributed a stock dividend recorded at $45,000. If the beginning balance of the retained earnings account was $190,000, the ending balance is A) $222,000 B) $267,000 C) $35,000 D) $190,000

A declaration and distribution of a 20 percent stock dividend on common stock will A) not change the total stockholders' equity. B) increase the assets of the corporation. C) result in an increase in the book value of each share of common stock outstanding. D) increase the liabilities of the corporation.

A dividend is declared by the A) board of directors. B) stockholders. C) president of the corporation. D) CFO of the corporation.

A liability for cash dividends exists A) on the date of declaration. B) on the date of record. C) on the date of payment. D) no liability is recorded for cash dividends.

A liability for the payment of cash dividends is recorded A) on the date the board of directors publicly declares its intention to pay the dividends. B) only when cumulative preferred dividends are passed over (not paid) and are in arrears. C) at the end of any year during which common stock dividends were not paid. D) at the end of every year that the corporation makes a profit.

A retained earnings appropriation is a restriction of retained earnings by A) the board of directors. B) stockholders. C) senior management. D) accountants.

A stock dividend is recorded with a transfer from A) retained earnings to contributed capital. B) retained earnings to assets. C) contributed capital to retained earnings. D) assets to contributed capital.

A stock dividend transfers A) retained earnings to contributed capital. B) contributed capital to retained earnings. C) contributed capital to assets. D) assets to contributed capital.

Capital resulting from the retention of earnings should be entered in an account with an appropriate title such as A) retained earnings. B) appropriated retained earnings. C) earnings retained in the business. D) capital stock.

Several years ago, a company. issued 100,000 of its $2 par value stock for a total of $800,000. This is the only time that it has sold stock. This year it purchased 1,000 shares of its own stock for $10 a share. As a result of acquiring treasury stock A) its stockholders' equity decreases by $10,000. B) it will recognize a loss of $2,000. C) its common stock account decreases by $10,000. D) its retained earnings decrease by $10,000.

The board of directors of a corporation declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 20X1. The dividend is to be paid on August 15, 20X1, to stockholders of record on July 31, 20X1. The entry to be recorded on August 15, 20X1, would be A) dividends payable 63,000 cash 63,000 B) dividends expense 63,000 cash 63,000 C) cash 63,000 retained earnings 63,000 D) dividends payable 63,000 retained earnings 63,000

The correct order for closing accounts is A) revenue, expenses, income summary. B) revenue, income summary, expenses. C) revenue, expenses, retained earnings. D) revenue, retained earnings, expenses.

The effect of a retained earnings appropriation is to A) divide the retained earnings into two categories. B) increase cash and other assets. C) allow the corporation to use its assets for dividends. D) increase the number of shares of stock available.

The entry to record the declaration of a cash dividend consists of A) a debit to retained earnings and a credit to dividends payable. B) a debit to retained earnings and a credit to common stock dividend distributable. C) a debit to dividends payable and a credit to retained earnings. D) a debit to dividend expense and a credit to cash.

The purpose of a retained earnings appropriation is to inform readers of the balance sheet that A) the appropriated amount is unavailable for dividends. B) such an appropriation is required to pay corporate income taxes. C) an appropriation is needed because the corporation expects a net loss for the year. D) an appropriation is needed because the corporation is involved in a lawsuit.

The record date is the date A) used to determine who will receive the dividend. B) on which the board of directors declares the dividend. C) on which the dividend is paid. D) on which the dividend transaction is recorded in the general journal.

The second financial accounts to be closed in the closing entry process are A) expenses. B) revenues. C) retained earnings. D) net income.

To close salaries expense, A) debit income summary; credit salaries expense. B) debit salaries expense; credit retained earnings. C) debit salaries expense; credit income summary. D) debit retained earnings; credit salaries expense.

When a stock dividend is declared and the market value exceeds the par or stated value of the shares, an amount equal to the market value of the shares to be distributed should be charged (debited) to which of the following accounts A) stock dividends. B) stock dividends distributable. C) paid-in capital in excess of par. D) capital stock.

Which of the following statements is correct A) when a stock dividend is distributed, no assets leave or enter the corporation. B) the common stock dividends distributable account is shown as a current liability on the balance sheet. C) when a stock dividend is declared, the total amount debited to retained earnings is the par value, or stated value, of the shares to be issued. D) when a stock dividend is declared, the total amount of the dividend is debited to the common stock account.

Which of the following statements is not correct A) retained earnings represents a cash fund. B) a corporation can have a large cash balance but no retained earnings. C) a corporation can have a balance in the retained earnings account but no cash. D) retained earnings represent the undistributed profits and losses of the corporation.

Which of the following would not change the amount of total retained earnings for the year A) the transfer of retained earnings appropriated for treasury stock. B) the net income after taxes for the year. C) stock dividends declared and distributed. D) cash dividends declared and distributable.

Which one of the following events would not require a journal entry on a corporation's books A). 2-for-1 stock split. B). 100% stock dividend. C). 2% stock dividend. D) $1 per share cash dividend.

A corporation reported net income of $120,000 for its fiscal year and declared and paid cash dividends of $60,000 during the year. In November, the 10,000 shares of $10 par, common stock split, 2 for 1. If the ending balance of the retained earnings prior to the split was $200,000, the beginning balance was A) $120,000 B) $140,000 C) $150,000 D) $160,000

A journal entry for a cash dividend is required A) the date of declaration and date of record. B) the date of declaration and date of payment. C) only on the date of declaration. D) only on the date of payment.

A resolution by the board of directors to set aside a part of the credit balance of the retained earnings account for a specific use is called A) earnings retained in the business. B) an appropriation. C) a recapitalization. D) a deficit.

A stock split will do which of the following A) affect a stockholder's percentage interest in the corporation. B) decrease the par value of the stock. C) increase the par value of the stock. D) decrease the number of shares outstanding.

All of the following statements concerning retained earnings are true EXCEPT A) declaring cash dividends will decrease retained earnings. B) distributing stock dividends will decrease retained earnings. C) appropriating retained earnings will have no effect on total stockholders' equity. D) declaring a stock split will have no effect on retained earnings.

An appropriation of retained earnings represents A) cash set aside for some designated purpose. B) a portion of retained earnings that is currently unavailable for dividends. C) a current liability of the corporation. D) a current asset of the corporation.

An entry to appropriate a portion of retained earnings to finance a future plant expansion would include a credit to A) unappropriated retained earnings. B) appropriated retained earnings. C) cash. D) paid-in capital in excess of par.

Stock dividends and stock splits have the following effects on retained earnings Stock Splits Stock Dividends A) increase no change B) no change decrease C) decrease decrease D) no change no change

The declaration date is the date A) used to determine who will receive the dividend. B) on which the board of directors declares the dividend. C) on which the dividend is paid. D) on which the dividend transaction is recorded in the general journal.

The entry to record the declaration of a stock dividend consists of A) a debit to retained earnings and a credit to dividends payable. B) a debit to retained earnings and a credit to common stock dividend distributable. C) a debit to dividends payable and a credit to retained earnings. D) a debit to dividend expense and a credit to cash.

The first financial accounts to be closed in the closing entry process are A) expenses. B) revenues. C) retained earnings. D) net income.

The purchase of treasury stock will A) increase assets and shareholders' equity. B) decrease assets and shareholders' equity. C) have no effect on assets or shareholders' equity. D) decrease assets but have no effect on shareholders' equity.

Treasury stock A) does not appear on the balance sheet. B) is a contra-equity account. C) is an asset account. D) is recorded as additional paid-in capital.

Treasury stock is A) donated by stockholders. B) stock previously purchased by a stockholder, then repurchased by the issuing corporation. C) always preferred stock. D) categorized under paid-in capital on the balance sheet and added to preferred and common stock.

Typically, the only credit to the retained earnings account for a corporation is A) the initial investment of all owners. B) net income of the period. C) net loss of the period. D) any withdrawal by the owners.

When a stock dividend is distributed, the account to be debited would be A) retained earnings. B) stock dividends distributable. C) paid-in capital in excess of par. D) capital sock.

Which of the following below correctly states the sequence of dates related to dividends on common stock A) board of directors date, date of declaration, date of payment. B) declaration date, date of record, date of payment. C) date of record, declaration date, date of payment. D) declaration date, date of payment, date of distribution.

Which of the following is true of a stock dividend A) the decision to declare a stock dividend resides with the shareholders. B) does not affect total equity, but transfer amounts between the components of equity. C) it is a liability on the balance sheet. D) reduces a corporation's assets and stockholders' equity.

Which of the following statements about a stock split is correct A) a stock split decreases retained earnings B) a stock split does not require a journal entry. C) a stock split is the same as stock dividends. D) a stock split increases the par value per share.

A corporation reported a net income of $170,000 for its fiscal year and declared and paid cash dividends of $42,000 and declared and distributed a stock dividend recorded at $72,000. If the beginning balance of the retained earnings account was $200,000, the ending balance is A) $170,000 B)$ 328,000 C) $256,000 D) $298,000

An exchange of one share of an old issue of stock for a multiple number of shares of a new issue of stock with reduced par or stated value is known as a A) property dividend. B) stock dividend. C) stock split. D) liquidating dividend.

Income summary A) is a temporary account. B) is a permanent account. C) summarizes revenue and expenses and transfers the balance to retained earnings. D) both A and C are correct.

On February 16, a company declares a 68¢ dividend to be paid on April 5. There are 950,000 shares of common stock issued and outstanding. The entry recorded by the company on April 5 includes a debit to A) A debit to dividends payable and a credit to cash for $680,000. B) A debit to retained earnings and a credit to dividends payable for $46,000. C) A debit to dividends payable and a credit to cash for $646,000. D) A debit to retained earnings and a credit to dividends payable for $680,000.

On January 1, a corporation had 80,000 shares of $10 par value common stock outstanding. On May 11 the corporation declared a 10% stock dividend to stockholders of record on May 25. Market value of the stock was $13 on May 11. The entry to record the transaction of May 11 would include a A) credit to stock dividends for $104,000. B) credit to cash for $104,000. C) credit to common stock dividends distributable for $104,000. D) credit to common stock dividends distributable for $24,000.

Stock splits A) increase the number of shares of stock issued. B) decrease par value per share. C) both A and B. D) neither A nor B.

The board of directors declared a $2 per share cash dividend on common stock and the corporation had 5,000 shares authorized and 4,000 shares outstanding and make a journal entry. The entry for the dividend payment would be A) a debit to cash dividends for $8,000 and a credit to common dividends payable for $8,000. B) a debit to cash dividends for $10,000 and a credit to common dividends payable for $10,000. C) a debit to cash dividends payable for $8,000 and a credit to cash for $8,000. D) a debit to cash dividends payable for $10,000 and a credit to cash for $10,000.

The board of directors declared a $2 per share cash dividend on common stock and the corporation had 5,000 shares authorized and 4,000 shares outstanding. The entry required to record the declaration of dividends would be A) a debit to cash and a credit to common dividends payable. B) a debit to common dividends payable and a credit to cash. C) a debit to retained earnings and a credit to common dividends payable. D) a debit to cash dividends and a credit to common dividends payable.

The declaration of a cash dividend will result in a decrease in A) cash. B) contributed capital. C) retained earnings. D) income taxes.

The difference between revenue income summary and expense income summary is transferred to what account A) expenses. B) revenues. C) retained earnings. D) net income.

The entry to record the appropriation of funds to reacquire its own stock includes a A) debit to treasury stock - common. B) credit to treasury stock - common. C) debit to retained earnings. D) debit to retained earnings appropriated for treasury stock purchase.

The entry to record the payment of a cash dividend consists of A) a debit to retained earnings and a credit to dividends payable. B) a debit to retained earnings and a credit to common stock dividend distributable. C) a debit to dividends payable and a credit to cash. D) a debit to dividend expense and a credit to cash.

The journal entry made on the date of declaration of a cash dividend to common stockholders includes A) a debit to cash dividends and a credit to common dividends payable. B) a debit to cash dividends and a credit to cash. C) a debit to common dividends payable and a credit to cash dividends. D) a debit to cash and a credit to common dividends payable.

The total of the owners' claims to the assets of a corporation is represented by the A) balance of the common stock account. B) total retained earnings. C) total stockholders' equity. D) total assets of the corporation.

The treasury stock account is shown on the balance sheet as A) an asset. B) an addition to the common stock and preferred stock accounts in the stockholders' equity section. C) a deduction from the sum of all other items in the stockholders' equity section. D) a deduction from the retained earnings in the stockholders' equity section.

To close sales revenue, A) debit income summary; credit sales revenue. B) debit sales revenue; credit retained earnings. C) debit sales revenue; credit income summary. D) debit retained earnings; credit sales revenue.

Total stockholders' equity would be decreased by A) a stock split. B) an appropriation of retained earnings. C) a cash dividend. D) a stock dividend.

When a corporation reacquires its own shares of stock A) the treasury stock account is debited for the par value of the shares reacquired. B) the treasury stock account is debited for the original issue price of the shares. C) the treasury stock account is debited for the price paid to reacquire the shares. D) the treasury stock account is credited for the current market value of the shares.

When a dividend is paid in cash, it is known as a A) liquidating dividend. B) dividend payable. C) cash dividend. D) property dividend.

When a small stock dividend is declared and the market value exceeds the par or stated value of the shares, the excess of market value over par or stated value should be entered in which of the following accounts A) stock dividends. B) stock dividends distributable. C) paid-in capital in excess of par. D) capital stock.

When the balance of the income summary account is a credit, the entry to close this account is A) debit retained earnings, credit income summary. B) debit income summary; credit revenue. C) debit income summary; credit retained earnings. D) debit revenue; credit income summary.

Which of the following statements is not correct A) treasury stock represents issued shares of the corporation. B) some states require that retained earnings be appropriated in an amount equal to the cost of treasury stock. C) the treasury stock account has a normal credit balance. D) the re-issuance of treasury stock increases stockholders' equity.

Which of the following transactions result in a decrease in stockholders' equity A) stock split. B) stock dividend. C) cash dividend. D) all of the above.

Which of the following would be found on a corporation's income statement A) retained earnings B) dividends payable C) income tax expense D) stockholder's equity

A corporation declared and issued a 10% stock dividend on December 1. Prior to the declaration, the corporation's retained earnings were $200,000, shares outstanding were 20,000, $5 par value, common stock with a current market value of $10 per share. Contributed capital will increase (decrease) as a result of recording this stock dividend by A) $0. B) $10,000 C) $(10,000) D) $20,000

A corporation declared and issued a 8% stock dividend on December 1. Prior to the declaration, the corporation's retained earnings were $735,000, shares outstanding were 62,000, $5 par value, common stock with a current market value of $16 per share. As a result of recording this stock dividend total stockholders' equity will increase (decrease) by A) $24,750 B) $(79,360) C) $79,360 D) $0

A corporation has 11,000 shares of $2 par common stock outstanding. On August 22, 2019, a 3% stock dividend was declared to be distributed on September 30, 2019. The market value of the stock on August 22 was $21; the market value on September 30 was $18. What is the amount to be debited to the retained earnings account on August 22 A) $6,270 B) $990 C) $5,940 D) $6,930

A declaration and distribution of a 20 percent stock dividend on common stock will A) increase the liabilities of the corporation. B) increase the assets of the corporation. C) result in an increase in the book value of each share of common stock outstanding. D) not change the total stockholders' equity.

A liability for stock dividends exists A) on the date of declaration. B) on the date of record. C) on the date of payment. D) no liability is recorded for stock dividends.

A stock dividend A) decreases common stock. B) increases stockholders' equity. C) decreases stockholders' equity. D) decreases retained earnings.

If a corporation issues additional shares of its own stock to the stockholders on a proportional ownership basis, these are known as a A) liquidating dividend. B) dividend payable. C) cash dividend. D) stock dividend.

On April 15, the board of directors declared a 2 for 1 split on a corporation's 20,000 outstanding shares of $10 par, common stock. After the split, the total number of shares and par value per share are A) 20,000 shares, $10 par. B) 10,000 shares, $20 par. C) 20,000 shares, $5 par. D) 40,000 shares, $5 par.

Retained earnings A) is decreased by a stock split. B) represents an amount of cash available to pay shareholders. C) represents the total amount of net income earned by the company during its existence. D) can be subject to appropriation by a corporation's directors to limit dividends.

The City of St. Charles purchased land ten years ago for $100,000. The land is now worth $120,000. The city wishes to attract new industry to its town and gives the land to a corporation for a plant site. The corporation will record this transaction with a A) debit to the donated to capital account for $100,000. B) credit to the donated to capital account for $100,000. C) debit to the donated capital account for $120,000. D) credit to the donated capital account for $120,000.

The balance of the income summary account of a corporation is transferred to which of the following accounts A) capital stock. B) cash. C) premium on sale of capital stock. D) retained earnings.

The entry to record the distribution of a stock dividend consists of A) a debit to retained earnings and a credit to dividends payable. B) a debit to retained earnings and a credit to common stock dividend distributable. C) a debit to common stock and a credit to common stock dividend distributable. D) a debit to common stock dividend distributable and a common stock.

The formal method by which a company can restrict dividend distributions is called A) deferral. B) reserve. C) declaration. D) appropriation.

The issuance of a stock dividend will A) decrease total assets. B) increase retained earnings. C) decrease paid-in capital. D) not affect total equity.

The owner of 100 shares of stock of a corporation with 2,000 shares of stock outstanding has a 5% interest in the total stockholders' equity. If a 20% stock dividend is declared and distributed, that stockholder would own which of the following number of shares A) 20 shares. B) 100 shares. C) 105 shares. D) 120 shares.

The payment date is the date A) used to determine who will receive the dividend. B) on which the board of directors declares the dividend. C) on which the dividend is paid. D) on which the dividend transaction is recorded in the general journal.

The two major components of shareholders' equity are A) preferred stock and common stock. B) contributed capital and paid-in capital. C) contributed capital and retained earnings. D) common stock and treasury stock.

Treasury stock can be purchased for all of the following reasons except A) to distribute at a later date in connection with an employee incentive plan. B) to avoid a hostile takeover. C) to maintain or increase market value for the company stock. D) to increase stockholders' book value per share.

When a stock dividend is distributed, the account to be credited would be A) stock dividends. B) stock dividends distributable. C) paid-in capital in excess of par. D) capital stock.

Which of the following accounts should NOT be closed to income summary at the end of the fiscal year A) salaries expense. B) sales revenue. C) utilities expense. D) treasury stock.

Which of the following statements is not correct A) the statement of retained earnings shows the beginning balance, the changes, and the ending balance for the unappropriated and appropriated retained earnings accounts. B) some corporations combine the statement of retained earnings with the income statement. C) a statement of stockholders' equity provides an analysis reconciling the beginning and ending balance of each of the stockholders' equity accounts. D) all of the above statements are correct.

Which of the following would not be found on the statement of retained earnings A) dividends on preferred stock. B) appropriation for treasury stock. C) appropriation for construction of an office building. D) the cash payment made when the corporation completes construction of a building for which an appropriation of retained earnings had been made.

Which of the following would not be shown on the statement of retained earnings A) declaration of a cash dividend. B) declaration of a stock dividend. C) an appropriation for plant expansion. D) the purchase of treasury stock.

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