Test 3

False

A 2-for-1 stock split will reduce total contributed capital.

$12,000

A cereal company includes one premium coupon in every cereal box. Upon returning 10 such coupons to the company, a customer will be sent a free cereal bowl. In a recent year, the company sold 200,000 boxes of cereal for $1 a box. It is estimated that 20% of the coupons will be returned. If the cereal bowls cost the company $3 each, what amount of liability for coupon redemptions must be recorded by the company?

$501

A company determines that the maximum they should pay for a new machine is $52,433. The company estimates the machine will produce a net cash flow of $9,000 per year and will last for 7 years.

$81,755

A company is considering the purchase of equipment. The company's financial goals include a 5% desired rate of return for any investment the company considers. The equipment under consideration has an estimated useful life of 8 years and an estimated salvage value of $6,200. Production from the equipment should increase the company's annual net cash flow by $12,000 per year.

$219,750

A company reported $212,000 of accounts payable and $36,000 of unearned revenue on its March 31, 2013 balance sheet. During April, the following transactions occurred: Apr. 1 Signed a 9-month 3% note for $100,000 Apr. 3 Paid suppliers $130,000 of what was owed on account Apr. 15 A neighboring firm filed a lawsuit against the company seeking $80,000 in damages for alleged pollution of a local water source.

$122,654 $76,526

A company reported the following amounts on its balance sheet at January 1, 2012: What is the Dec 31, 2012 balance in Retained Earnings and APIC - Common after closing entries?

Retained Earnings: $122,654 APIC - Common: $76,526

A company reported the following amounts on its balance sheet at January 1, 2015: Common Stock, $10 par $ 25,500 APIC- Common 75,200 Retained Earnings 93,000 What is the Dec 31, 2015 balance in Retained Earnings and APIC - Common after closing entries?

$145,000

A company reported the following information for 2014 and 2015 Accounts Receivable, December 31, 2014 $ 14,000 Accounts Receivable, December 31, 2015 23,000 Sales Revenue - 2015 154,000 How much cash was collected from customers during 2015?

$1,210

A company sold 152 bikes at $225 each. The bikes carry a 3 year warranty for defects. The companyestimates that repair costs will average 5% of the total selling price. The estimated warranty liability atthe beginning of the year was $1,400 and $1,900 in claims were actually incurred during the year tohonor the warranty. What was the ending balance in the estimated warranty liability account?

$13,400

A company was organized on January 1, 2011. During its first year, the company issued the following stock and have made no other stock issuances since: Preferred Stock (4%, $80 par, cumulative, 10,000 shares authorized, 6,000 issued and outstanding) Common Stock ($5 par, 100,000 authorized, 80,000 issued, 70,000 outstanding) On December 31, the company declared the following cash dividends in each respective year: 2011: $5,000; 2012: $12,000; 2013: $54,000

$2.33

A company's Dec 31, 2015 equity accounts are shown below: Preferred Stock (7%, $100 par, cumulative, 8,000 authorized) $ 400,000 Common Stock ($10 par, 200,000 shares authorized) 1,000,000 On April 1, 2015, 25,000 shares of common stock had been issued when the market price of the stock was $15. On August 31, 2015, 30,000

$33,000

A company's contributed capital is as follows: 6 % Cumulative Preferred Stock 5,000 shares issued, $80 par value Common Stock, 15,000 shares issued, $2 par value Determine the total amount of the dividends to be allocated to the preferred stockholders in 2013?

True

A possible loss from a lawsuit is not reported on the balance sheet as a current liability, but disclosed in the footnotes of the financials.

$16,580

An analysis of a company's estimated liability account revealed the following information: Balance - November 1, 2013: $8,250 Sales of product with 2-year warranty: $900,000 Balance - November 30, 2013: 9,670 Estimated liability recorded in November 2013: 18,000

$103,500

At Dec 31, ABC Company had currency and coins on hand of $500, deposits in checking accounts of $3,000, U.S. Treasury bills purchased on Dec. 1 and due on Jan. 31of $30,000, U.S. Treasury bills purchased on Nov 1 and due March 31 of $50,000, a money market account of $70,000, and 200 shares of Wal-Mart stock worth $2,000 purchased on Dec. 15 that management intends to sell on Jan. 15. What amount should ABC report as the balance in the Cash & Cash Equivalents account on Dec. 31?

$1.66

At the beginning of 2013, a company had 200,000 shares of $5 par value common stock outstanding. On August 1, the company issued another 100,000 shares. The company's 2013 net income $425,000. In addition, you are given the following portion of the company's 12/31/2013 stockholders' equity section of its balance sheet: Preferred stock (4%, $10 par, 60,000 shares issued and outstanding) $600,000

8

Barton Company has just purchased a machine with a cost of $99,992, and signed a note agreeing to pay the manufacturer equal annual amounts of $17,400. If the current rate of interest is 8%, how many equal annual payments will be made?

$7,900 Loss

Because of changing market conditions, a company made the decision to redeem $900,000 of its bonds prior to maturity. The bonds originally sold for $952,250 and the unamortized premium at the time of redemption was $28,100. The corporation's bond certificates indicated that the bonds could be retired early at 104. Determine the gain or loss on the bond retirement.

$114,000

Below is the Income Statement for Lopez Company for the year-ending December 31, 2017: Sales (net) $500,000Cost of Goods Sold: Beginning Inventory$50,000 Net Purchases300,000 Goods Available for Sale350,000 Ending Inventory40,000 Cost of Goods Sold 310,000Gross Profit $190,000 Expenses: Wages$35,000 Depreciation30,000 Advertising15,000 Administrative5,000$85,000Income from Operations $105,000Gain on Sale of Equipment 50,000Net Income $155,000 Calculate Total Cash Flow from Operations at December 31, 2017:

True

Bonds can be a risky source of financing because a company having cash flow problems cannot postpone interest payments to bondholders.

$255,369

College Station Company issued 300 of its 8%, $1000, 5-year bonds on January 1, 2013.

($2,350)

Condensed Financial Data of Clark, Inc. appear below: Clark, Inc. Comparative Balance Sheet December 31 Assets20172016Cash & Cash Equivalents$97,800$38,400Accounts Receivable90,80033,000Inventory112,500102,850Prepaid Expenses18,40016,000Investments108,00094,000Plant Assets270,000242,500Accumulated Depreciation(50,000)(52,000) $647,500$474,750 Using the indirect method, calculate Cash Flow from Financing for December 31, 2017:

$159,250

Condensed Financial Data of Clark, Inc. appear below: Clark, Inc. Comparative Balance Sheet December 31 Assets20172016Cash & Cash Equivalents$97,800$38,400Accounts Receivable90,80033,000Inventory112,500102,850Prepaid Expenses18,40016,000Investments108,00094,000Plant Assets270,000242,500Accumulated Depreciation(50,000)(52,000) $647,500$474,750 Using the indirect method, calculate Cash Flow from Operations for December 31, 2017:

($97,500)

Condensed Financial Data of Clark, Inc. appear below: Clark, Inc. Comparative Balance Sheet December 31 Assets20172016Cash & Cash Equivalents$97,800$38,400Accounts Receivable90,80033,000Inventory112,500102,850Prepaid Expenses18,40016,000Investments108,00094,000Plant Assets270,000242,500Accumulated Depreciation(50,000)(52,000) $647,500$474,750Liabilities & Stockholders' Equity Accounts Payable$92,000$67,300Accrued Expenses Payable16,50017,000Bonds Payable85,000110,000Common Stock180,000150,000APIC - Common Stock40,00025,000Retained Earnings234,000105,450 $647,500$474,750 Using the indirect method, calculate Cash Flow from Investing for December 31, 2017:

False

Contingent assets may be disclosed in the notes if probable and reasonably estimable.

Decreased

Destin Co. issued $250,000, 9%, 10 year bonds on January 1, 2011.

Decreased

Destin Co. issued $250,000, 9%, 10 year bonds on January 1, 2011. On December 31, 2012 (after the periodicinterest payment was made), the unamortized discount is $642. On January 1, 2013, Destin retires one-half of thesebonds on the open market at 101 ½. Have market interest rates increased, decreased, or stayed the same since the bonds were issued?

a debit to Loss on Retirement of Bond of $2,196

Destin Co. issued $250,000, 9%, 10 year bonds on January 1, 2011. On December 31, 2012 (after the periodicinterest payment was made), the unamortized discount is $642. On January 1, 2013, Destin retires one-half of thesebonds on the open market at 101 ½. The journal entry to record the sale of this retirement of debt would include:

Assets: Increase Liabilities: No Effect SHE: Increase Revenue: No Effect Expense: No Effect Net Income: No Effect

Determine the financial effect of selling treasury stock above cost:

Assets: No Effect Liabilities: Increase SHE: Decrease Net Income: No Effect Retained Earnings: Decrease

Determine the financial effect on the day that dividends are declared if they won't be paid until a future date:

False

Dividends are paid on the number of shares of issued stock.

$8,000

Equipment, December 31, 2014 $65,000 Equipment, December 31, 2015 $72,000 Accumulated Depreciation, December 31, 2014 $39,000 Accumulated Depreciation, December 31, 2015 $30,000 During 2015, the company sold equipment with a cost of $30,000 and accumulated depreciation of $25,000. A gain of $3,000 was recognized on the sale of the equipment. What amount would be reported as the cash proceeds from the sale of the equipment?

$16,000

Equipment, December 31, 2014 $65,000 Equipment, December 31, 2015 $72,000 Accumulated Depreciation, December 31, 2014 $39,000 Accumulated Depreciation, December 31, 2015 $30,000 During 2015, the company sold equipment with a cost of $30,000 and accumulated depreciation of $25,000. A gain of $3,000 was recognized on the sale of the equipment. What was Depreciation Expense for 2015?

True

For an interest bearing note, the amount of each payment that is allocated to interest expense decreases with each payment.

$10,857

Greene Corp. issued bonds on January 1, 2012 with the following terms: Determine the amount of interest expense on this bond issuance on Greene's 2012 Income Statement:

$ 18,314

Greene Corp. issued bonds on January 1, 2012 with the following terms: Determine the unamortized premium or discount of the bonds as of December 31, 2012:

$272,457

Greene Corp. issued bonds on January 1, 2012 with the following terms: Determine what investors paid for these bonds:

$52,543

Greene Corp. issued bonds on January 1, 2012 with the following terms: Identify the total cost of borrowing that the corporation will incur over the life of this debt:

$10,857

Greene Corp. issued bonds on January 1, 2015 with the following terms:

False

If a bank discounts a note, then the borrower needs to only pay the cash received and not the face value of the note.

False

If a company purchases equipment by issuing a 12 month note, the company's current ratio will decrease, but the working capital will remain the same.

True

If a contingent liability is both probable and estimable, it should be recorded as a liability on the balance sheet.

False

If an investor has the right to retire bonds, they are referred to as callable.

False

If market interest rates are rising, then bond prices are also rising.

True

Interest expense decreases each payment period on bonds that are issued at a premium.

$1,825

Listed below are selected accounts from ABC balance sheet as of December 31, 2012:Accounts Receivable $ 900 Accounts Payable $ 325Estimated Warranty liability 120 Accumulated depreciation 200Wages payable 350 Current maturities of long-term debt 125Prepaid Rent 120 Interest payable 80Unearned revenue 425 Discount on note payable, due 9/1/13 200Note payable, due 9/1/13 600 Note payable, due 7/1/16 1,500Allowance for doubtful accounts 130 Discount on note payable, due 7/1/16 100Warranty Expense 90 Marketable Equity Securities 450Determine ABC's current liabilities balance at 12/31/12.

Credit to discount for $2,800

On April 1, 2012, Aggie Company borrowed $120,000 on a bank note for 7 months. Thebank discounted the note at 4%. The entry to record the payment of this note onOctober 31, 2012 would include a

$1,392

On January 1, 2012 Aggie company purchased equipment with a list price of $23,000. They made a20% cash down payment and financed the balance with an 8%, 4 year note. Payments on the note areto be made semi-annually. Determine interest expense to be reported on the Income Statement for the year endingDecember 31, 2012.

$14,326

On January 1, 2012 Aggie company purchased equipment with a list price of $23,000. They made a20% cash down payment and financed the balance with an 8%, 4 year note. Payments on the note areto be made semi-annually. Determine the Carrying Value of the Note Payable as of December 31, 2012.

$33,819

On January 1, 2012 a company purchased a new machine by signing a non-interest bearing note for $38,000

$8,838

On January 1, 2012 a company purchased an $180,000 machine and made a cash down payment of$60,000. A four year, 8% note payable was signed for the balance. The note will be paid in sixteen equalquarterly payments starting on March 31, 2012. What is the amount of each of the equalquarterly payments that will be paid on the note?

$47,191

On January 1, 2012, a company purchased equipment at a contract price of $56,000. The companymade a cash down payment of $6,000 and signed a 3 year, 6% non-interest bearing note for thebalance, due on December 31, 2014. Interest is compounded annually. The carrying value of the note on December 31, 2013, after adjustment, would be

$48,000

On January 1, 2012, a company purchased equipment at a contract price of $56,000. The companymade a cash down payment of $6,000 and signed a 3 year, 6% non-interest bearing note for thebalance, due on December 31, 2014. Interest is compounded annually.2. The equipment account would be debited for what amount on January 1, 2012?

$565,206

On January 1, 2012, a company purchased land for a future warehouse site. A $50,000 down payment is made on that date.

$30,000

On January 1, 2013, a corporation issued $500,000, 6% 5 year bonds for $459,464.

$36,893

On January 1, 2013, a corporation issued $500,000, 6% 5 year bonds for $459,464.

$218,229

On January 1, 2013, a corporation issued $500,000, 6%, 10-year bonds for $581,771.

$22,928

On January 1, 2013, a corporation issued $500,000, 6%, 10-year bonds for $581,771.

$3,398

On January 1, 2014, Aggie Company purchased a building for $65,000, making a cash down payment of $5,000 and signing a note requiring eight equal semi-annual payments for the balance. Payments are to be made on June 30 and December 31. The implicit interest rate is 6%.

$11,800

On March 1, 2013 ABC Company sold a machine to XYZ Company. XYZ made a cash down payment of $4,000 and signed a 90-day non-interest bearing note of $8,000 discounted at 10%.

$2,667

On September 1, 2012, Coral Equipment signed a one-year 8% interest-bearing note payable for $50,000.

False

One reason that a company may choose to issue equity over debt is that dividends will help reduce the company's tax burden.

True

Par value has no relationship to market value of stock.

None of the above

Red Corp issued $1,000,000, 5%, 10 years bonds with annual interest payments on January 1, 2012 when the market rate of interest was 7%. Which of the following statements is true?

False

Stock dividends will reduce total Stockholders' Equity.

False

Stock splits reduce total stockholders' equity and assets.

False

Stock splits reduce total stockholders' equity and assets.

True

Stockholders' equity is reduced at the time that a cash dividend is declared.

$115

The Stockholder's Equity accounts of Aspen Corp. on December 31, 2012 were as follows: Preferred Stock (6%, $100 par, cumulative, 8000 authorized) $ 600,000 Common Stock ($3 par, 1,500,000 authorized) 900,000 APIC - Preferred 90,000 APIC - Common 700,000 Retained Earnings 780,000 Treasury Stock- Common ($9 cost) 45,000

$3,584,540

The Stockholder's Equity accounts of Aspen Corp. on December 31, 2012 were as follows: Preferred Stock (6%, $100 par, cumulative, 8000 authorized) $ 600,000 Common Stock ($3 par, 1,500,000 authorized) 900,000 APIC - Preferred 90,000 APIC - Common 700,000 Retained Earnings 780,000 Treasury Stock- Common ($9 cost) 45,000

Preferred: $72,000 Common: $63,160

The Stockholder's Equity accounts of Aspen Corp. on December 31, 2012 were as follows: Preferred Stock (6%, $100 par, cumulative, 8000 authorized) $ 600,000 Common Stock ($3 par, 1,500,000 authorized) 900,000 APIC - Preferred 90,000 APIC - Common 700,000 Retained Earnings 780,000 Treasury Stock- Common ($9 cost) 45,000

$2,514,500

The Stockholder's Equity accounts of Aspen Corp. on December 31, 2012 were as follows: Preferred Stock (6%, $100 par, cumulative, 8000 authorized) $ 600,000 Common Stock ($3 par, 1,500,000 authorized) 900,000 APIC - Preferred 90,000 APIC - Common 700,000 Retained Earnings 780,000 Treasury Stock- Common ($9 cost) 45,000 What is the Total Contributed Capital as of December 31, 2013?

a credit to Additional Paid in Capital of $160,000

The Stockholder's Equity accounts of Aspen Corp. on December 31, 2012 were as follows: Preferred Stock (6%, $100 par, cumulative, 8000 authorized) $ 600,000 Common Stock ($3 par, 1,500,000 authorized) 900,000 APIC - Preferred 90,000 APIC - Common 700,000 Retained Earnings 780,000 Treasury Stock- Common ($9 cost) 45,000 The March 21 entry would include a

$69.20

The Stockholder's Equity accounts of a corporation on January 1, 2012, were as follows: As of Dec. 31, 2012, what is the average selling price of the preferred stock?

158,500

The Stockholder's Equity accounts of a corporation on January 1, 2012, were as follows: How many shares of common stock are outstanding as of December 31, 2012?

$33,700

The Stockholder's Equity accounts of a corporation on January 1, 2012, were as follows: What is total amount of dividends declared and paid in 2012?

$4,468,850

The Stockholder's Equity accounts of a corporation on January 1, 2012, were as follows: What it total stockholder's equity as of December 31, 2012?

credit to Treasury Stock of $21,500

The Stockholder's Equity accounts of a corporation on January 1, 2012, were as follows: he journal entry to record the March 21st sale of Treasury Stock would include a:

$115.83

The Stockholder's Equity accounts of a corporation on January 1, 2013, were as follows: Preferred Stock (2%, $100 par, cumulative, 8,000 shares authorized) $ 600,000 Common Stock ($3 par, 1,500,000 shares authorized) 900,000 Additional Paid in Capital - Preferred 90,000 Additional Paid in Capital - Common 700,000 Additional Paid in Capital - Treasury 24,000 Retained Earnings 780,000 Treasury Stock - Common ($9 per share cost) 45,000

$3,606,975

The Stockholder's Equity accounts of a corporation on January 1, 2013, were as follows: Preferred Stock (2%, $100 par, cumulative, 8,000 shares authorized) $ 600,000 Common Stock ($3 par, 1,500,000 shares authorized) 900,000 Additional Paid in Capital - Preferred 90,000 Additional Paid in Capital - Common 700,000 Additional Paid in Capital - Treasury 24,000 Retained Earnings 780,000 Treasury Stock - Common ($9 per share cost) 45,000

$4,468,850

The Stockholders' Equity accounts of a corporation on January 1, 2015, were as follows: Preferred Stock (5%, $10 par, cumulative, 5,000 shares authorized) $ 35,000 Common Stock ($5 par, 500,000 shares authorized) 750,000 Additional Paid in Capital - Preferred 205,800 Additional Paid inCapital - Common 2,220,000 Retained Earnings 857,000

158,500

The Stockholders' Equity accounts of a corporation on January 1, 2015, were as follows: Preferred Stock (5%, $10 par, cumulative, 5,000 shares authorized) $ 35,000 Common Stock ($5 par, 500,000 shares authorized) 750,000 Additional Paid in Capital - Preferred 205,800 Additional Paid inCapital - Common 2,220,000 Retained Earnings 857,000 How many shares of common stock are outstanding as of December 31, 2015?

credit to Treasury Stock of $21,500

The Stockholders' Equity accounts of a corporation on January 1, 2015, were as follows: Preferred Stock (5%, $10 par, cumulative, 5,000 shares authorized) $ 35,000 Common Stock ($5 par, 500,000 shares authorized) 750,000 Additional Paid in Capital - Preferred 205,800 Additional Paid inCapital - Common 2,220,000 Retained Earnings 857,000 The journal entry to record the March 21st sale of Treasury Stock would include a:

True

The current market price of the bond does not affect the amount that the company pays in periodic cash interest payments.

($960)

The following balance sheets apply to Foster & Company at year-end December 31, 2017: Assets20172016Cash & Cash Equivalents$1,200$800Accounts Receivable400440Inventory1,220740Land820500Equipment4,6004,140Accumulated Depreciation(800)(620)Total Assets$7,440$6,000 Using the indirect method, calculate Cash Flow from Financing for December 31, 2017:

($60)

The following balance sheets apply to Foster & Company at year-end December 31, 2017: Assets20172016Cash & Cash Equivalents$1,200$800Accounts Receivable400440Inventory1,220740Land820500Equipment4,6004,140Accumulated Depreciation(800)(620)Total Assets$7,440$6,000Liabilities & Stockholders' Equity Accounts Payable$1,000$1,600Long-Term Borrowings1,4401,800Common Stock2,0001,200Retained Earnings3,0001,400 $7,440$6,000 Using the indirect method, calculate Cash Flow from Investing for December 31, 2017:

$1,420

The following balance sheets apply to Foster & Company at year-end December 31, 2017: Assets20172016Cash & Cash Equivalents$1,200$800Accounts Receivable400440Inventory1,220740Land820500Equipment4,6004,140Accumulated Depreciation(800)(620)Total Assets$7,440$6,000Liabilities & Stockholders' Equity Accounts Payable$1,000$1,600Long-Term Borrowings1,4401,800Common Stock2,0001,200Retained Earnings3,0001,400 $7,440$6,000 Using the indirect method, calculate Cash Flow from Operations for December 31, 2017:

$845,650

The following information is available for a company on December 31, 2012: Common Stock, $1.75 par, 400,000 shares authorized $542,500 Additional Paid in Capital - Common Stock 700,000 Retained Earnings 630,000 Total Stockholders' Equity $1,872,500

a credit to Discount on Bonds Payable of $3,900

The journal entry to record the interest payment on June 30, 2012, assuming a market interest rate of 9% wouldinclude:

a credit to Discount on Bonds Payable of $3,900

The long term debt section of a company's balance sheet at December 31, 2011 showed the following:

True

The present value is the value today of a single amount to be paid or received at a specific date in the future.

False

The sale of treasury stock for an amount above its purchase price will result in a gain being recorded.

False

The stated rate of interest on a non-interest bearing note is always higher than the effective interest rate.

$7,050

The stockholders' equity section of the balance sheet of a company reveals etermine the total amount of dividends that the common stockholders received during the years 2010-2012:

False

Treasury stock is listed on the balance sheet as either a marketable security or LT investment, depending when the company plans to sell it.

Interest expense increases and the bond carrying value increases

Under the effective-interest method of amortizing a bond discount, for each semi-annual interest payment, which of the following happens?

$840

Use the information below to determine cash flow from operations for 2015. Summary Balance Sheet Information20152014Cash$300$240Accounts Receivable200180Inventory120240Prepaid Insurance90120Plant and Equipment600510Accumulated Depreciation(240)(180)Accounts Payable$380$300Bonds Payable150120Common Stock420420Retained Earnings120270 Cash Flow from Operations for 2015 is:

it is a non-cash expense that was deducted in determining net income

Using the indirect method of presenting net cash flow from operating activities, depreciation expense is added to net income because

False

When a bond is sold at face value, the carrying value will change over the life of the bond.

False

When a liability is accrued, the account debited in the transaction is a stockholders' equity account.

the date of declaration

When recording cash dividends, liabilities increase on

The current market price of the bond does not affect the amount that the company pays in periodic cash interest payments.

Which of the following is true?

The current market price of the bond does not affect the amount that the company pays in periodic cash interest payments.

Which of the following is true?

Operating: Loss on Sale of Equipment Investing: Purchase of Equipment Financing: Payment of Dividends

Which of the following properly identifies the section of the cash flow statement where each transaction or event would be reported.

Declaration and payment of a stock dividend

Which of the following transactions would affect total contributed capital?

Option C

You are considering several possible investment alternatives.

$27,766

he following refers to a purchase of a machine by a company on January 1, 2012.Salvage Value: $6,500Life: 7 yearsDesired Rate of Return 5 %Interest Compounded: annuallyAnnual net cash flow $4,000What is the maximum amount the company should pay for the machine to achieve the desired rate of return?

True

he normal balance of a discount account is a debit.

Using the indirect method of presenting net cash flow from operating activities, depreciation expense is added to net income because

it is a non-cash expense that was deducted in determining net income