#3 Accounting Exam

A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock

d. $8,800

When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity, the bonds are

d. callable bonds

On the statement of cash flows, the cash flows from operating activities section would include

d. cash receipts from sales of merchandise

A corporation uses the indirect method for preparing the statement of cash flows. A fixed asset has been sold for $25,000 representing a gain of $4,500. The value in the operating activities section regarding this event would be

b. $(4,500)

How is treasury stock shown on the balance sheet?

b. as a decrease in stockholders' equity

Treasury stock shares are

d. issued shares that have been reacquired by a corporation

The journal entry a company records for the interest payment and amortization of bond premium is

debit Interest Expense and Premium on Bonds Payable credit Cash

The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be

debit Cash credit Premium on Bonds Payable and Bonds Payable

The journal entry a company records for the issuance of bonds when the contract rate is less than the market rate would be

debit Cash and Discount on Bonds Payable credit Bonds Payable

The Glenn Corporation issues 1,000, 10-year, 8%, $2,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a

debit to Discount on Bonds Payable for $80,000

Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

discarding an asset that had been fully depreciated

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be

less than $500,000

The balance in Discount on Bonds Payable that is applicable to bonds due in three years would be reported on the balance sheet in the section entitled

long-term liabilities

Cash paid for preferred stock dividends should be shown on the statement of cash flows under

b. financing activities

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

a. depreciation expense

Changes in current assets and current liabilities are reported on the statement of cash flows, indirect method, in the

a. operating activities

The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called

authorized stock

A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under

investing activities

If $1,000,000 of 8% bonds are issued at 102 3/4, the amount of cash received from the sale is

$1,027,500 (100000 x 102+3/4)= 1027500

Franklin Corporation issues $50,000, 10%, 5-year bonds on January 1, for $52,100. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is

$2,290

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

$3,000 loss

3. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the third year

$3.25 and $0.25

30. Which of the following can be found on the statement of cash flows?

. cash flows from operating activities

A ten-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under

. financing activities

Norris Company declared cash dividends of $60,000 during the year. Cash dividends payable were $20,000 at the beginning of the year and $25,000 at the end of the year. The amount of cash Norris Co. used for payment of dividends during the year was

$55,000

. Texas Inc. has 10,000 shares of 6%, $125 par value cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31. What is the annual dividend on the preferred stock?

$75,000 in total

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 10,000 were subsequently reacquired. What is the number of shares outstanding?

30,000

The entry to record the issuance of common stock at a price above par includes a debit to

Cash

Alma Corp. issues 1,000 shares of $10 par common stock at $14 per share. When the transaction is recorded, credit(s) are made to

Common Stock, $10,000, and Paid-In Capital in Excess of Par, $4,000

The journal entry a company records for the interest payment and amortization of bond discount is

a. debit Interest Expense, credit Cash and Discount on Bonds Payable

d. treasury stock is not shown on the balance sheet 26. Treasury stock that had been purchased for $5,600 last month was reissued this month for $8,500. The journal entry to record the reissuance would include a credit to

Paid-In Capital from Sale of Treasury Stock for $2,900

Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the second year.

a. $2.25 and $0.00

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

a discount

Net income for the year was $45,500. Accounts receivable increased $5,500, and accounts payable increased by $11,200. Under the indirect method, the cash flow from operations is

a. $51,200

The interest rate specified in the bond indenture is called the

contract rate

If a gain of $11,000 is realized in selling (for cash) office equipment having a book value of $55,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

d. $66,000

A $300,000 bond was redeemed at 104 when the carrying amount of the bond was $316,000. The entry to record the redemption would include a

gain on bond redemption of $4,000

. Stockholders' equity

includes retained earnings and paid-in capital

The primary purpose of a stock split is t

reduce the market price of the stock per share

Characteristics of a corporation include

shareholders who have limited liability