Accounting Final Chapters

If Vision paid a total of $55,800 in dividends, how much would each common stockholder receive for each share of stock owned? (Assume there are no dividends in arrears.) Multiple Choice $0.12 per share $0.24 per share $0.06 per share $0.18 per share

$0.12 per share Total dividends paid to common stockholders = $55,800 − (4,500 × $6) = $28,800 Common dividend per share = $28,800 ÷ 240,000 = $0.12

On April 1, Year 1, Cricket Corporation issues $38 million of 6%, 15-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1. The company has a calendar year-end. What is the amount of cash paid to bondholders for interest during Year 1? Multiple Choice $2,090,000 $570,000 $1,140,000 $1,710,000

$1,140,000

Cardinal Company's bank statement showed a balance at May 31 of $182,974. The only reconciling items consisted of a large number of outstanding checks totaling $43,780. At May 31, what balance should Cardinal's Cash account show? Multiple Choice $226,754 $139,194 $95,414 $182,974

$139,194

On November 1 of the current year, Garcia Company borrowed $144,000 by issuing a 10%, six-month note payable, all due at maturity date. The company has a calendar year-end. Interest expense on this note to be recognized during the current year amounts to: Multiple Choice $1,440. $2,400. $4,800. $14,400.

$2,400.

On November 1, Year 1, Noble Company borrowed $72,000 from South Bank and signed a 11%, six-month note payable, all due at maturity. The interest on this loan is stated separately. The company has a calendar year-end. How much interest expense will Noble recognize on this note in Year 2? Multiple Choice $7,920 $1,980 $3,960 $2,640

$2,640

On April 1, Year 1, Cricket Corporation issues $60 million of 12%, 8-year bonds payable at par. Interest on the bonds is payable semiannually each April 1 and October 1. The company has a calendar year-end. Interest expense on this bond issue reported in Cricket's Year 1, income statement is: Multiple Choice $2,400,000. $4,800,000. $5,400,000. $7,200,000.

$5,400,000. Interest expense for Year 1 = $60,000,000 × 12% × 9/12 = $5,400,000

An asset that costs $14,400 and has accumulated depreciation of $8,000 is sold for $5,600. What amount of gain or loss will be recognized when the asset is sold? Multiple Choice A gain of $800 A loss of $800 A loss of $2,400 A gain of $2,400

A loss of $800

Coca-Cola's famous name printed in distinctive typeface is an example of: Multiple Choice A trademark. A patent. A copyright. Goodwill.

A trademark

The advantages of corporations going public include all of the following except: Multiple Choice Professional management. Transferability of ownership. Limited personal liability for shareholders. Ability of stockholders to remove assets.

Ability of stockholders to remove assets.

Which of the following is not considered a cash equivalent? Multiple Choice U.S. Treasury bills Money market funds Accounts receivable High-grade commercial paper

Accounts receivable

All of the following may be classified as intangible assets except: Multiple Choice Accounts receivable. Copyrights. Franchises. Goodwill.

Accounts receivable.

While preparing the bank reconciliation, an accountant discovered that a $426 check returned with the bank statement had been recorded erroneously in the depositor's accounting records as $462. In preparing the bank reconciliation the appropriate action to correct this error would be to: Multiple Choice Add $36 to the balance per the depositor's records. Add $36 to the balance per the bank statement. Deduct $36 from the balance per the bank statement. Deduct $36 from the balance per the depositor's records.

Add $36 to the balance per the depositor's records.

Which of the following is not a capital expenditure? Multiple Choice Advertising expenditures to introduce a new product line Sales tax paid in conjunction with the purchase of new machinery Installation of elevators to replace escalators An amount paid to acquire a patent with a remaining life of only three years

Advertising expenditures to introduce a new product line

A capital expenditure is recorded as: Multiple Choice An expense. An asset. A liability. Income.

An Asset

A company issues $50 million of bonds at par on January 1, Year 1. The bonds pay 10% interest semi-annually on 12/31 and 6/30 and mature in 20 years. Which of the following journal entries will be recorded when the bonds are sold?

Cash Debit- 50,000,000 Bonds Payable Credit- 50,000,000

Bonds that may be exchanged for a specified number of shares of capital stock are called: Multiple Choice Junk bonds. Convertible bonds Debenture bonds. Mortgage bonds.

Convertible bonds

The journal entry to record the issuance of common stock at a price above its par value includes a: Multiple Choice Credit to Cash. Credit to a liability account for the difference between the price paid by the stockholders and the par value of the stock. Credit to Additional Paid-in Capital: Common Stock. Debit to Common Stock.

Credit to Additional Paid-in Capital: Common Stock.

On November 1, Year 1, Metro Corporation borrowed $55,000 from a bank and signed a 12%, 90-day note payable in the amount of $55,000. Which of the following adjusting entries, dated November 30, Year 1, should be recorded by the company? (Assume 360 days in year.) Multiple Choice Debit Interest Expense $550 and credit Notes Payable $550 Debit Interest Expense $550 and credit Interest Payable $550 Debit Discount on Notes Payable $1,100 and credit Interest Payable $1,100 Debit Interest Expense $550 and credit Cash $550

Debit Interest Expense $550 and credit Interest Payable $550

The entry to record amortization on a copyright would include a: Multiple Choice Debit to Amortization Expense Debit to Accumulated Amortization. Debit to Copyright. Credit to Amortization Expense

Debit to Amortization Expense

When preparing a bank reconciliation, outstanding checks will: Multiple Choice Increase the balance per depositor's records. Decrease the balance per depositor's records. Increase the balance per the bank statement. Decrease the balance per the bank statement.

Decrease the balance per the bank statement.

Treasury stock: Multiple Choice Is an asset. Increases total stockholders' equity. Decreases total stockholders' equity. Does not change total stockholders' equity.

Decreases total stockholders' equity.

Which of the following is not a characteristics of most preferred stock? Multiple Choice Dividends that vary as income changes. Preference as to dividends. Preference as to assets in the event of liquidation of the company. No voting power.

Dividends that vary as income changes.

Dorfman Industries has an accounts receivable turnover rate of 12. Which of the following statements is not correct? (Use 365 days in a year.) Multiple Choice Dorfman's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 8. Dorfman waits approximately 30 days to make collections of its credit sales. Dorfman writes off accounts receivable as uncollectible if they are over 30 days old. Dorfman's net credit sales are about twelve times the amount of its average accounts receivable.

Dorfman writes off accounts receivable as uncollectible if they are over 30 days old.

The term "junk bonds" describes bonds with: Multiple Choice Low interest rates. Indefinite maturity dates. Low maturity values. High risk.

High risk

The current portion of long-term debt should be reported: Multiple Choice Separately in the long-term liabilities section of the statement of financial position (balance sheet). In the long-term liabilities section of the statement of financial position (balance sheet), along with the other long-term debt. In the current liabilities section of the statement of financial position (balance sheet). In a separate section of the statement of financial position (balance sheet), between long-term liabilities and shareholders' equity.

In the current liabilities section of the statement of financial position (balance sheet).

One advantage of issuing bonds instead of stock is that: Interest is tax deductible, whereas dividends are not. Bonds have a longer maturity date. Interest rates are lower than dividend rates. Borrowing funds by issuing bonds does not affect earnings per share.

Interest is tax deductible, whereas dividends are not.

Financial assets include all of the following except: Multiple Choice Cash. Marketable securities. Inventories. Accounts receivable.

Inventories

Each of these categories of assets is normally shown in the balance sheet at current value except: Multiple Choice Inventories. Accounts receivable. Short-term investments in marketable securities. Cash.

Inventories.

Intangible assets: Multiple Choice Lack physical properties. Cannot be sold. Have been depreciated below their estimated residual values. Cannot be specifically identified.

Lack physical properties.

Public corporations are required by law or regulation to perform all of the following except: Multiple Choice Submit much of their financial information to the Securities and Exchange Commission for review. Make regularly scheduled dividend payments to all stockholders. Have their annual financial statements audited by an independent firm of Certified Public Accountants. Disclose their financial information to the public.

Make regularly scheduled dividend payments to all stockholders.

A 2-for-1 stock split will: Multiple Choice Increase the total par value of the stock and increase the number of shares outstanding. Decrease the total par value of the stock and increase the number of shares outstanding. Not change the total par value of the stock and increase the number of shares outstanding. Increase total stockholders' equity.

Not change the total par value of the stock and increase the number of shares outstanding.

Which of the following items would cause cash per the bank statement to be larger than the balance of cash shown in the accounting records? Multiple Choice Bank service charges Deposits in transit Outstanding checks NSF check from one of the depositor's customers

Outstanding checks

Shares that have been sold and remain in the hands of stockholders are called: Multiple Choice Outstanding. Issued. Treasury. Underwritten.

Outstanding.

Treasury stock represents: Multiple Choice Shares of ownership in the United States Treasury Department. A current asset. Authorized shares that have never been issued. Previously outstanding shares that have been repurchased by the issuing company.

Previously outstanding shares that have been repurchased by the issuing company.

When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the depositor's records are to: Multiple Choice Correct errors made by the bank in recording the dollar amounts of cash transactions during the period. Reconcile items that explain the difference between the balance per the books and the balance per the bank statement. Record outstanding checks and bank service charges. Record items that explain the difference between the balance per the accounting records and the adjusted cash balance.

Record items that explain the difference between the balance per the accounting records and the adjusted cash balance.

For financial reporting purposes, the gain or loss on the sale of a plant asset is determined by comparing the asset's: Multiple Choice Cost with its book value. Sales price with its book value. Tax basis with its book value. Sales price with its tax basis.

Sales price with its book value.

Which depreciation method is the most commonly used for financial reporting purposes? Multiple Choice Straight-line Double-declining balance Units-of-output All of the various depreciation methods are used equally

Straight-line

If a corporation has only common stock outstanding, which of the following constitutes legal capital at a particular date? Multiple Choice The amount in the Common Stock account The sum of the Common Stock account and any additional paid-in capital The total amount of stockholders' equity The sum of the Common Stock account and retained earnings

The amount in the Common Stock account

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

The balance per bank statement and the cash balance per the accounting records of the depositor.

Which of the following would not be considered as part of the cost of equipment recently purchased? Multiple Choice Sales tax Transportation charges Installation and setup charges The cost to repair damage incurred after dropping the equipment

The cost to repair damage incurred after dropping the equipment

A measure of a company's liquidity is: Multiple Choice Total assets divided by total equity. The current ratio. The dollar amount of liabilities that bear interest. The dollar amount of assets used as collateral for a loan.

The current ratio.

Which of the following would usually be the greatest amount? Multiple Choice The number of shares authorized The number of shares issued The number of shares outstanding The number of shares of treasury stock

The number of shares authorized

Which statement about a stock split is correct? Multiple Choice A stock split causes total shareholders' equity to increase. A stock split causes total shareholders' equity decrease. Total shareholders' equity remains the same when there is a stock split. The change in total stockholders' equity depends upon whether it is a 2-for-1 split or a 3-for-1 split.

Total shareholders' equity remains the same when there is a stock split.

The primary functions of the board of directors include all of the following except: Multiple Choice Hiring corporate officers. Setting officers' salaries. Declaring dividends. Transacting corporate business.

Transacting corporate business.

Assuming a 365-day year, Gore Industries calculated an average of 53 days to collect its accounts receivable in Year 1. During Year 1, Gore's accounts receivable turnover rate: Multiple Choice Was approximately 6.89. Was equal to 53 times its average accounts receivable. Was approximately 0.15. Can't be determined from this information alone.

Was approximately 6.89.

The rights of a common stockholder do not include the right to: Multiple Choice Vote for directors. Withdraw a share of corporate net assets proportionate to the person's stockholdings. Receive a proportionate share of corporate assets upon liquidation, after creditors have been paid. Share in profits when the board of directors declares a dividend.

Withdraw a share of corporate net assets proportionate to the person's stockholdings.

The accounts receivable turnover rate for Baldwin Corporation is 8, and for Basinger Company the turnover rate is 10. These statistics indicate that Basinger: Multiple Choice Collects its accounts receivable within 10 days on average; Baldwin collects its accounts receivable in 8 days on average. Writes off as uncollectible a greater percentage of its accounts receivable than does Baldwin Company. Collects its accounts receivable faster than does Baldwin Company. Makes on average 10 credit sales annually to each of its customers, while Baldwin makes 8 credit sales to each customer.

Writes off as uncollectible a greater percentage of its accounts receivable than does Baldwin Company. Collects its accounts receivable faster than does Baldwin Company.