Accounting Final Exam

Investing Examples

Anything that says "investing/investment" PPE Buildings Land

Authentic Exposure Company had the following transactions that took place during the year: I. Recorded credit sales of $2,500 II. Collected $1,500 from customers III. Recorded sales returns of $500 and credited the customer's account. What is the total effect of these transactions on free cash flow?

Cash Flow Increase

Which of the following is not typically a characteristic experienced by a company during the introductory phase of the corporate life cycle?

Cash from investing is positive.

Journal Stock Dividends Issuance Date (To record issuance of 5,000 shares in a stock dividend)

Dr. Common Stock Dividends Distributable 50,000 Cr. Common Stock 50,000

Journal Cash Dividends Payment Date (To record payment of cash dividend)

Dr. Dividends Payable 50,000 Cr. Cash 50,000

Journal accounts for Closing Entry to close out Net Income into Retained Earnings

Dr. Income Summary 100,000 Cr. Retained Earnings 100,000

Journal accounts for Closing Entry to close out Dividends into Retained Earnings

Dr. Retained Earnings 10,000 Cr. Dividends 10,000

Journal Stock Dividends Declaration Date (Company declares a 10% stock dividend on its $10 par common stock when 50,000 shares were outstanding. The market price was $15 per share.

Dr. Stock Dividends 75,000 Cr. Common Stock Dividends Distributable 50,000 Cr. Paid-in Capital in Excess of Par Value 25,000 solution: $15 x 10% x50,000 = 75,000 $10 x 5,000 plug

Journal Purchase of Treasury Stock: (To record purchase of 4,000 shares of treasury stock at $8 per share)

Dr. Treasury Stock 32,000 Cr. Cash 32,000

Which one of the following would not be considered an advantage of the corporate form of organization?

Government regulation.

Operating Examples

Income Statement current assets and current liabilities Revenues pre paid expenses depreciation expense + interest payable GLAD!!!! gains, (losses, amortization, depreciation) - +

Leary Manufacturing Corporation purchased 5,000 shares of its own previously issued $10 par common stock for $125,000. As a result of this event,

Leary's total stockholders' equity decreased $125,000.

Journal Stock Splits (To record a 2-for-1 split, increasing the number of outstanding shares 500,000 to 1,000,000 and reducing par value from $10 to $5)

No journal entry just memorandum Dr. Common Stock ($10 par value) Cr. Common Stock ($5 par value)

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at

a discount.

The acquisition of land by issuing common stock is

a noncash transaction that is not reported in the body of a statement of cash flows.

explain 2:1 stock split

amount of shares double, par and markets prices cut in half

Using the indirect method, if equipment is sold at a gain, the

amount of the gain is deducted in the operating activities section.

The acquisition of treasury stock by a corporation

decreases its total assets and total stockholders' equity.

If accounts payable have increased during a period

expenses on an accrual basis are greater than expenses on a cash basis.

Dividends in arrears on cumulative preferred stock

must be paid before common stockholders can receive a dividend.

Journal Cash Dividends Record Date

no entry

The number of shares of issued stock equals

outstanding shares plus treasury shares.

Unearned Rent Revenue is

reported as a current liability.

The contractual interest rate on a bond is often referred to as the

stated rate.

Zoum Corporation had the following transactions during 2017: 1. Issued $250,000 of par value common stock for cash. 2. Recorded and paid wages expense of $120,000. 3. Acquired land by issuing common stock of par value $100,000. 4. Declared and paid a cash dividend of $20,000. 5. Sold a long-term investment (cost $6,000) for cash of $6,000. 6. Recorded cash sales of $800,000. 7. Bought inventory for cash of $320,000. 8. Acquired an investment in Zynga stock for cash of $42,000. 9. Converted bonds payable to common stock in the amount of $1,000,000. 10. Repaid a 6-year note payable in the amount of $440,000. What is the net cash provided by financing activities?

$(210,000). 1.- 4. - 10.

Zoum Corporation had the following transactions during 2017: 1. Issued $250,000 of par value common stock for cash. 2. Recorded and paid wages expense of $120,000. 3. Acquired land by issuing common stock of par value $100,000. 4. Declared and paid a cash dividend of $20,000. 5. Sold a long-term investment (cost $6,000) for cash of $6,000. 6. Recorded cash sales of $800,000. 7. Bought inventory for cash of $320,000. 8. Acquired an investment in Zynga stock for cash of $42,000. 9. Converted bonds payable to common stock in the amount of $1,000,000. 10. Repaid a 6-year note payable in the amount of $440,000. What is the net cash provided by operating activities?

$360,000. 6. - 2. -7. = 360,000

The interest charged on a $300,000 note payable, at the rate of 6%, on a 90-day note would be

$4,500. Solution: $300,000 x .06 x 90/360 = $4,500(Face val. 6% 90/360)

Berman Inc. has 6,000 shares of 6%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2016, and December 31, 2017. The board of directors declared and paid an $12,000 dividend in 2016. In 2017, $72,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2017?

$48,000. Solution: 6,000 x $50 x .06 = $18,000; $72,000 - ($18,000 - $12,000) - $18,000 = $48,000 (Pref. sh. x PV/sh. x div. rate = ann. div.; Div. declared. - div. inarr. - ann. div.

Bonds with a face value of $600,000 and a quoted price of 104¼ have a selling price of

$625,500. solution; 600,000x 1.0424

Winrow Company received proceeds of $754,000 on 10-year, 8% bonds issued on January 1, 2016. The bonds had a face value of $800,000, pay interest annually on December 31st, and have a call price of 101. Winrow uses the straight-line method of amortization. What is the amount of interest expense Winrow will show with relation to these bonds for the year ended December 31, 2017?

$68,600 Solution: ($800,000 - $754,000) / 10 = $4,600; ($800,000 x .08) + $4,600 = $68,600 (Face val. - proc.) ÷ 10 = ann. amort.; (Face val. × 8%) + ann. amort.

Zoum Corporation had the following transactions during 2017: 1. Issued $250,000 of par value common stock for cash. 2. Recorded and paid wages expense of $120,000. 3. Acquired land by issuing common stock of par value $100,000. 4. Declared and paid a cash dividend of $20,000. 5. Sold a long-term investment (cost $6,000) for cash of $6,000. 6. Recorded cash sales of $800,000. 7. Bought inventory for cash of $320,000. 8. Acquired an investment in Zynga stock for cash of $42,000. 9. Converted bonds payable to common stock in the amount of $1,000,000. 10. Repaid a 6-year note payable in the amount of $440,000. What is the net cash provided by investing activities?

($36,000). 5.- 8. INVESTING IS INVESTING

Which of the following changes in retained earnings during a period will be reported in the financing activities section of the statement of cash flows? 1. Declaration and payment of a cash dividend during the period. 2. Net income for the period.

1. net income goes in operating

Statement of Cash Flows when theres 1. positive cash flow 2. negative cash flow

1. provided by 2. used by

The following data is available for BOX Corporation at December 31, 2017: Common stock, par $10 (authorized 30,000 shares) $270,000 Treasury stock (at cost $15 per share) $ 1,200 Based on the data, how many shares of common stock are outstanding?

26,920. solution: (270,000/10)- (1,200/15)

Green, Inc. had 200,000 shares of common stock outstanding before a stock split occurred and 600,000 shares outstanding after the stock split. The stock split was

3-for-1.

West County Bank agrees to lend Drake Builders Company $400,000 on January 1. Drake Builders Company signs a $400,000, 6%, 6-month note. The entry made by Drake Builders Company on January 1 to record the proceeds and issuance of the note is

Dr Cash .......................................................................400,000 Cr Notes Payable.................................................. 400,000

Five thousand bonds with a face value of $1,000 each, are sold at 102. The entry to record the issuance is

Dr Cash .....................................................................5,100,000 Cr Premium on Bonds Payable ................................... 100,000 Cr Bonds Payable.......................................................... 5,000,000 Solution: (5,000 x $1,000) x 1.02 = $5,100,000(Num. of bonds × $1,000) ×1.02

Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

Dr Cash Dividends Cr Dividends Payable

West County Bank agrees to lend Drake Builders Company $400,000 on January 1. Drake Builders Company signs a $400,000, 6%, 6-month note. What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30?

Dr Interest Expense .................................6,000 Cr Interest Payable ................................................................ 6,000 Solution: $400,000 x .06 x 3/12 = $6,000(Face val. 6% 3/12)

West County Bank agrees to lend Drake Builders Company $400,000 on January 1. Drake Builders Company signs a $400,000, 6%, 6-month note. What entry will Drake Builders Company make to pay off the note and interest at maturity assuming that interest has been accrued to June 30?

Dr Notes Payable...........................................................400,000 Dr Interest Payable .................................................................12,000 Cr Cash.................................................................................. 412,000 Solution: $400,000 x .06 x 6/12 = $12,000(Face val. 6% 6/12)

Journal Common stock Issued at Par: To record issuance of 1,000 shares of $1 par common stock at par

Dr. Cash 1,000 Cr. Common Stock 1,000

Journal preferred stock Issued at par: (To record issuance of 10,000 shares of $10 par preferred stock at par)

Dr. Cash 100,000 Cr. Preferred Stock 100,000

Journal preferred stock Issued above par value: (To record the issuance of 10,000 shares of $10 par value preferred stock for $12 cash per share)

Dr. Cash 120,000 Cr. Preferred Stock 100,000 Cr. Paid-in Capital in Excess of Par Value - Preferred Stock 20,000

Journal common stock If no par stock is issued that does not have a stated value, the full amount received is credited to the Common Stock account and there is no need for the Paid-in Capital in Excess of Stated/Par Value account: (To record issuance of 1,000 shares of no-par value common stock for cash of $5 per share)

Dr. Cash 5,000 Cr. Common Stock 5,000

Journal common stock Issued above par value: (To record issuance of 1,000 shares of $1 par value common stock for cash of $5 per share)

Dr. Cash 5,000 Cr. Common stock 1,000 Cr. Paid-in Capital in Excess of Par Value 4,000

Journal common stock Issued below par value: (To record issuance of 1,000 shares of $1 par value common stock for cash of $.50 per share)

Dr. Cash 500 Dr. Paid-in Capital in Excess of Par Value 500 Cr. Common stock 1,000

Journal preferred stock Issued below par value: (To record the issuance of 10,000 shares of $10 par value preferred stock for $8 cash per share)

Dr. Cash 80,000 Dr. Paid-in Capital in Excess of Par Value - Preferred Stock 20,000 Cr. Preferred Stock 100,000

Journal Cash Dividends Declaration Date (To record declaration of cash dividend)

Dr. Cash Dividends 50,000 Cr. Dividends Payable 50,000

Financing Examples

Stocks Bonds Shares Dividends issuance of stock

The effect of a stock dividend is to

change the composition of stockholders' equity.

Investing activities include

collecting cash on loans made. (we did not discuss this but this would be a long-term receivable and would be considering an investing activity) purchasing PP&E.

A company receives $348, of which $28 is for sales tax. The journal entry to record the sale would include a

debit to Cash for $348.

The following totals for the month of April were taken from the payroll records of Noll Company. Salaries $120,000 FICA taxes withheld 9,180 Income taxes withheld 25,000 Medical insurance deductions 4,500 Federal unemployment taxes 320 State unemployment taxes 2,160 The journal entry to record the monthly payroll on April 30 would include a

debit to Salaries and Wages Expense for $120,000.

A current liability is a debt that can reasonably be expected to be paid

within one year, or the operating cycle, whichever is longer.