ACG 2021 study guide

Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor's Investment in Investee account contained a $70,000 balance at the beginning of the year. How much dividend income will Investor record?

$0

Stockup, Inc. issued 1,000 shares of $1 par value common stock for $3,000. The common stock account will increase by __________________.

$1,000

Sparks Corporation had 15,000 shares of common stock outstanding on January 1 and 20,000 shares of common stock outstanding on December 31. There was preferred stock outstanding, and dividends on the preferred stock amounted to $20,000. The corporation reports net income of $200,000. The preferred stock is not convertible. How much is basic earnings per share (to the nearest cent) for the calendar year?

$10.29. , (200,000-20,000=180,000), ((15,000+20,000)/2= 17,500), 180,000/17,500= 10.29

A company signs a note payable for $8,500 at 8% for 60 days. How much interest (to the nearest cent) will the company owe using a 360-day year?

$113.33 $8,500 * 8% * (60/360) = $113.33

Plymouth Corporation's net income for the current year is $360,000. The corporation had outstanding 6,000 shares of 10%, $100 par value nonconvertible preferred stock and 25,000 shares of $10 par value common stock. No shares were issued or retired during the year. What is the earnings per share of the company?

$12.00. , (6,000*100*10%= 60,000), (360,000-60,000= 300,000), 300,000/25,000 = 12.00

On April 1, 20X1, German Corporation issued $100,000 of 7%, 5-year bonds dated April 1, 20X1, at 101. Interest is paid on March 31 and September 30. The proper entries to record bond interest expense for the fiscal year ended 20X1 would include a decrease in interest expense for premium amortization in the amount of (round to the nearest dollar and assume straight-line amortization):

$150. , (1,000/60 months= 16.67), (16.67*9= $150)

On January 1, 2018 Debtor Corporation issued $2,000,000 of 20-year 8% bonds at 96, when the market rate of interest was 8.5%. The bonds pay interest annually on December 31. The company uses the effective interest method amortization. How much cash will bondholders receive on December 31, 2018, the first interest payment date?

$160,000 , $2,000,000 * 8% = $160,000

On January 1, 2018, Debtor Corporation issued $2,000,000 of 20-year, 8% bonds at 96, when the market was at 8.5%. The bonds pay interest annually on December 31. The company uses the effective interest method of amortization. How much interest will Debtor Corporation report on its income statement for the year ended December 31, 2018?

$163,200 , ($2,000,000 * 96% = $1,920,000) , $1,920,000 * 8.5% = 163,200.

Magic Corporation paid $100,000 in dividends. The corporation had 10,000 shares of common stock outstanding and 5,000 shares of $100 par value 5% preferred stock. The preferred stock was two years in arrears prior to the current year. How much was paid to the common stockholders?

$25,000

On January 1, Thompson Corporation issued $3,000,000, 14%, 5-year bonds with annual interest payable on December 31. The bonds sold for $3,216,288. The market rate of interest for these bonds was 12%. At the end of the first year, the carrying value of the bonds using straight-line amortization is

$3,173,030 , (3,216,288-3,000,000= 216,288), (216,288/5 years= 43,258), (216,288-43,258= 172,030) , 3,000,000 + 173,030= 3,173,030

On January 1, Southeast Airlines issued $300,000 of 9%, 5-year, callable bonds when the market interest was 8%. On a date when the carrying value of the bonds is $300,500, the bonds are called and retired at 99. Southeast will report a:

$3,500 Gain on Retirement of Bonds Payable. , ($297,000 - $300,500 =3,500)

Basil Company issued $640,000, 6%, 5-year bonds for 104, with interest paid annually. Assuming straight-line amortization, what is the amount of interest expense for the first year of the bond?

$33,280, ($640,000*6%= $38,400), ($640,000*104%= $665,600), ($665,600-$640,000= $25,600), ($25,600/5 years= $5,120), $38,400-$5,120= $33,280

Aria's, Inc. has 1,000 shares of 5%, $100 par value cumulative preferred stock and 10,000 shares of $1 par value common stock outstanding. The company has not paid dividends in two years. In its third year, it paid the common shareholders $2 per-share dividend, plus the amount owed to preferred shareholders. What is the total amount of dividends paid?

$35,000

Aria's, Inc. has 1,000 shares of 5%, $100 par value cumulative preferred stock and 10,000 shares of $1 par value common stock outstanding. The company has not paid dividends in two years. In its third year, it paid the common shareholders a $2 per-share dividend, plus the amount owed to the preferred shareholders. What is the total amount of dividends paid?

$35,000, (($100 * 5%) *1,000= $5,000), (5,000 * 3 years= $15,000) , (10,000 * $2= $20,000), $15,000+ $20,000= $35,000

Thompson Inc. began and ended the year with a retained Earnings balance of $820,000 and $630,000, respectively. Thompson's reported Net Income during the year of $180,000. The only transaction that affected Retained Earnings was the declaration and payment of a cash dividend. Determine the amount of dividends declared and paid by Thompson, Inc. during the year.

$370,000 , (630,000- 820,000- 180,000= 370,000)

Illusions Corp. issues 5,000 shares of $20 par common stock for $28 per share. The amount credited to paid-in capital in excess of par is:

$40,000 , (5,000*28= 140,000) , (5,000* 20= 100,000), 140,000-100,000= 40,000

Charger Utilities purchased 25% of the outstanding stock of Bronco Builders for $380,000, which it classified as an Equity-method Investment. During the year. Charger declared a dividend of $40,000 and reported Net Income of $250,000. What is the amount of the Equity- method Investment account reported on the balance sheet at year-end?

$432,500 , 380,000- 10,000+ 62,500= 432,500

Spencer Company purchased 34% of the outstanding shares of Clark Corporation January 1 at a cost of $620,000. Clark Corporation reported net income of $93,000 and declared and paid total dividends of $20,000 for the year. At the end of the year, Clark shares had a current fair value of $614,000. After all necessary adjusting entries are made for the year, the balance in Spencer Company's Equity-method Investment account will be:

$644,820 , 620,000 + (93,000* 34%) -(20,000 *34%)= 644,820

Basil company issued $640,000, 6%, 5-year bonds for 104, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

$660,480 , ($640,000*104%= $665,600) , ($665,600-$640,000= $25,600) , (25,600/5 years= $5,120) , $665,600-$5,120= $660,480

Wilkin Corporation reported accrual basis sales of $200,000, cost of goods sold of $80,000, and operating expenses, taxes, and interest summing to $30,000. In evaluating Wilkin's comparative balance sheets, it is determined that accounts receivable increased $10,000, inventory increased $5,000, and accounts payable decreased $7,000. There were no changes in prepaid expenses nor were there any interest or taxes payable at the beginning or end of the year. How much was cash basis income for Wilkin Corporation for the year?

$68,000. , (200,000-80,000-30,000= 90,000), 90,000-10,000-5,000-7,000= 68,000

During the current year, Hayden, Inc., had net income of $600,000. Hayden also recorded $200,000 in depreciation expense and had the following changes in its balance sheet accounts: December 31, 2019: Accounts Receivable: $20,000 Increase Inventory: $10,000 Decrease Accounts Payable: $25,000 Decrease Compute the net cash provided by operating activities using the indirect method.

$765,000, (200,000 - 20,000+ 10,000 - 25,000 = 165,000), 600,000+ 165,000= $765,000

Dixon Corporation reported 20X1 accrual basis net income of $50,000. Relevant information to adjust accrual basis income to cash basis income follows. Depreciation expense $12,000 Loss on the sale of land 16,000 Increase in accounts receivable 8,000 Decrease in merchandise inventory 4,000 Increase in accounts payable 3,000 Increase in taxes payable 2,000 How much is net cash provided by operating activities?

$79,000. , 50,000+12,000+16,000-8,000+4,000+3,000+2,000= 79,000

The Webster Company had $800,000 of sales revenue. During the same accounting period the beginning and ending accounts receivable balance was $37,000 and $39,000, respectively. What amount of cash was collected from the customers during this period?

$798,000. , (800,000- 39,000+37,000 = 798,000)

On January 1, 2108, Bentley corporation Issued $1,000,000 of 10-year, 8% bonds at 105, when the market rate of interest was 7%. The bonds pay interest annually on December 31. The company uses the effective interest method of amortization. How much cash will bondholders receive on December 31, 2018, the first interest payment date?

$80,000, $1,000,000*8%= $80,000

Stonework Company's outstanding stock is 100 shares of $100, 6% cumulative preferred stock and 2,000 shares of $10 par common stock. Stonework paid $2,000 in cash dividends including one-year dividends in arrears to preferred stockholders. Common stockholders received:

$800. , (100* 100*6%= 600), (600*2= 1200), 2000-1200= 800

9. Anew Health Care Company reports net income of $200,000 and Depreciation Expense of $20,000 for the year ending December 31, 2015. No long-term assets were sold or exchanged during 2015. They also have the following data available: December 31, 2015: Current Assets: Cash: $30,000 Accounts Receivable: 160,000 Inventory: 95,000 Prepaid rent: 5,000 Total Current assets:$290,000 Current Liabilities: Accounts Payable: $50,000 Salaries Payable: 40,000 Total Current Liabilities: $90,000 December 31, 2014: Current Assets: Cash: $80,000 Accounts Receivable: 100,000 Inventory: 60,000 Prepaid rent: 10,000 Total Current assets:$250,000 Current Liabilities: Accounts Payable: 450,000 Salaries Payable: 90,000 Total Current Liabilities: $130,000 Using the indirect method, what is the net cash provided (or used) from operating activities for the year ending December 31, 2015?

$90,000. , (200,000+ 20,000-60,000-35,000+5,000+10,000-50,000= 90,0000

The MNO corporation purchased a large machine 6 years ago at a total cost of $300,000. The accumulated depreciation on this machine is $180,000. The corporation sold the machine at a $30,000 loss. What amount would be reported as cash proceeds from this sale?

$90,000. , (300,000-180,000= 120,000), 120,000- 30,000= 90,000

On January 1, 20X2, Miller Corporation purchased $100,000 of 5%, 10-year bonds dated January 1, 20X2, at 98. This bond investment was classified as held-to-maturity. Interest is paid on June 30 and December 31 of each year. Assuming use of the straight-line amortization method, the proper amount to report for Investment in Bonds at December 31, 20X3 is:

$98,400

Taylor and Company has the following: Total Assets: $100,000 Total Current Liabilities: $20,000 Total Long-Term Liabilities: $25,000 Total Common Stock: $65,000 What is Taylor Company's debt ratio (round to two decimal places)?

0.45 , Total Liabilities/Total Asset. ($20,000+ $25,000)/ $100,000 = 0.45.

Current liabilities are expected to be settled within:

1 year

Which of the following transactions decrease cash? 1) Purchase inventory from cash 2) Pay trade accounts payable 3)Accruing operating expenses 4) Purchase stock in R&D partner 5) Charging depreciation

1,2,4

Bengal Builders had operating income as of December 31st of the current year of $1,420,000, as well as the following outstanding debt: - Bonds Payable, $2,000,000, 5% issued at Par, outstanding the entire year. - Notes Payable, $500,000, 4%, issues on July 1st of the current year. What is Bengal's times-interest-eaarned ratio on December 31st?

12.91 times, BIE ($2,000,000 * 5% *12/12 = $100,000), NIE ($500,000 * 4% * 6/12 = $10,000), $100,000 + $10,000= $110,000, $1,420,000/$110,000= 12.91

Sally's Dress shop, Inc, reports operating income of $200,000 and interest expense of $18,000. The average common stockholders' equity during the year was $20,000. The beginning assets balance is $80,000 and ending assets balance is $120,000. What is the leverage ratio?

5.00, [(80,000 + 120,000)/2]/ $20,000= 5.00

On January 1, 2018, Debtor Corporation issued $2,000,000 of 20-year, 8% bonds when the market rate of interest was 9%. The bonds pay interest annually on December 31. These bonds sold at

A Discount

Which of the following statements describing a corporation is true?

A corporation is subject to greater government regulation than a proprietorship or a partnership.

Dalton Company issues 50, $1,000 face value, 10% bonds at 102.5. The journal entry includes which of the following?

A credit to Premium on Bonds Payable for $1,250. $50,000* 102.5%= 51,250 , $51,250- $50,000= $1,250

Brooks company issues 10, $2,000 face value, 10% bonds at 102.5. the journal entry includes which of the following?

A debit to cash for $20,500, $20,000*102.5= $20,500

Which of the following leases would not be classified as a Finance Lease?

ABC leased a vehicle from GHI. The vehicle is expected to last for 10 years and the term of the lease is 5 years, at which point ABC will return the vehicle to GHI. The present value of the lease payments made by ABC is $10,000, while the vehicle has a current market value of $17,500.

Which of the following treatments of an equity investment is correct?

ABC purchased 1,000 of the 10,000 outstanding shares of GHI Common Stock. ABC does not intend to sell these shares in the near future, so it classifies the investment as Available for sale and records the investment using the fair value method.

Which of the following items are not included in determining the cash payments (outflows) from financing activities?

Acquisition of plant assets (Investing)

All of the following would be included in the operating activities section when preparing the statement of cash flows under the indirect method, except:

Adding a decrease in accounts payable

Bonds payable should be disclosed on the balance sheet.

At their face value minus any unamortized discounts.

Investments in Bonds that the investor intends to hold to maturity should be disclosed on the balance sheet:

At their face value plus any unamortized premiums

Consolidated financial statements are prepared for the:

Balance sheet, Income statement, statement of cash flows and statement of stockholders' equity.

In preparing the statement of cash flows, how should noncash investing/financing activities be reported?

Be reported in a separate schedule accompanying the statement of cash flows

Bonds payable minus the Discount on bonds payable yields the:

Carrying Amount

The appropriate journal entry to record the issue of 1,000 shares of $1 par-value common stock, which is issued for $4 per share would be:

Cash [Debit] 4,000 Common stock [Credit] 1,000 Paid-in capital in Excess of Par [Credit] 3,000.

On June 1, Surge Corporation issued $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 20X1. The bonds were issued at 96, and pay interest on December 1 and June 1. The entry to record issuance of the bonds is:

Cash [Debit] 96,000 Discount on Bonds Payable [Debit] 4,000 Bonds Payable [Credit] 100,000. , (100,000*96%= 96,000) , 100,000-96,000= 4,000)

When preparing a statement of cash flows under the indirect method, supplemental disclosure should be made for which of the following?

Cash paid for interest and taxes

Which of the following is an advantage of a corporation?

Continuous life

On a statement of cash flows, which of the following types of activities would not be disclosed in a separate section?

Contractual activities

Jules & Associates purchased 40% of the outstanding stock of JayBird Jewelers. JayBird later declared a dividend of $60,000. Which of the following is included in the entry to record the dividend received from JayBird?

Credit Equity Method Investment; $24,000 , 60,000*40%= $24,000

Kahn Corporation issued 100,000 shares of $1 par common stock at a price of $10 per share. On June 1, Kahn purchased 2,000 shares of its own stock at a cost of $14 per share. On December 1, Kahn resold all the 2,000 treasury shares for $16 each. The entry on December 1 would include which of these?

Credit to Paid-in Capital from Treasury Stock, $4,000. , (2,000*16= 32,000) , (2,000 * 14= 28,000), 32,000-28,000=4,000

Which of the following dates do NOT require a journal entry?

Date of record

Which of the following activities would generally be regarded as a financing activity in preparing a statement of cash flows?

Dividend distribution

Jackson Corporation has 500,000 shares of common stock outstanding. On April 10, the board of directors declared a $0.60 per share cash dividend, to be paid to stockholders of record on April 25. The dividend was distributed on June 6. The proper journal entry to record on June 6 is:

Dividends payable[Debit] 300,000 Cash [Credit] 300,000. , (500,000 *0.60= 300,000)

In which section of the statement of cash flows would "payment of dividends" be reported?

Financing activities

When using the indirect method, what should be subtracted from net income in determining net cash flow from operating activities?

Gain on sale of long-term assets / Decrease in accounts payable.

Which of the following statements about treasury stock is false?

Gains are not recorded on treasury stock transactions, but losses are.

If the indirect approach for the statement of cash flows is presented, which of the following items should be subtracted from accrual basis net income to derive cash flow from operating activities?

Gains on the sale of long-term investments

Which of the following is NOT an advantage of a corporation?

Government regulation

Where is the gain resulting from the sale of equipment shown under the indirect method?

In the operating activities section as a deduction

Southern Corporation has pretax accounting income of $575,000 and taxable income of $560,000. The company's income tax rate is 35%. Income tax expense for the firm is:

Income Tax Expense 201,250. , 575,000*35%= 201,250

As a generalization, the adjustment of accrual basis income to cash provided by operating activities requires which of the following to be added?

Increases in current liabilities related to operating activities

Purchases of long-term assets are reported in which section of the statement of cash flows?

Investing activities

On June 1, Pennell Corporation purchased $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 20X1. The bonds were issued at 96, and pay interest on December 1 and June 1. This bond investment was classified as held-to-maturity. The entry to record the investment in bonds is:

Investment in Bonds [debit] 96,000 Cash [Credit] 96,000

Which of the following best describes paid-in capital?

Investments by the stockholders of a corporation

Which of the following is not something that must be completed by the incorporators in order to bring a corporation into existence?

Issues shares of stock

On January 2, 2019, Lot Company issues $200,000 face value, 6% bonds for $196,000. What can be concluded about the effective (market) rate of interest?

It is more than 6%.

Contingent liabilities should be recorded in the accounts when:

It is probable that the future event will occur / The amount of the liability can be reasonably estimated.

According to DuPont analysis, the impact of debt on a company's profitability is measured by ______________ ratio.

Leverage

Which of the following characteristics is considered to be an advantage of the corporate form of organization?

Limited liability of stockholders

Fruit Flakes Purchased 10-year,5% bonds of Frosted Loops with a face value of $5,000 at 102. Fruit Flakes intends to hold these bonds until it receives the full $5,000 face value at maturity. How should Fruit Flakes classify this investment on the balance sheet?

Long-term Asset- Held-to- Maturity Investment in Bonds

Cash flows from investing activities can be discovered by analyzing changes in a company's:

Long-term asset accounts

Mangelo Restaurant had liabilities with a carrying value of $425,000 and fair value of $600,000. How should Mangelo report these liabilities on the balance sheet?

Mangelo should report the liabilities at the carrying value and disclose the fair value of the liabilities in a not to the financial statements.

Which of the following equity-related transaction would not be included in the financing activities section of the statement of cash flows?

Matty Manufacturing declared and distributed a 10% stock dividend on common shares outstanding during the year.

Consolidated financial statements are prepared when a company owns ______________ of the common stock of another company.

More than 50%

Cash-related transactions that affect the income statement are included in which section of the statement of cash flows?

Operating

Receiving of cash dividends would be included in which section of the statement of cash flows?

Operating Activities

In the long run, a company must generate positive cash flow from ___________________ or it will not survive.

Operating activities

What are two major classifications of leases?

Operating and Finance

The activity classifications in the statement of cash flows include:

Operating, Investing, and financing activities

How would most companies prefer to classify leases? why?

Operating, because finance leases have a negative effect on the debt ratio.

The major parts of the Stockholders' Equity section of the Balance Sheet are:

Paid-In Capital and Retained Earnings.

Of the following characteristics, which is not generally regarded as a right of common shareholders?

Preference in dividend distribution

Typical current liabilities include:

Prepayments by customers.

Which of the following is included in the calculation of cash receipts from investing activities?

Proceeds from the sale of long-term investments (Investing inflow)

Available-for-sale securities are initially _________________________.

Recorded at cost and adjusted to current fair values at the end of each reporting period.

Smith Company has 800,000 shares authorized and 250,000 shares issued and outstanding of its $2 par value common stock. The stock is currently selling for $10 per share. If Smith Company declared and issued a 5% stock dividend, what journal entry would the company make?

Retained Earnings ((250,000* 10)*5%) [Debit] 125,000 Common Stock ((250,000* 2)*5%) [Credit] 25,000 Paid-in Capital in Excess of Par- Common (125,000- 25,000) [Credit] 100,000

Hancock Company has 900,000 shares authorized and 350,000 shares issued and outstanding of its $2 par value common stock. The stock is currently selling for $20 per share. If Hancock Company declared and issued a 5% stock dividend, what journal entry would the company make?

Retained Earnings (350,000*5%*20) [Debit] 350,000 Common Stock (350,000*5%*2) [Credit] 35,000 Paid-in Capital in Excess of Par-Common (350,000-35,000) [Credit] 315,000

Smith Company has 800,000 shares authorized and 250,000 shares issued and outstanding of its $2 par value common stock. The stock is currently selling for $10 per share. If Smith Company declared and issued a 30% stock dividend, what journal entry would the company make?

Retained Earnings [Debit] 150,000 Common Stock [Credit] 150,000

Elmer Company has 500,000 shares of common stock authorized. The stock has a par value of $1.50 per share, and 150,000 shares are outstanding. The company declared a 5% stock dividend at a time when the market value was $7 per share. What entry, if any, should Elmer record for the declaration?

Retained Earnings [Debit] 52,500 Common Stock [Credit] 11,250 Paid-in Capital in Excess of Par [Credit] 41,250. , (150,000*5%=7,500) , 7,500*7= 52,500), (7,500*1.50= 11,250)

Bonds that mature in installments over a period of time are called:

Serial bonds

The interest rate paid by the issuer of the bond is referred to as the:

Stated Rate

Which of the following statement explain why a company's cash balance changed over a period of time?

Statement of cash flows

For purposes of calculating cash receipts from customers, which of the following adjustments should be made to convert accrual basis sales to cash basis sales?

Subtract an increase in accounts receivable from accrual basis sales

When the contract interest rate for a bond exceeds the effective interest rate of the bond, then:

The bond will be issued at a premium.

Short-term investments are classified as trading, held-to-maturity, or available-for-sale, depending on _____________________.

The intent and ability of the investor

Which of the following is TRUE regarding treasury stock?

Treasury Stock has a debit balance / treasury stock is recorded at cost.

For a debit investment to be classified as a current asset on the balance sheet, which of the following criteria must be met?

Two of the criteria listed must be met for a debit investment to be classified as current asset.

If the journal entry to record an accrued liability were accidentally recorded twice, it would:

Understate income for the year

Landry paid $5,000 cash for warranty service work. If a Warranty Liability account had been previously established, the proper journal entry to record the service work would be:

Warranty Liability [Debit] 5,000 Cash [Credit] 5,000

Both of the following companies are merchandisers that began operations this year. X Company: Cash from operating activities: $20,000 Cash from investing activities: (200,000) Cash from financing activities: 230,000 Net Increase in Cash: $50,000 Y company: Cash from operating activities: $60,000 Cash from investing activities: (100,000) Cash from financing activities: 90,000 Net Increase in Cash: $50,000 Which of these two companies appear to have made the larger purchases of property, plant, and equipment during the year?

X Company

If the market rate of interest is greater than the bond's stated rate of interest, the bond will be issued at:

a Discount

Ace Corporation has a long-term investment in the common stock of another entity. The investment does not render the investor with the ability to exercise significant influence or control over the investee. A journal entry to record a $10,000 decline in market value below cost would necessarily involve:

a debit to Unrealized Gain/Loss

Oblique, Inc., prepares its statement of cash flows using the indirect method. In calculating cash from operating activities, increases in current liabilities should be:

added to net income

All of the following would be included in the operating activities section when preparing the statement of cash flows under the indirect method, except:

adding a gain from the sale of a fixed asset

S&C Roofing had sales on account of $30,200 which were subject to state sales tax of 7%. The entry to record this sales transaction would be to:

debit Accounts Receivable, $32,314; credit Sales revenue, $30,200; credit Sales tax payable, $2,114. $30,200 is the sales price, the sales tax is 7% of the sales price (30,200 x 7% = 2,114).

A $250,000 issue of bonds that sold for $275,000 matures on June 25, 2020. The journal entry to record the payment of the bond on the maturity date is to:

debit Bonds payable, $250,000; credit Cash, $250,000.

The journal entry to record $200,000 of bonds that were issued at 104 would be to:

debit Cash, $208,000; credit Bonds payable, $200,000; credit Premium on bonds payable, $8,000. , (200,000*104%= 208,000)

$200,000 of 6%, 25-year bonds were sold for $190,000 on January 1. The bonds require semiannual interest payments on June 30 and December 31. The entry to record the June 30 interest payment on the bonds using the straight-line method would be to:

debit Interest Expense $6,200; credit Discount on bonds payable, $200; credit Cash, $6,000. (200,000-190,000= 10,000) , (10,000/25 years = 400), (400/2 semiannual payments= 200)

The declaration of a stock dividend:

does not affect total stockholder's equity.

Arie Company's investment in equity securities with insignificant influence had a fair value of $45,900 when the company's management decided to sell it. The investment was purchased for $42,000. If Arie Company sold this investment for $55,100, Arie will have a(n):

gain on Sale of Equity Securities for $9,200. , 55,100-45,900= $9,200.

Stock that is held by stockholders is called:

outstanding stock.

The disclosure of a contingent liability only in the footnotes designates that the possibility of an actual obligation occurring is:

possible

Which of the following does not have an effect on cash?

recording depletion expense.

Long-term investments include:

Stocks and bonds that are not liquid or readily convertible to cash.

Oblique, Inc., prepares its statement of cash flows using the indirect method. In calculating cash from operating activities, increases in current assets other than Cash should be:

Subtracted from net income

All of the following would be included in the operating activities section when preparing the statement of cash flows under the indirect method, except:

Subtracting a decrease in prepaid expenses

On a balance sheet, investments in short-term marketable securities are classified as _____________.

Current assets

On January 1, 2018, Bentley corporation issued $1,000,000 of 10-year, 8% bonds at 105, when the market rate of interest was 7%. The bonds pay interest annually on December 31. How much cash did Bentley Corporation receive when the bonds were issued?

$1,050,000 , 105% * $1,000,000 = $1,050,000

Our Feathered Friends, Inc., reported credit sales of $1,500,000 for 2019. Cost of goods sold was $700,000. the following additional information is available from the company's records: December 31, 2019: Accounts Receivable: $50,000 Inventory: $75,000 Accounts Payable: $30,000 December 31, 2018: Accounts Receivable: $40,000 Inventory: $80,000 Accounts Payable: $25,000 How much cash did the company collect from the customers in 2019?

$1,490,000 , (50,000- 40,000= $10,000), 1,500,000- 10,000= 1,490,000.

Decrease in salary Payable: $1,500 Increase in accounts Payable: 2,000 Decrease in accounts Payable: 3,500 Net income: 108,000 Increase in inventory: 5,800 Decrease in prepaid expenses: 1,200 Depreciation expense- equipment: 5,000 Depreciation expense- buildings: 7,500 Gain on sale of equipment: 1,300 Loss on sale of land: 2,500 Using the above data, determine the net cash provided/ used by operating activities for Asakura Corporation for the current year. Assume the indirect method is used.

$121,100

Aria's, Inc. has 100 shares of 55, $100 par value cumulative preferred stock and 10,000 shares of $1 par value common stock outstanding. The company has not paid dividends in two years. In its third year, it paid the common shareholders a $2 per-share dividend. How much must each preferred shareholders have received?

$15 per share, ($100*5%= $5), $5*3= $15

Basic Enterprises reported the following stockholder's equity at year-end: Preferred Stock, 3%, $200 par, 10,000 shares authorized, 600 shares outstanding: $220,000 Common Stock, $3 Par, 1,000,000 shares authorized, 77,000 shares outstanding: $331,000 Paid-in Capital in Excess of Par- Common: $870,000 Retained Earnings: 1,140,000 Treasury Stock (500 shares @ $25 per share): $22,500 What is the total stockholders' equity reported on the balance sheet for Basic?

$2,538,500, (220,000+ 331,000+ 1,140,000+ 870,000- 22,500= $2,538,500)

Angel Enterprises reported the following stockholder's equity at year-end: Preferred Stock, 3%, $200 Par, 10,000 shares authorized, 600 shares outstanding : $120,000 Common Stock, $? Par, 1,000,000 shares authorized, 77,000 shares outstanding : 231,000 Paid-in Capital in Excess of Par- Common : 770,000 Retained Earnings: 1,040,000 Treasury Stock (500 shares @ $25 per share) What is the par value of Angel's Common Stock?

$3, 231,000/ 77,000= 3

Talks-A-Lot, Inc. sells cell phones to customers and expects that 10% of phones sold will be returned for repair under its warranty program. The average repair cost is $75 per phone. For 2015, Talks-A-Lot has sold 750 cell phones and has repaired 30 of them as of December 31, 2015. What amount of warranty liability should be reported at December 31, 2015?

$3,375 (750*10%=75) , (75*75= 5625), (30*75= 2250), 5,625-2,250= 3,375

Running Inc. Purchased $25,000, 3%, 5-year bonds of Slacker Co. on July 1,2019, at 103. These bonds pay interest annually on June 30. Running Inc. intends to hold these bonds to maturity, so they are classified as held-to-maturity investment in bonds. How much interest revenue will Running Inc. report on the December 31, 2019 Income statement related to this investment?

$300

Our Taylor Inc., reported credit sales of $2,500,000 for 2019. Cost of goods sold was $900,000. The following additional information is available from the company's records: December 31, 2019: Accounts Receivable: $60,000 Inventory: 75,000 Accounts Payable: 30,000 December 31, 2018: Accounts Receivable: $40,000 Inventory: 80,000 Accounts Payable: 25,000 How much cash was paid for inventory in 2019?

$890,000, (900,000-80,000+ 75,000= 895,000), 895,000- 30,000+ 25,000= $890,000

On December 31, Jones Corporation has the following data available: Net Income: $190,000 Interest Expense: 20,000 Total assets at the beginning of the year: 810,000 Total assets at the end of the year: 750,000 Total Stockholders' equity at the beginning of the year: 600,000 Total stockholders' equity the end of the year: 480,000 What is return on assets?

24.36%, 190,000/ ((810,000+750,000)/2) = 24.36%

On December 31, Joe Deer Corporation has the following data available: Net Income: $200,000 Interest Expense: 20,000 Total assets at the beginning of the year: 850,000 Total assets at the end of the year: 780,000 Total Stockholders' equity at the beginning of the year: 550,000 Total stockholders' equity the end of the year: 490,000 What is Joe Deer's return on equity?

38.46%, 200,000/ ((550,000+490,000)/2)= 38.46%

The operating activities section has a relationship with which part of the balance sheet?

Current assets and current liabilities

Kaldon, Inc. acquired 2,500 of its own shares at $30 per share. The shares are to be held in treasury. The par value of Kaldon's common stock is $4 per share. If Kaldon were to resell all its treasury stock at $32 per share, what journal entry would Kaldon make?

Cash (2,500 shares * $32) [Debit] 80,000 Treasury Stock (2,500 shares * $30) [Credit] 75,000 Paid-in Capital from Treasury Stock Transactions (80,000-75,000) [Credit] 5,000

If convertible notes payable are converted into common stock, the entry to record the conversion would include a debit to:

Convertible Notes Payable

Held-to-maturity investments in bonds are initially reported at ________ on the purchase dat. On a subsequent balance sheet date, the bonds are reported at _______________.

Cost; Amortized cost

Gallant investors has several investments classified as Available-for-Sale. Gallant received $1,200 in dividends for these investments on December 10. Which of the following would be included in entry to record of these dividends?

Credit Dividend Revenue

Lenders of Chief Distributors decided to convert $75,000 of convertible notes payable into $10,000 shares of $1 par Common Stock. Which of the following would be included in the journal entry for this conversion?

Credit Paid-in-Capital in Excess of Par- Common $65,000 , $75,000-$10,000= $65,000

Which type of bond is not secured by any type of asset, but backed only by the borrower's promise to pay?

Debenture bonds

Fruit Flakes Purchased 10-year,5% bonds of Frosted Loops with a face value of $5,000 at 102. Fruit Flakes intends to hold these bonds until it receives the full $5,000 face value at maturity. Which of the following would be included in the journal entry to record this investment?

Debit Held-to-Maturity Investment in Bonds, $5,100, 5,000* 102%= $5,100

Kaldon, Inc. had the following account balances related to treasury shares: - Treasury Stock (2,500 shares @ $30 per share): $75,000 - Paid-in Capital from Treasury Stock Transactions: $2,000 If Kaldon, Inc. were to resell all its treasury stock at $34 per share, the journal would include which of the following?

Debit cash $85,000, 2,500* $34= $85,000

When a company receives a cash dividend from equity securities with insignificant influence, the journal entry is:

Debit to Cash and credit to Dividend Revenue

Which of the following would be included in the journal entry to record the issuance of new shares of common stock to employees as part of a stock based compensation plan?

Debit to Compensation Expense

Which of the following would be included in the journal entry to record the issuance of new shares of common stock to employees as part of a stock-based compensation plan?

Debit to Compensation Expense

Carly Classics purchased 150 shares of Crush Enterprises for $12 per share on November 1 and classified this investment as available-for-sale. Crush Enterprises stock was trading for $15 per share on December 31, Carly's year-end. What is included in the journal entry needed on December 31 to adjust this investment to fair value?

Debit to investment in Equity Securities, $450

A Corporation issues 1,800 shares of $10 par value common stock in exchange for land with a current market value of $23,000. How would this be recorded in the Land account?

Debited for $23,000

A corporation issues 1,800 shares of $10 par value common stock in exchange for land with a current market value of $23,000. How would this be recorded in the Land account?

Debited for $23,000

Gloria Company has 100,000 shares of common stock authorized, 33,000 shares issued and outstanding. On September 1, 2018, the company declared a $3.30 per share dividend for those of record on October 1, 2018, to be paid on November 1, 2018. Based on this information, which of the following journal entries would Gloria Company make on November 1, 2018?

Dividends Payable (33,000 * 3.30) [Debit] 108,900 Cash (33,000 *3.30) [Credit] 108,900

Cash inflows and outflows related to bonds payable and long term notes payable are reported on which section the statement of cash flows?

Financing Activities Section

Dividend payments would be included in which section of the statement of cash flows?

Financing activities

The purchase of treasury stock would be included in which section of the statement of cash flows?

Financing activities

Luke Land Development purchased Land during the year by signing a 10-year, $300,000, 4% Note Payable. Under which section of the statement of cash flows would this purchase of Land appear?

Non-cash investing and financing activities.

A company had the following treasury-stock related account balance: - Treasury Stock: $250,000 - Paid-in Capital from Treasury Stock Transactions: $25,000 If the company resells Treasury Stock that originally cost $60,000 for $40,000, then

Paid-in Capital from treasury stock transactions is reduced $20,000, $40,000- $60,000= -$20,000

Morton Company began operations on January 1, 2019. The company has the following items included in its stockholders' equity section of the balance sheet on. December 31, 2020: 6% Preferred stock, $100 par, 100,000 shares authorized, 25,000 shares issued and outstanding: $2,500,000 Common stock, $3 par, 500,000 share authorized; 150,000 shares issued and outstanding: $450,000 Additional Paid-in Capital: $2,250,000 Total Dividends for 2019 & 2020 were: During 2019, Dividends not paid : N/A During 2020 Dividends Declared and Paid: $160,000 If Morton Company's preferred stock was noncumulative, how much of the 2020 dividends would have been distributed to preferred and common stock holders?

Preferred: $150,000 (6%8 $100 Par *25,000) ; Common: $10,000 (160,000 - 150,000)

Trading Securities are initially _____________________.

Recorded at cost and adjusted to current fair values at the end of each reporting period.

Mr. Cello bought 4,000 shares of Ventures, Inc. of $1 par value common stock directly from Ventures, Inc. for $80,000. Mr. Cello later sold 1,000 of these purchased shares to Mr. Bill for $30,000. Which of the following true of the sale of these shares by Mr. Cello?

Shareholders' equity of Ventures, Inc. will be unaffected by the sale.

Which of the followings an objective of the statement of cash flows?

These are all objectives of the statement of cash flows, Evaluate management decisions, Predict future cash flows, Determine the ability to pay dividends and interest

Jordan Inc. had 20,000 shares of $2 par common stock outstanding when it decided to split its common stock 2-for-1. The shares were trading for $60 per share. How will total stockholder's equity change as a result of this stock split?

Total Stockholder's equity is unchanged by a stock split.

Expectation Co. purchased $10,000, 5%, 10-year bonds of Abandon International at 97 on January 1. These bonds pay interest annually on December 31. Which of the following would be one of the journal entries Expectation would record on December 31?

cash (debit) 500 Interest Revenue (Credit) 500