Exam Prep

Metalcrafts Inc. Selected information from the company's financial records is presented below: Equipment, December 31, 2022 $300,000 Equipment, December 31, 2023 400,000 Accumulated depreciation, December 31, 2022 80,000 Accumulated depreciation, December 31, 2023 60,000 During 2023, the company sold equipment with a cost of $50,000 and accumulated depreciation of $30,000. A gain of $10,000 was recognized on the sale of the equipment. This was the only equipment sale during the year. What was depreciation expense for 2023?

$10,000

A company reported the following information: 2023 2022 Accounts receivable $50,000 $65,000 Inventories 43,000 40,000 Accounts payable 29,000 39,000 Net income 100,000 Depreciation expense 11,000 If the indirect method is used to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2023?

$113,000

An addition to employee compensation whereby the corporation provides a right to purchase stock at a set price is called

a stock option.

On January 15, a corporation paid a cash dividend that had been declared prior to the end of its previous fiscal year. The entry to pay the dividends includes a debit to

dividends payable and a credit to cash.

Outstanding shares represent the

number of shares that are currently held by stockholders.

Which of the following operating activities results in a cash outflow?

paying creditors for merchandise

Which of the following statements is not true? The information in the statement of cash flows helps investors, creditors and others

show the inflows and outflows of net income on an accrual basis.

When a corporation declares a cash dividend, which of the following is true?

stockholders' equity decreases

The stockholders' equity section of the balance sheet shows all changes in stockholders' equity for the period.

False

Each of the following transactions would be classified as an investing activity except:

Receiving dividends on an investment in the stock of another company.

Shares outstanding may be less than shares issued.

True

Lanthier's Heating & Air company began business on June 1. The articles of incorporation authorize issuance of 10,000 shares of $2 par common stock and 5,000 shares of $8 par, 6% cumulative preferred stock. What is the maximum amount that can be reported on the balance sheet for common stock and preferred stock, respectively, if all of the stock is issued?

$20,000 Common $40,000 Preferred

A particular balance sheet includes the following information within the stockholders' equity section: Common stock, $5 par value$300,000 Additional paid-in capital-common stock 1,740,000 Assume that common stock is the only class of stock that has been issued and that there have been two issues of stock since the corporation began business. What is the average issue price per share of stock?

$34.00

Memorial Corporation Information from the financial records is presented below: Retained earnings, December 31, 2023 $400,000 Retained earnings, December 31, 2022 250,000 Dividends payable, December 31, 2023 20,000 Dividends payable, December 31, 2022 30,000 Net income for 2023 200,000 Assume that there were no retained earnings transactions other than those dealing with dividends and net income. Dividends declared during 2023 totaled

$50,000.

A used car dealer reported the following information: Accounts payable, December 31, 2023 $95,000 Accounts payable, December 31, 2022 50,000 Cost of goods sold for 2023 560,000 Assuming there was no change in inventory during the period, how much cash was paid for merchandise purchases during 2023?

$515,000

A corporation has 5,000 shares of $5 par, 6% cumulative preferred stock outstanding, and 25,000 shares of $2 par common stock outstanding. No dividends have been paid for the past 2 years. If the company wishes to distribute $2 per share to the common stockholders this year, what is the total amount of dividends that must be paid?

$54,500

Lanier Tech was incorporated as a new business on January 1. The company is authorized to issue 50,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par, cumulative, participating preferred stock. On January 1, the company issued 8,000 shares of the common stock for $15 per share and 2,000 shares of the preferred stock for $30 per share. Net income for the year ended December 31 was $375,000. Assume that no dividends were declared or paid during the first year of operations. What is the dollar amount of total stockholders' equity reported on the balance sheet at December 31?

$555,000

A company reported the following information: Salaries payable, December 31, 2023 $20,000 Salaries payable, December 31, 2022 15,000 Salaries expense for 2023 80,000 How much cash was paid for salaries during 2023?

$75,000

A company reported the following information: Accounts receivable, December 31, 2023 $122,000 Accounts receivable, December 31, 2022 113,000 Sales (all on credit) for 2023 850,000 How much cash was collected from customers during 2023?

$841,000

A company reported the following information: Accounts payable, December 31, 2022 $60,000 Accounts payable, December 31, 2023 80,000 Inventory, December 31, 2022 45,000 Inventory, December 31, 2023 60,000 Cost of goods sold, 2023 1,000,000 Assuming all merchandise purchases were on account, how much cash was paid to suppliers for merchandise purchases during 2023?

$995,000

Total stockholders' equity includes $50,000 of common stock with a stated value of $0.50 and 5,000 shares of treasury stock with a total cost of $25,000. How many total shares of common stock are outstanding?

95,000

Which of the following statements is false?

A statement of retained earnings reports the amount of cash received from operating activities and the amount of cash paid for dividends.

If a corporation declares a 2-for-1 stock split, which of the following is true?

A stockholder who previously held 100 shares will have 200 shares after the split.

Suppose a corporation issues 5,000 shares of $1 par common stock for $30 per share. In addition to the increase in cash, what effect does this transaction have on the accounting equation?

Additional paid-in capital-common stock increases by $145,000.

The following information was taken from the financial records of Mr. Transmission: Accounts payable, December 31, 2023$ 88,000 Accounts payable, December 31, 2022 99,000 Operating expenses for 2023 999,000 How would the change in accounts payable be reported in the operating activities section of the statement of cash flows under the indirect method?

As a deduction from net income

Which of the following transactions is not a significant noncash investing and financing activity?

Cash equivalents are purchased.

Which of the following types of information is not set forth within the corporate charter?

Dates of future dividend distributions

Which of the following is one of the elements of stockholders' equity?

Retained earnings

Lakeshore Industries reported the following information on its recent balance sheet: Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding What is the effect on the company's accounting equation of issuing 1,000 additional shares of common stock at $15 per share?

Stockholders' equity increases by $15,000.

A company reported net income of $150,000 for the current year, but its cash balance decreased by $40,000. Which financial statement should the management refer to for an explanation of this situation?

The Statement of Cash Flows

A company reported the following information: 2023 2022 Land $350,000, $100,000 Common stock 450,000 200,000 An analysis of records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should the changes in these accounts be reported on a statement of cash flows?

The company should report $250,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock.

Presented below is the operating activities section of a statement of cash flows for the current year: Operating activities: Net income $120,000 Add:Depreciation 10,000 Decrease in accounts receivable 5,000 $135,000 Deduct: Decrease in accounts payable 15,000 Net cash inflow from operating activities $120,000 Which method of preparing the operating activities section was used?

The indirect method

Which of the following statements is true with regard to equity capital?

The number of shares actually in the hands of stockholders is called outstanding shares.

Which of the following is not a current reporting requirement for a statement that reports changes in cash over a period of time?

Working capital may be used as a substitute for cash in preparing this statement.