Accounting 2100 Pre Final quiz 2

Flagler Corporation shows a total of $660,000 in its common stock account and $1,600,000 in its paid-in capital in excess of par value - common stock account. The par value of Flagler's common stock is $8. How many shares of Flagler stock have been issued?

82,500 Explanation $660,000 total par value ÷ $8 par value per share = 82,500 shares issued

Elroy Corporation repurchased 4,000 shares of its own stock for $30 per share. The stock has a par of $10 per share. A month later Elroy resold 900 shares of the treasury stock for $32 per share. Required: What is the balance of the Treasury Stock account after these transactions are recognized?

Balance of treasury stock$93,000 Explanation Purchase: 4,000 × $30 = $120,000Sale: 900 × $32 = $28,800 (Stock is removed from the Treasury stock account at the purchase amount; any difference is shown in Paid in Capital in Excess of Cost - Treasury Stock) Treasury stock1.120,000 2.(27,000)* Bal.93,000 *900 shares × $30 = $27,000

On June 30, 2018, Franza Company's total current assets were $900,000 and its total current liabilities were $360,000. On July 1, 2018, Franza issued a short-term note to a bank for $72,000 cash. Required Compute Franza's working capital before and after issuing the note. Compute Franza's current ratio before and after issuing the note.

Before the transaction After the transaction a. Working Capital$540,000 $540,000 b.Current Ratio 2.50 2.25 Explanation a.Working capital before the transaction:Current assets - Current liabilities = $900,000 - $360,000 = $540,000 Working capital after the transaction:Current assets - Current liabilities = $972,000 - $432,000 = $540,000 b.Current ratio before the transaction:Current assets ÷ Current liabilities = $900,000 ÷ $360,000 = 2.50:1 Current ratio after the transaction:Current assets ÷ Current liabilities = $972,000 ÷ $432,000 = 2.25:1

On June 30, 2018, Franza Company's total current assets were $900,000 and its total current liabilities were $360,000. On July 1, 2018, Franza issued a long-term note to a bank for $72,000 cash. Required Compute Franza's working capital before and after issuing the note. Compute Franza's current ratio before and after issuing the note

Before the transaction After the transaction a.Working Capital$540,000 $612,000 b.Current Ratio2.5 2.7 Explanation a.Working capital before the transaction: $900,000 - $360,000 = $540,000Working capital after the transaction: $972,000 - $360,000 = $612,000 b.Current ratio before the transaction: $900,000 ÷ $360,000 = 2.5:1Current ratio after the transaction: $972,000 ÷ $360,000 = 2.7:1

On January 12, Year 1, Gilliam Corporation issued 550 shares of $12 par-value common stock for $15 per share. The number of shares authorized is 5,000, and the number of shares outstanding prior to this transaction is 1,200. Which of the following answers describes the effect of the January 12, Year 1 transaction? Assets=Liab.+Com. Stk.+Pd-in ExcessRev.−Exp.=Net Inc.Cash Flow A.6,600=NA+6,600+NANA−NA=NA6,600 FA B.8,250=NA+8,250+NANA−NA=NA8,250 FA C.8,250=NA+6,600+1,650NA−NA=NA8,250 FA D.8,250=NA+6,600+1,650NA−NA=NA8,250 IA

Choice C Explanation Assets (cash) increase by $8,250 (550 × $15), common stock increases by $6,600 (= 550 shares × $12 par value), and paid-in excess of par value − common increases by $1,650 (= $8,250 − $6,600). The cash inflow is a financing activity.

When Crossett Corporation was organized in January 2018, it immediately issued 4,000 shares of $50 par, 6 percent, cumulative preferred stock and 50,000 shares of $20 par common stock. Its earnings history is as follows: 2018, net loss of $35,000; 2019, net income of $125,000; 2020, net income of $215,000. The corporation did not pay a dividend in 2018. Required a. How much is the dividend arrearage as of January 1, 2019?

Dividend arrearage$12,000 Explanation a. Computation of Preferred Dividends Par Value of Stock×Dividend %=Dividend per Share×PreferredSharesOutstanding=Total Dividends perYear$50×6%=$3.00×4,000=$12,000

Tom Yuppy, a wealthy investor, paid $20,000 for 1,000 shares of $10 par common stock issued to him by Leuig Corp. A month later, Leuig Corp. issued an additional 2,000 shares of stock to Yuppy for $25 per share.

Explanation (Event 1) Common stock = 1,000 × $10 = $10,000(Event 2) Issue of additional shares = 2,000 × $10 = $20,000

The following transactions apply to Ozark Sales for 2018: The business was started when the company received $50,000 from the issue of common stock. Purchased equipment inventory of $380,000 on account. Sold equipment for $510,000 cash (not including sales tax). Sales tax of 8 percent is collected when the merchandise is sold. The merchandise had a cost of $330,000. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 2 percent of sales. Paid the sales tax to the state agency on $400,000 of the sales. On September 1, 2018, borrowed $50,000 from the local bank. The note had a 4 percent interest rate and matured on March 1, 2019. Paid $6,200 for warranty repairs during the year. Paid operating expenses of $78,000 for the year. Paid $250,000 of accounts payable. Recorded accrued interest on the note issued in transaction no. 6. What is the total amount of current liabilities at December 31, 2018?

Explanation c. Current liabilities: Accounts payable$130,000 Sales tax payable 8,800 Warranty Payable 4,000 Interest payable 667 Notes payable 50,000 Total current liabilities$193,467

Which of the following is not considered an advantage of the corporate form of business organization?

Lack of government regulation.

Which of the following statements about types of business entities is true?

One advantage of a corporation is ability to raise capital.

On January 2, Year 1, Torres Corporation issued 20,000 shares of $10 par-value common stock for $11 per share. Which of the following statements is true?

The paid-in capital in excess of par value account will increase by $20,000. Explanation The cash account will increase by $220,000 (20,000 × $11), the common stock account will increase by $200,000 (20,000 × $10 par value), and the paid-in capital in excess of par value account will increase by $20,000 (20,000 × $1).

The following information pertains to JAE Corp. at January 1, 2018: Common stock, $10 par, 20,000 shares authorized, 2,000 shares issued and outstanding$20,000 Paid-in capital in excess of par, common stock 15,000 Retained earnings 82,000 JAE Corp. completed the following transactions during 2018: Issued 3,000 shares of $10 par common stock for $25 per share. Repurchased 500 shares of its own common stock for $26 per share. Resold 200 shares of treasury stock for $30 per share. Required: How many shares of common stock were outstanding at the end of the period? How many shares of common stock had been issued at the end of the period?

a. Outstanding shares at the end of the period 4,700 b.Issued shares at the end of the period 5,000 Explanation a. & b. Common StockIssued OutstandingBeginning number of shares 2,000 2,000 Issued this period 3,000 3,000 Repurchased as treasury stock (500) Resold treasury stock 200 Ending number of shares(b)5,000 (a)4,700

Selected data from Emporia Company follow: Balance SheetsAs of December 31 2018 2017 Accounts receivable $600,000 $480,000 Allowance for doubtful accounts (40,000) (20,000) Net accounts receivable $560,000 $460,000 Inventories, lower of cost or market$500,000 $400,000 Income StatementFor the Years Ended December 31 2018 2017 Net credit sales $2,400,000 $1,950,000 Net cash sales 600,000 450,000 Net sales 3,000,000 2,400,000 Cost of goods sold 1,800,000 1,520,000 Selling, general, and admin.expenses 300,000 240,000 Other expenses 80,000 50,000 Total operating expenses$2,180,000 $1,810,000 Required a. Compute the accounts receivable turnover for 2018. b. Compute the inventory turnover for 2018. c. Compute the net margin for 2017.

a.Accounts receivable turnover 4.71 times b.Inventory turnover 4.00 times c.Net margin 24.58% Explanation a.Accounts receivable turnover = Net credit sales ÷ Average net receivables= $2,400,000 ÷ $510,000 = 4.71 times b.Inventory turnover = Cost of goods sold ÷ Average inventories= $1,800,000 ÷ $450,000 = 4.00 times c.Net margin = Net income ÷ Total net sales= ($2,400,000 - $1,810,000) ÷ $2,400,000 = 24.58%

Bill Darby started Darby Company on January 1, 2018. The company experienced the following events during its first year of operation: Earned $16,200 of cash revenue. Borrowed $12,000 cash from the bank. Adjusted the accounting records to recognize accrued interest expense on the bank note. The note, issued on September 1, 2018, had a one-year term and an 8 percent annual interest rate.

a.Interest expense$320 b.Amount of cash$0 Explanation a.$12,000 × 8% = $960; $960 × 4/12 = $320 b.$0, no interest was paid in 2018; interest will be paid in 2019.

Dan Dayle started a business by issuing an $80,000 face value note to First State Bank on January 1, 2018. The note had an 8 percent annual rate of interest and a five-year term. Payments of $20,037 are to be made each December 31 for five years. Required What portion of the December 31, 2018, payment is applied to interest expense and principal? What is the principal balance on January 1, 2019? What portion of the December 31, 2019, payment is applied to interest expense and principal?

a.Interest expense$6,400 Principal $13,637 b.Principal balance$66,363 c.Interest expense$5,309 Principal $14,728