accounting exam 3

A company issues 100,000 shares of preferred stock for $40 a share. The stock has a fixed annual dividend rate of 5% and a par value of $3 per share. Preferred stockholders can anticipate receiving a dividend of:

$15,000 each year

Waxman Company's 20D income statement reported total revenues, $850,000 and total expenses (including $40,000 depreciation) of $720,000. The 20D balance sheet reported the following: accounts receivable---beginning balance, $50,000 and ending balance, $40,000; accounts payable---beginning balance, $22,000 and ending balance, $28,000. Therefore, based only on this information, the 20D net cash inflow from operating activities was

$186,000

Matlock Company reported total sales revenue of $55,000 and total expenses amounting to $45,000 (i.e., net income $10,000) on its income statement for the year ended December 31, 20B. During 20B, accounts receivable decreased by $4,000, merchandise inventory decreased by $6,000, accounts payable increased by $2,000 and depreciation of $8,000 was recorded. Therefore, based only on this information, the net cash flow from operating activities for 20B was:

$30,000

Jackson Company gathered the following data to prepare its 20B statement of cash flows: Net Income $40,000 Depreciation expense 5,000 Accounts receivable decrease 3,000 Wages payable increase 4,000 Amortization of patent 1,000 Based only of the above data, the net cash inflow from operating activities during 20B was:

$53,000

Kela Corporation reported 20D net income of $580,000 including the effects of depreciation expense, $60,000 and amortization expense on a patent, $5,000. Also, cash of $50,000 was borrowed on a 5-year note payable. Based on this data, total cash inflow from operating activities for 20D was

$645,000

A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. Of the 3 million shares bought back, the company cancels 2 million and holds 1 million. The number of authorized shares after these transactions are accounted for is

20 million shares

A company purchases a $300,000 building, paying $200,000 in cash and signing a $100,000 promissory note. What will be reported on the statement of cash flows as a result of this transaction?

A $200,000 cash outflow for investing activities

Your company owned equipment with a book value of $120,000 that was sold during this accounting period for $30,500 in cash, and purchased new equipment for $148,000. Your company would record:

A debit of $30,500 and a credit of $148,000 to the cash account for a net cash outflow of $117,500

On February 16, a company declares a 34 cent dividend to be paid on April 5. There are 2 million shares of common stock outstanding and 100,000 shares of treasury stock. What does the company record in February?

A debit to dividends declared and a credit to dividends payable, each for $680,000

Type 1 Adjustments

Add back- Depreciation Amortization expense Loss on sale

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by:

Adding the amount of discount amortization for the period to the amount of cash paid for interest during the period.

Cash transactions relating to the purchase and sale of which types of assets affect a company's cash flows from investing activities?

All of a company's non-current assets

Which of the following transactions would not create a cash flow?

Amortization of patent for the period.

Which of the following would be reported as a cash outflow from investing activities?

Buying another company's bond with cash

Which of the following statements about dividends is not true?

Cash dividends paid to stockholders reduce net income.

Which of the following would not be a cash flow from financing activities?

Collection of a cash dividend

Which of the following would not be a cash flow from investing activities?

Collection of interest revenue on a long-term note.

A company sells 1 million shares of stock with no par value for $15 a share. In recording the transaction, it would

Debit cash for $15 million and credit common stock $15 million

The payment date for a dividend is the date on which the company

Debits dividends payable and credits cash for the dividend amount

Market rate

Effective rate Yield

Which of the following information is not needed in calculating the value of a bond?

Future value of periodic interest payments

Type 2 Adjustments

If a current asset other than cash increases, subtract the increase If a current liability increase, add the increase If a current liability decreases, subtract the decrease

Treasury stock

Is recorded as a contra-equity account

Which of the following represent cash inflows from financing activities?

Issuing long-term bonds at a discount.

Which of the following represent cash outflows from financing activities?

Paying a bond's face value at maturity.

A cash inflow from financing activities includes:

Proceeds from issuance of bonds payable.

Which of the following is a cash flow from operating activities?

Purchase of merchandise for resale.

If a corporation declares and distributes a 10% stock dividend on its common shares, the account debited is

Retained earnings

If the market rate of interest is higher than the face interest rate at the date of issuance, bonds will:

Sell at a discount.

The incorporation of companies in the U.S. is controlled by

State governments

Bond rate

Stated rate Contractual Rate

On January 1, 19x4, Holzman Corporation issued ten-year bonds payable with a face value of $400,000 and a face interest rate of 9 percent. The bonds were issued to yield an effective (market) rate of 10 percent. Interest is payable semiannually on January 1 and July 1. In calculating the present value of the bond issue on January 1, 19x4.

The 10 percent rate will be used to calculate the present value of the face amount and a 5 percent rate will be used to calculate the present value of the periodic interest payments.

Bond rate

The amount that an issuing unit is obligated to pay on the par value of the bond during the interim between the date of issuance and the date of redemption.

Cash dividends can be paid only when

The retained earnings account has a positive balance greater than the dividend, the cash account has a balance greater than the amount of the dividend declared, and the board of directors has declared the dividend

The effect of a stock dividend is to

change the composition of stockholders' equity

The declaration date for a dividend is the date on which the company:

debits Dividends Declared and credits Dividends Payable for the amount of the dividend.

The date of record for a dividend is the date on which the company:

establishes who will receive the dividend payment.

Stockholders equity is

the amount the company received for all stock when issued plus the amount of retained earnings minus treasury stock.

Stockholders' equity frequently includes which of the following: - the preset value of future dividends to be paid - the total par value of common stock - retained earnings - total par value of common stock and retained earnings

total par value of common stock and retained earnings