CBAD final

Over the term of the bonds, the balance in the Premium on Bonds Payable account will: A) increase or decrease if the market is unstable. B) increase. C) decrease. D) not change until the bonds mature.

B

Long-lived tangible assets that are used in the operation of the business are called: A) intangible assets. B) natural resources. C) plant assets. D) goodwill.

C

On December 31, Sulfur Corporation has the following data available: Net Income $140,000 Market price of one share of common stock $5 Preferred dividends 36,000 Weighted-average number of shares of common stock outstanding 20,000 shares Total common stockholders' equity at the beginning of the year 360,000 Total common stockholders' equity at the end of the year 160,000 What is the earnings per share? (Round the final answer to two decimal places.) A) 1.86 B) 2.57 C) 5.20 D) 0.54

C

Sage Company issued $600,000, 8%, 5-year bonds for 106, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year? A) $636,000 B) $600,000 C) $628,800 D) $648,000

C

Land was purchased with the proceeds from the issuance of common stock. This transaction would be reported on the statement of cash flows as a(n): A) operating activity. B) investing activity. C) financing activity. D) noncash investing and financing activity.

D

An example of an intangible asset is: A) land. B) equipment. C) coal mine. D) goodwill.

D

Dividends are declared by the: A) Chief Accounting Officer. B) Chief Financial Officer. C) President. D) Board of directors.

D

Green Corporation purchases 40,000 shares of its own $10 par value common stock for $25 per share. What will be the effect on stockholders' equity? A) Increase $400,000 B) Increase $1,000,000 C) Decrease $400,000 D) Decrease $1,000,000

D

A bond will sell at a premium when: A) the coupon rate is equal to the effective rate. B) the coupon rate is greater than the effective rate. C) the coupon rate is less than the effective rate. D) the bond is sold at the end of the fiscal period.

B

A contingency that is remote: A) should be disclosed in the financial statements. B) does not need to be disclosed. C) must be accrued as a loss. D) is recorded as a contingent liability.

B

Amortization expense: A) is the title of the expense associated with natural resources. B) is recorded for intangible assets with a finite life. C) is recorded for assets with an indefinite life. D) cannot be credited directly to the asset account.

B

Ben's Burgers paid $300,000 for a piece of equipment. Ben uses straight-line depreciation. Currently the equipment has a balance in the accumulated depreciation account of $100,000. If the asset has no residual value and an estimated life of 6 years, for how many years has the asset been depreciated? A) 1 B) 2 C) 4 D) 6

B

Bond interest paid is: A) higher when bonds sell at a discount and lower when bonds sell at a premium. B) the same whether bonds sell at a discount or a premium. C) lower when bonds sell at a premium. D) higher when bonds sell at a discount.

B

Bonds with a 7% interest rate were issued when the market rate of interest was 6%. This bond was issued at: A) par value. B) a premium. C) a discount. D) face value.

B

Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000. It is apparent that the bonds had a: A) stated rate less than 8%. B) stated rate greater than 8%. C) market rate less than 8%. D) market rate greater than 8%.

B

Cash received from the issuance of bonds would be reported on a statement of cash flows under: A) investing activities. B) financing activities C) operating activities. D) noncash activities.

B

Equipment acquired on January 1, 2010, is sold on June 30, 2013, for $11,200. The equipment cost $26,800, had an estimated residual value of $6,800, and an estimated useful life of 5 years. The company prepared financial statements on December 31, and the equipment has been depreciated using the straight-line method. Prior to determining the gain or loss on the sale of this equipment, the company should record depreciation of: A) $0. B) $2,000. C) $5,000. D) $31,700.

B

Flanders, Inc. has 20,000 shares of preferred stock outstanding, with annual dividends paid at a rate of $2 per share. Flanders also has 40,000 shares of common stock outstanding. If Flanders, Inc. declares a $200,000 dividend, each outstanding share of common stock would receive: A) $2.00. B) $4.00. C) $3.33. D) $5.00.

B

If $350,000 of bonds are issued during the year, but $150,000 of old bonds are retired during the year, the statement of cash flows will show a(n): A) net gain on retirement of bonds of $200,000. B) increase in cash of $350,000 and a decrease in cash of $150,000. C) net increase in cash of $200,000. D) net decrease in cash of $200,000.

B

If the market interest rate is greater than the stated interest rate, bonds will sell: A) at face value. B) at a discount. C) at a premium. D) at market value.

B

In computing net cash provided by operating activities, each of the following is added to net income EXCCEPT: A) an increase in accrued expenses payable. B) a gain on sale of equipment. C) depreciation expense. D) a decrease in inventory.

B

In the balance sheet, the account, Discount on Bonds Payable, is: A) added to bonds payable. B) deducted from bonds payable. C) classified as a stockholders' equity account. D) classified as a revenue account.

B

Increases and decreases in the long-term assets available to a company are reported on the statement of cash flows as: A) operating activities. B) investing activities. C) financing activities. D) noncash activities.

B

Investing activities include: A) obtaining cash from creditors. B) collecting cash on loans. C) obtaining capital from owners. D) repaying borrowed money.

B

Kathy's Corner Store has total receipts for the month of $36,750 including sales taxes. If the sales tax rate is 5%, what are Kathy's sales for the month? A) $36,750 B) $35,000 C) $34,012.50 D) $1,837.50

B

Land, buildings and equipment are acquired for a lump sum of $850,000. The market values of the three assets are, respectively, $250,000, $480,000 and $180,000. What is the cost assigned to the equipment? A) $150,132 B) $168,132 C) $180,000 D) $209,590

B

Mitchell Corporation sells 4,000 units of inventory during the year for $500 each. The selling price includes a one-year warranty on parts. It is estimated that 3% of the units will be defective and that repair costs are estimated to be $50 per unit. In the year of sale, warranty contracts are honored on 80 units for a total cost of $4,000. What amount will be reported as Estimated Warranty Liability at the end of the year? A) $4,000. B) $2,000. C) $6,000. D) $0.

B

On January 2, 2011, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. If KJ Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2012, assuming that during this period, the asset was used 8,250 hours? A) $48,000 B) $49,500 C) $51,500 D) $53,625

B

On January 2, 2012, Hockey Skates, Inc., acquired equipment for $230,000. The estimated life of the equipment is 5 years. The estimated residual value is $30,000. What is the book value of the equipment on December 31, 2012, if Hockey Skates uses the double-declining-balance method of depreciation? A) $92,000 B) $138,000 C) $150,000 D) $184,000

B

Pat's Pets recently paid to have the engine in its delivery van overhauled. The estimated useful life of the van was originally estimated to be 4 years. The overhaul is expected to extend the useful life of the van to 10 years. The overhaul is regarded as a(n): A) revenue expenditure. B) capital expenditure. C) equity expenditure. D) matching expenditure.

B

The cost of installing lights in the parking lot should be recorded as: A) land. B) land improvements. C) building. D) equipment.

B

The date when a cash dividend becomes a legal obligation is on the: A) date of record. B) declaration date. C) last day of the corporate year. D) payment date.

B

The discount on bonds payable: A) decreases interest expense on the income statement. B) increases interest expense on the income statement. C) decreases the amount of cash paid to bondholders over the stated rate of interest. D) increases the amount of cash paid to bondholders over the stated rate of interest.

B

The statement of cash flows is designed to fulfill all the following purposes EXCEPT to: A) show the relationship of net income to changes in the company's cash. B) assess the collectability of accounts receivable. C) evaluate management decisions. D) help predict future cash flows.

B

Unearned revenue is reported on the balance sheet as: A) a revenue account. B) a current liability. C) an unearned liability. D) a long-term debt.

B

Using the indirect method to calculate net cash provided by operating activities, a decrease in prepaid expenses is: A) subtracted from net income. B) added to net income. C) ignored since it does not affect expenses. D) ignored since it does not affect income.

B

When preferred stock is cumulative, preferred dividends not paid in a year are: A) distributions of earnings. B) called dividends in arrears. C) a liability. D) never paid to the preferred stockholders.

B

Which of the following transactions does NOT affect cash during a period? A) Sale of treasury stock B) Write-off of an uncollectible account C) Purchase of property D) Payment of an accounts payable

B

Wildcat, Inc. declared a 10% stock dividend when it had 150,000 shares of $1 par value common stock outstanding. The market price per share of common stock was $10 per share when the dividend was declared. The entry to record the stock dividend would include a credit to: A) Retained Earnings $150,000. B) Paid-in Capital in Excess of Par $135,000. C) Common Stock $150,000. D) Retained Earnings $15,000.

B

Wolverine Corporation issued 5,000 shares of its $5 par value common stock in payment for attorney services of $40,000. Wolverine stock has been actively trading at $20 per share. This transaction would include a: A) credit to Paid-in Capital in Excess of Par $40,000. B) credit to Paid-in Capital in Excess of Par $15,000. C) credit to Common Stock $100,000. D) credit to Common Stock $40,000

B

The carrying amount of bonds issued at a discount is calculated by: A) subtracting Discount on Bonds Payable from Bonds Payable. B) subtracting the sum of Discount on Bonds Payable and Interest Payable from Bonds Payable. C) subtracting Interest Payable from Bonds Payable. D) subtracting Interest Expense from Bonds Payable.

A

The effect of the declaration of a cash dividend is a(n): A) increase to Liabilities and a decrease to Stockholders' Equity. B) increase to Liabilities and a decrease to Assets. C) increase to Assets and a decrease to Liabilities. D) increase to Stockholders' Equity and a decrease to Assets.

A

The main purpose of the statement of cash flows is to: A) provide information about the cash receipts and cash payments during a period. B) provide information about the investing and financing activities during a period. C) prove that revenues exceed expenses if there is a net income. D) assist banking relationships.

A

The purchase of treasury stock would be reported on a statement of cash flows as a: A) cash outflow under the financing activities. B) cash inflow under the investment activities. C) cash inflow under the operating activities. D) cash outflow under the investment activities.

A

The three sections contained in the statement of cash flows are presented in the following order: A) operating, investing, and financing. B) financing, operating, and investing. C) investing, operating, and financing. D) financing, investing, and operating.

A

Under the indirect method, when calculating cash flows from operating activities, a gain on the sale of equipment is: A) subtracted from net income. B) added to net income. C) only the proceeds are added to net income. D) ignored since this transaction does not affect cash.

A

When computing depreciation for a plant asset, which of the following must be estimated? A) Useful life and residual value B) Residual value and current market value C) Useful life and current market value D) Useful life, current market value, and residual value

A

Delivery Company Corporation purchased a delivery van for $32,500. Delivery Company also paid $1,200 in sales taxes. After driving the van for 5,000 miles, a flat tire needed to be repaired at a cost of $60.The cost of the van is: A) $32,500. B) $32,560. C) $33,700. D) $33,760.

C

Equipment purchased for $85,000 on January 1, 2010, was sold on July 1, 2013. The company uses the straight-line method of computing depreciation and recognizes $17,000 of depreciation expense annually. When recording the sale, the company should record a debit to Accumulated Depreciation for: A) $0. B) $51,000. C) $59,500. D) $68,000.

C

If a corporation issues 4,000 shares of $1 par value common stock for $8,000, the entry would include a credit to: A) Common Stock for $8,000. B) Paid-in Capital in Excess of Par for $8,000. C) Common Stock for $4,000. D) Paid-in Capital in Excess of Par for $4,000.

C

If the market interest rate is 6%, a $10,000, 7%, 5-year bond, that pays interest semiannually would sell at an amount: A) less than face value. B) equal to face value. C) greater than face value. D) the stated value.

C

Interest paid on debt would be reported on a statement of cash flows under: A) financing activities. B) investing activities. C) operating activities. D) noncash activities.

C

Ludington Corporation has 1,000 shares of 6%, $50 par value, cumulative preferred stock and 25,000 shares of $1 par value common stock outstanding on December 31, 2011 and December 31, 2012. The board of directors declared and paid a $2,000 dividend in 2011. In 2012, $12,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2012? A) $1,000 B) $3,000 C) $8,000 D) $12,000

C

Mercury Corporation issues a $3,000,000, 10-year, 8% bond dated January 1 at 103. The journal entry to record the issuance will include a: A) credit to cash for $3,090,000. B) debit to cash for $3,000,000. C) credit to premium on bonds payable for $90,000. D) credit to bonds payable for $3,090,000.

C

Mouse Corporation acquired a building on January 1, 2010, for $500,000. The building had an estimated useful life of 20 years and an estimated salvage value of $25,000. On January 1, 2013, Mouse Corporation determined that the building could only be used for another 10 years and there would be no salvage value. Compute depreciation expense for the year ending December 31, 2013, if Mouse Corporation uses straight-line depreciation. A) $16,667 B) $40,000 C) $42,875 D) $50,000

C

Mr. Smith, a shareholder in the Wolverine Corporation, owns 1,000 shares of their common stock, which represents 30% of the outstanding common stock of Wolverine Corporation. Mr. Smith receives a 10% stock dividend. After the stock dividend, what is Mr. Smith's ownership in Wolverine Corporation's common stock? A) 10% ownership B) 20% ownership C) 30% ownership D) 40% ownership

C

Mr. Smith, a shareholder in the Wolverine Corporation, owns 1,000 shares of their common stock. Mr. Smith receives a 5% stock dividend. After the stock dividend, Mr. Smith will have a: A) total of 50 shares of Wolverine's common stock. B) total of 950 shares of Wolverine's common stock. C) total of 1,000 shares of Wolverine's common stock. D) total of 1,050 shares of Wolverine's common stock.

C

Omaha Bank lends Nebraska Paper Company $100,000 on January 1. Nebraska Paper Company signs a $100,000, 8%, 6-month note. The entry made by Nebraska Paper Company on January 1 to record the proceeds and issuance of the note would include: A) a debit to cash of $92,000. B) a debit to interest expense of $8,000. C) a credit to Notes Payable of $100,000 D) a credit to Interest Payable of $8,000.

C

On January 1, 2012, ACT Corporation issued $800,000 of 6%, 5-year bonds at 98, with interest paid annually. Using the straight-line amortization method, what is the carrying value of the bonds one year later on January 1, 2013? A) $784,000 B) $785,600 C) $787,200 D) $790,400

C

On July 1, Browning Corporation issues $1,500,000 of 10-year, 7% bonds dated July 1 at 90 when the market rate of interest is 9%. Browning uses the straight-line method of amortization. Interest is paid each June 30 and December 31. The interest expense recognized for the first semiannual interest payment on December 31 is: A) $7,500. B) $52,500. C) $60,000. D) $150,000.

C

Pretzel, Inc. paid $54,000 to buy back 9,000 shares of its $1 par value common stock. The stock was sold later at a selling price of $10 per share. The entry to record the sale would include a: A) debit to Paid-in Capital — Treasury Stock $54,000. B) debit to Common Stock $54,000. C) credit to Paid-in Capital-Treasury Stock $36,000. D) credit to Common Stock $36,000.

C

Robertson Corporation incorporated on January 2, 2012. During 2012 Robertson had the following transactions: • issued 30,000 shares of common stock at $25 per share • purchased 2,000 shares of treasury stock at $28 per share • had net income of $400,000. What is the total amount of stockholders' equity as of December 31, 2012? A) $750,000 B) $400,000 C) $1,094,000 D) $1,206,000

C

Supreme Foods Corporation has 2,000 shares of 6%, $50 par value, cumulative preferred stock and 150,000 shares of $1 par value common stock outstanding at December 31, 2012 and December 31, 2011. In 2011 a $5,000 dividend was declared and paid. In 2012, $32,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2012? A) $3,000 B) $6,000 C) $7,000 D) $12,000

C

The carrying amount of bonds will equal the market price: A) at the end of the fiscal period. B) at the close of every business day. C) on the date the bond is issued. D) only when the bonds are converted to common stock.

C

The difference between the issue price of the stock and the par value of the stock is: A) market value. B) par value. C) additional paid-in capital. D) preferred stock.

C

The entry to record amortization: A) increases total assets and decreases total equity. B) decreases total assets and increases total equity. C) decreases both total assets and total equity. D) increases both total assets and total equity.

C

The journal entry to record accrued interest on a short-term note payable must include a debit to: A) interest payable and a credit to cash. B) interest expense and a credit to cash. C) interest expense and a credit to interest payable. D) interest payable and a credit to notes payable.

C

The journal entry to record depletion would include: A) a debit to Depletion Expense and credit to Accumulated Depreciation. B) a debit to Accumulated Depletion and a credit to Depletion Expense. C) a debit to Depletion Expense and a credit to Accumulated Depletion. D) none of the above.

C

The method that starts with net income and adjusts it for items that affect net income, but do not affect cash is called the: A) lower-of-cost or market method. B) direct method. C) indirect method. D) gross profit method.

C

The statement of cash flows: A) can be prepared instead of an income statement. B) must be prepared daily. C) summarizes the operating, financing, and investing activities of an entity. D) is part of the income statement.

C

Tyler Company paid $1,500 cash to replace a wheel on equipment sold under warranty. The entry to record the payment would be to: A) debit warranty expense and credit cash. B) debit equipment expense and credit cash. C) debit warranty payable and credit cash. D) debit parts expense and credit cash.

C

Under the direct method of preparing the financing section of the statement of cash flows, net cash provided by financing activities is $388,000. If the indirect method of preparing the financing section of the statement of cash flows was used: A) cash provided by financing activities would be less than $388,000. B) cash provided by financing activities would be more than $388,000. C) cash provided by financing activities would be the same, $388,000. D) cash provided by operating activities would equal $388,000.

C

Using the indirect method to prepare the statement of cash flows, dividends paid during the year are: A) subtracted from net income in the operating activities section. B) added to net income in the operating activities section. C) shown as a cash outflow in the financing activities section. D) shown as a cash outflow in the investing activities section.

C

Which of the following would be reported on a statement of cash flows as an investing activity? A) Depreciation expense B) Purchase of treasury stock C) Sale of equipment for cash D) Paying cash dividends

C

Wildcat Corporation issues $500,000, 10%, 5-year bonds on January 1, 2012 for $479,000. Interest is paid semiannually on January 1 and July 1. If Wildcat uses the straight-line method of amortization of bond discount, the amount of bond interest expense on July 1, 2012 is: A) $22,900. B) $25,000. C) $27,100. D) $52,100.

C

________ are accounted for as long-term assets when purchased or developed, and their cost is transferred to expense through a process called depletion. A) Intangible assets B) Franchises C) Natural resources D) Trademarks

C

On January 2, 2011, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. What is the balance in Accumulated Depreciation on December 31, 2011, if KJ Corporation uses the double-declining-balance method of depreciation? A) $62,400 B) $88,000 C) $96,000 D) $104,000

D

On January 2, 2011, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. What is the book value of the asset on December 31, 2012, if KJ Corporation uses the straight-line method of depreciation? A) $80,000 B) $96,000 C) $104,000 D) $164,000

D

On June 5, 2012, Cheap Oil Company purchased an oil well for $650,000. The well contains an estimated 162,500 barrels of oil, with an estimated residual value of zero. During 2012, 32,500 barrels of oil were removed from the well. To record depletion for 2012, Cheap Oil Company will debit Depletion Expense for: A) $ 65,000. B) $100,000. C) $108,500. D) $130,000.

D

Preferred stockholders: A) receive dividends after common stockholders. B) receive corporate assets upon liquidation after the common stockholders. C) do not have any stockholder rights. D) receive a fixed dividend when the board of directors declares the dividend.

D

Research and development costs incurred by a company should be: A) capitalized and depreciated over a period not to exceed 20 years. B) capitalized and amortized over the useful life of the asset. C) either capitalized and depreciated or expensed immediately at the option of the accountant. D) expensed on the current year's income statement.

D

Tech Support, Inc. issued common stock for $470,000 cash in 2012. The company paid cash dividends of $50,000 and purchased treasury stock at a cost of $20,000. The financing section of the statement of cash flows will report net cash inflows of: A) $540,000. B) $500,000. C) $440,000. D) $400,000.

D

The declaration of a cash dividend: A) reduces liabilities and increases stockholders' equity. B) increases liabilities and reduces assets. C) increases liabilities and increases stockholders' equity. D) increases liabilities and decreases stockholders' equity.

D

The journal entry to record depreciation expense is: A) debit depreciation expense, credit the asset account. B) debit accumulated depreciation, credit the asset account. C) debit the asset account, credit accumulated depreciation. D) debit depreciation expense, credit accumulated depreciation.

D

The premium on bonds payable: A) increases the amount of cash paid to bondholders over the stated rate of interest. B) decreases the amount of cash paid to bondholders over the stated rate of interest. C) increases interest expense on the income statement. D) decreases interest expense on the income statement.

D

Travis Corporation issued 20,000 shares of common stock. Travis purchased 2,000 shares and later reissued 1,000 shares. How many shares are issued and outstanding? A) 18,000 issued and 18,000 outstanding B) 20,000 issued and 18,000 outstanding C) 19,000 issued and 19,000 outstanding D) 20,000 issued and 19,000 outstanding

D

Which of the following costs should NOT be added to the cost of the machine? A) The cost of transporting the machine to its setup location B) The cost of insurance for the machine while it is in-transit C) The cost of a special platform for the machine D) The cost of oiling the machine after it has been used for two years

D

Which of the following would be reported on a statement of cash flows as a financing activity? A) Sale of equipment B) Amortization expense C) Collection of notes receivable D) Purchase of treasury stock

D

Which one of the following is NOT a stockholders' right of ownership in a corporation? A) To vote and elect the board of directors B) To receive a proportionate share of the assets upon liquidation C) To maintain one's proportional share of ownership in the corporation D) To declare dividends

D

A bond with a face value of $100,000 and a quoted price of 102 has a selling price of: A) $102,000. B) $98,000. C) $100,000. D) $120,000.

A

Cash receipts from interest and dividends are classified as: A) operating activities. B) investing activities. C) financing activities. D) noncash activities.

A

Depreciation expense: A) allocates a portion of the cost of an asset against the revenue the asset helps earn each period. B) is not required for plant assets according to GAAP. C) is reported on the balance sheet. D) is required for land according to GAAP.

A

During the year, New Liberty Corporation's treasury stock increased $30,000 from a cash purchase, cash dividends paid totaled $44,000 and the company reported net income of $220.000. Net cash used by financing activities is: A) $74,000. B) $14,000. C) $146,000. D) $206,000.

A

Fortune, Inc. declares a 10% common stock dividend when it has 20,000 shares of $10 par value common stock outstanding. If the market value of the common stock is $25, the journal entry to record the stock dividend would include a: A) debit to Retained Earnings $50,000. B) debit to Retained Earnings $20,000. C) credit to Paid-in Capital in Excess of Par Value $50,000. D) credit to Paid-in Capital in Excess of Par Value $20,000

A

Hawthorne Company sold office furniture for $2,500 cash. The furniture cost $30,000 and had accumulated depreciation through the date of sale totaling $29,000. The company will recognize: A) a gain of $1,500. B) a loss of $1,500. C) a gain of $2,500. D) neither a gain or a loss.

A

If an asset is sold: A) depreciation must be recorded to the date of sale. B) the cost of the asset is compared to the selling price to determine any gain or loss. C) the journal entry to record the sale will include a credit to cash. D) for a gain, total assets remain the same and total equity increases.

A

If bonds have been issued at a premium, over the life of the bonds, the: A) carrying value of the bonds will decrease. B) carrying value of the bonds will increase. C) interest expense will decrease, if the premium is being amortized on a straight-line basis. D) premium amortization will decrease.

A

Michigan Bank lends Canton Furniture Company $100,000 on December 1. Canton Furniture Company signs a $100,000, 8%, 4-month note. The entry made by Canton Furniture Company on December 31 to record the accrued interest on the note would be: A) a debit to interest expense and a credit to interest payable of $2,000. B) a debit to interest payable and a credit to interest expense of $2,000. C) a debit to interest expense and a credit to cash of $2,000. D) a debit to interest payable and a credit to cash of $2,000.

A

Nelson Corporation has $1 par value Common Stock and has 100,000 shares authorized and 25,000 shares issued. The entry to record Nelson's purchase of 5,000 shares of common stock at $5 per share would include a: A) debit to Treasury Stock for $25,000. B) credit to Common Stock $25,000. C) credit to Paid-in Capital in Excess of Par Value — Common Stock for $20,000. D) debit to Common Stock $5,000.

A

On January 1, Right Way Corporation issues $3,000,000, 5-year, 10% bonds for $2,910,000. Interest is paid semiannually on January 1 and July 1. Right Way uses the straight-line method of amortization. The amortization amount for the discount on bonds payable on July 1 is: A) $9,000. B) $90,000. C) $30,000. D) $29,100.

A

Stock that a corporation purchases from shareholders is called: A) treasury stock. B) authorized stock. C) issued stock. D) outstanding stock.

A

Stockholders of a corporation directly elect the: A) Board of directors. B) President of the corporation. C) Chief Financial Officer of the corporation D) Chairperson of the Board.

A

The book value of an asset is defined as: A) cost minus accumulated depreciation. B) cost minus salvage value. C) current sales value minus historical cost. D) cost minus annual maintenance expense.

A

A $5,000, 7% bond is quoted at 95. When the bond is issued, the Bonds Payable account will be increased by: A) $4,750. B) $4,650. C) $5,000. D) $5,100.

C

A company has a contingent loss that can be estimated and has a probable chance of occurrence. What reporting does FASB require regarding this contingency? A) It should be reported in the notes to the financial statements. B) It should be ignored until the actual loss occurs. C) It should be accrued, reported on the financial statements and disclosed in the notes to the financial statements. D) Nothing is required since there is only a probable chance of occurrence.

C

A lump-sum purchase of assets: A) requires the company to record the assets bought as a single asset. B) requires the company to divided the total cost among the various assets according to their historical cost. C) uses the market values of the assets to determine the cost of each individual asset. D) is also known as the group purchase of assets.

C

Before a company can pay dividends to the common stockholders, the owners of cumulative preferred stock must receive: A) the current year's dividends, but not dividends in arrears. B) neither the current year's dividends nor dividends in arrears. C) all dividends in arrears plus the current year's dividends. D) all dividends in arrears, but not the current year's dividends.

C

Best Model Company reported $61,000 in depreciation expense for the current year using the double-declining-balance method. The company estimates that it saved net cash of $12,000 in income taxes by using the double-declining-balance instead of the straight-line method. The company has a 30% tax rate. What would depreciation expense have been using the straight-line method? A) $43,857 B) $40,000 C) $21,000 D) $7,200

C

Bonds which are backed only by the good faith of the borrower are referred to as: A) junk bonds. B) unregistered bonds. C) debenture bonds. D) callable bonds.

C

Burton, Inc. had the following transactions: Sale of land $300,000 Sale of equipment 150,000 Purchase of treasury stock 40,000 Purchase of equipment 45,000 Issuance of common stock 100,000 Net cash provided by investing activities is: A) $465,000. B) $545,000. C) $405,000. D) $265,000.

C

Casey's Computers purchased 4,000 shares of its own $10 par value common stock for $92,000. As a result of this transaction: A) Casey's Paid-in Capital in Excess of Par Value account decreased $52,000. B) Casey's Common Stock decreased $40,000. C) Casey's Stockholders' Equity decreased $92,000. D) Casey's Stockholders' equity increased $52,000.

C

Cash equivalents do NOT include: A) treasury bills. B) money market funds. C) 4-year certificates of deposit. D) short-term corporate notes.

C

Common Stock will: A) increase $100. B) increase $2,500. C) increase $2,400. D) stay the same.

C

On January 1, Multichip Corporation issued $2,000,000, 10-year, 8% bonds at 102. The journal entry to record this transaction would include a: A) credit to bonds payable $2,040,000. B) debit to discount on bonds payable $40,000. C) debit to cash $2,000,000. D) credit to premium on bonds payable $40,000.

D

A stock split: A) increases Assets and decreases Stockholders' Equity. B) decreases Assets and increases Stockholders' Equity. C) increases Common Stock and decreases Paid-in Capital. D) has no effect on total equity.

D

ABC Corporation purchases 40,000 shares of its own $10 par value common stock for $25 per share. What will be the effect on stockholders' equity? A) Increase $400,000 B) Decrease $400,000 C) Increase $1,000.000 D) Decrease $1,000,000

D

Acme Corporation issues $500,000, 10%, 5-year bonds on January 1, for $479,000. Interest is paid annually on January 1. If Acme uses the straight-line method of amortization of bond discount, the amount of interest expense recorded at year-end would be: A) $4,200. B) $45,800. C) $50,000. D) $54,200.

D

Bay Back Company acquired equipment on July 1, 2011, for $210,000. The residual value is $35,000 and the estimated life is 5 years or 40,000 hours. Compute the balance in accumulated depreciation as of December 31, 2013, if Bay Back Company uses the double-declining-balance method of depreciation. A) $68,040 B) $134,400 C) $141,960 D) $149,520

D

Bixby Corporation purchased land and a building for $800,000. An appraisal indicates that the land's value is $400,000 and the building's value is $500,000. When recording this transaction Galaxy should debit: A) Land for $800,000. B) Building for $355,555. C) Land Improvement-Building for $500,000. D) Building for $444,444.

D

Buggy Company purchased equipment on June 3, 2012, for $100,000. The residual value is zero and the estimated life is 10 years or 42,550 hours. Compute depreciation expense for the year ending December 31, 2012, if the company uses the units-of-production method of depreciation and uses the equipment for 8,600 hours. A) $3,210 B) $5,628 C) $11,628 D) $20,210

D

Company A purchased a used piece of equipment. All of the following costs should be included in the cost of the equipment EXCEPT for: A) insurance while in transit. B) sales tax paid. C) installation costs. D) maintenance costs after the equipment is up and running.

D

Company B purchased some land and is preparing the land for a new building. Company B should include which of the following in the cost of the land? A) Cost of driveways B) Cost of fencing C) Cost of sprinkler systems for the shrubbery D) Grading and clearing the land

D

Declaring and distributing stock dividends: A) is the distribution of cash to the stockholders. B) increases the total liabilities of the corporation and decreases the total stockholders' equity. C) reduces the total assets of the corporation. D) has no effect on total stockholders' equity.

D

Double-declining balance depreciation: A) is an accelerated method of depreciation. B) ignores the residual value in computing depreciation, except during the last year. C) is based on book value. D) is all of the above.

D

Equipment costing $37,450 with a book value of $18,410 is sold for $20,000. The journal to record the sale will include a : A) debit to cash for $18,410. B) debit to accumulated depreciation for $18,410. C) debit to gain on sale of equipment for $1,590. D) debit to accumulated depreciation for $19,040.

D

Goodwill: A) that is created internally is recorded on the company's books as an intangible asset. B) does not need to be tested for impairment. C) is amortized over a period of ten years. D) is recorded when it is purchased in the acquisition of another company.

D

If a company reports a net loss, it: A) cannot pay cash dividends. B) cannot obtain a loan. C) cannot purchase property. D) may still have an increase in cash.

D

Ironwood Company's sales for May 24 were $29,000. Ironwood is required to collect 6% state sales tax. The total cash received from customers was: A) $1,740. B) $27,260. C) $29,000. D) $30,740.

D

Jackson Corporation acquired equipment on January 1, 2010, for $320,000. The equipment had an estimated useful life of 10 years and an estimated salvage value of $25,000. On January 1, 2013, Jackson Corporation revised the total useful life of the equipment to 6 years and the estimated salvage value to be $20,000. Using the straight-line method of depreciation, what is the book value as of December 31, 2013? A) $146,000 B) $154,333 C) $159,000

D

Nationwide Magazine sells 60,000 subscriptions in March at $15 each. The entry is made in March to record the sale of the subscriptions would include a: A) debit to subscriptions receivable for $900,000. B) debit to prepaid subscriptions for $900,000 C) credit to cash for $900,000. D) credit to unearned subscription revenue for $900,000.

D

On December 1, Goliath Corporation borrowed $10,000 on a 90-day, 6% note. Goliath Corporation's year end is December 31. Prepare the journal entries to record the issuance of the note, the accrual of interest at year end, and the payment of the note. Answer: December 1: Cash 10,000 Notes Payable 10,000 December 31: Interest Expense 50 Interest Payable 50 March 1: Interest Expense 100 Interest Payable 50 Notes Payable 10,000 Cash 10,150 The stated interest rate is always declared as a(n): A) monthly rate. B) daily rate. C) semiannual rate. D) annual rate.

D