ACC Mj

When bonds are issued at a premium, the bond issuer receives more cash on the issue date than it repays at maturity. The difference, a premium, is a reduction in the cost of borrowing, which has to be:

amortized

Ordinary repairs and maintenance:

are recorded as expenses. -Ordinary repairs and maintenance are expenditures for routine operating upkeep of long-lived assets; they are recorded as expenses.

Heatherbrae Co. uses the units-of-production method to estimate depreciation. The company purchased a new machine for $56,000 that will produce an estimated 410,000 units over its useful life. The estimated residual value of the machine is $4,000. What is the depreciation rate per unit?

$0.13 -Depreciation rate per unit = (Cost − Residual value) ÷ Estimated total production= ($56,000 − $4,000) ÷ 410,000 units = $0.13 per unit

A company purchased land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The residual value of the land is estimated to be $250,000. What is the amount of depletion per ton of ore?

$0.625 -Depletion per ton = (Cost − Residual value) ÷ Estimated number of tons= ($1,500,000 − $250,000) ÷ 2,000,000 = $0.625

Tidy Limited purchased a new van on January 1, 2018. The van cost $28,000. It has an estimated life of eight years and the estimated residual value is $3,000. Tidy uses the double-declining-balance method to compute depreciation. What is the adjusted balance in the Accumulated Depreciation account at the end of 2019?

$12,250. -2018:= ($28,000 − $0) × 2 / 8 = $7,0002019:= ($28,000 − $7,000) × 2 / 8 = $5,250

A company issues 1 million shares of common stock with a par value of $0.19 for $16.70 a share. The entry to record this transaction includes a debit to Cash for:

$16,700,000, a credit to Common Stock for $190,000, and a credit to Additional Paid-in Capital for $16,510,000.

Pebble Beach Co. buys a piece of equipment for $57,000. The equipment has a useful life of six years. No residual value is expected at the end of the useful life. Using the double-declining-balance method, what is the company's depreciation expense in the first year of the equipment's useful life?

$19,000 -Depreciation expense = (Cost − Accumulated depreciation) × (2 ÷ Useful life)= ($57,000 − $0) × 2 / 6 = $19,00

Barbur, Inc. reported net income of $12 million. During the year the average number of common shares outstanding was 3 million. The price of a share of common stock at the end of the year was $5. There were 400,000 shares of preferred stock outstanding on average and no dividends were declared and the preferred stock is noncumulative. The EPS is approximately:

$4.00 -EPS= (Net income − Preferred dividends) ÷ Average number of common shares outstanding= ($12,000,000 − $0) ÷ 3,000,000 shares = $4.00 per share

Seville Co. issued 1,300 shares of $64 par value stock for $97,500. What is the total amount of contributed capital?

$97,500 -

A company has net income of $26.60 million. Stockholders' equity at the beginning of the year is $67.55 million and, at the end of the year, it is $108.15 million. The only change to stockholders' equity came from net income. The return on equity ratio is approximately:

0.30 -Return on equity (ROE) = (Net income − Preferred dividends) ÷ Average common stockholders' equity= ($26,600,000 − $0) ÷ [($67,550,000 + $108,150,000) ÷ 2] = 0.30 (rounded)

Galveston, Inc. has 308,000 shares authorized, 140,000 shares issued, and 14,000 shares of treasury stock. How many shares are outstanding?

126,000 -Shares outstanding = Shares issued − Treasury shares= 140,000 − 14,000 = 126,000

A corporate charter specifies that the company may sell up to 28 million shares of stock. The company sells 20 million shares to investors and later buys back 7.0 million shares. The current number of outstanding shares after these transactions have been accounted for is:

13.0 million shares. - This corporation has 13.0 million shares outstanding (or 20 million shares issued − 7.0 million shares of treasury stock).

Barbur, Inc. reported net income of $7.75 million. During the year the average number of common shares outstanding was 3.1 million. The price of a share of common stock at the end of the year was $5. There were 440,000 shares of preferred stock outstanding on average and no dividends were declared and the preferred stock is noncumulative.The Price/Earnings Ratio is approximately:

2.00 -Price/Earnings (P/E) ratio = Current stock price (per share) ÷ EPS= $5.00 ÷ $2.50 = 2.00

A company paid $503,000 to purchase equipment and $15,300 to have the equipment delivered to and installed in the company's production facilities. The equipment is expected to be used a total of 28,300 hours throughout its estimated useful life of seven years. The estimated residual value of the equipment is $5,300. The company began using the equipment on May 1, 2018. The company has an October 31, 2018 year-end. It used the equipment for a total of 11,500 hours between May 1 and October 31, 2018. Using the units-of-production method, what amount of depreciation expense would the company report in the income statement prepared for the year-ended October 31, 2018?

208,463 -Cost = Purchase price + Delivery and installation costs= $503,000 + $15,300 = $518,300Depreciation expense this period = (Cost − Residual value) × (Actual production this period ÷ Estimated total production)= ($518,300 − $5,300) × ($11,500 ÷ 28,300) = $208,462.90

A corporate charter specifies that the company may sell up to 34 million shares of stock. The company sells 26 million shares to investors and later buys back 10.0 million shares. The number of authorized shares after these transactions are accounted for is:

34 million shares. -Authorized shares are the maximum number of shares of capital stock of a corporation that can be issued, as specified in the charter. This corporation has 34 million shares authorized.

Harry owns 1,000 shares of stock in Xit Corporation. What is the effect on Xit Corporation if Harry dies?

A stockholder's death has no effect on a corporation.

In an IPO on May 1, 2012, Timmy Hilfigure purchased 1,000 shares of Abner Crummie, Inc. for $5,000. On April 30, 2018, Timmy Hilfigure sold the 1,000 shares for $8,000 to Ralph Loring. What is the effect of the sale on April 30, 2018?

Abner Crummie, Inc. will not be directly affected by this transaction.

A company sells 1 million shares of common stock with no par value for $15.10 a share. In recording the transaction, it would debit:

Cash and credit Common Stock for $15.10 million. -Since the common stock does not have a par or stated value, the entry includes a debit to Cash and a credit to Common Stock for $15.10 million (or 1 million shares × issue price of $15.10 per share).

Which of the following reasons best explains why earnings per share (EPS) is such a popular measure to evaluate a company?

EPS provides information that investors can factor into their expectations about future dividends and stock prices.

Equity and debt financing both have their advantages and disadvantages. Which of the following pairs of phrases below accurately reflect the advantages of both types of financing?

Equity does not have to be repaid. Debt must be repaid or refinanced. Dividends are optional. Interest must be paid on debt.

If Squid Roe Company's P/E ratio is 12, which of the following statements is correct?

Investors are willing to pay 12 times the current year's earnings per share of stock.

Which of the following events does not create a liability?

Remitting sales tax to the government

Which of the following circumstances would require a contingent liability to be recorded under generally accepted accounting principles?

The liability is probable and estimable

Current liabilities could include all of the following except:

a bank loan due in 18 months -Current liabilities are defined as short-term obligations that will be paid or fulfilled within the company's current operating cycle or within one year of the balance sheet date, whichever is longer. A bank loan due in 18 months would be classified as a noncurrent or long-term liability.

Sales tax collected by a company is normally reported as:

a current liability

The law requires ________ to pay FICA taxes

both employee and employer

Ownership structure can vary from one company to another, but the most basic form of corporation offers:

common stock

Accumulated Depreciation is classified as a(n):

contra-asset account. -Accumulated Depreciation is a contra-asset account that is related to a long-lived tangible asset account.

The Discount on Bonds Payable account is classified as a(n):

contra-liability

Some bonds allow the borrower to repay the bond by issuing stock. These bonds are known as:

convertible bonds

atural resources are first recorded as ________, then recorded as ________ when extracted, and lastly recorded as ________ when sold.

fixed assets; inventory; cost of goods sold

A partnership:

has two or more co-owners.

A productive asset:

is used to produce goods or services that will be sold to customers.

A category of long-lived assets that are depleted over time is:

natural resources

Contributed capital is found in the ________ section of the ________.

stockholders' equity; balance sheet

Liabilities are classified as current if they:

will be paid within the company's operating cycle or within 1 year, whichever is longer.