Accounting Cap 10-11

Lionworks, Inc. issues 5,000 shares of $40 par common stock for $43 per share. The amount credited to Additional Paid-In Capital is: - $215,000. - $0. - $15,000. - $200,000.

$15,000 APIC Foruma = (Issue Price - Par Value) x # of shares issued (43-40)x5,000=$15,000

S&C, Inc. has 420,000 shares of $12-par common stock outstanding. They have declared a 7% stock dividend. The current market price of the common stock is $19/share. The amount that will be credited to Additional Paid-In Capital-Common Stock on the date of declaration is: - $205,800. - $352,800. - $558,600. - $911,400.

$205,800 (Reference APIC formula from earlier Q.11) APIC= Mkt val - Par Val APIC = ($19-$12) = $7 APIC= Shares*stock dividend*(mkt val-par val) = 420,000 shares *.07*$7 = $205,800

Evergreen Building, Inc. has declared a $43,000 cash dividend to shareholders. The company has 4,500 shares of $20-par, 5% preferred stock and 20,000 shares of $20-par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $12,000 in arrears? - $16,500 preferred, $26,500 common - $21,500 preferred, $21,500 common - $43,000 preferred, $0 common - $4,500 preferred, $38,500 common

$4,500 preferred, $38,500 common 4,500X20x.05= $4,500 Preferred Annual preferred dividends = Number of preferred shares x Par value of 1 preferred share x Dividend rate on preferred shares 4,500+12,000= $16,500 Dividends distributed to preferred stockholders = Annual preferred dividends +Arrears of preferred dividends $43,000- $16,500= $26,500 Dividend distributed to common stockholders = Cash dividend declared- Dividends distributed to preferred stockholders

Charmed, Inc. reacquired 7,000 shares of its $16-par common stock for $11/share. The debit to Treasury Stock will be: - $77,000. - $35,000. - $112,000. - based on the last treasury stock transaction.

$77,000.

HiTech Industries has 15,000 shares of treasury cost which it purchased for $63/share. It later resold 3,300 of those shares for $82/share. The amount to be credited to Paid-in Capital-Treasury Stock is: - $207,900. - $270,600. - $222,300. - $62,700.

- $62,700 3,300x82=270,600 3,300 x 63 = 207,900 Subtract these two totals PIC - Treasury Stock = $62,700

The statement of cash flows is used for all of the following except. Check all that apply. a. Predict current cash flows b. Predict future cash flows c. Evaluate individual employees' performance d. Evaluate management decisions e. Determine a firm's ability to pay dividends and interest f. Show the relationship of net income to cash flows g. Show the relationship of cash and investments h. Reconciles the cash in cash for the period

- Predict future cash flows - Evaluate management decisions - Determines a firm's ability to pay dividends and interest - show the relationship of new income to cash flows - Reconciles the change in cash for the period.

If a company uses the indirect method to prepare the statement of cash flows, which of the following items would be added to net income to determine the net cash flow from operating activities? - A decrease in accounts receivable would be added to net income to determine the net cash flow from operating activities in the statement of cash flows. - An increase in preferred dividends payable would be added to net income to determine the net cash flow from operating activities in the statement of cash flows. - A decrease in accounts payable would be added to net income to determine the net cash flow from operating activities in the statement of cash flows. - An increase in inventory would be added to net income to determine the net cash flow from operating activities in the statement of cash flows.

A decrease in accounts payable would be added to net income to determine the net cash flow from operating activities in the statement of cash flows.

A company uses the indirect method to prepare the statement of cash flows. How would a gain from the sale of equipment be presented on the statement? - A gain from the sale of equipment would be added to net income in the operating activities section. - A gain from the sale of equipment would be deducted from net income in the operating activities section. - A gain from the sale of equipment would be an addition in the investing activities section. - A gain from the sale of equipment would be a deduction in the financing activities section.

A gain from the sale of equipment would be deducted from net income in the operating activities section.

Which of the following parties would have an interest in the amount of cash at a company? - Investors expecting a dividend - Creditors expecting consumers to repay loans and interest - Employees expecting payment for their work - All of the above are parties interested in the amount of cash at a company

All of the above are parties interested in the amount of cash at a company

The number of shares of stock that a corporation is given the right to sell is called: - issued stock. - outstanding stock. - capital stock. - authorized stock.

Authorized Stock

Treasury Stock is when a company? a. Issues stock b. Buys back its own common stock c. Buys other company's stock d. Issues hybrid stock

Buys back its own common stock

Which of the following items is NOT one of the three sections on the statement of cash flows? - Cash from operating activities - Cash from financing activities - Cash from investing activities - Cash from capital activities

Cash from capital activities

Which of the following items is one of the three sections on the statement of cash flows? - Retained earnings - Cash from investing activities - Total stockholder's equity - Total liabilities

Cash from investing activities Remember there are only 3 sections 1. Operating 2. Financing 3. Investing

The term stock is understood to refer to: a. Preferred Stock b. Treasury Stock c. Stock d. Common Stock

Common Stock

The journal entry to record stock sold at the stated rate if the market rate is greater than the stated rate includes which of the following as the credit? a. Cash b. Common Stock only c. Common Stock and APIC-CS d. Cash and Common Stock

Common Stock and APIC-CS

A company issues 1,000 no par common stock. The current market value of the stock is $10 per share. What would be the credit for the sale of the stock? a. Cash b. Common Stock only c. Common Stock and Additional Paid in Capital d. Retained Earnings

Common Stock and Additional Paid in Capital

A journal entry for the sale of $10 par-common stock for $18 per share would include a: - credit to Additional Paid-In Capital-Common Stock. - debit to Common Stock. - debit to Additional Paid-In Capital-Common Stock. - credit to Cash.

Credit to Additional Paid-In Capital-Common Stock (Debit cash - then credit common stock Additional Paid-in Capital)

What two items are needed to complete the Statement of Cash Flows? a. Current Year's Income Statement and Comparative Balance Sheet b. Last Year's Income Statement and Current Year's Balance Sheet c. Current Year's Income Statement and Current Year's Balance Sheet d. Last Year's Income Statement and Comparative Balance Sheet

Current Year's Income Statement and Comparative Balance Sheet

If Company ABC declared a $150,000 cash dividend, which date will the accountants record the dividend? a. Date of Declaration b. Date of Record c. Date of Payment d. None of the above

Date of Declaration

Anderson Industries purchased 600 shares of the company's issued common stock, paying $14 per share. To record the purchase, the journal entry will be: - Debit to Treasury Stock $8,400, credit to Cash $8,400 - Debit to Treasury Stock $8,400, credit to Common Stock $8,400 - Debit to Common Stock $8,400, credit to Cash $8,400 - No journal entry is needed.

Debit to Common Stock $8,400, credit to Cash $8,400

All of the following would be done when calculating the change in cash from operating activities under the indirect method except - add a decrease in merchandise inventory. - add an increase in accrued interest payable. - deduct the purchase of equipment. - deduct a decrease in accounts payable.

Deduct the purchase of equipment.

If a company uses the indirect method to prepare the statement of cash flows, how will depreciation be presented on the statement of cash flows? - Depreciation expense will be added to net income in the financing activities section on the statement of cash flows. - Depreciation expense will be added to net income in the operating activities section on the statement of cash flows. - Depreciation expense will be subtracted from net income in the operating section on the statement of cash flows. - Depreciation expense will be added to net income in the investing activities section on the statement of cash flows.

Depreciation expense will be added to net income in the operating activities section on the statement of cash flows.

The Statement of Cash Flows operating section does not report which of the following? a. Net Income b. Dividends Payable c. Unearned Revenue d. Accounts Payable

Dividends Payable

T/F In the operating section, if a current asset is decreasing, you need to subtract it the amount decreased.

False, add decreases in current assets

T/F Net Income is not the starting point for the statement of cash flows using the indirect method?

False, it is.

True/F A small stock dividend is when the stock dividend is less than or equal to 20%.

False, stock dividend is less than or equal to 25%

On the statement of cash flows, the issuance of stock would be reporting in which section? a. Operating b. Investing c. Financing d. None of the above

Financing

Financing activities on a statement of cash flows relate to? a. How to firms runs day to day b. How the firm improves itself c. How the firm obtains money d. How the firm spends cash

How the firm obtains money

The ________ section from the statement of cash flows includes activities that affect the buying and selling of long term assets on the balance sheet. - financing - investing - operating - None of the above

Investing

On the statement of cash flows, which of the following section includes activities that increase and decrease long-term liabilities and owners' equity? - Financing section - Operating section - Investing section - None of the above

Investing Activities

When a company purchases treasury stock, outstanding stock is computed as: - Authorized stock — Treasury stock - Authorized stock + Treasury stock - Issued stock - Treasury stock - Issued stock + Treasury stock

Issued stock - Treasury stock

The date of declaration creates a(n) ________ for the corporation. - expense - asset - liability - revenue

Liability

Stockholders receiving their proportionate share of any assets left after a company goes out of business is an example of which stockholder right? - Preemption - Liquidation - Dividends - Vote

Liquidation

The beginning and ending balances of long-term debt are $65,000 and $40,200, respectively, and, cash payments for long-term debt during the year were $37,100. How much new long-term debt was issued during the year? - New long-term debt issued during the year was $12,300. - New long-term debt issued during the year was $24,800. - New long-term debt issued during the year was $77,300. - New long-term debt issued during the year was $3100.

New long-term debt issued during the year was $12,300 65,000-40,200=$24,800 $24,800-$37,100= $12,300

On the statement of cash flows, depreciation expense appears in which section? a. Operating b. Investing c. Financing d. None of the above

Operating

The ________ section from the statement of cash flows includes activities that create revenue, expenses, gains and losses. - investing - financing - operating - None of the above

Operating

The activities are reporting in which of the following order on the statement of cash flows? a. Financing, Investing, Operating b. Operating, Financing, Investing c. Investing, Operating, Financing d. Operating, Investing, Financing

Operating, Investing, Financing

Which of the following is not a current asset? a. Prepaid Assets b. Plant Assets c. Inventory d. Accounts Receivable

Plant asset

All of the following accounts are associated with the Contributed Capital (Paid-in Capital)section of Stockholder's Equity except: - Retained Earnings - Preferred Stock - Additional Paid-in Capital - Common Stock

Retained Earnings

If Company ABC declared a $150,000 cash dividend, which account will be debited? a. Dividends Declared b. Dividends Payable c. Retained Earnings d. Cash

Retained Earnings

Stockholders' equity is divided into which of the following? a. Common Stock and Additional Paid In Capital b. Common Stock, Preferred Stock, and Treasury Stock c. Net Income and Dividends d. Retained Earnings and Contributed Capital

Retained Earnings and Contributed Capital

The ________ reports an entity's cash receipts and cash payments during the period. - statement of retained earnings - income statement - statement of cash flows - balance sheet

Statement of cash flows

A company uses the indirect method to prepare the statement of cash flows. It presents the following data on its financial statements: ​What will appear in the operating activities section related to inventory? - The decrease of $19,000 will be added to cost of goods sold. - The decrease of $19,000 will be subtracted from cost of goods sold. - The decrease of $19,000 will be subtracted from net income. - The decrease of $19,000 will be added to net income.

The decrease of $19,000 will be subtracted from net income.

Operating activities resulting from the sales of goods and services relate to - the income statement. - assets and liabilities reported on the balance sheet. - net income on the retained earnings statement. - retained earnings reported on the balance sheet.

The income statement Income Statement comprises of Company's financial performance for a specific period and summarises the revenue and expenses generated by the Company for that specific period. Therefore, Sale of goods and services are to be summarised and mentioned in the Income Statement.

A company uses the indirect method to prepare the statement of cash flows. It sold a piece of equipment at a loss of $5600. The equipment was purchased several years ago for $75,500 and had accumulated depreciation of $59,900. What is reported under the operating activities section on the statement of cash flows? -The loss of $5600 is subtracted from net income. -Cash proceeds of $10,000 are subtracted from net income. -Cash proceeds of $10,000 are added to net income. -The loss of $5600 is added to net income.

The loss of $5600 is added to net income.

What are dividends in arrears? - The portion of Stockholders' Equity that cannot be used to pay dividends - A distribution of a corporation's own stock to its shareholders - The portion of an annual dividend on cumulative preferred stock which has not been paid - An increase in the number of outstanding shares of stock

The portion of an annual dividend on cumulative preferred stock which has not been paid

Which of the following statements is true about the information in a statement of cash flows? - The statement of cash flows contains information about the business's percentage change in each item of revenue and expense. - The statement of cash flows contains information about the differences between net income and additions to retained earnings. - The statement of cash flows contains information about stock splits and stock dividends distributed by the company. - The statement of cash flows contains information about the business's ability to generate positive cash flows in future periods.

The statement of cash flows contains information about the business's ability to generate positive cash flows in future periods.

A type of stock that pays dividends in arrears is: -cumulative preferred stock. -cumulative common stock. -non-cumulative common stock. -non-cumulative preferred stock.

cumulative preferred stock

The formula to determine dividends on par-value preferred stock is: - dividend rate times par value. - par value times number of outstanding shares times dividend rate. - number of outstanding shares times dividend rate. - number of outstanding shares divided by the dividend rate.

dividend rate times par value.

If a firm has a negative cash flow from operating activities, is the firm performing well?

lol, no

The formula needed to compute " Additional Paid-In Capital" is: -number of shares of stock times (selling price per share - par value per share). -number of shares of stock times (selling price per share + par value per share). -number of shares of stock times selling price per share of stock. -number of shares of stock times par value per share of stock.

number of shares of stock times (selling price per share - par value per share)