Accounting Exam 5

more than $25,000

A $25,000 bond issue with a stated rate of 5%, when the market rate of interest is 4%, means that the bond will sell for:

debit Bonds payable, $400,000; credit Cash, $400,000

A $400,000 issue of bonds that sold for $363,000 matures in August 1, 2015. The journal entry to record the payment of the bond on the maturity date is to:

$686,000

A $700,000 bond priced at 98 would cost _______.

$750,000

A company issues 50,000 shares of its $8 par common stock for $15 per share. The amount to be debited to Cash is:

$39.38

A company signs a note payable for $3,500 at 9% for 45 days. How much interest (to the nearest cent) will the company owe using a 360-day year?

Debit Retained Earnings, credit Common Stock; credit Paid-in Capital in Excess of Par

A stock dividend has what effect on the following accounts; Retained Earnings, Common Stock, Paid-in Capital in Excess of Par

memorandum

A stock split is recorded as a(n):

debit Warranty Expense, $2,185; credit Estimated warranty payable, $2,185

Everhart Painting had cash sales for the month of June totaling $43,700. Everhart offers a 1-year warranty on its painting services. If Everhart estimates warranty claims will equal 5% of sales, the journal entry to record the estimated warranty expense for the month is:

debiting Cash and crediting Preferred Stock

If shares of preferred stock are sold at par value for cash, the transaction would be entered by:

no action is necessary in the accounting treatment

If the likelihood of an obligation is remote:

a discount

If the market rate of interest is greater than the bond's stated rate of interest, the bond will be issued at:

discount

Lowery Corp. bonds payable carry a stated interest rate of 6%, and the market rate of Interest is 7.5%. The bonds would sell at a _____.

decrease in stockholders' equity

Payment of a cash dividend causes a(n):

paid in capital and retained earnings

Stockholders' equity consists of:

authorized stock

The number of shares of stock that a corporation is given the right to sell is called:

True

True or False. A pending litigation would be considered a contingent liability.

True

True or False. The debt ratio focuses on the total liabilities of an organization.

False

True or False. The debt ratio is used to analyze a business's ability to pay its current obligations as they come due.

True

True or False. The debt ratio reveals the percentage of a business' assets financed with liabilities.

True

True or False. The percentage of a company's total assets that it would take to pay off all of the company's liabilities is called the debt ratio.

True

True or False. Warranties payable would be considered an estimated liability.

$700

What are the annual dividends on $20 par preferred 5% stock, if 2,000 shares are authorized and 700 shares have been issued and are outstanding?

declaration, record, payment/issue

What are the three dates regarding stock and cash dividends given by a corporation?

possible

When the likelihood of a contingent loss is _____, a note is included in the financial report of the company.