Accounting Exam (Practice)

M-Bot Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2016. No dividends were declared in 2014 or 2015. If M-Bot wants to pay $335,000 of dividends in 2016, common stockholders will receive:

10,000 x par value (100) = 1,000,000 x.08 = 80,000 x 3 (cumlative) = 240,000 335,000-240,000=95,000 Anwser 95,000

24. The following data is available for BOX Corporation at December 31, 2016: Common stock, par $10 (authorized 30,000 shares) $250,000 Treasury stock (at cost $15 per share) $ 1,200 Based on the data, how many shares of common stock are issued?

25,000 250,000/10 (par value)

3. The Don't Bite Me Pest Control Company has 10,000 gallons of insecticide supplies on hand that cost $300,000; a bill from the vendor for $100,000 of these supplies has not yet been paid. The company expects to earn $800,000 for its services when it uses the insecticide supplies. The company's balance sheet would include an asset, Supplies, in the amount of:

300,000

4. The Smith Corp. began business this year and entered into the following transactions during the year. The company issued common stock in exchange for cash of $20,000 from stockholders, borrowed $10,000 from a bank, bought $3,000 of inventory on account, and purchased $8,000 of equipment by paying $3,000 in cash and issuing a note for the remainder. What is the amount of total assets to be reported on the balance sheet at the end of the year?

38,000 (20+10+3+8-3)

6. Lexington Company updates its inventory periodically. The company's beginning inventory was $1,000 and purchases were $5,000 during the year. The company's ending inventory count was $2,000. What was the amount of its cost of goods sold?

4,000

ABC Corp. issues 1,000 shares of $10 par value common stock at $13 per share. When the transaction is recorded, credits are made to:

Common Stock $10,000 and Paid-in Capital in Excess of Par Value $3,000.

17. Rodgers Company purchased equipment and these costs were incurred: Cash price $45,000 Sales taxes 3,600 Initial operating cost of equipment 900 Insurance during transit 640 Installation and testing 860 Rodgers will record the acquisition cost of the equipment as

51,000

13. A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $189,000, what is the amount of the sales taxes owed to the taxing agency?

9,000 (189,000 / 1.05 = 180,000; 189,000 - 180,000 = 9,000)

22. A plant asset was purchased on January 1 for $75,000 with an estimated salvage value of $15,000 at the end of its useful life. The current year's Depreciation Expense is $5,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $25,000. The remaining useful life of the plant asset is

A: 7 years 75,000-15,000=60,000-25,000= 35,000/5,000= 7 years

When an account becomes uncollectible an must be written off

Accounts receivable should be creditied

Inventory effect on net income:

Add to net income: decrease - from net income: Increase

Which of the following correctly identifies normal balances of accounts?

Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit

5. Your company received payment from a customer last month for a service that you provided this month. How will the business activity of the current month affect the basic accounting equation?

Assets will not change; liabilities will decrease; and stockholders' equity will increase.

9. Which of the following is not an expense? A) Wages of employees B) Interest incurred on a note payable C) Dividends D) Corporate income tax

C.) dividens

7. Features of common stock usually include all of the following except: A) voting rights. B) dividends. C) primary claim to the company's assets in case of liquidation. D) preemptive rights.

C.) primary claim to the company's assets in case of liquidation.

30. An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 debit balance, the adjustment to record bad debts for the period will require a

Debit to bad debt expense 6,100 4,500+1,600= 6,100

Net income is increased when accounts receivable are collected (T/F)

False

You paid $10,000 to buy 1% of the stock in a corporation that is now bankrupt. The company owes $10 million dollars to its creditors. As a result of the bankruptcy, you are responsible for paying $100,000 (or $10 million × 1%) of the amount owed to the creditors. (T/F)

False

If bonds are issued at a premium, the stated interest rate is

Higher than the market rate of interest

12. West County Bank agrees to lend Drake Builders Company $100,000 on January 1. Drake Builders Company signs a $100,000, 6%, 6-month note. What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30?

Interest Expense 1,500 Interest Payable 1,500

26. Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, interest paid on note would be classified on the statement of cash flows.

Interest paid on a note is : Operating activites

Which of the following is not a right or preference associated with preferred stock?

The right to vote

You paid $10,000 to buy 1% of the stock in a corporation that is now bankrupt. The company owes $10 million dollars to its creditors. As a result of the bankruptcy, you are responsible for paying $100,000 (or $10 million × 1%) of the amount owed to the creditors.

Sales Revenue of $11 million

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:

Total Assests: No change Total Liabilities: Increase Total Stockholders' Equity: Decrease

The book value of an asset is equal to the

asset's cost less accumulated depreciation

The declining-balance method of depreciation produces a(n)

decreasing depreciation expense each period.

11. Discount on Bonds Payable

is a contra account

8. A cumulative dividend preference means that:

unpaid dividends to preferred stockholders accumulate and must be paid before common stockholders receive dividends.