Acct Final Exam

Stated capital is the amount of capital that, under law, cannot be returned to the corporation's owners except upon liquidation

True

What will be the increase in the additional paid-in capital-common stock account if a corporation issues 20,000 shares of $1.00 par common stock for $6 per share?

$100,000

On June 1, the board of directors declared a $100,000 cash dividend to be distributed to common stockholders of record on June 15. The dividend will be paid on July 1. The required journal entry on June 1 includes a

$100,000 debit to dividends declared

On June 30, a company had $1,924 in its cash account according to its general ledger. This included a deposit of $174 that was in transit on June 30. The June 30 bank statement contained the following information: Bank statement balance $2,178 Bank service charge 14 Collection of notes receivable 136 NSF check 32 Assuming outstanding checks of $338, what is the company's adjusted cash balance at June 30?

$2,014

A company's unadjusted bank balance is $3,000. Outstanding checks amount to $500 and deposits in transit total $300. Based on this information alone, what is the company's adjusted cash balance for the purpose of preparing a bank reconciliation?

$2,800

The stockholders' equity section of a balance sheet at December 31 is provided below: Common stock, $0.50 par value $10,000 Additional paid-in capital-common stock 40,000 Total capital stock 50,000 Retained earnings 25,000 Less: Treasury stock (at cost, $20 per share)(2,000) Total Stockholders' Equity $73,000 How many shares of common stock are issued?

$20,000

Lakeshore Industries reported the following information on its recent balance sheet: Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the stock dividend is declared?

$225,000 of retained earnings is transferred to the capital stock accounts

In anticipation of preparing the July bank reconciliation, the accountant gathered the following information: Bank statement balance $4,300 Deposit in transit 500 Outstanding checks 300 Bank service charges 10 Customer's NSF check returned by the bank 50 What is the company's adjusted cash balance at July 31?

$4,500

Lanier Tech was incorporated as a new business on January 1. The company is authorized to issue 50,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par, cumulative, participating preferred stock. On January 1, the company issued 8,000 shares of the common stock for $15 per share and 2,000 shares of the preferred stock for $30 per share. Net income for the year ended December 31 was $375,000. What is the number of the company's unissued shares of common stock at December 31?

$42,000

The stockholders' equity section of the December 31, prior year, balance sheet is provided below: Common Stock, $3 par, 2,000 shares issued and outstanding $60,000 Additional Paid-In Capital-Common Stock 1,000 Retained Earnings 5,400 Total Stockholders' Equity $12,400 Assume that all 2,000 shares of stock were issued as of December 31, prior year, for $3.50 per share. On March 1, current year, the company reacquired 1,000 shares of its common stock for $4.50 per share. If all of the 1,000 shares that Lake Lanier Grill repurchased on March 1, current year, were later reissued for $4.00 per share, the journal entry to record this transaction includes a debit to what account and for what amount?

$500 to retained earnings

Total stockholders' equity includes $50,000 of common stock with a stated value of $0.50 and 5,000 shares of treasury stock with a total cost of $25,000. How many total shares of common stock are outstanding?

$95,000

Which of the following types of information is not set forth within the corporate charter?

Dates of future dividend distributions

A company's internal control system must be designed and maintained by its external auditors.

False

A corporation may become chartered by applying to the federal government.

False

A good system of internal control requires that the physical custody of assets be separated from the accounting for those assets. This concept is known as safeguarding of assets and records.

False

Accumulated other comprehensive income is NOT considered to be a source of stockholders' equity.

False

All authorized stock is issued.

False

Cash equivalents typically appear in the long-term investments section of a balance sheet.

False

If a company has an internal audit function, it does not need to have external auditors.

False

If a company hires honest employees and its top management acts with integrity, no internal control procedures will be necessary.

False

If preferred stock is convertible, then the preferred shareholders have the option to trade voting privileges for the dividend payment preference.

False

The key to being classified as a cash equivalent is that the amount must be available to pay debts within a year's time or less.

False

The stockholders' equity section of the balance sheet shows all changes in stockholders' equity for the period.

False

When reconciling a bank account, the company must prepare an adjusting entry for deposits in transit.

False

When treasury stock is reissued at a price that is less than its cost, the difference should be credited to retained earnings.

False

Which of the following statements is true pertaining to participating preferred stock?

It includes the right to share in dividends in excess of the regular annual dividend

Which of the following statements is true regarding a credit memo and its relationship to a company's bank reconciliation procedures?

It must be recorded as a debit to the balance per the company's records

Which of the following is the correct entry to establish a petty cash fund in the amount of $300?

Petty Cash Fund 300 Cash 300

A petty cash custodian maintains a $250 petty cash fund. At the end of each month, the custodian tallies the records of the petty cash transactions and presents them for reimbursement. April 4 U.S. Post Office (postage)$ 48 April 21 Callabaugh Supply (office supplies)146 April 25 Speedy Delivery (package delivery)35 Which of the following entries is necessary for recording the replenishment of the fund?

Postage Expense 48 Office Supplies Expense 146 Delivery Expense 35 Cash 229

The only essential element of internal control from the following is

Procedures for proper authorization of transactions

On a bank reconciliation, interest earned for the month is added to the cash balance per the company records.

True

Petty Cash is NOT considered to be a cash equivalent.

True

If a corporation declares a 2-for-1 stock split, which of the following is true?

The par value will be reduced to half of the presplit par value

How are cash equivalents reported or disclosed in financial statements?

They are included with cash as a current asset on the balance sheet

Which of the following is not a provision of the Sarbanes-Oxley Act as to the responsibility of a company's top managers?

They may deny responsibility for certain financial reporting matters if they are not knowledgeable about the proper accounting procedures for those transactions

What is the primary reason for a stock split?

To decrease the market value of the stock

A corporation began operations on October 1, 2021, with 3,000 shares of $2 par common stock authorized. The company issued common stock on several occasions during 2021 and 2022. On December 31, 2022, the company repurchased 1,000 shares of its outstanding shares and then reissued 500 of these shares on March 1, 2023. On June 1, 2023, the company's board of directors declared a 2-for-1 stock split. As a result of this stock split, which of the following is true?

Total stockholders' equity remained the same

A debit memo may be issued in the monthly bank statement in order for the bank to notify a company that a service charge has been assessed on the company's account.

True

Shares outstanding may be less than shares issued.

True

The corporate charter is sometimes called the articles of incorporation.

True

When a corporation declares a dividend, a liability must be recorded.

True

Each of the following items is considered a cash equivalent EXCEPT

a 180-day note issued by a local government

Which one of the following would NEVER be considered a cash equivalent?

common stock issued by a corporation

A physical count of inventory is required even though the company uses the perpetual inventory system. This is an example of which of the following internal control activities?

checks on recorded amounts

Amounts collected and recorded by a company but NOT yet reflected in a bank statement are known as

deposits in transit

Lanthier's Heating & Air company began business on June 1. The articles of incorporation authorize issuance of 10,000 shares of $2 par common stock and 5,000 shares of $8 par, 6% cumulative preferred stock. On June 5, the company issued 2,400 shares of common stock for $20 per share. What effect does the entry to record the stock issuance have on total stockholders' equity?

increase of $48,000

All of the following are reasons that a corporation may purchase treasury stock EXCEPT

it desires to make an investment in its own stock

Which of the following is one of the elements of stockholders' equity?

retained earnings

Which internal control activity is followed when inventory storage areas are secured with limited access?

safeguarding of assets and records

When petty cash balance is replenished and the expenses are recognized, _____.

the petty cash balance is not affected