ACTG 223 Exam 2
Spinoza Enterprises purchased a truck for $27,000 on January 1, 2020. The truck will have an estimated salvage value of $2,000 at the end of five years. Using the units of activity method, the accumulated depreciation at December 31, 2021, can be computed by using which formula?
($25,000 ÷ Total estimated activity) X Units of activity for 2020 and 2021
Using the straight-line method, depreciation expense is calculated using the formula
(Cost - Salvage value) ÷ Useful life
Land improvements include
-fences. -trees and shrubs. -outdoor lighting.
Kepler Corporation had 300,000 shares of common stock outstanding during the year. Kepler declared and paid cash dividends of $150,000 on the common stock and $120,000 on the preferred stock. Net income for the year was $660,000. What is Kepler's earnings per share?
1.80
Bruno Company purchased equipment on January 1, 2020, at a total invoice cost of $280,000; additional costs of $5,000 for freight and $25,000 for installation were incurred. The equipment has an estimated salvage value of $10,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2021, if the straight-line method of depreciation is used is
120000
Nietzsche Company purchased a machine on January 1, 2019, for $350,000. The machine has an estimated useful life of five years and a salvage value of $50,000. The machine is being depreciated using the double-declining-balance method. The book value at December 31, 2020, is
126000
Carter Resources has 1 million shares of $20 par value common stock authorized and 800,000 shares issued and outstanding. The current market value for Carter's common stock is $37 per share. Based on this, the balance of Carter's Common Stock account on their balance sheet should be
16000000
Plato Company acquired land with a purchase price of $150,000 plus attorney's fees ($6,000), demolition and removal costs of an old building ($4,000), and grading and filling the land ($3,000). The land should be recorded at
163000
The income statement for Monkey, Co. shows income before income taxes $400,000, income tax expense $120,000, and net income $280,000. If Monkey has 100,000 shares of common stock outstanding throughout the year, earnings per share is
2.80
Morris Enterprises has 5,000 shares of 5.5%, $100 par value cumulative preferred stock and 100,000 shares of $10 par value common stock. In 2018, Morris paid the preferred dividend and $25,000 in dividends to common stockholders. In 2019, Morris paid no cash dividends to stockholders. In 2020, Morris has declared a cash dividend totaling $75,000. How much in cash dividends will common stockholders receive in 2020?
20,000
The balance sheet for Nelson & Associates indicates that they have 300,000 shares of common stock authorized and 280,000 shares issued and outstanding. How many unissued shares of common stock do they have?
20000
Elton John Corporation was organized on January 1, 2020, with authorized capital of 500,000 shares of $10 par value common stock. During 2020, Elton John issued 10,000 shares at $12 per share, purchased 1,000 shares of treasury stock at $13 per share, and sold 1,000 shares of treasury stock at $14 per share. What is the amount of additional paid-in capital at December 31, 2020?
21000
In 2020, Bennett Enterprises had a net income of $3,104,700 and had no outstanding preferred stock. They had total stockholders' equity of $8,297,000 on January 1, 2020, and total stockholders' equity of $9,932,300 on December 31, 2020. What was their return on common stockholders' equity?
34%
Bob Marley Corporation was organized on January 2, 2020. During 2020, Bob Marley issued 20,000 shares at $12 per share, purchased 3,000 shares of treasury stock at $13 per share, and had net income of $150,000. What is the total amount of stockholders' equity at December 31, 2020?
351000
A plant asset cost $27,000 when it was purchased on January 1, 2013. It was depreciated by the straight-line method based on a 9-year life with no salvage value. On June 30, 2020, the asset was discarded with no cash proceeds. What gain or loss should be recognized on the retirement?
4,500 loss
Santayana Company purchased a machine on January 1, 2018, for $8,000 with an estimated salvage value of $2,000 and an estimated useful life of 8 years. On January 1, 2020, Santayana decides the machine will last 12 years from the date of purchase. The salvage value is still estimated at $2,000. Using the straight-line method, the new annual depreciation will be
450
On May 1, 2020, Bentham Company sold office furniture for $60,000 cash. The office furniture originally cost $150,000 when purchased on January 1, 2013. Depreciation was recorded by the straight-line method over 10 years with a salvage value of $15,000. What amount of gain should be recognized on the sale?
9000
How does a stock dividend differ from a cash dividend?
A cash dividend decreases total stockholders' equity, but a stock dividend does not.
Which of the following is an INCORRECT statement about a corporation?
A corporation may be formed in writing, orally, or implicitly
The entries in the sales journal must be posted daily to the
Accounts Receivable subsidiary ledger
Which of the following transactions would be recorded in the cash receipts journal?
Cash is received by signing a note for $3,000
In which columns of the cash receipts journal are debits entered?
Cash, Sales Discounts, and Cost of Goods Sold
Aretha Franklin Inc. issues 10,000 shares of $1 stated value no-par value common stock at $8 per share. The entry for the issue will include a debit to Cash for $80,000 and credits to
Common Stock for $10,000 and Paid-in Capital in Excess of Stated Value—Common Stock for $70,000
Which of the following is a journal that most merchandising enterprises do not use?
Equipment journal
Which of the following is considered a disadvantage of a corporation?
Government regulation
Which of the following statements about retained earnings restrictions is correct?
Many states require a corporation to restrict retained earnings for the cost of treasury stock purchased.
Big Head Todd sells 2,000 shares of treasury stock purchased for $32,000 at $20 per share. The entry to record this sale should include a credit to
Paid-in Capital from Treasury Stock, $8,000
Mary Wells, Inc. issues 2,000 shares of $10 par value common stock at $22 per share. The entry for the issue will include a credit of $24,000 to
Paid-in Capital in Excess of Par—Common Stock.
Campbell Industries issued 5,000 shares of $10 par value preferred stock, which sold for $45 per share. The journal entry for this transaction would include a credit to
Paid-in Capital in Excess of Par—Preferred Stock for $175,000.
When the totals of the sales journal are posted at the end of the month, there will be credits to
Sales Revenue and Inventory and debits to Accounts Receivable and Cost of Goods Sold
The Other Accounts column of a columnar journal is sometimes referred to as the
Sundry Accounts column
Which of the following statements about a cash dividend is correct?
The legality of a cash dividend depends on state corporation laws
Flores Industries' stockholders received one share of common stock for every 10 shares of stock they previously held. Rogers Company's stockholders received three shares of common stock for every one share of stock they previously held. How would the par value of Flores' stock change compared to Rogers' stock?
The par value of Flores' common stock would remain the same, whereas the par value of Rogers' common stock would decrease by threefold.
Which of the following is an advantage of a subsidiary ledger?
They make possible a division of labor.
Each share of common stock gives the stockholder which of the following ownership rights
Voting rights, preemptive rights, and residual claim rights
On December 31, 2020, Little Richard, Inc., has 2,000 shares of 6% $100 par value cumulative preferred stock and 30,000 shares of $10 par value common stock outstanding. On December 31, 2020, the directors declare an $8,000 cash dividend. The entry to record the declaration of the dividend would include
a credit of $8,000 to Dividends Payable
Edwards Enterprises issued 1,000 shares of common stock with no stated value and no par value. The stock sold for $22 per share. Edwards' journal entry for this transaction would include
a debit to Cash for $22,000 and a credit to Common Stock for $22,000
Treasury stock is reported on the balance sheet as
a deduction from total paid-in capital and retained earnings.
Which of the following is an addition to and an extension of the general ledger
a subsidiary ledger
Common features of entry-level software packages include
ability to track all transactions
Which of the following general ledger accounts is associated with customers?
accounts receivable
Which choice correctly describes how the purchase of treasury stock affects the amount reported in the balance sheet for additional paid-in capital and retained earnings?
additional paid-in capital, no effect; retained earnings, no effect
Corporations that record an income tax expense on their income statement journalize income tax entries during the ________ process.
adjusting
A purchased patent has a legal life of 20 years. It should be
amortized over its useful life if less than 20 years
Portia works at a large company that employs about 650 people. Last year they generated $800 million in sales revenue. Recently the company has been looking for a new accounting system. What type should they buy?
an enterprise resource planning system
Jace's company has 17 employees who work full time. The company has a number of very dedicated clients, and last year they generated $2 million in revenue. What type of software should Jace use?
an entry level program
Cara is looking over the net sales for her company for this past year. So far she has found them to be $78,000. This morning she asked her manager to find the average total assets for the past year. What is Cara most likely trying to calculate?
asset turnover
Tina has recently purchased a new accounting system for her company. The feature Tina likes most is the system's ability to decrease the chance for fraud by tracking all transactions. Which feature is this an example of?
audit trail
Which of the following is true of the relationship between the general ledger for accounts payable and the subsidiary ledger?
balance for Accounts Payable = sum of subsidiary balances of Creditors
The most common form of dividend that a company pays out is a ________ dividend
cash
A cash receipts journal will be used for
cash sales and sales discounts but not cost of goods sold.
In the stockholders' equity section of the balance sheet, the classification of capital stock consists of
common stock and preferred stock
Millie is considering ordering a new accounting system for her business. The system is more expensive than her current system, but it seems to include a lot of features that would greatly benefit the company. She decides that these features are worth the extra money. This is an example of
cost effectiveness
How often should companies post from the sales journal to the individual accounts receivable in the subsidiary ledger?
daily
On January 1, Averroes Company sold a machine that had a book value of $7,500 for $8,000 cash. The entry by Averroes Company on January 1 will include a
debit to cash
When considering cash dividends on stocks, which of the following dates requires a journal entry?
declaration and payment date
The purchase of treasury stock
decreases common stock outstanding.
The entry to record depletion expense
decreases owner's equity and assets
A stock dividend _________ retained earnings and _________ paid-in capital
decreases; increases
When common stock is issued for services or noncash assets, cost should be
either the fair market value of the consideration given up or the consideration received, whichever is more clearly evident
Research and development costs are
expensed as incurred.
Which of the following is an intangible asset?
franchises
A cash dividend is considered a liability to a company when it
has been declared
Assuming that net income for Sponge Bob Co. in its first year of operations is $130,000, the closing entry is
income summary 130000 net income 130000
Goodwill from the acquisition of a business enterprise
is an asset that is not subject to amortization
Bussan Corporation splits its common stock 4-for-1 when the market value is $80 per share. Prior to the split, Bussan had 50,000 shares of $12 par value common stock issued and outstanding. After the split, the par value of the stock
is reduced to $3 per share
Plant assets are often subdivided into four groups. Which of the following would be classified as a plant asset?
land improvements
A debit balance in Retained Earnings indicates that a company has a net
loss over the life of the company
How often do companies post to the control accounts in the general ledger?
monthly
Which of the following will always increase the balance of Retained Earnings?
net income
Which of the following would be considered an ordinary repair?
painting buildings
Kaitlyn's Cosmetics purchased a few items on account from a local store. The company plans to pay off the account at the end of the month. This is an example of a transaction that will be recorded in Kaitlyn's ________ journal
purchases journal
Which of the following is a distinguishing characteristic of natural resources?
replaceable only by an act of nature
A prior period adjustment should be reported in the
retained earnings statement as an adjustment of the beginning balance.
Which of the following is an example of a plant asset disposal?
sale, exchange, and retirement
Which of the following is a debit column in the cash receipts journal?
sales discounts
Watson Markets currently has 50,000 shares of $20 par value common stock issued and outstanding. In 2017, they declared a 15% stock dividend when the market value of their common stock was $47. The journal entry to record this declaration of a stock dividend would be
stock dividends 352,500 common stock dividends distribut. 150,000 PIC in excess of par-com. stock 202,500
If a company does not want to present a detailed stockholders' equity section in the balance sheet, they may prepare a
stockholders equity statement
Which of the following numbers will be largest?
the number of authorized shares
Which of the following needs to be reported in the capital stock section of the balance sheet?
the par value of common stock issued
