Accounting Practice Final

89 Questions  I  By Mackenzie_Roman
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Accounting Quizzes & Trivia

  
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  • 1. 
    Ryan, Inc., uses straight-line depreciation for all of its depreciable assets. Ryan sold a used piece of machinery on December 31, 2012, that it purchased on January, 2011, for $10,000. The asset had a five-year life, zero risidual value, and $2,000 accumulated depreciation as of december 31, 2011. If the sales price of the used machine was $6,500, the resulting gain or loss upon the sale was which of the following amounts? 
    • A. 

      Loss of $1,500

    • B. 

      Gain of $1,500

    • C. 

      Loss of $500

    • D. 

      Gain of $500

    • E. 

      No gain or loss upon the sale


  • 2. 
    Sandy Co. filed suit against Zenith, Inc., seeking damages for patent infringement. Zenith's legal counsel believes it is probable that Zenith will settle the lawsuit for an estimated amount in the range of $100,000 to $250,000, and that $150,000 is the amount that most likely will be accepted by Sandy Co. How should Western report the suit filed by Sandy Co.?
    • A. 

      As a disclosure only. No liability is reported since the loss is contingent

    • B. 

      As a liability for $250,000 with disclosure of the range

    • C. 

      As a liability for $150,000 with disclosure of the range

    • D. 

      As a liability for $100,000 with disclosure of the range


  • 3. 
    A company wishes to report the highest earnings possible for financial reporting purposes. Therefore, when calculating depreciation, 
    • A. 

      It will select the lowest residual values for its assets

    • B. 

      It will estimate higher residual values for its assets

    • C. 

      It will select the double declining balance method of depreciation

    • D. 

      It will select the shortest lives possible for its assets


  • 4. 
    Which of the following factors causes a lease to be treated as a capital lease rather than an operating lease?
    • A. 

      The lease term is 50% or more of the asset's expected economic life

    • B. 

      The present value of the lease payments is 90% or more of the fair market value of the asset when the lease is signed

    • C. 

      The lease is for real property

    • D. 

      The lease permits the lessee to purchase the asset at its fair market value at any time during the lease term

    • E. 

      Any of these factors will result in capital lease accounting


  • 5. 
    Amigo company and porter company both bought a new delivery truck on January 1, 2008. Both companies paid exactly the same cost, $30,000, for their respective vehicles. As of December 31, 2011, the net book value of Amigo's truck was less than Porter company's net book value for the same vehicle. Which of the following is an acceptable explanation for the difference in net book value?
    • A. 

      Both companies elected straight-line depreciation, but Amigo company used longer estimated life

    • B. 

      Because GAAP specifies rigid guidelines regarding the calculation of depreciation, this situation is not possible.

    • C. 

      Amigo company is using the straight-line method of depreciation, and Porter Company is using the double-declining balance method of depreciation

    • D. 

      Amigo company estimated a lower residual value, but both estimated the same useful life and both elected straight-line depreciation


  • 6. 
    A company is facing a class-action lawsuit in the upcoming year. It is reasonably possible, but not probable, that the company will have to pay a settlement of approximately $2,000,000. How would this fact be reported in the financial statements to be issued at the end of the current month?
    • A. 

      In a descriptive narrative in the footnote section

    • B. 

      None because disclosure is not required

    • C. 

      $2,000,000 in the current liability section

    • D. 

      $2,000,000 in the long-term liability section


  • 7. 
    Jacobs company borrowed 100,000 at 8% interest for 3 months. How much interest does the company owe at the end of 3 months?
    • A. 

      $800

    • B. 

      $200

    • C. 

      $8000

    • D. 

      $2000


  • 8. 
    Company x borrowed $100,000 from the bank to be repaid with interest at the market rate over the next 5 years, with payments beginning next month. Which of the following best describes the presentation of this debt in the balance sheet as of today(the date of borrowing)?
    • A. 

      A portion of the $100,000 in the current liability section and the remainder of the principal in the long term liability section

    • B. 

      A portion of the $100,000 plus interest in the current liability section and the remainder of the principal plus interest in the long term liability section

    • C. 

      $100,000 in the long term liability section

    • D. 

      $100,000 plus the interest to be paid over the 5 year period in the long term liabilty section


  • 9. 
    Which of the following is correct for smith company when smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for a building? The market price of the smith stock on the exchange date was $35 per share. The building's book value on the books of the seller was $200,000.
    • A. 

      Stockholders' equity increases $200,000

    • B. 

      Stockholders' equity increases $330,000

    • C. 

      Total assets increase $350,000

    • D. 

      Total assets increase $370,000


  • 10. 
    Which of the following describes the effect of recording depreciation expense at year end?
    • A. 

      Net income decreases and total assets decreases

    • B. 

      Net income decreases and total assets aren't affected

    • C. 

      Total assets decrease and stockholder's equity is not affected

    • D. 

      Stockholder's equity is not affected and net income decreases


  • 11. 
    On march 1, Wright company purchased new equipment with a total cost of $50,000. The seller agreed to finance the equipment at 10% for 3 months. Wright paid cash of $10,000 upon delivery and must pay the balance ($40,000) in 3 months. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $3,000; and installation cost, $2,500. Wright paid the balance due plus interest of $1,000 3 months later. At what amount will the equipment be recorded at on a balance sheet?
    • A. 

      $50,000

    • B. 

      $51,000

    • C. 

      $54,000

    • D. 

      $56,000

    • E. 

      $57,500


  • 12. 
    Lemon delivery purchased a fleet of trucks on Feb. 1, 2011 requiring the following payment schedule: $90,000 on Feb. 1, 2011 $20,000 on Feb. 1, 2012 $80,000 on Feb. 1, 2013 The seller normally charges an interest rate of 9%. What is the present value of the payments needed to record the purchase of the trucks?
    • A. 

      $159,923

    • B. 

      $161,176

    • C. 

      $174,294

    • D. 

      $175,684


  • 13. 
    Flyer Company has provided the following information: Cash Sales, $150,000 Credit Sales, $450,000 Selling and administrative expenses, $110,000 Sales returns and allowances, $30,000 Gross profit, $490,000 Accounts Receivable, $110,000 Sales Discounts, $14,000 Allowance for Doubtful Accounts Credit Balance, $1,200 How much is bad debt expense assuming that 5% of accounts receivable is estimated to be uncollectible?
    • A. 

      $5,500

    • B. 

      $6,700

    • C. 

      $4,240

    • D. 

      $4,300


  • 14. 
    Flyer Company has provided the following information: Cash Sales, $150,000 Credit Sales, $450,000 Selling and administrative expenses, $110,000 Sales returns and allowances, $30,000 Gross profit, $490,000 Accounts Receivable, $110,000 Sales Discounts, $14,000 Allowance for Doubtful Accounts Credit Balance, $1,200 Flyer estimates bad debt expense assuming that 5% of accounts receivable is estimated to be uncollectibel. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?
    • A. 

      $5,500

    • B. 

      $6,700

    • C. 

      $4,240

    • D. 

      $4,300


  • 15. 
    Which of the following journal entries correctly records bad debt expense?
    • A. 

      Bad Debt Expense Accounts Receivable

    • B. 

      Allowance for Doubtful Accounts Accounts Receivable

    • C. 

      Allowance for Doubtful Accounts Bad Debt Expense

    • D. 

      Bad Debt Expense Allowance for Doubtful Accounts


  • 16. 
    Which of the following journal entries correctly records the write-off of an uncollectible account receivable assuming that the allowance method is used?
    • A. 

      Bad Debt Expense Accounts Receivable

    • B. 

      Allowance for Doubtful Accounts Accounts Receivable

    • C. 

      Allowance for Doubtful Accounts Bad Debt Expense

    • D. 

      Bad Debt Expense Allowance for Doubtful Accounts


  • 17. 
    When a depositor receives a bank statement indicating that there was a “NSF check”, the depositor should do which of the following?
    • A. 

      Reduce the cash amount per the books for the amount of the “NSF check”.

    • B. 

      Reduce the cash account per the bank statement for the amount of the “NSF Check”.

    • C. 

      Credit allowance for doubtful accounts for the amount of the check

    • D. 

      Increase the sales returns and allowances account.


  • 18. 
    Laurer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers: Date Transaction Number of Units Cost per Unit Jan 1 Beginning Inventory 100 $800 May 5 Purchase 200 $900 Aug 10 Purchase 300 $1,000 Oct 15 Purchase 200 $1,050   During the year, 750 laptop computers were sold. What was the ending inventory using the FIFO cost flow assumption?
    • A. 

      $60,000

    • B. 

      $52,500

    • C. 

      $52,000

    • D. 

      $40,000


  • 19. 
    Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers: Date Transaction Number of Units Cost per Unit Jan 1 Beginning Inventory 100 $800 May 5 Purchase 200 $900 Aug 10 Purchase 300 $1,000 Oct 15 Purchase 200 $1,050   During the year, 750 laptop computers were sold. What was the cost of goods sold using the FIFO cost flow assumption?
    • A. 

      $717,500

    • B. 

      $730,000

    • C. 

      $703,125

    • D. 

      $725,500


  • 20. 
    Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers: Date Transaction Number of Units Cost per Unit Jan 1 Beginning Inventory 100 $800 May 5 Purchase 200 $900 Aug 10 Purchase 300 $1,000 Oct 15 Purchase 200 $1,050   During the year, 750 laptop computers were sold. What was the cost of goods sold using the LIFO cost flow assumption?
    • A. 

      $717,500

    • B. 

      $730,000

    • C. 

      $703,125

    • D. 

      $725,500


  • 21. 
    Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers: Date Transaction Number of Units Cost per Unit Jan 1 Beginning Inventory 100 $800 May 5 Purchase 200 $900 Aug 10 Purchase 300 $1,000 Oct 15 Purchase 200 $1,050   During the year, 750 laptop computers were sold. What was the ending inventory using the LIFO cost flow assumption?
    • A. 

      $40,000

    • B. 

      $52,500

    • C. 

      $60,000

    • D. 

      $55,000


  • 22. 
    Under the first-in, first out (FIFO) cost flow assumption during a period of inflation, which of the following is false?
    • A. 

      Income tax expense will be higher than under LIFO

    • B. 

      Gross margin will be higher than under LIFO

    • C. 

      Ending inventory will be lower than under LIFO

    • D. 

      Cost of goods sold will lower than under LIFO


  • 23. 
    Iris Company has provided the following information regarding its inventory at year-end: Inventory Item Number of Units Unit Cost Replacement Cost A 100 $20 $18 B 50 $50 $55 C 60 $30 $38 D 40 $40 $35   What is the total reported cost of ending inventory using lower of cost or market on an item-by-item basis?
    • A. 

      $8,230

    • B. 

      $7,900

    • C. 

      $7,500

    • D. 

      None of the above


  • 24. 
    Which of the following correctly describes the effects of accruing income tax expense at year-end?
    • A. 

      Net income is not affected

    • B. 

      A cash payment is made to pay the taxes due

    • C. 

      Liabilities are not affected

    • D. 

      Retained earnings decreases


  • 25. 
    On Jnue 1, 2011, Allen company signed a $100,000, one year, 9% note payable. The principal and interest will be paid on May 30, 2012. How much interst expense should be reported on the income statement for the year ended December 31, 2011?
    • A. 

      $5,250

    • B. 

      $9,000

    • C. 

      $4,500

    • D. 

      $0 in 2011


  • 26. 
    On october 1, 2010, Adams company paid $4,000 for a two year insurance policy with the insurance coverage beginning on that date. As of december 31, 2010, which of the following account balances are correct after adjusting entries have been made?
    • A. 

      Prepaid insurance, $4,000 and insurance expense, $0

    • B. 

      Prepaid insurance, $2,000 and insurance expense, $2,000

    • C. 

      Prepaid insurance, $3,500 and insurance expense, $500

    • D. 

      Prepaid insurance, $0 and insurance expense, $4,000


  • 27. 
    Which of the following best descibes the difference between an unadjusted trial balance and an adjusted trail balance?
    • A. 

      An unadjusted trial balance is prepared by companies that make adjusting entries, while an adjusted trial balance is prepared by companies that do not make adjusting entries

    • B. 

      An unadjusted trail balance is prepared at the start of the accounting period and is not provided to external decision makers, while an adjusted trail balance is prepared at the end of the period and is provided to external decision makers

    • C. 

      An unadjusted trail balance is prepared before the adjusting entries have been made, while an adjusted trail balance is prepared after the adjusting entries have been made

    • D. 

      An unadjusted trail balance is prepared after the post-closing trail balance


  • 28. 
    Which of the following correctly describes the following journal entry? Debit         Depreciation expense Credit                  Accumulated depreciation
    • A. 

      Liabilities will increase

    • B. 

      Stockholder's equity is not affected

    • C. 

      Net income is not affected

    • D. 

      Total assets decrease


  • 29. 
    Which of the following transactions results in a decrease in both total assets and net income?
    • A. 

      Collecting cash from an account receivable

    • B. 

      The accrual of salaries expense at year end

    • C. 

      Recognizing revenue that was previously recorded as unearned revenue

    • D. 

      Adjustment of the prepaid rent account for rent which expired during the period


  • 30. 
    On january 1, 2011, the general ledger of global corp. included supplies inventory of $1,000. During 2011, supplies purchases amounted to $5,000. A physical count of inventory on hand at december 31,2011 determined that the supplies inventory was $1,200. How much is the 2011 supplies expense?
    • A. 

      $1,000

    • B. 

      $6,000

    • C. 

      $5,200

    • D. 

      $4,800


  • 31. 
    What is the effect on the financial statements when a company fails to accrue interest expense at year end?
    • A. 

      Net income is overstated and liabilities are overstated

    • B. 

      Expenses are understated and liabilities are understand

    • C. 

      Expenses are understated and stockholders' equity is understated

    • D. 

      Net income is overstated and assets are overstated


  • 32. 
    Which of the following statements is false?
    • A. 

      The board of directors meets with the external auditors to discuss management's compliance with their financial reporting obligations

    • B. 

      The external auditors are selected by the securities & exchange commission

    • C. 

      The securities & exchange commission requires publically traded companies to have their financial statements audited by an independent accountant

    • D. 

      The external auditors assume some responsibility with respect to the fairness of the financial statements


  • 33. 
    Which of the following would most lifkely increase the net profit margin ratio?
    • A. 

      An increase in the unit selling price

    • B. 

      A decrease in the overall sales volume

    • C. 

      An increase in operating expenses

    • D. 

      An increase in cost of goods sold


  • 34. 
    On december 31, 2011, Krug company reported total liabilities of $110,000 prior to the following adjusting entries: Depreciation expense was $31,000 Accrued service revenues totaled $29,000 Accrued expenses totaled $12,000 Expired insurance that was prepaid totaled $9,000 Rent revenue earned was $7,000; the rent was prepaid by the tenant and credited to unearned rent revenue How much are Krug's total liabilities after adjusting entries?
    • A. 

      $115,000

    • B. 

      $141,000

    • C. 

      $86,000

    • D. 

      $110,000


  • 35. 
    In which of the following classifications would cash dividend payments to stockholders be reported?
    • A. 

      Operating activities

    • B. 

      Financing activities

    • C. 

      Investing activities

    • D. 

      Stockholder activities


  • 36. 
    Which of the following results in an increase in the return on assets ratio?
    • A. 

      A decrease in the asset turnover ratio

    • B. 

      An increase in the net profit margin ratio

    • C. 

      Purchasing a building by signing a long-term mortgage payable

    • D. 

      Using cash to purchase land


  • 37. 
    The Callie company has provided the following information: Operating expenses were $231,000 Cost of goods sold was $376,000 Net sales were $940,000 Interest expense was $32,000 Gain on sale of a building was $76,000 Income tax expense was $151,000 What was Callie's gross profit?
    • A. 

      $564,000

    • B. 

      $188,000

    • C. 

      $333,000

    • D. 

      $232,000


  • 38. 
    Which of the following statements is false when a company sells inventory costing $900 for $1,500 cash?
    • A. 

      Current assets increase $600

    • B. 

      Gross profit increases $1,500

    • C. 

      Stockholders' equity increases $600

    • D. 

      Net sales increases $1,500


  • 39. 
    Based on the above facts, the present value of the future interest payments is:
    • A. 

      $7,577

    • B. 

      $3,789

    • C. 

      $1,941

    • D. 

      $3,593

    • E. 

      None of the above


  • 40. 
    Based on the above facts, the present value of the future principal payment:
    • A. 

      $20,000

    • B. 

      $18,106

    • C. 

      $19,030

    • D. 

      $16,406

    • E. 

      None of the above


  • 41. 
    San Antonio outdoor furniture issues bonds with a face value of $1,000,000 having an 8% coupon rate of interest. The market rate for similar bonds is 11%. The bonds were issued:
    • A. 

      At par

    • B. 

      At a premium

    • C. 

      At a discount

    • D. 

      At coupon


  • 42. 
    DC waste uses the effective interest method to determine the interst expense on $3,350,000 of bonds issued with a coupon rate of 7%, when the market rate was 4%. The bonds mature in 10 years and pay interest every 6 months. If the premium at the time the bonds were issued was $821,752 what amount of interest expense is recognized by the company on the first interest payment?
    • A. 

      $67,000

    • B. 

      $83,435

    • C. 

      $117,250

    • D. 

      $146,011


  • 43. 
    Which of the following describes the primary objective of the balance sheet?
    • A. 

      To measure the net income of a business up to a particular point in time

    • B. 

      To report the difference between cash infolows and cash outflows for the period

    • C. 

      To report the financial position of the reporting entity at a particular point in time

    • D. 

      To report the market value of assets, liabilities and stockholders’ equity at a particular point in time.


  • 44. 
    Which of the following equations is the balance sheet equation?
    • A. 

      A+L=SE

    • B. 

      A+SE=L

    • C. 

      A=L+SE

    • D. 

      A=L+contributed capital


  • 45. 
    Which financial statement would you use to determine a company’s earnings performance during an accounting period?
    • A. 

      Balance Sheet

    • B. 

      Statement of Retained Earnings

    • C. 

      Income Statement

    • D. 

      Statement of cash flows


  • 46. 
    Which of the following would be reported in the investing section of a cash flow statement?
    • A. 

      Cash Received from customers

    • B. 

      Cash received from the issue of stock

    • C. 

      Cash paid to repay a bank loan.

    • D. 

      Cash paid to acquire stock of another company


  • 47. 
    Which of the following correctly describes retained earnings?
    • A. 

      It is the cumulative net income of a company.

    • B. 

      It represents the investments by stockholders in a company.

    • C. 

      It equals total asset minus total liabilities

    • D. 

      It is the cumulative net income of a company less dividend declarations.


  • 48. 
    The duality (or duality of effects) concepts states that:
    • A. 

      Both the income statement and balance sheet are impacted by every transaction

    • B. 

      Every transaction has an impact on assets and stockholders’ equity

    • C. 

      It is a measure of a firm’s short-run liquidity

    • D. 

      Every transaction has at least two effects on the accounting equation.


  • 49. 
    Which of the following statements does NOT properly describe the current ratio?
    • A. 

      A measures the ability of a firm to pay its debts in the short-run.

    • B. 

      It is current assets divided by current liabilities

    • C. 

      It is a measure of a firm’s short-run liquidity

    • D. 

      It measures a firm’s ability to pay its long-term debts as they mature.


  • 50. 
    Which of the following is not reported as an operating expense on the income statement?
    • A. 

      Salaries Expense

    • B. 

      Rent Expense

    • C. 

      Interest Expense

    • D. 

      Advertising Expense


  • 51. 
    The following information has been provided by Hable Company: Advertising Expense: $9,900 Interest Expense: $3,700 Rent Expense: $ 12,000 Loss on Sale of Plant and Equipment: $5,700 Cost of goods sold: $21,300 Depreciation Expense: $7,100 How much were Hable’s operating expenses?
    • A. 

      $50,300

    • B. 

      $54,000

    • C. 

      $59,700

    • D. 

      $43,200


  • 52. 
    Which of the following journal entries is correct when a company has incurred interest expense but has not yet paid the interest?
    • A. 

      Interest Expense Operating Income

    • B. 

      Interest Expense Interest Payable

    • C. 

      Interest Payable Interest Expense

    • D. 

      Retained Earnings Interest Expense


  • 53. 
    Rodgers, Inc. has a complex capital structure. It has 1,000 shares of 5%, $100 par value cumulative preferred stock issued and outstnading. All preferred dividends have been paid in prior years. It orignially issued 230,000 shares of $.01 par value common stock at $28.00 per share. Rodgers currently has 30,000 shares of its common stock held as treasury stock with cost of $960,000. It had 200,000 shares of its common stock outstanding for all of 2011. During 2011, Rodgers reported net income of $1,680,000. What is the amount of earnings per share(EPS) for 2011?
    • A. 

      $7.30

    • B. 

      $8.40

    • C. 

      $8.38

    • D. 

      $7.28


  • 54. 
    Hunt foods has the following stocks outstanding: 50,800 shares cumulative, 6% preferred stock, $20 par value, and 104,000 shares of $1 par, common stock. The company has not been able to pay dividends the last two years, however this year the company declared and paid a cash dividend of $209,000. How much were the common shareholders paid?
    • A. 

      $140,413

    • B. 

      $26,120

    • C. 

      $148,040

    • D. 

      $87,080


  • 55. 
    Pinnacle sports, Inc. paid cash dividends of $.30 per share on sept. 25, 2011 to shareholders of record on august 19, 2011. The board of directors had declared the dividend when they met in May 2011. On sept. 25, 2011:
    • A. 

      No journal entry was required

    • B. 

      The journal entry required a credit to retained earnings

    • C. 

      The journal entry required a credit to cash

    • D. 

      The journal entry required a credit to dividends payable


  • 56. 
    When bonds with a face value of $6,320,000 having 8% stated rate of interest are issued at $5,960,000, the journal entry to record the transaction would be:
    • A. 

      Cash $5,960,000 Discount on bonds payable $360,000 Bonds payable $6,320,000

    • B. 

      Cash $5,960,000 Loss on bonds payable $360,000 Bonds payable $6,320,000

    • C. 

      Cash $5,960,000 Bonds payable $5,960,000

    • D. 

      Cash $5,960,000 Interest payable $360,000 Bonds payable $6,320,000


  • 57. 
    Beatrice Manufacturing purchased 61,900 shares of its own $7 par stock on the open market when it had a price of $33.90 per share. If these shares of stock were sold for $21.00 per share, what would the journal entry be to record this transaction?
    • A. 

      Cash $2,098,410 Treasury stock $2,098,410

    • B. 

      Cash $1,299,900 Additional paid-in capital $798,510 Treasury stock $2,098,410

    • C. 

      Cash $1,299,900 Loss on the sale of treasury stock $798,510 Treasury stock $2,098,410

    • D. 

      Cash $2,098,410 Retained earnings $2,098,410


  • 58. 
    Which of the following is correct about treasury stock transactions?
    • A. 

      Companies purchase shares of stock so that they can obtain the voting rights and vote on important issues

    • B. 

      Treasury Stock is an Asset

    • C. 

      Companies will repurchase their stock for employee bonus plans

    • D. 

      Selling treasury stock for more than the purchase price allows the company to experience gains that increase net income.


  • 59. 
    River City Publications incorporated on February 1, 2011. The following information related to their common stock during the first month of the company’s operations: Feb-1 Shares Authorized 5,160,000 Feb-5 Shares Issued 1,580,000 Feb-16 Shares Issued 774,000 Feb-20 Treasury stock purchased 217,600 Feb-24 Shares Issued 312,800   How many shares of stock are outstanding at the end of February 2011?
    • A. 

      2,449,000 Shares

    • B. 

      7,609,200 Shares

    • C. 

      8,044,400 Shares

    • D. 

      2,884,000 Shares


  • 60. 
     Owing stock of a corporation has certain benefits. Which of the following is not one of those benefits?
    • A. 

      A residual claim to assets remaining upon distribution of the company.

    • B. 

      The ability to vote on major issues concerning management of the corporation.

    • C. 

      The right to receive a proportional share of profits distributed?

    • D. 

      The right to receive annual dividends


  • 61. 
    Dorris Outdoor Furniture issued 5 year bonds with a face value of $1,000,000 having a 9% coupon rate of interest, with interest payments made every six months. The market rate for similar bonds is 8%. What were the total proceeds for the bond issue?
    • A. 

      $711,197

    • B. 

      $1,022,231

    • C. 

      $1,040,591

    • D. 

      $1,000,000


  • 62. 
    Dorris Outdoor Furniture issued 5 year bonds with a face value of $1,000,000 having a 9% coupon rate of interest, with interest payments made every six months. The market rate for similar bonds is 8%. What were the total proceeds for the bond issue?
    • A. 

      $711,197

    • B. 

      $1,022,231

    • C. 

      $1,040,591

    • D. 

      $1,000,000


  • 63. 
    Lane County Transit District issued zero coupon bonds with a maturity value of $7,720,000 in 10 years. The bonds were sold at a price to yield 9% compounded annually. What were the total proceeds generated by this bond issue?
    • A. 

      $3,260,928

    • B. 

      $4,569,072

    • C. 

      $8,414,000

    • D. 

      $7,720,000


  • 64. 
    A company purchased 6,250 shares of carol common stock at $26 per share. Pick the correct journal entry that applies
    • A. 

      Investments-Trading security $162,500 Cash $162,500

    • B. 

      Investments-Trading security $162,500 Dividends $162,500

    • C. 

      Investments-Trading security $162,500 Income $162,500

    • D. 

      Investments-Trading security $162,500 Unrealized loss $162,500


  • 65. 
    Carol corporation declared and paid a cash dividend of $3 per share. pick the correct journal entry
    • A. 

      Unrealized loss $25,000 Investments $25,000

    • B. 

      Investments $18,750 Dividend Income $18,750

    • C. 

      Cash $18,750 Dividend Income $18,750

    • D. 

      None


  • 66. 
    Carol corp. determined the current market price of carol stock to be $22 per share. Pick the correct journal entry
    • A. 

      Dividends $25,000 Investments $25,000

    • B. 

      Unrealized loss $25,000 Investments $25,000

    • C. 

      Cash $25,000 Investments $25,000

    • D. 

      None


  • 67. 
    Company X owns 40 percent of Company Y and exercises significant influence over the management of Company Y. Therefore, Company X uses what method of accounting for reporting its ownership of stock in Company Y?
    • A. 

      The amortized cost method.

    • B. 

      The fair value method.

    • C. 

      The equity method.

    • D. 

      Consolidation of the financial statements of companies X and Y.


  • 68. 
    Company W purchases 10 percent of Company Z and Company W intends to hold the stock for at least five years. At the end of the current year, how would Company W's investment in Company Z be reported on Company W's December 31 (year-end) balance sheet?
    • A. 

      At the December 31 fair value in the long-term assets section.

    • B. 

      At original cost in the current assets section.

    • C. 

      At the December 31 fair value in the current assets section.

    • D. 

      At original cost in the long-term assets section.


  • 69. 
    Dividends received from stock that is reported as a security available for sale in the long-term assets section of the balance sheet are reported as which of the following?
    • A. 

      An increase to cash and a decrease to the investment in stock account.

    • B. 

      An increase to cash and an increase to revenue.

    • C. 

      An increase to cash and an unrealized gain on the income statement.

    • D. 

      An increase to cash and an unrealized gain on the balance sheet.


  • 70. 
    Realized gains and losses are recorded on the income statement for which of the following transactions in trading securities and available-for-sale securities?
    • A. 

      When adjusting a trading security to its fair value.

    • B. 

      Only when recording the sale of a trading security.

    • C. 

      When adjusting an available-for-sale security to its fair value.

    • D. 

      When recording the sale of either a trading security or an available-for-sale security.


  • 71. 
    When recording dividends received from a stock investment accounted for using the equity method, which of the following statements is true?
    • A. 

      Total assets are increased and net income is increased.

    • B. 

      Total assets are increased and total stockholders' equity is increased.

    • C. 

      Total assets and total stockholders' equity do not change.

    • D. 

      Total assets are decreased and total stockholders' equity is decreased.


  • 72. 
    When using the equity method of accounting, when is revenue recorded on the books of the investor company?
    • A. 

      When a dividend is received from the affiliate.

    • B. 

      When the fair value of the affiliate stock increases.

    • C. 

      When the affiliate company reports net income.

    • D. 

      Both (a) and (c).


  • 73. 
    Jan. 1 2010- purchased 2,000 shares of common stock of dear company at $40 per share to be held as securities available for sale. This purchase represented 1% of the shares outstanding. PIck the correct journal entry
    • A. 

      Investment in Dear Co. $80,000 retained earnings $80,000

    • B. 

      Investment in Dear Co. $80,000 Cash $80,000

    • C. 

      Investment in Dear Co. $80,000 Common stock $80,000

    • D. 

      None


  • 74. 
    Dec. 31-Determined that the current market price of the Dear stock was $39. pick the correct journal entry
    • A. 

      OCI-Unrealized loss $2,000 Investment in Dear Co. $2,000

    • B. 

      Investment in Dear Co. $80,000 Cash $80,000

    • C. 

      Investment in Dear Co. $2,000 Issued stock $2,000

    • D. 

      None


  • 75. 
    Mar. 15-2011- Sold 2,000 shares of common stock of Dear company for $41 per share
    • A. 

      Cash $82,000 Investment in Dear Co. $78,000 Investment income-realized gain $4,000

    • B. 

      Common stock $82,000 Investment in Dear Co. $78,000 OCI-Unrealized loss $2,000 Investment income-realized gain $2,000

    • C. 

      Cash $82,000 Investment in Dear Co. $78,000 OCI-Unrealized loss $2,000

    • D. 

      Cash $82,000 Investment in Dear Co. $78,000 OCI-Unrealized loss $2,000 Investment income-realized gain $2,000


  • 76. 
    Which of the following are operating activities?
    • A. 

      Depreciation and amortization expense

    • B. 

      Gain or loss on sale of assets

    • C. 

      Cash proceeds from a sale

    • D. 

      Cash paid to purchase stock

    • E. 

      Increase or decrease in operating liabilities

    • F. 

      Decrease or decrease in operating assets


  • 77. 
    Which of the following are investing activities? 
    • A. 

      Cash paid for purchase of property and equip

    • B. 

      Cash proceeds from sale of prop and equip

    • C. 

      Cash paid for purchase of investment securities

    • D. 

      Gain on sale of assets

    • E. 

      Cash proceeds from sale or maturity of investment securities


  • 78. 
    Which of the following are financing activities?
    • A. 

      Amount borrowed from banks

    • B. 

      Repayment of loan and bond principal

    • C. 

      Issuance of bond for cash

    • D. 

      Cash proceeds from issuance of stock

    • E. 

      Depreciation and amortization expense

    • F. 

      Cash paid to purchase treasury stock

    • G. 

      Payment of cash dividends to stockholders


  • 79. 
    Pick if the activity is operating, investing, or financing 1. Received $46,202 in cash from initial public offering of common stock  2. Made cash deposits on equipment of $5,038 3. Sold stock to employees for $13 in cash 4. Income tax refund receivable decreased by $326 5. Accounts receivable increased by $881

  • 80. 
    Read each scenario and pick if it follows: amortized cost, equity cost, purchase method and consolidation, fair value method 1. Less than 20 percent ownership               2. current fair value 3. more than 50% ownership 4. At least 20% but no more than 50% ownership 5. Bonds held to maturity 6. Orignal cost less any amortization of premium or discount with the purchase 7. Original cost plus proportionate part of the income of the affiliate less proportionate part of the dividends declared by the affiliate. 

  • 81. 
    pick if the following scenarios are operating, investing, or financing 1. Proceeds from issuance of long-term debt 2. Collections from customers 3. Payment of interest on debt 4. Purchase of prop., plant, and equip. 5. Proceeds from disposal of investment securities

  • 82. 
    Quality of income ratio:
    • A. 

      Net Income/ Cash Flow from Operating Activities

    • B. 

      Cash Flow From Operating Activities/Dividends

    • C. 

      Cash Flow from Operating Activities/Net Income

    • D. 

      Net Income/Capital Expenditures


  • 83. 
    Free cash flow (how much cash is available):
    • A. 

      Dividends-Cash Flows from Operating Activities

    • B. 

      (Dividends-Capital Expenditures)/Cash Flow from Operating Activities

    • C. 

      Cash Flows from Operating Activities-Capital Expenditures

    • D. 

      Cash Flows from Operating Activities-Dividends-Capital Expenditures


  • 84. 
    Increase in inventories
    • A. 

      + use of cash

    • B. 

      - use of cash

    • C. 

      + non-cash expense

    • D. 

      - non-cash expense

    • E. 

      NA- financing


  • 85. 
    Proceeds from issuance of notes payable
    • A. 

      + use of cash

    • B. 

      - use of cash

    • C. 

      + non-cash expense

    • D. 

      - non-cash expense

    • E. 

      NA-financing


  • 86. 
    Amortization expense
    • A. 

      + use of cash

    • B. 

      - use of cash

    • C. 

      + non-cash expense

    • D. 

      - non-cash expense

    • E. 

      NA-financing


  • 87. 
    Decrease in accounts receivable
    • A. 

      + use of cash

    • B. 

      - use of cash

    • C. 

      + non-cash expense

    • D. 

      - non-cash expense

    • E. 

      Source of cash

    • F. 

      NA-financing


  • 88. 
    Increase in accounts payable
    • A. 

      + use of cash

    • B. 

      - use of cash

    • C. 

      Source of cash

    • D. 

      + non-cash expense

    • E. 

      - non-cash expense

    • F. 

      NA-financing


  • 89. 
    Increase in prepaid expenses
    • A. 

      + use of cash

    • B. 

      - use of cash

    • C. 

      + non-cash expense

    • D. 

      - non-cash expense

    • E. 

      NA-financing


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