Accounting 557 Week 10 Final Exam part 1

Question 1

Treasury Stock is a(n)

                       

contra asset account.

                       

retained earnings account.

                       

asset account.

                       

contra stockholders’ equity account.

 

Quedtion 2

Dividends in arrears on cumulative preferred stock

                       

are shown in stockholders’ equity of the balance sheet.

                       

must be paid before common stockholders can receive a dividend.

                       

should be recorded as a current liability until they are paid.

                       

enable the preferred stockholders to share equally in corporate earnings with the common stockholders.

 

Question 3

 

Each of the following decreases retained earnings except

                       

A cash dividend.

                       

liquidating dividend.

                       

stock dividend.

                       

All of these decrease retained earnings.

Question 4

The dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees is

                       

the sole proprietorship.

                       

the partnership.

                       

the corporation.

                       

not known.

 

Question 5

Farmer Company reports the following amounts for 2015:

Net income                                                                                $135,000

Average stockholders’ equity                                                   500,000

Preferred dividends                                                                       15,000

Par value preferred stock                                                          100,000

The 2015 rate of return on common stockholders’ equity is

                       

30.0%.

                       

24.0%.

                       

27.0%.

                       

33.8%.

 

Question 6

On January 1, Edison Corporation had 1,000,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 20% stock dividend. Market value of the stock was $18/share. As a result of this event,

                       

Edison’s Paid-in Capital in Excess of Par account increased $1,600,000.

                       

Edison’s total stockholders’ equity was unaffected.

                       

Edison’s Stock Dividends account increased $3,600,000.

                       

All of these answers are correct.

 

Question 7

Ramos Corporation sold 400 shares of treasury stock for $45 per share. The cost for the shares was $35. The entry to record the sale will include a

                       

credit to Gain on Sale of Treasury Stock for $14,000.

                       

credit to Paid-in Capital from Treasury Stock for $4,000.

                       

debit to Paid-in Capital in Excess of Par for $4,000.

                       

credit to Treasury Stock for $18,000.

 

Question 8

Retained earnings is increased by each of the following except

                       

net income.

                       

some prior period adjustments.

                       

some disposals of treasury stock.

                       

All of these increase retained earnings.

 

Question 9

Previously issued financial statements with errors are required to be restated under

                       

GAAP only.

                       

IFRS only.

                       

Both GAAP and IFRS.

                       

Neither GAAP or IFRS.

 

Question 10

On October 1, 2015, Holt Company places a new asset into service. The cost of the asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2015, balance sheet assuming that Holt Company uses the double-declining-balance method of depreciation?

                       

$78,000

                       

$90,000

                       

$108,000

                       

$114,000

 

Question 11

The book value of an asset will equal its fair market value at the date of sale if

                       

a gain on disposal is recorded.

                       

no gain or loss on disposal is recorded.

                       

the plant asset is fully depreciated.

                       

a loss on disposal is recorded

 

Question 12

Intangible assets are the rights and privileges that result from ownership of long-lived assets that

                       

must be generated internally.

                       

are depletable natural resources.

                       

have been exchanged at a gain.

                       

do not have physical substance

 

Question 13

Question 13

 

A company has the following assets:

Buildings and Equipment, less accumulated depreciation of $2,000,000                       $9,600,000

Copyrights                                                                                                                                          960,000

Patents                                                                                                                                            4,000,000

Timberlands, less accumulated depletion of $2,800,000                                                     4,800,000

The total amount reported under Property, Plant, and Equipment would be

                       

$19,360,000.

                       

$14,400,000.

                       

$18,400,000.

                       

$15,360,000

 

Question 14

Which of the following methods of computing depreciation is production based?

                       

Straight-line

                       

Declining-balance

                       

Units-of-activity

                       

None of these answer choices are correct.

 

 

Question 15

Equipment was purchased for $300,000. Freight charges amounted to $14,000 and there was a cost of $40,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $60,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

                       

$70,800.

                       

$58,800.

                       

$49,200.

                       

$48,000

 

Question 16

A computer company has $2,800,000 in research and development costs. Before accounting for these costs, the net income of the company is $2,000,000. What is the amount of net income or loss after these R & D costs are accounted for?

                       

$800,000 loss

                       

$2,000,000 net income

                       

$0

                       

Cannot be determined from the information provided

 

Question 17

 

The calculation of depreciation using the declining balance method:

                       

A. ignores salvage value in determining the amount to which a constant rate is applied.

                       

B. multiplies a constant percentage times the previous year's depreciation expense.

                       

C. yields an increasing depreciation expense each period.

                       

D. multiplies a declining percentage times a constant book value.

 

Question 18

Thirty $1,000 bonds with a carrying value of $39,600 are converted into 4,000 shares of $5 par value common stock. The common stock had a market value of $9 per share on the date of conversion. The entry to record the conversion is

                       

Bonds Payable ......................................................................... 39,600

                   Common Stock ...............................................................           20,000

                   Paid-in Capital in Excess of Par..........................................           19,600

                       

Bonds Payable ......................................................................... 30,000

        Premium on Bonds Payable ....................................................... 9,600

                   Common Stock ...............................................................           30,000

                   Paid-in Capital in Excess of Par .........................................             3,600

                       

Bonds Payable ......................................................................... 30,000

        Premium on Bonds Payable ....................................................... 9,600

                   Common Stock ...............................................................           20,000

                   Paid-in Capital in Excess of Par..........................................           19,600

                       

Bonds Payable ......................................................................... 39,600

                   Common Stock ...............................................................           36,000

                   Paid-in Capital in Excess of Par...............................           3,600

Question 19

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revene at December 31?

                       

$0.

                       

$12,000.

                       

$24,000.

                       

$36,000.

 

Question 20

Interest expense on an interest-bearing note is

                       

always equal to zero.

                       

accrued over the life of the note.

                       

only recorded at the time the note is issued.

                       

only recorded at maturity when the note is paid.

 

Question 21

With an interest-bearing note, the amount of assets received upon issuance of the note is generally

                       

equal to the note's face value.

                       

greater than the note's face value.

                       

less than the note's face value.

                       

equal to the note's maturity value.

Question 22

When current liabilities are presented under IFRS, they are generally shown

                       

alphabetically.

                       

in order of magnitude.

                       

in order of the dates they become due.

                       

in order of liquidity

 

Question 23

A mortgage note payable with a fixed interest rate requires the borrower to make installment payments over the term of the loan. Each installment payment includes interest on the unpaid balance of the loan and a payment on the principal. With each installment payment, indicate the effect on the portion allocated to interest expense and the portion allocated to principal.

          Portion Allocated                                  Portion Allocated

        to Interest Expense                         to Payment of Principal

                       

Increases                                                  Increases

                       

Increases                                                  Decreases

                       

Decreases                                                 Decreases

                       

Decreases                                                 Increases

 

Question 24

On October 1, 2014, Pennington Company issued a $90,000, 10%, nine-month interest-bearing note. Assuming interest was accrued in June 30, 2015, the entry to record the payment of the note on July 1, 2015, will include a:

                       

debit to Interest Expense of $2,250.

                       

credit to Cash of $90,000

                       

debit to Interest Payable of $6,750.

                       

debit to Notes Payable of $96,750.

 

Question 25

Advances from customers are classified as a(n)

                       

revenue.

                       

expense.

                       

current asset.

                       

current liability


Answer

Accounting 557 Week 10 Final Exam part 1

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