1. Lily Company had the following account balances for Year 1. Compute Lily Company's total stockholders' equity as of the end of Year 1. Note: All equity accounts are included in this list. However, the asset and liability accounts in the list do NOT include all of the company's asset and liability accounts. As a result, you can't use the accounting equation to compute stockholders' equity.
Common Stock, at par
$10,000
Foreign Currency Translation Adjustment (debit balance, decrease)
30,000
Income Taxes Payable
82,000
Treasury Stock
20,000
Long-Term
250,000
Paid-in Capital from Treasury Stock
52,000
Paid-in Capital in Excess of Par-common
200,000
Prepaid Expenses
77,000
Retained Earnings (end of the year)
180,000
Unearned Revenue
53,000
Investment Securities - Available for Sale
75,000
Market Adjustment Account - Available for Sale (debit balance, increase)
14,000
Unrealized Increase on Available-for-Sale Securities
14,000
$436,000
$446,000
$466,000
$459,000
$420,000
$392,000
$406,000
$481,000
2.
Boatie Company has four leases. The terms of the four leases are summarized in the table below:
Transfer of Ownership at the End of the Lease Term?
Cash Price of Leased Asset
Economic Life of Leased Asset
Present Value of Lease Payments
Length of the Lease
Existence of Bargain Purchase Option in the Lease Contract?
Lease 1
No
$100,000
20 Years
$92,000
13 Years
No
Lease 2
No
$100,000
20 Years
$82,000
16 Years
No
Lease 3
No
$100,000
20 Years
$92,000
16 Years
No
Lease 4
No
$100,000
20 Years
$82,000
13 Years
No
Of these four leases, which should Boatie Company account for as capital leases? Note: ALL of the leases are noncancellable.
Lease 1 only
Lease 2 only
Lease 3 only
Lease 4 only
Leases 1, 2, and 3 only
All of the leases should be accounted for as capital leases.
Leases 3 and 4 only
3.
Which ONE of the following statements is TRUE?
In the United States, a company with a stock price of $15 per share is likely to do a 2-for-1 stock split.
A company that has never paid cash dividends is likely to start paying cash dividends if it expects very high sales growth every year for the next five years.
A company that expects to introduce several new products in the next year is more likely to do its IPO now rather to wait for a year.
A company that is relatively certain about its strong operating cash flow for the next few years is more likely to increase its cash dividends this year than it is to increase the amount of cash used to repurchase shares of its stock.
The FASB allows a company to wait until up to 18 months following the purchase of an investment security before deciding whether that security should be classified as trading or available for sale.
None of the statements in (a) through (e) is true.
4.
At the end of the year, Ryanes Company had the following information:
Writeoffs of verified bad debts during the year
$13,000
Accounts receivable, end of year
135,000
Credit Sales for the year
150,000
Allowance for bad debts (before year-end adjusting entry)
4,000
debit
Historically, Ryanes has sometimes used the percentage of sales method and has sometimes used the allowance method in estimating bad debt expense. The percentages that Ryanes has used are as follows:
Percentage of sales method
4.0%
Allowance method
2.5%
For this year, which ONE of the following statements is correct with respect to the comparison of bad debt expense computed using the percentage of sales method and the allowance method?
Bad debt expense using the percentage of sales method is HIGHER by $1,375.
Bad debt expense using the percentage of sales method is HIGHER by $2,625.
Bad debt expense using the percentage of sales method is HIGHER by $2,250.
Bad debt expense using the percentage of sales method is HIGHER by $5,375.
Bad debt expense using the allowance method is HIGHER by $1,375.
Bad debt expense using the allowance method is HIGHER by $1,750.
Bad debt expense using the allowance method is HIGHER by $1,975.
Bad debt expense using the allowance method is HIGHER by $3,375.