1. On December 1, 2015, company signed a $300,000, 5%, six month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2016. The company records the appropriate adjusting entry for the note on December 31, 2015. What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1, 2016?
A) $300,000
B) $301,250
C) $306,250
D) $307,500
2. If you pay for $25.00 for purchase which includes 11% sales tax. How much is the sales tax?
A) $2.48
B) $2.75
C) $3.00
D) $2.55
3. Which of the following is not a characteristic of debenture Bonds?
A) payment of interest to bondholders is required
B) they are not secured by any specific assets of the corporation
C) bondholders have priority over common stockholders in the liquidation of assets
D) bonds cannot be retired before the end of their life
4. F Corporation has authorized an issue of 15%, 10-year bonds. At the issue date the market rate of interest for this type of bond is 13.5%. On these facts it might be expected that:
A) The company will find it difficult to sell the bonds
B) The bonds will be sold at a premium
C) The bonds will be sold at a discount
D) The bonds will be sold at face value
E) The bond contract will be rewritten because it is inconsistent.
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO (2) QUESTIONS:
On January 1, 2015, ABC Company issued $10,000 of 8%, 12 year bonds for $9,632 cash. The bonds are dated January 1, 2015, and pay interest annually each December 31. The market rate of interest on the bonds is 8.5% on the issue date.
5. The bond interest expense to be reported on the income statement for the year ended December 31, 2015 will be somewhere between:
A) 0 and $774
B) $775-794
C) $795-814
D) $815-834
E) $835 and $1,000
6. The cash paid for interest on December 31, 2015 would be:
A) $768
B) $800
C) $816
D) $850
The following factors from the present value tables may be of use when answering the next 2 questions:
Present value of $1.00
|
|
4%
|
5%
|
6%
|
|
5 periods
|
0.8219
|
0.7835
|
0.7473
|
|
10 periods
|
0.6756
|
0.6139
|
0.5584
|
Present value of an Annuity of $1.00.
|
|
4%
|
5%
|
6%
|
|
5 periods
|
4.4518
|
4.3295
|
4.2124
|
|
10 periods
|
8.1109
|
7.7217
|
7.3601
|
7. An investor wishes to have $1,000 available in five years. How much should be invested today, if the current interest rate is 5 percent (round to the nearest dollar)?
A) $784
B) $614
C) $433
D) $772
8. On January 1, 2015, Sawyer Company issued $100,000 of its 10 year bonds payable to generate cash for expansion. The bonds will retire in 10 years, and have a stated rate of 5 percent. Interest will be paid annually each December 31, starting December 31, 2015.
The market rate is 4%, what amount of cash would Sawyer receive at issue (round to nearest whole dollar)?
A) $100,000
B) $108,115
C) $67,560
D) $92,277
9. Z company retires a $70 million bond issue when the carrying value of the bonds is $65 million, but the market value of the bonds is $74 million. Z company will record the retirement as:
A) A debit of $9 million to Loss due to early extinguishment.
B) A credit of $9 million to Gain due to early extinguishment.
C) No gain or loss on retirement.
D) A debit to Cash for $74 million.
10. Which of the following is NOT a true statement about accounting for corporations?
A) The dividends account is closed out to retained earnings.
B) The balance in retained earnings at any point in time is equal to the total accumulated earnings of the business (net of losses) less the total dividends since the inception of the corporation.
C) Any income or loss is closed out to the common stock account.
D) Retained earnings may have a debit balance.
E) Two primary sources of equity capital are contributed capital and earned capital (retained earnings).
11. Nelson Corporation issues 50,000 shares of $0.50 par value stock. The market price of the stock is$8 per share. Additional paid-in capital on this transaction would be:
A) debited for $400,000
B) credited for $375,000
C) debited for $375,000
D) credited for $25,000
12. Liabilities:
a. Are obligations
b. Require a probable future sacrifice of economic benefits.
c. Are a result of past transactions or events.
d. All of the above
13. On December 15, 19x5, FLM Corporation exchanged 2,000 shares of $10 par value common stock for land. The current market price of the stock was $20 per share. The value of the land was not readily determinable. Which of the following entries should be made to record the issuance of the stock?
A) Land 20,000
Common Stock 20,000
B) Land 40,000
Common Stock 40,000
C) Land 40,000
Common Stock 20,000
Paid-in Capital in Excess of Par Value 20,000
D) Cannot be determined.
14. Which of the following is the best definition of retained earnings?
A) Accumulated earnings of the corporation since the date of incorporation minus any losses and minus all dividends declared
B) Stockholders' equity minus capital stock
C) Net assets minus capital stock and all dividends paid since date of incorporation
D) Extraordinary gains minus extraordinary losses plus income from operations since date of incorporation
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO QUESTIONS:
Subara Corporation purchases 1,000 shares of its own $10 par value stock for $15 per share. The transaction is recorded using the cost method
15. Proper recording of this transaction will
A) result in a decrease in stockholders' equity
B) result in a decrease in net income
C) result in an increase in investments
D) include a debit to an Additional Paid-In Capital for $5,000
16. Assume that Subara reissued the stock for $14 per share. Which of the following statements is true?
A) Common Stock will be credited for $5,000
B) Treasury Stock will be credited for $15,000
C) Net income will be reduced by a loss on treasury stock of $1,000
D) An Additional Paid-In Capital account will be credited for $2,000
17. The beginning balance of Retained Earnings was $100 and the ending balance of Retained Earnings was $125. Dividends declared for the period were $30. What was the net income?
A) $25
B) $55
C) $15
D) $5
18. Which of the following occurs when accrued interest is accrued on a note payable, at yearend?
a. Interest is accrued for the number of days the note is outstanding in the subsequent period.
b. Interest is accrued for the number of days the note is outstanding in the current period.
c. Interest is accrued for the total life of the note.
d. None of the above.
Please use the following table of Houston Furniture Company for answering the review questions on cash flow:
|
Net Income
|
$40,000
|
Increase in accounts payable
|
$9,000
|
|
Depreciation expense
|
$15,000
|
Acquisition of equipment
|
$25,000
|
|
Payment of dividends
|
$1,000
|
Sale of treasury stock
|
$6,000
|
|
Increase in accounts receivable
|
$3,000
|
Payment of long-term debt
|
$13,000
|
|
Collection of long-term notes receivable
|
$11,000
|
Proceeds from the sale of land
|
$42,000
|
|
Loss on sale of land
|
$10,000
|
Decrease in inventories
|
$6,000
|
19. Under the indirect method, net cash provided by operating activities is:
A) $94,000
B) $97,000
C) $77,000
D) $71,000
20. Under the indirect method, net cash provided by (used for) investing activities would be:
A) $94,000
B) $71,000
C) $28,000
D) $(97,000)
21. Under the indirect method, net cash provided by (used for) financing activities would be:
A) $5,000
B) $1,000
C) $(8,000)
D) $94,000
22. Houston Magazine receives $100 in advance from a customer for a 2 year subscription. Houston Magazine's entry to record this transaction would include a:
A) debit to Subscription Revenue for $100
B) credit to Subscription Revenue for $100
C) debit to Unearned Subscription Revenue for $100
D) credit to Unearned Subscription Revenue for $100
23. Company A filed suit against Company B, seeking damages for patent infringement. Company B's legal counsel believes it is probable that Company B will settle the lawsuit for an estimated amount in the rage of $50,000 to $100,000, with all amounts in the rage considered equally likely. How should Company B report this litigation?
A) As a liability for $50,000 with disclosure of the range.
B) As a liability for $75,000 with disclosure of the range.
C) As a liability for $100,000 with disclosure of the range.
D) As a disclosure only. No liability is reported.
24. Company's cash balance at the end of the month was $6,500. After comparing the company's records with the monthly bank statement. The company's accountant identified the following reconciling items: outstanding checks, $800; deposits in transit, $700; bank service charge, $30; NSF check, $500. What is the adjusted bank balance?
A) $6,600
B) $5,970
C) $6,370
D) The adjusted bank balance cannot be determined from this information
25. A piece of equipment purchased on January 1, 2015 for $15,000 has a residual value of $3,000 and an estimated useful life of 6 years. The asset was depreciated straight-line for two years, then sold on January 1, 2017 for $9,000. What is the amount of the gain or loss that should be recorded?
A) $3,000 loss
B) $3,000 gain
C) $2,000 loss
D) $4,000 loss
26. In 2002, Company XX developed a patent, which has a 20 year legal life, and a 10 year useful life. How should Company XX account for the research and development costs (for scientists' salaries) that were incurred to develop the patent?
A) capitalize and amortize over a 10 year period.
B) expense as incurred.
C) capitalize and amortize over a 20 year period.
D) capitalize, but do not amortize.
27. If your company purchases land and a building for $100,000, and it intends to tear down the existing building to allow construction of a new warehouse, the purchase price should be allocated to the following accounts:
A) $100,000 to the Construction Expense account
B) $100,000 to the Land account and $0 to the Building account
C) Prorated to the Land account and Building account based on the appraised values of each.
D) $100,000 to the Building account and $0 to the Land account
28. After aging Accounts Receivable, Z Company estimates uncollectible for 2015 to be $4,000. The balance in the allowance account at January 1, 2015 was a $300 credit. During the year, Z Co. wrote off $400 of accounts receivable. The debit to bad debts expense for 2015 would be for what amount?
A) $3,700
B) $3,900
C) $4,000
D) $4,100
29. Net accounts receivable is defined as
A) total accounts receivable less the amounts written off this year.
B) total sales less the accounts receivable collected this year.
C) total accounts receivable less the estimated amounts expected to be uncollectible in the future.
D) total cash sales plus total credit sales less the bad debt expenserecognized this year.
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO QUESTIONS:
The following inventory, purchases, and sales data are for the FLM Company. FLM uses the periodic method.
Beginning Inventory Inventory Purchases No. of Units Sold
4 at $4 each 1st - 8 units at $5 each 15
2nd - 6 units at $6 each
3rd - 4 units at $10 each
30. Under FIFO, the ending inventory value is
A) $30.
B) $74.
C) $58.
D) $60.
31. Under LIFO, the ending inventory value is
A) $58.
B) $31.
C) $101.
D) $60.
32. How would the following transaction affect the balances of assets, liabilities, and equity?
Buying equipment on account
Assets Liabilities Equity
A) Increase Increase No change
B) Increase No change Increase
C) Decrease Decrease No change
D) Decrease No Change Decrease
33. Beginning Inventory is $22,000; Purchases are $9,000; Ending Inventory is $2,000; and Income is $33,200. How much is Goods Available for Sale?
A) $ 4,200
B) $ 9,200
C) $31,000
D) $62,200
34. Adjusting entries are necessary
A) to correct estimates made in prior accounting periods.
B) to transfer the balances in the temporary accounts into the capital account.
C) to bring certain account balances up to date to reflect the accrual of revenues and expenses.
D) to create problems for accounting students.
35. During 2015, the Electra Company debited Office Supplies for $124,000 for purchases made during the year. The balance in the Office Supplies account at the beginning of 2015 was $1,000. On December 31, 2015, $2,000 of the supplies remained unused. The adjusting journal entry at 12/31/15 to recognize the supplies used would include a debit to Supplies Expense for:
A) $125,000
B) $124,000
C) $123,000
D) $122,000
36. Castle financed the purchase of a delivery truck by borrowing cash from E-Z Credit on January 1. The annual interest on this loan is $750 payable on January 1 of each year. What is the adjusting entry to accrue interest on December 31 at fiscal year end?
A) debit Interest Expense $750; credit Interest Payable $750
B) debit Interest Income $750, credit Interest Payable $750
C) debit Interest Expense $750; credit Cash $750
D) debit Interest Payable $750; credit Interest Expense $750
37. The statement of cash flows:
A) Provides information on the financial position of a firm at a particular point in time.
B) Provides detailed data on the specific revenues and expenses of a firm.
C) Provides details of the equity of the owners of a firm.
D) Provides information on the sources and uses of cash.
E) Provides the details of the assets, liabilities, and owners equity of a firm.
38. Of the following ownership rights, which is NOT usually associated with preferred stock?
A) Cumulative rights
B) Voting rights
C) Dividend rights
D) Liquidation rights.