Task: Chase County Bank agrees to lend Agler Brick Company $300,000 on January 1. Agler Brick Company signs a $300,000, 8%, 9-month note.
Question 1: The entry made by Agler Brick Company on January 1 to record the proceeds and issuance of the note is
a. Interest Expense ...................... 18,000
Cash .................................. 282,000
Notes Payable ..................... 300,000
b. Cash .................................. 300,000
Notes Payable ..................... 300,000
c. Cash ................................. 300,000
Interest Expense ...................... 18,000
Notes Payable ..................... 318,000
d. Cash .................................. 300,000
Interest Expense ...................... 18,000
Notes Payable ..................... 300,000
Interest Payable ................. 18,000
Question 2: If Wayne Company issues 2,000 shares of $5 par value common stock for $160,000, the account
a. Common Stock will be credited for $160,000.
b. Paid-In Capital in Excess of Par Value will be credited for $10,000.
c. Paid-In Capital in Excess of Par Value will be credited for $150,000.
d. Cash will be debited for $150,000.
Question 3: Which one of the following events would not require a formal journal entry on a corporation's books?
a. 2 for 1 stock split
b. 100% stock dividend
c. 2% stock dividend
d. $1 per share cash dividend
Question 4: Which one of the following would not be considered an advantage of the corporate form of organization?
a. Limited liability of owners
b. Separate legal existence
c. Continuous life
d. Government regulation
Question 5: When a company owns more than 50% of the common stock of another company,
a. affiliated financial statements are prepared.
b. consolidated financial statements are prepared.
c. controlling financial statements are prepared.
d. significant financial statements are prepared.
Question 6: On January 1, 2003, Sanders Company purchased at face value, a $1,000, 6%, bond that pays interest on January 1 and July 1. Sanders Company has a calendar year end.
Question 7: The entry for the receipt of interest on July 1, 2003, is
a. Cash ..................................... 30
Interest Revenue ..................... 30
b. Cash ..................................... 60
Interest Revenue ..................... 60
c. Interest Receivable ...................... 30
Interest Revenue ..................... 30
d. Interest Receivable ...................... 60
Interest Revenue ..................... 60
Question 8: When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor
a. has insignificant influence on the investee and that the cost method should be used to account for the investment.
b. should apply the cost method in accounting for the investment.
c. will prepare consolidated financial statements.
d. has significant influence on the investee and that the equity method should be used to account for the investment.
Question 9: Meyer Company reported net income of $40,000 for the year. During the year, accounts receivable increased by $14,000, accounts payable decreased by $6,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year is
a. $30,000.
b. $70,000.
c. $38,000.
d. $40,000.
Question 10: Boone Company reports the following:
End of Year Beginning of Year
Inventory $25,000 $40,000
Accounts Payable 30,000 10,000
If cost of goods sold for the year is $250,000, the amount of cash paid to suppliers is
a. $255,000.
b. $245,000.
c. $215,000.
d. $285,000.