Ritter Company issues $1,200,000 of 10%, 10-year bonds on January 1, 2015, at 102.
Interest is payable semiannually on July 1 and January The company uses the
straight-line method of amortization.
Instructions
(a) Journalize the entries for the bonds on (1) January 1, 2015, (2) July 1, 2015, and (3)
December 31, 2015.
(b) Show the balance sheet presentation of the bonds at December 31, 2015.
(c) Assume on July 1 2015, after paying interest, Ritter calls bonds having a face value
of $600,000. The call price is 101. Record the redemption of the bonds.
Answer:
If merchandise is sold for $3,000 subject to credit terms of 2/10, n/30, the entry to
record collection in full within the discount period would include a
a. credit to Sales Discounts for $60.
b. credit to Cash for $2,940
c. credit to Accounts Receivable for $60.
d. none of These answer choices are correct.
Answer:
When goods are returned that relate to a prior cash sale,
a. the Sales Returns and Allowances account should not be used.
b. the cash account will be credited.
c. Sales Returns and Allowances will be credited.
d. Accounts Receivable will be credited.
Answer:
The following reconciling items are applicable to the bank reconciliation for the Spahn
Company. Indicate how each item should be shown on a bank reconciliation.
a. Outstanding checks.
b. Bank credit memorandum for collecting a note for the depositor.
c. Bank debit memorandum for service charge.
d. Deposit in transit.
Answer:
On January 1, Staley Corporation had 90,000 shares of no-par common stock issued.
5,000 shares are held as treasury stock. The stock has a stated value of $5 per share.
During the year, the following transactions occurred.
Instructions
(a) Prepare the entries, if any, on each of the three dividend dates.
(b) How are dividends and dividends payable reported in the financial statements
prepared at December 31?
Answer:
The cash account shows a balance of $40,000 before reconciliation. The bank statement
does not include a deposit of $9,200 made on the last day of the month. The bank
statement shows a collection by the bank of $3,960 and a customer’s check for $1,300
was returned because it was NSF. A customer’s check for $1,380 was recorded on the
books as $1,920, and a check written for $318 was recorded as $390. The correct
balance in the cash account was
a. $42,048.
b. $42,192.
c. $43,128.
d. $51,392.
Answer:
A company just starting in business purchased three merchandise inventory items at the
following prices. First purchase $64; Second purchase $76; Third purchase $68. If the
company sold two units for a total of $200 and used FIFO costing, the gross profit for
the period would be
a. $56.
b. $60.
c. $62.
d. $68.
Answer:
Barton Company is a publicly held corporation whose $1 par value stock is actively
traded at $31 per share. The company issued 3,000 shares of stock to acquire land
recently advertised at $100,000. When recording this transaction, Barton Company will
a. debit Land for $100,000.
b. credit Common Stock for $93,000.
c. debit Land for $93,000.
d. credit Paid-In Capital in Excess of Par for $93,000.
Answer:
Ranger Corporation reports the following amounts in their 2015 financial statements:
Instructions
(a) Compute the December 31, 2013, balance in stockholders’ equity.
(b) Compute the debt to assets ratio at December 31, 2015.
(c) Compute times interest earned for 2015.
Answer:
Revenues are
a. the cost of assets consumed during the period.
b. gross increases in stockholders’ equity resulting from business activities.
c. the cost of services used during the period.
d. actual or expected cash outflows.
Answer:
Prior period adjustments
a. may only increase retained earnings.
b. may only decrease retained earnings.
c. may either increase or decrease retained earnings.
d. do not affect retained earnings.
Answer:
A $1,000 face value bond with a quoted price of 98 is selling for
a. $1,000.
b. $980.
c. $908.
d. $98.
Answer:
Chik Chik Company showed the following balances at the end of its first year:
What did Chik Chik Company show as total credits on its trial balance?
a. $51,400
b. $60,800
c. $62,200
d. $70,200
Answer:
In preparing a bank reconciliation, outstanding checks are
a. added to the balance per bank.
b. deducted from the balance per books.
c. added to the balance per books.
d. deducted from the balance per bank.
Answer:
Bad Debt Expense is considered
a. an avoidable cost in doing business on a credit basis.
b. an internal control weakness.
c. a necessary risk of doing business on a credit basis.
d. avoidable unless there is a recession.
Answer:
(a) What is the present value of $90,000 due 7 years from now, discounted at 9%?
(b) What is the present value of $150,000 due 5 years from now, discounted at 12%?
Answer:
In vertical analysis, the base amount for each income statement item is
a. gross profit.
b. net income.
c. net sales.
d. sales.
Answer:
Vertical analysis is also known as
a. perpendicular analysis.
b. common size analysis.
c. trend analysis.
d. straight-line analysis.
Answer:
Credits
a. decrease both assets and liabilities.
b. decrease assets and increase liabilities.
c. increase both assets and liabilities.
d. increase assets and decrease liabilities.
Answer:
Which table has a factor of 1.00000 for 1 period at every interest rate?
a. Future value of 1
b. Future value of an annuity of 1
c. Present value of 1
d. Present value of an annuity of 1
Answer:
The operating cycle of a merchandiser is
a. always one year in length.
b. generally longer than it is for a service company.
c. about the same as for a service company.
d. generally shorter than it is for a service company.
Answer:
On January 2, Angle Corporation acquired 40% of the outstanding common stock of
Bobbe Company for $550,000. For the year ended December 31, Bobbe reported net
income of $90,000 and paid cash dividends of $30,000 on its common stock. At
December 31, the carrying value of Angle’s investment in Bobbe under the equity
method is
a. $538,000.
b. $550,000.
c. $586,000.
d. $574,000.
Answer:
Customer purchases using credit cards are a significant source of revenue for many
retailers. From the standpoint of a retailer, briefly discuss some advantages and
disadvantages of a retail store having its own credit card as opposed to accepting one of
the national credit cards (e.g., Visa, MasterCard).
Answer:
A control account and subsidiary ledger can be established for inventory.
Answer:
Fair Value Adjustment is a valuation _______________ account which is
_______________ to (from) the cost of the investments.
Answer:
Domaine Corporation is authorized to issue 1,000,000 shares of $1 par value common
stock. During 2015, the company has the following stock transactions.
Jan. 15 Issued 500,000 shares of stock at $7 per share.
Sept. 5 Purchased 30,000 shares of common stock for the treasury at $9 per share.
Instructions
Journalize the transactions for Domaine Corporation.
Answer:
Record the following transactions for Quik Corporation on the dates indicated.
1> On March 31, 2015, Quik Corporation discovered that Depreciation Expense on
equipment for the year ended December 31, 2014, had been recorded twice, for a total
amount of $84,000 instead of the correct amount of $42,000.
2> On June 30, 2015, the company’s internal auditors discovered that the April 2015
telephone bill for $2,400 had erroneously been charged to the Interest Expense account.
3> On August 14, 2015, cash dividends on preferred stock of $150,000 declared on July
1, 2015, were paid.
Answer:
