Herman Corporation had net income of $120,000 and paid dividends of $24,000 to
common stockholders and $20,000 to preferred stockholders in 2014. Herman
Corporation’s common stockholders’ equity at the beginning and end of 2014 was
$450,000 and $550,000, respectively. Herman Corporation’s payout ratio for 2014 is
a.5%.
b.20%.
c.17%.
d.10%.
Watson, Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock and
20,000 shares of $1 par value common stock outstanding at December 31, 2014. There
were no dividends declared in 2012. The board of directors declares and pays a
$100,000 dividend in 2013 and in 2014. What is the amount of dividends received by
the common stockholders in 2014?
a.$20,000.
b.$60,000.
c.$100,000.
d.$0.
Suppose you have a winning lottery ticket and you are given the option of accepting
$3,000,000 three years from now or taking the present value of the $3,000,000 now.
The sponsor of the prize uses a 5% discount rate. If you elect to receive the present
value of the prize now, the amount you will receive is
a.$2,591,520.
b.$2,518,860.
c.$2,670,000.
d.$3,000,000.
Johnson Company reports the following for the month of June.
(a)Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO,
(2) LIFO, and (3) average cost.
(b)Which costing method gives the highest ending inventory? The highest cost of goods
sold? Why?
(c)How do the average-cost values for ending inventory and cost of goods sold relate to
ending inventory and cost of goods sold for FIFO and LIFO?
Financial information is presented below:
a.$114,000.
b.$ 36,000.
c.$ 45,000.
d.$ 24,000.
KB Retail sold merchandise for $800 subject to credit terms of 3/10, n/30. Which one
of the following is part of the journal entry made by KB Retail to record the collection
in full within the discount period in a perpetual inventory system?
a.Debit to Sales Discounts for $24
b.Debit to Cash for $824
c.Credit to Accounts Receivable for $824
d.Credit to Inventory for $24
Which of the following is a true statement as it relates to impairments of plant assets?
a.The assets are recorded at the book value of the asset.
b.The impairment amount is capitalized and depreciated along with the cost of the
original asset.
c.The impairment amount is added to the plant asset account in the year the decline of
value occurs.
d.They are written down to the new fair value during the year in which the decline
occurs.
Jim and Aneta O’Connor invested $12,000 in a savings account paying 5% annual
interest when their son, Austin, was born. They also deposited $500 on each of his
birthdays until he was 20 (including his 20th birthday). Jim and Aneta have obtained the
following values related to the time value of money to help them with their planning
process for their compounded interest decisions.
To the closest dollar, how much was in the savings account on his 20th birthday (after
the last deposit)?
a.$33,166
b.$48,373
c.$22,000
d.$28,533
Janus Coat Company purchased a delivery truck on June 1 for $30,000, paying $10,000
cash and signing a 6%, 2-month note for the remaining balance. The truck is expected
to depreciate $6,000 each year. Janus Coat Company prepares monthly financial
statements.
Instructions:
(a)Prepare the general journal entry to record the acquisition of the delivery truck on
June 1st.
(b)Prepare any adjusting journal entries that should be made on June 30th.
(c)Show how the delivery truck will be reflected on Janus Coat Company’s balance
sheet on June 30th.
A $30,000, 8%, 10-year note payable that pays interest quarterly would be discounted
back to its present value by using tables that would indicate which one of the following
period-interest combinations?
a.10 interest periods, 8% interest
b.40 interest periods, 8% interest
c.40 interest periods, 2% interest
d.10 interest periods, 2% interest
A company just starting in business purchased three merchandise inventory items at the
following prices. First purchase $80; Second purchase $95; Third purchase $85. If the
company sold two units for a total of $290 and used FIFO costing, the gross profit for
the period would be
a.$115.
b.$125.
c.$110.
d.$100.
Using the allowance method, the uncollectible accounts for the year is estimated to be
$40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 debit
before adjustment, what is the amount of bad debt expense for the period?
a.$9,000
b.$31,000
c.$40,000
d.$49,000