The board of directors of Benson Company declared a cash dividend of $1.50 per share
on 42,000 shares of common stock on July 15, 2014. The dividend is to be paid on
August 15, 2014, to stockholders of record on July 31, 2014. The correct entry to be
recorded on August 15, 2014, will include a
a.debit to Cash Dividends.
b.credit to Cash Dividends.
c.credit to Dividends Payable.
d.debit to Dividends Payable.
Warner Company issued $4,000,000 of 6%, 10-year bonds on one of its interest dates
for $3,454,800 to yield an effective annual rate of 8%. The effective-interest method of
amortization is to be used. How much bond interest expense (to the nearest dollar)
should be reported on the income statement for the end of the first year?
a.$277,110
b.$276,384
c.$275,655
d.$240,000
Use the following information to calculate for the year ended December 31, 2014 (a)
net income (net loss), (b) ending retained earnings, and (c) total assets.
Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows.
Indicate where, if at all, a stock dividend declared and issued would be classified on the
statement of cash flows.
a.Operating activities section.
b.Investing activities section.
c.Financing activities section.
d.Does not represent a cash flow.
Using the following information, which company appears to be least solvent?
a.Jones Company
b.Parles Company
c.Brady Company
d.Chambers Company
If $10,000 is put in a savings account paying interest of 4% compounded annually, what
amount will be in the account at the end of 5 years?
a.$8,220
b.$12,000
c.$12,155
d.$12,167
Carter Company uses a periodic inventory system. The inventories at January 1, 2013,
and December 31, 2014, are correct. However, the ending inventory at December 31,
2013, is overstated by $4,000.
Instructions
(a)Prepare correct income statement data for the 2 years.
(b)What is the cumulative effect of the inventory error on total gross profit for the 2
years?
An item is considered material if
a.it doesn’t costs a lot of money.
b.it is of a tangible good.
c.its size is likely to influence the decision of an investor or creditor.
d.the cost of reporting the item is greater than its benefits.
A truck costing $45,000 and on which $39,000 of accumulated depreciation has been
re-corded was discarded as having no value. The entry to record this event would
include a
a.gain of $6,000.
b.loss of $6,000.
c.credit to Accumulated Depreciation for $39,000.
d.credit to Accumulated Depreciation for $45,000.
These T accounts summarize the ledger of Garner Gardening Company Inc. at the end
of the first month of operations, April 2014.
Instructions
(a)Prepare in the order they occurred the journal entries (including explanations) that
resulted in the amounts posted to the accounts.
(b)Prepare a trial balance at April 30, 2014.
Assume that the E-Zip Corporation uses the indirect method to depict cash flows.
Indicate where, if at all, land and building purchased with a mortgage would be
classified on the statement of cash flows.
a.Operating activities section.
b.Investing activities section.
c.Financing activities section.
d.Does not represent a cash flow.
On October 1, 2014, Hess Company places a new asset into service. The cost of the
asset is $80,000 with an estimated 5-year life and $20,000 salvage value at the end of
its useful life. What is the book value of the plant asset on the December 31, 2014,
balance sheet assuming that Hess Company uses the double-declining-balance method
of depreciation?
a.$52,000.
b.$60,000.
c.$72,000.
d.$76,000.
The adjusted trial balance for Beneteau Corporation at the end of the 2014 included the
following accounts:
The total non-current liabilities reported on the statement of financial position at
December 31, 2014 are
a.9,880,000
b.10,030,000
c.10,120,000
d.10,360,000
If the single amount of $12,500 is to be received in 2 years and discounted at 11%, its
present value is
a.$11,363.75.
b.$10,145.25.
c.$11,261.25.
d.$10,330.63.
Giraldi Corporation’s stockholders’ equity section at December 31, 2013, appears
below:
On June 30, 2014, the board of directors of Giraldi Corporation declared a 15% stock
dividend, payable on July 31, 2014, to stockholders of record on July 15, 2014. The fair
value of Giraldi Corporation’s stock on June 30, 2014, was $16.
On December 1, 2013, the board of directors declared a 2 for 1 stock split effective
December 15, 2014. Giraldi Corporation’s stock was selling for $18 on December 1,
2014, before the stock split was declared. Par value of the stock was adjusted. Net
income for 2014 was $230,000 and there were no cash dividends declared.
nstructions
(a)Prepare the journal entries on the appropriate dates to record the stock dividend and
the stock split.
(b)Fill in the amount that would appear in the stockholders’ equity section for Giraldi
Corporation at December 31, 2014, for the following items:
Use the following data to determine the total dollar amount of assets to be classified as
current assets.
a.$534,000
b.$224,000
c.$364,000
d.$304,000
A plant asset cost $128,000 and is estimated to have a $16,000 salvage value at the end
of its 8-year useful life. The annual depreciation expense recorded for the third year
using the double-declining-balance method would be
a.$10,720.
b.$18,000.
c.$15,750.
d.$12,250.
Turner Corporation returned $150 of goods originally purchased on credit from Morgan
Industries. Using the periodic Inventory approach, Turner would record this transaction
as:
Instructions: Place an ‘X’ in the appropriate column to designate whether each of the
following accounts is an asset, a liability, stockholders’ equity, revenue or expense
account.
Barber Company lends Monroe Company $30,000 on April 1, accepting a four-month,
6% interest note. Barber Company prepares financial statements on April 30. What
adjusting entry should be made before the financial statements can be prepared?
The adjusted trial balance shown below is for Rich Company at the end of its fiscal
year:
Instructions:
Prepare the closing entries for the temporary accounts at March 31
Physician Reference Service (PRS) provides services to physicians including research
assistance, diagnosis coding, and medical practice software including an advanced
medical record cross-referencing system. PRS is aggressive in monitoring other firms’
offerings and ensuring that its services are comparable to all others.
Because of its need to stay abreast of new product offerings, PRS spends a lot of money
sending professionals to trade shows. In addition, PRS has agreements with several
clients whereby the client requests a presentation of a competitor’s services. A PRS
employee poses as an employee of the client’s office and attends the presentation,
obtaining as much data and sample information as possible. The cost of the travel and
attending presentations is charged to Product Development and expensed during the
current year.
In April of this year, PRS began selling a software product substitute before the
competitor’s software was released. The competitor, Compu-Med, sued for copyright
infringement and won. PRS had to withdraw its product from the market and pay $1.5
million in damages. PRS immediately negotiated an agreement with Compu-Med to sell
Compu-Med’s product (since it was prohibited from offering its own version for five
years). This agreement cost an additional $1.3 million, but it allowed PRS to continue
to offer a full line of services.
PRS’ accountant, Kelly Hall, initially recorded the cash payments as “Loss from
Lawsuit” and “Product Development,” respectively. However, Gilbert Brown, the
controller, instructed Kelly to create an intangible asset, named “Goodwill,” and charge
both costs to this account. “We’re protected from another lawsuit as long as this
agreement is in effect,” he says. “It’s about as close to goodwill as we’ll ever get from
our competitors. We might as well amortize the cost rather than take the full hit to
income, anyway.”
Required:
1)What are the ethical issues?
2)What should Kelly do?
List the characteristics of promissory notes.
List the reasons for obtaining promissory notes from customers.
What action relating to promissory notes must be taken at the end of the accounting
period?
Mintz Company issued $400,000, 10%, 10-year bonds on January 1, 2014, at 105.
Interest is payable annually. Mintz uses the straight-line method of amortization and has
a calendar year end.
Instructions
Prepare all journal entries made in 2014 related to the bond issue.