Winters Corporation purchased 15,000 shares of Poores Corporation common stock for
$60 per share on January 2, 2014. Poores Corporation reported net income of
$1,500,000 for 2014 and paid dividends of $300,000 during 2014. Poores has a total of
50,000 shares of common stock outstanding. The entry that would be recorded to
recognize the receipt of cash dividend is:
A. Cash 90,000
Dividend Income 90,000
B. Income, Poores Corporation Investment 90,000
Cash 90,000
C. Cash 90,000
Income, Poores Corporation Investment 90,000
D. Cash 90,000
The following information pertains to Patterson Corporation. Assume that all balance
sheet amounts represent both average and ending figures.
Patterson Corporation had 6,000 shares of common stock issued and outstanding. The
market price of Patterson common stock on December 31, 20×5, was $20. Patterson paid
dividends of $2.50 per share during 20×5.
What is the dividend yield of this corporation? Round your answer to two decimal places.
A. 12.5 percent
B. 18.75 percent
C. 9.90 percent
D. 6.25 percent
According to the long-term debt note in its annual report, the Modern Journal Company,
publisher of the West End Times, Technotes, and other publications, engaged in the
following long-term debt transactions in 20×5:
1) On April 1, 20×5, the company issued $50,000,000 of ten-year, 8 1/4 percent notes
with semi-annual interest payments on April 1 and October 1 at face value.
2) On October 15, 20×5, the company redeemed, prior to maturity dates, all of its
outstanding 10 percent notes that had been issued in connection with the acquisition of
E-Reporter Newspapers, Inc. The redemption price was $32,500,000 plus accrued
interest. The carrying value of the notes on October 15 was $32,500,000 less an
unamortized discount of $3,611,500. The semi-annual interest dates were June 15 and
December 15.
3) On December 8, 20×5, the company issued $50,000,000 of 8 percent notes due on
December 15, ten years later, with semi-annual interest payments on June 15 and
December 15. The notes were issued at face value plus accrued interest.
(Note: Long-term notes are accounted for in a manner similar to that for bonds. Round
answers to nearest dollar)
a. Prepare entries in journal form to record the three transactions described above.
b. Prepare the entries on the interest payment dates of October 1 and December 15, 20×5,
and the year-end adjustment on December 31, 20×5.
c. What was the total interest expense during 20×5 for the three long-term notes issued,
assuming that the balance in Unamortized Discount was $3,746,500 at the beginning of the
year? Assume the balance of the outstanding notes in transaction 2 above was $32,500,000
at the beginning of the year.
Current liabilities are debts that are expected to be satisfied within
A. one year or the normal operating cycle, whichever is shorter.
B. one year or the normal operating cycle, whichever is longer.
C. one year.
D. the normal operating cycle.
Use this balance sheet and income statement to answer the following question. Use
ending balances whenever average balances are required for computing ratios.
The debt to equity ratio for National Textile is
A. 67 percent.
B. 75 percent.
C. 25 percent.
D. 33-1/3 percent.
The owner’s Capital, Withdrawals, and Income Summary accounts for Laurel Repair
Company for the accounting period are presented below in T account form after the
recording and posting of closing entries:
The amount of withdrawals for the period is
A. $50.
B. $200.
C. $400.
D. $500.
Joint ventures
A. have become outmoded
B. are a form of partnership
C. are used only in the United States
D. have unlimited life
Assume that on November 1, a note which has a face value of $9,000, bears interest at 9
percent for 120 days, received from a customer as an extension of her past-due account
is dishonored. The entry that would be made to record the dishonor include all except
A. a debit to Accounts Receivable for $9,000
B. a credit to Interest Income for $266
C. a credit to Notes Receivable for $9,000
D. a debit to Accounts Receivable for $9,266
Sara invests $120,000 for a 30 percent interest in a partnership in which the other
partners have capital totaling $200,000 before admitting Sara. After distribution of the
bonus, what is Sara’s capital balance?
A. $60,000
B. $96,000
C. $120,000
D. $144,000
Income from operations is arrived at after considering all except
A. administrative salaries.
B. interest income.
C. the cost of sales.
D. sales returns and allowances.
Which of the following accounts might be placed first in a journal entry?
A. Interest Payable, when it has been decreased.
B. Accounts Receivable, when it has been decreased.
C. Unearned Revenue, when it has been increased.
D. Service Revenue, when it has been increased.
When a company purchases debt securities, it records them at
A. cost, ignoring any commissions and fees
B. cost plus commissions and fees
C. cost less commissions and fees
D. the value expected at maturity
Failure to record depreciation at year end will result in all of the following except
A. understatement of total liabilities.
B. overstatement of total assets.
C. overstatement of net income.
D. overstatement of owner’s equity.
The following steps in the accounting cycle are presented out of order below. Arrange
the steps in proper order by placing a number from 1 through 6 in the blanks provided.
Also identify each step as either a recurring activity (RA) —one that would be repeated
during the fiscal period—or an end-of-period activity (EOP)—one performed at the end
of the accounting period.
______ a. Prepare an adjusted trial balance.
______ b. Record entries in the journal.
______ c. Adjust the accounts.
______ d. Prepare a trial balance.
______ e. Analyze business transactions from source documents.
______ f. Post entries to the ledger.
April and Cammy are partners who have agreed to admit Elena, who will invest
$30,000 for a 20 percent interest. The previous capital balances were $30,000 and
$60,000 for April and Cammy, respectively. April and Cammy had shared profits and
losses equally. The entry that records Elena’s admission to the partnership is:
Other postretirement benefits should be expensed
A. on the employee’s retirement date.
B. as they are received by the employee.
C. when the employee is hired.
D. as the employee earns them.
The construction of a new wing on an existing building is described as a(n)
A. addition.
B. extraordinary repair.
C. revenue expenditure.
D. betterment.
The board of directors of Lark Corporation declared a cash dividend of $3.50 per share
on 57,000 shares of common stock on June 14, 20×5. The dividend is to be paid on July
15, 20×5, to shareholders of record on July 1, 20×5. The effects of the entry to record
the declaration of the dividend on June 14, 20×5, are to
A. decrease stockholders’ equity and increase liabilities.
B. increase stockholders’ equity and increase liabilities.
C. decrease stockholders’ equity and decrease assets.
D. increase stockholders’ equity and decrease assets.
A company should classify land held for a planned manufacturing facility as
A. an intangible asset.
B. an investment.
C. a current asset.
D. property, plant, and equipment.
Under the allowance method, when a specific account is written off,
A. total assets will be unchanged.
B. total assets will decrease.
C. net income will decrease.
D. total assets will increase.
Use this information to answer the following question.
Pinnacle Corporation has 90,000 shares of $10 par value common stock outstanding.
The following transactions occurred during the year:
The entry to record the transaction of March 17 is:
A. Stock Dividends 198,000
Common Stock Distributable 90,000
Additional Paid-in Capital 108,000
B. Common Stock Distributable 90,000
Common Stock 90,000
C. Common Stock Distributable 198,000
Common Stock 90,000
Retained Earnings 108,000
D. Stock Dividends 198,000
Which of the following is the most appropriate definition of accounting?
A. Electronic collection, organization, and communication of vast amounts of
information
B. The interconnected network of subsystems necessary to operate a business
C. A means of recording transactions and keeping records
D. The measurement, processing, and communication of financial information about an
identifiable economic entity
The owner’s Capital, Withdrawals, and Income Summary accounts for Harmon Repair
Company for the accounting period are presented below in T account form after the
recording and posting of closing entries:
The amount of withdrawals for the period is
A. $550.
B. $300.
C. $600.
D. $1,500.
Which of the following is not an application of accrual accounting?
A. Recognizing revenues when earned and expenses when incurred.
B. Applying the matching rule.
C. Adjusting the accounts.
D. Recording on the basis of actual receipt and payment of cash.
Which of the following is not an internal control activity for cash?
A. Unannounced audits of cash on hand should be made occasionally.
B. The number of persons who have access to cash should be limited.
C. The functions of recordkeeping and keeping custody of cash should be combined.
D. All cash receipts should be recorded promptly.
Copper Company engaged in the following transactions during April
What is the amount of cash still to be paid?
A. $18,000
B. $47,000
C. $94,000
D. $52,000
There are several types of business organizations that mimic the characteristics of a
partnership. Describe two of these business organizations.
a. S corporation, U.S. tax laws treat like a partnership.
b. Limited liability corporation (LLC), members are partners and their liability is
limited to their investment in the business.
c. Special-purpose entities (SPEs) firms with limited lives that a company creates to
achieve a specific objective, such as raising money by selling receivables. By meeting
certain conditions, a company that sets up an SPE can legitimately avoid including the
debt of the SPE on its balance sheet.
One of the best places to look for early signals of change in a company’s profitability is
the
A. Form 10-K.
B. Form 10-Q.
C. Form 8-K.
D. annual report sent to stockholders.
The lower-of-cost-or-market method of accounting for inventories follows the
convention of
A. full disclosure.
B. materiality.
C. conservatism.
D. cost-benefit.
The adjusting entry for the expiration of prepaid advertising, originally recorded as an
asset,
A. Advertising Expense – Debit; Prepaid Advertising – Credit
B. Prepaid Advertising – Debit; Cash – Credit
C. Advertising Expense – Debit; Cash – Credit
D. Prepaid Advertising – Debit; Advertising Expense – Credit