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When stock is issued for a noncash asset, the par value of the stock is the best indicator
of the value of the asset.
a. True
b. False
Select the letter of the term each statement best describes.
a. authorized shares
b. issued shares
c. outstanding shares
d. par value
e. additional paid-in capital
f. retained earnings
g. cumulative feature
h. participating feature
i. callable stock
j. treasury stock
k. retirement of stock
l. dividend payout ratio
m. stock dividend
n. stock split
o. market value per share
p. convertible stock
q. book value per share
Creation of additional shares of stock with a concurrent reduction of the par value of the
stock.
Under the cost principle, assets are always carried at their current market value.
a. True
b. False
The going concern assumption infers that a company will continue to operate
indefinitely.
a. True
b. False
Morton & Associates Use the following five transactions for Morton & Associates, Inc.
to answer the question(s).
See the transactions to Morton & Associates. The journal entry to record the May 15
transaction will include a debit of $1,220 to
a. Salaries Expense
b. Salaries Payable
c. Prepaid Expenses
d. Accounts Payable
Carlton Industries has identified the following items and would like you to answer a
few questions about their effect on Stockholders' Equity. (Items are used only once.)
a. Preferred stock issued by Carlton
b. Amount received by Carlton in excess of par value when preferred stock was issued
c. Dividends in arrears on Carlton preferred stock
d. Cash dividend declared but unpaid on Carlton stock
e. Stock dividend declared but unissued by Carlton
f. Treasury stock
g. Amount received in excess of cost when treasury stock is reissued by MJ
h. Retained earnings
Which item decreases Retained Earnings and also credits a payable (liability)?
Big Surf Shop provided the following information from its 2015 financial statements:
Total Assets $655,000
Total Liabilities 225,000 In addition, the stockholders' equity section of the balance
sheet showed: Preferred stock, 10%, $2 par value, 10,000 authorized, 8,000 issued and
outstanding, $5 liquidation value $16,000
Common stock, $4 par value, 20,000 shares authorized, 10,000 issued and outstanding
40,000
The common stock had a year-end market price of $24.
A) Calculate the book value per common share at year-end. B) Indicate the usefulness
of this ratio for Big Surf Shop.
Global Inc. had net income for 2015 of $24,000. It declared and paid a $13,000 cash
dividend in 2015. If the company's retained earnings for the end of the year was
$39,600, what was the company's retained earnings balance at the beginning of 2015?
a. $28,600
b. $50,600
c. $76,600
d. $2,600
a. A receivable arising from the sale of goods or services with a verbal promise to pay.
b. A form used to categorize the various individual accounts receivable according to the
length of time each has been outstanding.
c. A method of estimating bad debts on the basis of either the net credit sales of the
period or the accounts receivable at the end of the period.
d. A measure of the number of times receivables are collected in a period.
e. The general ledger account that is supported by a subsidiary ledger.
f. A contra-asset account used to reduce accounts receivable to its net realizable value.
g. The detail for a number of individual items that collectively make up a single general
ledger account.
h. The recognition of bad debts expense at the point an account is written off as
uncollectible. Aging schedule
Acquisition cost should not include expenditures unrelated to the acquisition, like
repair costs for damages incurred during installation, or costs incurred after the asset
was installed and use begun.
a. True
b. False
Failure to record amounts earned for services provided to customers but not yet paid
results in which of the following
a. Net income being overstated
b. No effect on total assets
c. Stockholders' equity being overstated
d. Total assets being understated
When using the allowance method, what are the effects on the accounting equation
when a company writes off a bad debt?
a. Assets and stockholders' equity increase.
b. Assets and stockholders' equity decrease.
c. Assets increase and stockholders' equity decreases.
d. No effect on overall assets or equity.
The gross profit ratio is calculated as gross profit divided by net income.
a. True
b. False
All operating assets, except land, are subject to depreciation, amortization, or depletion.
a. True
b. False
In 2015, Baloga Heating Company sold 400 water heaters for $350 each. The water
heaters carry a 2-year warranty for repairs. Baloga estimates that repair costs will
average 2% of the total selling price. How much is recorded in the warranty liability
account as a result of selling the water heaters during 2015?
a. $4,200
b. $2,800
c. $1,400
d. No liability should be recorded until the water heaters are brought back for repairs.
Goodwill can be recorded as an asset when a(n)
a. business has above normal profitability compared to other businesses in its industry.
b. business can determine that it has created customer goodwill and name recognition.
c. offer is received to purchase the business at a price in excess of the value of the
assets.
d. business is purchased and payment is made in excess of the value of the net assets.
For each of the following accounts, indicate whether it is a balance sheet account or an i
ncome statement account.
a. Balance sheet account
b. Income statement account
Accounts Payable
Front Corporation's endÂofÂyear balance sheet consisted of the following amounts:
What is Front's owners'equity balance at the end of the current year?
a. $3,000
b. $110,000
c. $63,000
d. $173,000
The interest rate used to calculate interest expense in the effective interest method of
amortization is equal to the market rate of interest at the time the bonds are issued.
a. True
b. False
Asset turnover is calculated as Net income divided by Average Total Assets.
a. True
b. False
In place of _____________, a worksheet is a useful device to help in the preparation of
a statement of cash flows.
Theis the file or book that contains all of a company's accounts.
River Company wants to minimize the amount of time and effort its bookkeepers spend
on calculating depreciation. Since River has not been profitable, taxes are not an issue,
but maximizing the profit and minimizing reported losses are major concerns.
Recommend a course of action for River. Support your recommendation.
Presented below are condensed data from the financial statements of Unique Factory
for 2015 and 2014. The figures are expressed in thousands. Use this information to
answer the questions that follow.
In 2014, you invested $12,000 along with 5 other investors in a new theatre, Rock-On,
that offers Broadway play productions. Because you live out of state, you have notbeen
actively involved in the daily affairs of the theatre. On January 10, 2015, you are
excited because you received $12,000 as a dividend after the end of the 1st year of the
theatre's existence. Included with your $12,000 check are financial statements and some
supplemental information regarding the accounting. The supplemental information
explains: (1) During the last three months of 2014, an aggressive advertising campaign
resulted in the sale of 600 season tickets for the 2015 productions. Each season ticket
cost $120 and the resulting $72,000 was included in 2014 income. (2) Along with the
advertising campaign, the general manager was able to secure pledges of $7,500 for
advertising by local merchants in the playbills for the first two productions for 2015.
This amount is included as advertising revenue in the 2014 financial
statements.REQUIRED:Are there any problems related to the supplementary
disclosures? If so, explain and indicate what effects (over- or understatements) these
items will have on the financial statements.
Assume that Wei Company's Stockholders' Equity category of the balance sheet appears
as follows as of January 1, 2015:
1> Assume that on January 2, 2015, Wei declares a 10% stock dividend to common
stockholders to be distributed on April 1, 2015. Prepare the journal entry to be recorded
by Wei. 2> Instead of (1) above, assume that on January 2, 2015, Wei declares a 100%
stock dividend to be distributed on April 1, 2015. Prepare the journal entry to be
recorded by Wei. 3> What entry would be made when the stock in (2) above, is actually
distributed?
If a company records a $310 receipt as $130, this type of error is called a(n).
Select the best answer from the list below to complete statements 131-141 that follow.
The number of shares issued less the number of shares held as treasury stock are
______________________________.
