Carson Packaging Corporation began business in 2015 by issuing 30,000 shares of $3
par common stock for $8 per share and 12,000 shares of 6%, $10 par preferred stock for
par. At year end, the common stock had a market value of $12. On its December 31,
2015 balance sheet, Carson Packaging would report
a. Common Stock of $360,000.
b. Common Stock of $90,000.
c. Common Stock of $240,000.
d. Paid-In Capital of $90,000.
Answer:
On October 1, 2014, Pennington Company issued a $90,000, 10%, nine-month
interest-bearing note. Assuming interest was accrued in June 30, 2015, the entry to
record the payment of the note on July 1, 2015, will include a:
a. debit to Interest Expense of $2,250.
b. credit to Cash of $90,000
c. debit to Interest Payable of $6,750.
d. debit to Notes Payable of $96,750.
Answer:
Blaine Company had these transactions pertaining to stock investments:
The entry to record the receipt of the dividends on June 1 would include a
a. debit to Stock Investments for $6,000.
b. credit to Dividend Revenue for $6,000.
c. debit to Dividend Revenue for $6,000.
d. credit to Stock Investments for $6,000.
Answer:
When a company pays dividends
a. it doesn’t have to be cash, it could be another asset.
b. the dividends account will be increased with a credit.
c. the retained earnings account will be directly increased with a debit.
d. the dividends account will be decreased with a debit.
Answer:
Planner Corporation’s comparative balance sheets are presented below.
Additional information:
1> Net income was $27,900. Dividends declared and paid were $22,500.
2> All other changes in noncurrent account balances had a direct effect on cash flows,
except the change in accumulated depreciation. The land was sold for $5,900.
Instruction
(a) Prepare a statement of cash flows for 2015 using the indirect method.
(b) Compute free cash flow.
Answer:
By January 31 following the end of a calendar year, an employer is required to provide
each employee with a(n)
a. state unemployment tax form.
b. federal unemployment tax form 940.
c. wage and tax statement form W-2.
d. employee’s withholding allowance certificate form W-4.
Answer:
Moore, Inc. had 250,000 shares of common stock outstanding before a stock split
occurred, and 1,000,000 shares outstanding after the stock split. The stock split was
a. 2-for-4.
b. 5-for-1.
c. 1-for-4.
d. 4-for-1.
Answer:
When journalizing, the reference column is
a. left blank.
b. used to reference the source document.
c. used to reference the journal page.
d. used to reference the financial statements.
Answer:
Netta Shutters has the following inventory information.
A physical count of merchandise inventory on November 30 reveals that there are 90
units on hand. Assume a periodic inventory system is used. Ending inventory under
LIFO is
a. $738.
b. $792.
c. $1,740.
d. $1,794.
Answer:
When a seller grants credit for returned goods, the account that is credited is
a. Sales Revenue.
b. Sales Returns and Allowances.
c. Inventory.
d. Accounts Receivable.
Answer:
If merchandise from a cash sale is returned by a customer for a refund, the sales return
is recorded in the
a. general journal.
b. cash receipts journal.
c. cash payments journal.
d. sales journal.
Answer:
The use of common size financial statements is an example of
a. ratio analysis.
b. vertical analysis.
c. liquidity analysis.
d. horizontal analysis.
Answer:
A retail store credited the Sales Revenue account for the sales price and the amount of
sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue
account amounted to $630,000, what is the amount of the sales taxes owed to the taxing
agency?
a. $600,000
b. $630,000
c. $31,500
d. $30,000
Answer:
During 2015, Parker Enterprises generated revenues of $90,000. The company’s
expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000
and a loss on the sale of equipment of $3,000.
Parker’s income from operations is
a. $18,000.
b. $27,000.
c. $45,000.
d. $90,000.
Answer:
The declaration of a stock dividend will
a. increase paid-in capital.
b. change the total of stockholders’ equity.
c. increase total liabilities.
d. increase total assets.
Answer:
The historical cost principle requires that when assets are acquired, they be recorded at
a. appraisal value.
b. cost.
c. market price.
d. book value.
Answer:
Rouse Corporation’s December 31, 2015 balance sheet showed the following:
Rouse’s total stockholders’ equity was
a. $51,990,000.
b. $43,710,000.
c. $51,360,000.
d. $50,730,000.
Answer:
For its fiscal year ending October 31, 2015, Dickerson Corporation reports the
following partial data.
The flood loss is considered an extraordinary item. The income tax rate is 40% on all
items.
Instructions
(a) Prepare a correct income statement, beginning with income before income taxes.
(b) Explain in memo form why the income statement data are misleading.
Answer:
Frye Company is considering investing in an annuity contract that will return $50,000
annually at the end of each year for 20 years. What amount should Frye Company pay
for this investment if it earns an 8% return?
Answer:
1> Green Corporation purchased 3,000 shares of Flynn Company’s common stock for
$12 per share as a long-term available-for-sale investment on June 30, 2015. Flynn
declared and paid a cash dividend of $1.00 per share on its common stock on
September 30, and had a closing fair value of $18 per share on December 31. Assuming
this investment is appropriately accounted for using the fair value method, it will
increase Green’s 2015 income before taxes by
$.
2> Hogan Inc. purchased 40% of the outstanding common stock of Wyatt Industries on
January 1, 2015 for $180,000. Wyatt reported net income of $70,000 for 2015 and
declared and paid cash dividends on common stock of $30,000. The amount of Hogan’s
investment in Wyatt on December 31, 2015 should be
$.
3> Baker Company purchased 30% of the outstanding common stock of Grey Corp. on
January 1, 2015. Grey reported net income of $90,000 for 2015 and declared and paid
cash dividends on common stock of $25,000. Baker should report revenue from its
investment in Grey for 2015 of
$.
4> Berlin Inc. accounts for its investment in Nolan Corporation using the fair value
method. Berlin bought 3,000 shares (5%) of Nolan’s outstanding common stock for $28
per share on January 1, 2015. Nolan earned $3 per share for 2015, declared and paid
cash dividends of $1 per common share, and had a closing fair value of $24 per share
on December 31. The reported balance sheet value of Berlin’s investment in Nolan at
December 31, 2015 is
$.
Answer:
The process of transferring net income [or loss) for the period to Retained Earnings is
accomplished by making ______________ entries.
Answer:
If disposal of a plant asset occurs at any time during the year, ___________________
for the fraction of the year to the date of disposal must be recorded.
Answer:
Accountants do not have to worry about issues of ethics.
Answer:
The fair value of a plant asset is always the same as its book value.
Answer:
Under GAAP, companies can choose which inventory system?
Perpetual Periodic
a> Yes No
b> Yes Yes
c> No Yes
d> Yes No
Answer:
The payment of interest on bonds payable is classified as a cash outflow from operating
activities.
Answer: