Which of the following is an incorrect statement about a corporation?
a. A corporation is an entity separate and distinct from its owners.
b. Creditors ordinarily have recourse only to corporate assets in satisfaction of their
claims.
c. A corporation may be formed in writing, orally, or implied.
d. A corporation is subject to numerous state and federal regulations.
Answer:
On January 1, 2015, Hunt Company purchased 30,000 shares of the 100,000 common
shares outstanding of Agler Company for $2,700,000. During 2015, Agler Company
reported net income of $600,000 and paid a cash dividend of $275,000. The balance of
the Stock Investments account on the books of Hunt Company on December 31, 2015,
is
a. $2,797,500.
b. $2,617,500.
c. $2,880,000.
d. $2,700,000.
Answer:
The discontinued operations section of the income statement refers to
a. discontinuance of a product line.
b. the income or loss on products that have been completed and sold.
c. obsolete equipment and discontinued inventory items.
d. the disposal of a significant component of a business.
Answer:
A business organized as a corporation
a. is not a separate legal entity in most states.
b. requires that stockholders be personally liable for the debts of the business.
c. is owned by its stockholders.
d. terminates when one of its original stockholders dies.
Answer:
Prepare the necessary journal entries to record the following transactions, assuming a
periodic inventory system:
(a) Purchased $450,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $30,000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.
Answer:
The manager of Brick Company is given a bonus based on income before income taxes.
Net income, after taxes, is $11,200 for FIFO and $9,800 for LIFO. The tax rate is 30%.
The bonus rate is 20%. How much higher is the manager’s bonus if FIFO is adopted
instead of LIFO?
a. $84
b. $2,800
c. $400
d. $420
Answer:
A subsidiary ledger is
a. used in place of the general ledger if the general ledger is destroyed or stolen.
b. a group of accounts used by branches and subsidiaries of a corporate business.
c. a group of accounts with a common characteristic that provides detailed information
about a control account in the general ledger.
d. used to post excess transactions if a general ledger account becomes full during an
accounting period.
Answer:
On July 4, 2015, Wyoming Mining Company purchased the mineral rights to a granite
deposit for $1,600,000. It is estimated that the recoverable granite will be 400,000 tons.
During 2015, 100,000 tons of granite was extracted and 60,000 tons were sold. The
amount of the Depletion Expense recognized for 2015 would be
a. $200,000.
b. $120,000.
c. $240,000.
d. $400,000.
Answer:
Given the following information, determine the adjusted cash balance per books from
the following information:
a. Balance per books as of June 30, $8,600.
b. Outstanding checks, $820.
c. NSF check returned with bank statement, $130.
d. Deposit mailed the afternoon of June 30, $300.
e. Check printing charges, $30.
f. Interest earned on checking account, $12.
Answer:
The income statement for Pointe Company for the year ended December 31, 2015
appears below.
*Includes $20,000 of interest expense and $25,000 of income tax expense.
Additional information:
1> Common stock outstanding on January 1, 2015 was 50,000 shares. On July 1, 2015,
10,000 more shares were issued.
2> The market price of Pointe’s stock was $11.70 at the end of 2015.
3> Cash dividends of $30,000 were paid, $7,000 of which were paid to preferred
stockholders.
Instructions
Compute the following ratios for 2015:
(a) Earnings per share.
(b) Price-earnings.
(c) Times interest earned.
Answer:
The first step in designing a computerized accounting system is the creation of the
a. general ledger.
b. general journal.
c. trial balance.
d. chart of accounts.
Answer:
Eneri Company’s inventory records show the following data:
A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units
for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic
inventory method. Under the LIFO method, cost of goods sold is
a. $28,000.
b. $169,200.
c. $173,040.
d. $178,000.
Answer:
Which one of the following payroll taxes is not withheld from the employee’s wages
because it is not levied on the employee?
a. Federal income tax
b. Federal unemployment tax
c. State income tax
d. FICA tax
Answer:
If a business pays rent in advance and debits a Prepaid Rent account, the company
receiving the rent payment will credit
a. Cash.
b. Prepaid Rent.
c. Unearned Rent Revenue.
d. Rent Revenue.
Answer:
A worksheet is a multiple column form that facilitates the
a. identification of events.
b. measurement process.
c. preparation of financial statements.
d. analysis process.
Answer:
Newell Company completed the following transactions in October:
Instructions
(a) Indicate the cash received for each collection. Show your calculations.
(b) Prepare the journal entry for the
(1) Oct. 17 sale. The merchandise sold had a cost of $3,500.
(2) Oct. 23 sales return. The merchandise returned had a cost of $140.
(3) Oct. 28 collection.
Newell uses a perpetual inventory system.
Answer:
The balance in the income summary account before it is closed will be equal to
a. the net income or loss on the income statement.
b. the beginning balance in the retained earnings account.
c. the ending balance in the retained earnings account.
d. zero.
Answer:
Assume the following sales data for a company:
If 2013 is the base year, what is the percentage increase in sales from 2013 to 2015?
a. 100%
b. 61.5%
c. 46.2%
d. 68.4%
Answer:
Colaw Company reported net income of $80,000 for the year ended December 31, 201
During the year, inventories decreased by $28,000, accounts payable decreased by
$32,000, depreciation expense was $40,000, and a gain on disposal of equipment of
$26,000 was recorded. Net cash provided by operations in 2015 using the indirect
method was
a. $206,000.
b. $42,000.
c. $154,000.
d. $90,000.
Answer:
The entry to record the payment of an interest-bearing note at maturity after all interest
expense has been recognized is
a. Notes Payable
Interest Payable
Cash
b. Notes Payable
Interest Expense
Cash
c. Notes Payable
Cash
d. Notes Payable
Cash
Interest Payable
Answer:
On January 1, Soft Corporation had 80,000 shares of $10 par value common stock
outstanding. On June 17, the company declared a 10% stock dividend to stockholders of
record on June 20. Market value of the stock was $15 on June 17. The stock was
distributed on June 30. The entry to record the transaction of June 30 would include a
a. credit to Common Stock for $80,000.
b. debit to Common Stock Dividends Distributable for $120,000.
c. credit to Paid-in Capital in Excess of Par for $40,000.
d. debit to Stock Dividends for $40,000.
Answer:
Assuming a FICA tax rate of 7.65% on the first $110,100 in wages and 1.45% in excess
of $110,100 and a federal income tax rate of 20% on all wages, what would be an
employee’s net pay for the year if he earned $180,000? Round all calculations to the
nearest dollar.
a. $135,577
b. $126,141
c. $144,000
d. $134,564
Answer:
Hsu, Inc. issued 10,000 shares of stock at a stated value of $8/share. The total issue of
stock sold for $15 per share. The journal entry to record this transaction would include a
a. debit to Cash for $80,000.
b. credit to Common Stock for $80,000.
c. credit to Paid-in Capital in Excess of Par for $150,000.
d. credit to Common Stock for $150,000.
Answer:
Eneri Company’s inventory records show the following data:
A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units
for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic
inventory method. The weighted-average cost per unit is
a. $8.00.
b. $8.01.
c. $8.24.
d. $9.30.
Answer:
The following data are available for Two-off Company.
Net cash provided by financing activities is:
a. $180,000.
b. $370,000.
c. $360,000.
d. $420,000.
Answer:
The contractual interest rate is always equal to the market interest rate on the date that
bonds are issued.
Answer:
Free cash flow equals cash provided by operations less capital expenditures and cash
dividends.
Answer:
A single-column purchases journal is used to record purchases of merchandise on
account.
Answer:
To be faithfully representative, accounting information should predict future events,
confirm prior expectations, and be reported on a timely basis.
Answer:
A corporation can issue more shares than it is authorized in its charter, if the board of
directors approves of an increase in the number of authorized shares.
Answer:
A good internal control feature is to have a written hiring authorization form completed
before a new employee is added to the payroll.
Answer:
Pleasant Company has decided to begin accumulating a fund for plant expansion. The
company deposited $80,000 in a fund on January 2, 201 Pleasant will also deposit
$40,000 annually at the end of each year, starting in 201 The fund pays interest at 4%
compounded annually. What is the balance of the fund at the end of 2015 (after the
2015 deposit)?
Answer: