A corporation purchases 30,000 shares of its own $15 par common stock for $30 per
share, recording it at cost. What will be the effect on total stockholders’ equity?
a. Increase by $450,000
b. Decrease by $900,000
c. Increase by $900,000
d. Decrease by $450,000
Answer:
Quagle Company had the following transactions pertaining to debt securities held as a
short-term investment.
Instructions
(a) Journalize the transactions.
(b) Prepare the adjusting entry for the accrual of interest on December 31.
Answer:
Internal users of accounting information include all of the following except
a. company officers.
b. investors.
c. marketing managers.
d. production supervisors.
Answer:
In Lynne Company, there was an increase in the land account during the year of
$43,000. Analysis reveals that the change resulted from a cash sale of land at cost
$115,000, and a cash purchase of land for $158,000. In the statement of cash flows, the
change in the land account should be reported in the investment section:
a. as a net purchase of land, $43,000.
b. only as a purchase of land $158,000.
c. as a purchase of land $158,000 and a sale of land $115,000.
d. only as a sale of land $115,000.
Answer:
On January 1 Jarret Corporation purchased a 35% equity in Dorman Corporation for
$220,000. At December 31 Dorman declared and paid a $60,000 cash dividend and
reported net income of $200,000.
Instructions
(a) Journalize the transactions.
(b) Determine the amount to be reported as an investment in Dorman stock at
December 31.
Answer:
An employee authorized to sign checks should not record
a. owner cash contributions.
b. mail receipts.
c. cash disbursement transactions.
d. sales transactions.
Answer:
Under a consignment arrangement, the
a. consignor has ownership until goods are sold to a customer.
b. consignor has ownership until goods are shipped to the consignee.
c. consignee has ownership when the goods are in the consignee’s possession.
d. consigned goods are included in the inventory of the consignee.
Answer:
Syfy Company on July 15 sells merchandise on account to Eureka Co. for $5,000, terms
2/10, n/30. On July 20 Eureka Co. returns merchandise worth $2,000 to Syfy Company.
On July 24 payment is received from Eureka Co. for the balance due. What is the
amount of cash received?
a. $2,900
b. $2,940
c. $3,000
d. $5,000
Answer:
Answer:
Each of the following would be reported under operating activities except cash receipts
a. from sales of goods.
b. from sales of investments.
c. of interest on loans.
d. of dividends from investments.
Answer:
Which of the following should be classified as an extraordinary item?
a. Effects of major casualties not infrequent in the area
b. Write-off of a significant amount of receivables
c. Loss from the expropriation of facilities by a foreign government
d. Losses due to a bitter, lengthy labor strike
Answer:
The balance in the Unrealized Gain or Loss’”Equity account will
a. appear on the balance sheet as a contra asset.
b. appear on the income statement under Other Expenses and Losses.
c. appear as a deduction in the stockholders’ equity section.
d. not be shown on the financial statements until the securities are sold.
Answer:
Under IFRS, the statement of comprehensive income can be prepared
under
a. the one-statement approach only.
b. the two-statement approach only.
c. either the one-statement approach or the two-statement approach
d. either the two-statement approach or the stockholders’ equity statement
approach.
Answer:
State the effect of the following transactions on the current ratio. Use increase,
decrease, or no effect for your answer.
(a) Collection of an accounts receivable.
(b) Declaration of cash dividends.
(c) Additional stock is sold for cash.
(d) Short-term investments are purchased for cash.
(e) Equipment is purchased for cash.
(f) Inventory purchases are made for cash.
(g) Accounts payable are paid.
Answer:
Companies with good credit ratings use _________________ bonds extensively.
a. callable bonds.
b. convertible bonds.
c. mortgage bonds.
d. debenture bonds.
Answer:
A compound journal entry requires several debits to one account and several credits to
one account.
Answer:
Amy Pond, a fellow employee, wants to understand the basic steps in the recording
process. Identify and briefly explain the steps in the order in which they occur.
Answer:
During 2015, Pink Corporation had the following transactions and events:
1> Issued par value preferred stock for cash at par value.
2> Issued par value common stock for cash at an amount greater than par value.
3> Completed a 2 for 1 stock split in which the $10 par value common stock was
changed to $5 par value stock.
4> Declared a small stock dividend when the market value was higher than the par
value.
5> Declared a cash dividend.
6> Made a prior period adjustment for understatement of net income.
7> Issued par value common stock for cash at par value.
8> Paid the cash dividend.
9> Issued the shares of common stock required by the stock dividend declaration in 4.
above.
Instructions
Indicate the effect(s) of each of the foregoing items on the subdivisions of stockholders’
equity. Present your answers in tabular form with the following columns. Use (I) for
increase, (D) for decrease, and (NE) for no effect.
Answer:
Distinguish between a reversing entry and an adjusting entry. Are reversing entries
required?
Answer:
When debt investments are sold, the gain or loss is the difference between the net
proceeds from the sale and the fair value of the bonds.
Answer:
Agler Company suffered a loss of its inventory on March 28 due to a fire in its
warehouse. As a basis for filing a claim with its insurance company, Agler Company
developed the following information:
The company has experienced an average gross profit rate of 35% in the past and this
rate appears to be appropriate in the current period.
Instructions
Using the gross profit method, prepare an estimate of the cost of the inventory
destroyed by fire on March 28. Show all computations in good form.
Answer:
