ACT 854 Quiz 2 | Course Paper

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Among the assets listed below, which one is considered the most liquid?

a. Cash

b. Accounts receivable

c. Merchandise inventory

d. Prepaid expenses

Museum Corporation acquired a new manufacturing building by issuing 10,000 shares

of its $50 par value preferred stock with a $75 per share market price. Similar buildings

have recently cost $780,000. What are the effects of this transaction on the accounting

equation for Museum?

a. Building and Preferred Stock increase $780,000.

b. Building and Preferred Stock increase $500,000.

c. Building increases $780,000Í¾ Preferred Stock increases $500,000Í¾ Additional

PaidÂin Capital-Preferred increases $280,000.

d. Building increases $750,000Í¾ Preferred Stock increases $500,000Í¾ Additional

PaidÂin Capital-Preferred increases $250,000.

When using the direct method, how is the retirement of bonds payable at their maturity

date shown on the statement of cash flows?

a. Operating activity

b. Investing activity

c. Financing activity

d. Noncash investing and financing activity

One example of a temporary difference between financial and tax reporting results from

a. rent expense.

b. tax-exempt interest from municipal bonds.

c. life insurance proceeds resulting from the death of an executive.

d. depreciation of long-term assets.

A company purchased machinery by issuing 2,000 shares of $3 par value common

stock. Since the company is new, there is no established market price for its stock. How

would the company record the transaction?

a. In terms of the par value of the stock issued.

b. At the fair market value of the machine.

c. At the cost recorded by the previous owner of the machine.

d. Recording the transaction would be postponed until a market price for the stock

could be determined.

Krenshaw Rentals

Use the five transactions for Krenshaw Rentals described below to answer the

question(s) that follow(s)

Refer to the transactions for Krenshaw Rentals. Based on the above transactions, how

much is still owed to Krenshaw on October 31 from its customers?

a. $ -0-

b. $ 250

c. $ 500

d. $ 750

An internal control system consists of all the following policies and procedures except :

a. Those necessary to ensure the safeguarding of an entity’s assets.

b. Those necessary to ensure that cash on hand and on deposit in checking accounts is

beyond the minimal amount for ongoing operations.

c. Those necessary to ensure the reliability of its accounting records.

d. Those necessary to ensure the accomplishment of its overall objectives.

With the effective interest method of amortization, the amortization of bond premium

results in a(n)

a. increase in stockholders’ equity.

b. no change in stockholders’ equity.

c. increase in interest expense.

d. decrease in interest expense.

Match the terms to the definitions by selecting the letter of the term. Each term may be

used more than once or not at all.

a. cumulative feature

b. stock dividend

c. retired stock

d. retained earnings

e. callable feature

f. convertible feature

g. outstanding shares

h. treasury stock

i. participating feature

j. additional paid-in capital

Allows preferred stock to be returned to the corporation in exchange for common stock.

When using the direct method, how are salaries paid to employees reported on the

statement of cash flows?

a. Operating activity

b. Investing activity

c. Financing activity

d. Noncash investing and financing activity

The inflow of assets resulting from the sale of products and services is called a(n)

a. asset

b. liability

c. revenue

d. expense