Many stockholders choose to invest in preferred stock because
a. preferred stock can always be converted into common stock at the stockholder’s
option.
b. the preferred dividend distributions are generally increased each year.
c. dividends are distributed to preferred stockholders before common stockholders.
d. preferred stock includes the right to participate in management decisions through
voting privileges.
A company purchased land and incurred the following costs:
What is the cost of the land?
a. $550,000
b. $597,500
c. $572,500
d. $562,500
Give the borrower the option to pay off the debt prior to maturity. Match these terms
with their definitions.
a. Callable bonds f. Mortgage bonds
b. Capital lease g. Notes payable
c. Convertible bonds h. Operating lease
d. Debenture bonds i. Secured bonds
e. Junk bonds
What effect does “recognizing accrued Interest Revenue at the end of the accounting
period” have on the accounting equation?
a. Assets increase and Stockholders’ equity decreases.
b. Assets increase and Stockholders’ equity increases.
c. Assets decrease and liabilities decrease.
d. Liabilities increase and Stockholders’ equity decreases.
Refer to AT&U Company. If the company uses the aging of accounts receivable
approach to estimate its bad debts, what amount will be reported as bad debt expense
for 2013?
AT&U Company
Data for the year ended December 31, 2013, are presented below:
a. $25,000
b. $45,000
c. $20,000
d. $49,000
Which stockholder ratio requires the use of dividends per share and the current market
price?
a. return on common equity
b. dividend payout ratio
c. earnings per share
d. dividend yield ratio
Which of the following is not classified as a current liability account?
a. accounts payable
b. note payable, due in 2 years
c. salaries and wages payable
d. income taxes payable
Paying dividends
For each transaction provided, choose the appropriate account from the list that would
receive a debit entry as a result of the transaction. (Choices may be used more than
once.)
a. Cash
b. Accounts receivable
c. Supplies
d. Prepaid insurance
e. Land
f. Equipment
g. Accounts payable
h. Unearned revenues
i. Notes payable
j. Common stock
k. Retained earnings
l. Service revenue
m. Salary expense
n. Insurance expense
o. Utilities expense
p. Dividends
Use the following selected financial data from the balance sheet at the end of 2015 and
2014:
Using the information provided, address the following questions for both 2015 and
2014: A) What is the dividend yield ratio?
B) What is the earnings per share measure?
C) What is the dividend payout ratio?
D) What is the total payout ratio?
E) What is the stock repurchase payout ratio?
F) Comment on the change in the stockholders ratios from 2014 to 2015.
A form of compensation whereby employees are granted rights to purchase shares of
stock in the future. Match the terms to the definitions.
Which method of accounting for investments recognizes income when income is earned
by the investee?
a. fair value method
b. amortized cost method
c. trading method
d. equity method
When preparing the financial statements, the accountant must estimate the balances of
certain accounts. When two possible estimates are available and when these estimates
are about equally likely, the accountant’s prudent reaction is to select the least optimistic
estimate in terms of the recorded amounts of assets or income statement accounts. This
is referred to as the principle of ____________________.
Depreciation has an effect on the company’s income taxes.
The list of accounts presented below are from the accounting records of Hoosier
Momma Promotions on September 30, 2013. Assume that each account balance is
normal, and present them in proper trial balance format.
The difference between accrual-based revenue and accrual-based expenses in the period
the activity occurred is called ____________________.
The first step in preparing the classified balance sheet is to list the assets in order of
liquidity.
Borrowing from the bank in order to acquire computer equipment for $1,500 has the
effect of increasing both assets and ____________________.
What impact does materiality have on the determination of how a cost related to a plant
asset is reported on the financial statements?
Graphic Designs, Inc. engaged in the following transactions during 2013:
Prepare journal entries for each of these transactions.
The accounting records for Durden Rentals shows a cash balance of $13,676 on March
31, 2013. On the evening of March 31, company receipts of $3,250 were placed in the
bank’s night deposit drop box; this deposit was processed by the bank on April 1. The
March 31 bank statement shows balance of $9,866, including a service charge of $45,
an NSF check from a customer for $210, and a $650 debit memo for the payment of the
company’s utility bill. All of the checks that the company had written during March
were listed on the bank statement except for check #2156 in the amount of $34 Prepare
a bank reconciliation to calculate the company’s adjusted cash balance at March 31,
2013.
