FC 638 | Course Paper

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The prospects for future dividend payments.

Provided is a list of important users of accounting information. Also provided are

descriptions of a major need for accounting information that may be experienced by the

various users. Identify the one user group that is most likely to have the need described.

(Choices may be used more than once.)

a. Investors

b. Management

c. Supplier

d. Banker

e. Government

f. Employees

g. Labor Union

h. Investors and Banker

i. Supplier and Banker

Paid interest on a capital lease.

Use the following codes to indicate how the cash flow effect, if any, of each transaction

would be reported on a statement of cash flows if the operating activities section is

prepared using the direct method. (Choices may be used more than once.)

a. Inflow from operating activity

b. Outflow from operating activity

c. Inflow from investing activity

d. Outflow from investing activity

e. Inflow from financing activity

f. Outflow from financing activity

g. Noncash investing and financing activity

h. Not reported on statement of cash flows

When a corporation issues a stock dividend, which of the following is true?

a. Cash decreases.

b. Total stockholders’ equity remains the same.

c. Total stockholders’ equity decreases.

d. Retained earnings is increased.

Land is not depreciated because it

a. appreciates in value.

b. does not have an established depreciable life.

c. has a useful life that is limited to the period of time a company is in business

d. will provide future benefits for a company for an unlimited period of time.

When a corporation declares a cash dividend, which of the following is true?

a. cash decreases

b. liabilities decrease

c. stockholders’ equity decreases

d. no entry is necessary

Sold office building for cash.

Use the following codes to indicate how the cash flow effect, if any, of each transaction

would be reported on a statement of cash flows if the operating activities section is

prepared using the direct method. (Choices may be used more than once.)

a. Inflow from operating activity

b. Outflow from operating activity

c. Inflow from investing activity

d. Outflow from investing activity

e. Inflow from financing activity

f. Outflow from financing activity

g. Noncash investing and financing activity

h. Not reported on statement of cash flows

Refer to the information for Gainesville Truck Center. Which of the following

statements is true regarding the entry to record wages and the related liabilities?

Gainesville Truck Center This company has a weekly payroll of $10,000 for its

employees who work Monday through Friday. Federal and state income taxes are

withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld

at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In

addition, the federal and state unemployment taxes are applied at rates of 2% and 5%,

respectively. The company’s year-end is December 31. a. FICA tax expense will be

debited in the amount of $765.

b. Social security tax payable will be debited in the amount of $620.

c. Medicare tax payable will be credited in the amount of $145.

d. Federal income taxes payable will be credited in the amount of $2,100.

Measures the profitability of a company’s operations in relation to its sales.Match these

terms to their correct definition.

Failure to record the earned portion of unearned revenue would result in which of the

following?

a. Net income being understated.

b. No effect on total liabilities.

c. Stockholders’ equity being overstated.

d. Total assets being understated.

Which of the following items is included as part of comprehensive income but not as

part of net income?

a. income tax expense

b. unrealized holding gains or losses

c. gains or losses on the sale of equipment

d. gains or losses on the sale of investments

Based on its income for the month, a company estimates that it will owe $23,000 of

federal income taxes for the month of May. What is the effect of the adjustment on the

financial statements?

a. increase stockholders’ equity

b. increase income taxes expense

c. increase retained earnings

d. decrease income taxes payable

A company issued 5-year bonds with a par value of $5,000,000 and a 7% annual stated

rate of interest on January 2, 20 The issue price of the bond issue was $4,431,850 which

reflected a 10% effective interest rate. Interest payments are made annually. Any

premiums or discounts should be amortized using the effective interest rate method.

Required: A) Record the issuance of the bonds.

B) Record interest expense at December 31, 2013.

C) Record the interest paid to the bondholders on January 2, 2014.

D) Record interest expense at December 31, 2014.

Adequate documents and records

Choose the proper category of internal control activities that best matches the

following actions. Each action should be matched with a different numbered item

within the internal controls list.

a. One employee or department should verify the work of another.

b. Specific approval is given by management for the performance of activities.

c. Accounting and cash collections should be properly separated.

d. Blank checks should be stored in a locked location.

e. Initial entry into the accounting system should be from a consistent source with

complete information.

Under this method, equal amounts of premium or discount are amortized to interest

expense each period. Match these terms with their definitions.

a. Bond i. Lessor

b. Contract, coupon, stated rate j. Leverage

c. Discount k. Long-term debt

d. Effective interest rate method l. Market rate, yield

e. Face value, par value, principal m. Maturity

f. Interest amortization n. Premium

g. Lease o. Straight-line method

h. Lessee

The bond issue price is determined by calculating the

a. present value of the stream of interest payments and the future value of the maturity

amount.

b. future value of the stream of interest payments and the future value of the maturity

amount.

c. future value of the stream of interest payments and the present value of the maturity

amount.

d. present value of the stream of interest payments and the present value of the maturity

amount.

Which of the following statements is true regarding a credit memo and its relationship

to a company’s bank reconciliation procedures?

a. It must be recorded as a credit to the balance per the customer’s records.

b. It is issued to notify a company of bank service charges which need to be recorded on

the company’s records.

c. It is issued when a customer gives the company an NSF check which needs to be

recorded on the company’s records.

d. It must be recorded as a debit to the balance per the company’s records.

Which of the following statements regarding the statement of cash flows is true?

a. The statement of cash flows analyzes the changes in consecutive balance sheets in

conjunction with the income statement.

b. The statement of cash flows is organized to present classifications for total cash

inflows and cash outflows.

c. The statement of cash flows analyzes only the changes in current assets and current

liabilities.

d. The statement of cash flows is an optional financial statement.

On April 1, 2013, Guyton Sails accepted a $12,000 advance payment for maintaining a

customer’s fleet of sail boats. The contract is for a twelve month period. In May 2013,

the company performed $1,200 worth of repairs. What is the remaining liability that

would appear on the company’s balance sheet at the end of May?

a. $12,000

b. $10,000

c. $10,800

d. $1,200

Earnings per share is an indication of how much

a. cash the company has for each share of all outstanding stock.

b. earnings the company has for each share of outstanding common stock.

c. earnings the company has for each share of all outstanding stock.

d. dividends the company paid for each share of outstanding common stock.

An amount received and recorded by the business but not yet recorded by the bank

Match the following terms with their correct definition.

a. Bank reconciliation d. Outstanding check

b. Deposit in transit e. Service charges

c. Non-sufficient funds check

During May 2013, Grant Park Refinery sold, on credit, 1,200,000 gallons of motor fuel

at $1.89 each plus Georgia sales tax of 6%. Included in the price per gallon was a $0.42

federal excise tax. All taxes collected are paid to the appropriate taxing authority at the

end of the quarter. Prepare the appropriate journal entries on May 31, 2013, and June

30, 2013.

Under the periodic method, the information on sales can be combined within any period

because all purchases are assumed to occur before any sales transactions.

Strategic risk assessment is designed to identify, analyze, and manage possible threats

to the organization’s success concerning ____________________ forces such as

competitors, customers, suppliers, and PEST factors.

What is conservatism and why is it important in accounting?

Large corporations are profitable enough to maintain their own stockholder lists and

arrange for the issuance of their stock certificates to stockholders rather than having to

retain an independent stock transfer agent to do those things.

The four steps in preparing the Income Statement are: 1) Prepare heading, 2) List the

revenues of the company, 3) List the expenses of the company, 4) List the dividends of

the company.

Dividends in arrears are associated with the cumulative preferred stock only.

Trade receivables represent a stronger legal claim against the debtor than do non-trade

receivables.