A common stock provision that provides for the maintenance of stockholders’
ownership percentage upon the issuance of new stock. Match the terms to the
definitions.
Any transaction or set of transactions that brings together two or more previously
separate entities to form a single accounting entity
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Refer to C2IT Corporation. Answer the following: Required: A) Determine the effect on
the accounting equation of each transaction. B) Determine the effect on the accounting
equation of the necessary adjustments at December 31 for each of the following:1)
Depreciation on the building2) Interest on the promissory note3) Recognition of the
expired portion of the insurance4) Depreciation on the computers5) Cash received in
advance of services provided C) Prepare an income statement for the six months ended
December 31, 2013. C2IT has a tax rate of 30%.
Which one of the following is an example of a deferred revenue?
a. Sales are made to customers on credit.
b. Revenue has been earned but not yet recorded.
c. Payments are received prior to providing the services to customers.
d. Cash sales are made to customers.
What is the primary reason for a stock split?
a. To distribute cash to the investor.
b. To decrease the market value of the stock.
c. To decrease the number of shares outstanding.
d. To increase the capital stock of the corporation.
Suppose a corporation issues 5,000 shares of $1 par common stock for $30 per share. In
addition to the increase in cash, what effect does this transaction have on the accounting
equation?
a. Retained earnings increases $150,000.
b. Paid-in capital in excess of par increases $145,000.
c. Common stock increases $150,000.
d. Gain on stock issuance increases $145,000.
A corporation is authorized by its corporate charter to issue 50,000 shares of preferred
stock with a 7% dividend rate and a par value of $10 per share, and 750,000 shares of
common stock with a par value of $2 per share. On January 15, 2014, 2,000 shares of
preferred stock was issued for $14 per share along with 10,000 shares of common stock
for $50 per share.
You just won the lottery and have elected to receive 10 annual payments instead of the
lump sum of $74,818.59. Calculate the amount of your annual payment assuming a 6%
interest rate.
a. $17,178.90
b. $10,165.44
c. $18,000.00
d. $10,832.11
Refer to LaFarge North America. How many shares of common stock are outstanding?
a. 68,000
b. 78,000
c. 98,000
d. 100,000
Failure to record depreciation expense for the period results in which of the following?
a. Net income being overstated.
b. No effect on total assets.
c. Stockholders’ equity being overstated.
d. Both a and c.
The elapsed time between the purchase of goods for resale and the collection of cash
from customers
Match the following terms with their correct definition.
a. Cash equivalents c. Operating cycle
b. Cash over and short d. Petty cash
The current assets of Rock Garden Gifts were considered very liquid at December 31,
2015. This means that the company
a. has a larger quick ratio than current ratio.
b. must decrease its liquidity in order to appear more favorable to potential investors.
c. should attempt to borrow money in order to remain in business.
d. is able to pay its current obligations using its current assets.
A company is referred to as a parent if it owns
a. 33% of the debt securities of another company.
b. 100% of the debt securities of another company.
c. 15% of the stock of another company.
d. more than 50% of the stock of another company.
Income Tax Expense
Several accounts from the financial records of Wynn Linders, Inc. are listed. Indicate its
normal balance and the debit/credit rules for increasing the account. (Choices may be
used more than once.)
A current liability includes obligations which must be repaid
a. within one year.
b. within one year or within the operating cycle, whichever is shorter.
c. within one year or within the operating cycle, whichever is longer.
d. by the end of the operating cycle.
Presented below are accounts from the general ledger:
Each of the accounts has been assigned an identification number which you will use as
answers for the transactions described below. Enter the account numbers in the blank
spaces under the headings Debit and Credit to indicate the accounts debited and
credited when each transaction is recorded in a general journal.
Which of the following results is generally considered favorable?
a. a large decrease in the accounts receivable turnover ratio
b. an increase in the inventory turnover ratio
c. an increase in sales along with a larger decrease in the gross profit percentage.
d. a decrease in the operating cash flow ratio
Refer to Rio Imports. The net profit margin percentage for 2015 is
Rio Imports
Information from the financial statements are provided below:
a. 14.32%.
b. 16.00%.
c. 18.95%.
d. 24.11%.
A list of all active accounts and their balances at a particular date, which is used to
prove the equality of debits and credits, is a
a. Chart of Accounts.
b. General Ledger.
c. Journal.
d. Trial Balance.
An independent auditor’s (CPA’s) report is a guarantee that the financial statements are
free from fraud or material error.
The Statement of Cash Flows classifies cash flow into these three categories:
____________________, ____________________ and ____________________.
When a company sells its own common stock, it is a(n) ____________________
activity on the statement of cash flows.
Both stock dividends and stock splits increase the number of a corporation’s outstanding
shares without altering the proportionate ownership of the corporation.
Property, plant and equipment is classified as ____________________ assets on the
balance sheet.
An expenditure that does not increase the future economic benefits of the asset is
referred to as a capital expenditure.
Independent auditors (CPAs) render an opinion that the financial statements do or do
not fairly present a company’s financial position, operating results, and cash flows.
Distinguish between stock warrants and stock options.