A decrease in the par value of a class of stock brought about by the exchange of original
shares for a greater number of new shares. Match the terms to the definitions.
If a corporation repurchases 500 shares of its previously-issued common stock then
retires these shares, which of the following is true?
a. A new class of stock must be issued in place of the 500 retired shares.
b. Approval from the state is required for this type of transaction.
c. A gain or loss must be recorded, depending on the difference between the repurchase
cost and the original issue price.
d. The common stock and paid-in capital accounts must be decreased by the amount of
the original issue price.
Refer to Lanier Tech. Assume that no dividends were declared or paid during the first
year of operations. What is the dollar amount of total stockholders’ equity reported on
the balance sheet at December 31, 2015?
Lanier Tech
This company was incorporated as a new business on January 1, 2015. The company is
authorized to issue 50,000 shares of $5 par common stock and 10,000 shares of 6%,
$10 par, cumulative, participating preferred stock. On January 1, 2015, the company
issued 8,000 shares of the common stock for $15 per share and 2,000 share of the
preferred stock for $30 per share. Net income for the year ended December 31, 2015
was $375,000. a. $ 60,000
b. $120,000
c. $555,000
d. $725,000
Consist of the long-lived assets that are owned by a business Match these terms with
their correct definition.
a. Franchise e. Organizational costs
b. Intangible operating assets f. Property, plant, and equipment
c. Natural resources g. Trademark
d. Operating assets h. Voluntary disposal
Refer to General Lighting. What is the amount of the accounts receivable as a result of
this transaction?
General Lighting During the first quarter of 2013, the company sold 4,000 batteries on
credit for $150 each plus state sales tax of 6%. a. $ 36,000
b. $600,000
c. $636,000
d. $150,000
The arbitrary amount that establishes a minimum issue price for the stock.
Match the terms to the definitions.
Refer to A-One Construction. If the aging approach is used to estimate bad debts, what
should the balance in the Allowance for Doubtful Accounts be after the bad debts
adjustment?
A-One Construction
The following data are from the company’s records for 2013:
a. $ 2,100
b. $31,100
c. $29,200
d. $27,100
Result when the value of securities must be written up or down to fair market value at
the balance sheet date, a process referred to as “marking to market’
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
Debit entries are used to
a. increase asset accounts.
b. increase revenue accounts.
c. increase liability accounts.
d. increase stockholders’ equity.
Purchased truck 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
Common Stock
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.)
Action Signs recorded credit sales of $10,000 on the gross method. Terms are 2/20,
n/30. Select the correct statement about the entry to record this sale.
a. Accounts receivable increases $10,000.
b. Sales increase $9,800
c. Sales discounts increase $200
d. All of the above are correct
Organization currently working to establish international financial reporting standards
Match each statement to the item listed below.
a. Financial Accounting Standards Board
b. Generally accepted accounting principles
c. International Accounting Standards Board
d. International financial reporting standards
e. Securities and Exchange Commission
In 2013, Karaoke Tunes issued $200,000 of bonds for $190,200. If the stated rate of
interest was 6.5% and the market rate of interest was 7.1%, how would the company
calculate the discount at the time the bonds were issued using the effective interest
method?
a. $190,200 x 7.1%
b. $190,200 x 6.5%
c. $200,000 x 7.1%
d. $200,000 x 6.5%
A bill is received for the current month’s utilities.
Select the choice that describes the type of transaction and whether it should be
recorded in the accounting system. (Choices may be used more than once.)
a. External event to be recorded as a transaction
b. Internal event to be recorded as a transaction
c. Event which should not be recognized in the accounting system
Dividends
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.)
On January 1, 2013, Krammer Company issued five-year, $50,000,000, 10% percent
notes at 103. The premium was $1,500,000. Interest is paid semiannually on June 30
and December 31. Required: A) Record the issuance of the bonds on January 1, 2013.
B) Record the journal entry required on December 31, 2013, assuming the use of
straight line amortization.
C) Record the repayment of the loan principal on December 31, 2017.
After a corporation declares a cash dividend, what takes place on the date of record?
a. cash decreases
b. liabilities decrease
c. stockholders’ equity decreases
d. no entry is necessary
Calmar Corporation sold merchandise to a customer for $30,000 on credit on July 15.
The customer paid Calmar Corporation the amount due on July 31. Under the accrual
basis of accounting, how should Calmar Corporation record the transaction?
a. The company will recognize the revenue on July 31.
b. The July 15th transaction increases revenue, but has no effect on assets because cash
has not been received.
c. Revenue is recognized after the cost of the merchandise sold has been paid by
Calmar Corporation
d. The July 31st transaction has no effect on total assets under the accrual basis.
The two promises made by a bond issuer to the purchaser of the bond are to pay
periodic interest and to ___________________.
For what purpose is horizontal analysis used by financial analysts?
If preferred stock is participating, then the preferred shareholders have the right to share
in excess dividends above their stated dividend.
When a company using LIFO experiences a partial or complete liquidation of its older,
lower-priced inventory, its gross margin will be ____________________ for the period.
A full disclosure policy stipulates that all information that would make a difference to
financial statement users should be revealed.
The demand for accounting information comes from stakeholders both inside and
outside the business. The five stakeholder groups discussed in the text include
____________________, ____________________, ____________________,
____________________, and ____________________.
A chart of accounts is prepared to determine whether the books have gotten out of
balance.