King Corporation had net income of $260,000 and paid dividends of $40,000 to
common stockholders and $10,000 to preferred stockholders in 2015. King
Corporation’s common stockholders’ equity at the beginning and end of 2015 was
$870,000 and $1,130,000, respectively. There are 100,000 weighted-average shares of
common stock outstanding.
King Corporation’s return on common stockholders’ equity was
a. 18.6%.
b. 25%.
c. 21%.
d. 22.1%.
Answer:
The trial balance of Houston Inc. includes the following balances: Common Stock,
$40,000; Paid-in Capital in Excess of Par, $64,000; Treasury Stock, $6,000; Preferred
Stock, $30,000. Capital stock totals
a. $70,000.
b. $104,000.
c. $134,000.
d. $140,000.
Answer:
Lark Corporation retires its $800,000 face value bonds at 104 on January 1, following
the payment of annual interest. The carrying value of the bonds at the redemption date
is $829,960. The entry to record the redemption will include a
a. credit of $2,040 to Loss on Bond Redemption.
b. debit of $2,040 to Loss on Bond Redemption.
c. credit of $32,040 to Premium on Bonds Payable.
d. debit of $32,000 to Premium on Bonds Payable.
Answer:
Related buying activities include
a. ordering, receiving, paying.
b. ordering, selling, paying.
c. ordering, shipping, billing.
d. selling, shipping, paying.
Answer:
If preferred stock is cumulative, the
a. preferred dividends not declared in a given year are called dividends in arrears.
b. preferred stockholders and the common stockholders receive equal dividends.
c. preferred stockholders and the common stockholders receive the same total dollar
amount of dividends.
d. common stockholders will share in the preferred dividends.
Answer:
Turturro Department Store utilizes the retail inventory method to estimate its
inventories. It calculated its cost to retail ratio during the period at 75%. Goods
available for sale at retail amounted to $600,000 and goods were sold during the period
for $420,000. The estimated cost of the ending inventory is
a. $135,000.
b. $180,000.
c. $315,000.
d. $450,000.
Answer:
The Constantine Company had the following assets and liabilities on the dates
indicated.
Constantine began business on January 1, 2014, with an investment of $100,000.
Instructions
From an analysis of the change in stockholders’ equity during the year, compute the net
income (or loss) for:
(a) 2014, assuming Constantine’s dividends were $45,000 for the year.
(b) 2015, assuming Constantine made an additional investment of $50,000 and paid no
dividends in 2015.
(c) 2016, assuming Constantine made an additional investment of $15,000 and paid
dividends of $40,000 in 2016.
Answer:
Each of the following is a factor affecting quality of earnings except
a. alternative accounting methods.
b. improper recognition.
c. pro forma income.
d. extraordinary items.
Answer:
Todd Corporation issues its bonds at a discount. Amortization of the discount will
a. decrease bond interest expense.
b. increase bond interest expense.
c. decrease the carrying value of the bonds on the balance sheet.
d. be reported as a loss on the income statement.
Answer:
Schwartzman Co., makes a credit card sale to a customer for $800. The credit card sale
has a grace period of 30 days and then an interest charge of 1.5% per month is added to
the balance. If the unpaid balance on the above sale is $640 at the end of the grace
period, the interest charge is
a. $6.40.
b. $9.60.
c. $11.00.
d. $16.00.
Answer:
The debt to assets ratio is computed by dividing
a. long-term liabilities by total assets.
b. total liabilities by total assets.
c. total assets by total liabilities.
d. total assets by long-term liabilities.
Answer:
Land acquired from the issuance of common stock is reported
a. as a financing activity.
b. as an investing activity.
c. as an operating activity.
d. in a separate schedule at the bottom of the statement of cash flows.
Answer:
Checks received through the mail should
a. immediately be endorsed “For Deposit Only.”
b. be sent to the accounts receivable subsidiary ledger clerk for immediate posting to
the customer’s account.
c. be cashed at the bank as soon as possible.
d. be “rung up” on a cash register immediately.
Answer:
Gross profit does not appear
a. on a multiple-step income statement.
b. on a single-step income statement.
c. to be relevant in analyzing the operation of a merchandiser.
d. on the income statement if the periodic inventory system is used because it cannot be
calculated.
Answer:
A petty cash fund should not be used for
a. postage due.
b. loans to the petty cash custodian.
c. taxi fares.
d. customer lunches.
Answer:
Under the direct method, noncash charges, such as depreciation, are _______________
in the statement of cash flows.
Answer:
Using the following operating data for Complex Corporation, illustrate horizontal analysis.
Answer:
Brandy Corporation’s trading portfolio at the end of the year is as follows:
Brandy subsequently sells Stock D for $10,000. What entry is made to record the sale?
Answer:
In a period of falling prices, the LIFO method results in a lower cost of goods sold than
the FIFO method.
Answer:
On March 1, 2015, Dick Miles purchased a suit at Kenny’s Fine Apparel Store. The suit
cost $600 and Dick used his Kenny credit card. Kenny charges 2% per month interest if
payment on credit charges is not made within 30 days. On April 30, 2015, Dick had not
yet made his payment. What entry should Kenny make on April 30th?
Answer:
For each of the following items, indicate by using the appropriate code letter, how the
item should be reported in the statement of cash flows, using the direct method.
A> Added in determining cash receipts from customers
B> Deducted in determining cash receipts from customers
C> Added in determining cash payments to suppliers
D> Deducted in determining cash payments to suppliers
E> Cash outflow’”investing activity
F> Cash inflow’”investing activity
G> Cash outflow’”financing activity
H> Cash inflow’”financing activity
I> Significant noncash investing and financing activity
J> Is not shown
____ 1> Decrease in accounts payable during a period.
____ 2> Declaration and payment of a cash dividend.
____ 3> Decrease in accounts receivable during a period.
____ 4> Depreciation expense.
____ 5> Conversion of bonds payable into common stock.
____ 6> Decrease in merchandise inventory during a period.
____ 7> Sale of equipment for cash at book value.
____ 8> Issuance of preferred stock for cash.
____ 9> Purchase of land for cash.
____ 10> Loss on sale of a plant asset.
Answer:
Scruffy Brothers Supply uses a periodic inventory system. During May, the following
transactions and events occurred.
Instructions
Journalize the May transactions for Scruffy Brothers. You may omit explanations.
Answer:
