The corporate charter of Torres Corporation allows the issuance of a maximum of
4,000,000 shares of $1 par value common stock. During its first three years of
operation, Torres issued 2,080,000 shares at $15 per share. It later acquired 80,000 of
these shares as treasury stock for $25 per share.
Instructions
Based on the above information, answer the following questions:
(a)How many shares were authorized?
(b)How many shares were issued?
(c)How many shares are outstanding?
(d)What is the balance of the Common Stock account?
(e)What is the balance of the Treasury Stock account?
Which of the following sets of transactions contain only operating activities?
a.Issued stock for cash; received cash from customers
b.Issued note payable for cash; paid rent for the month
c.Purchased equipment for cash; collected cash from customers
d.Received cash for services provided; paid cash for employee salaries
If Hostell Company has net sales of $500,000 and cost of goods sold of $325,000,
Hostell’s gross profit rate is
a.50%.
b.35%.
c.54%.
d.100%.
The amount you must deposit now in your savings account paying 6% interest, in order
to accumulate $20,000 for a down payment 5 years from now on a new Ferrari 458 is
a.$4,000.00.
b.$14,945.20.
c.$14,924.40.
d.$14,000.00.
BVI Corporation had net income of $1,600,000 and paid dividends to common
stockholders of $400,000 in 2014. The weighted average number of shares outstanding
in 2014 was 500,000 shares. BVI Corporation’s common stock is selling for $50 per
share on the NASDAQ. BVI Corporation’s price-earnings ratio is
a.3.2 times.
b.15.6 times.
c.10 times.
d.5 times.
Which of the following is not considered an external user of accounting information?
a.Finance directors
b.Regulatory agencies
c.Creditors
d.Stockholders
Which one of the following is not an objective of internal control?
a.To ensure compliance with laws and regulations
b.To guarantee the accuracy of the accounting records
c.To enhance the reliability of financial statements
d.To safeguard assets
Financial information is presented below:
The profit margin would be
a..70
b..06
c..30
d..94
Stellar, Inc. decided on January 1 to discontinue its telescope manufacturing division.
On July 1, the division’s assets with a book value of $840,000 are sold for $600,000.
Operating income from January 1 to June 30 for the division amounted to $130,000.
Ignoring income taxes, what total amount should be reported on Stellar’s income
statement for the current year under the caption, Discontinued Operations?
a.$130,000
b.$110,000 loss
c.$240,000 loss
d.$370,000
Carson Company on July 15 sells merchandise on account to Tayler Co. for $2,000,
terms 2/10, n/30. On July 20 Tayler Co. returns merchandise worth $800 to Carson
Company. On July 24 payment is received from Tayler Co. for the balance due. What is
the amount of cash received?
a.$1,200
b.$1,176
c.$1,160
d.$2,000
Using the following balance sheet and income statement data, what is the earnings per
share?
Average common shares outstanding was 10,000.
a.$1.50
b.$2.50
c.$0.67
d.$0.55
Plato Company reports the following for the month of June.
Instructions
(a)Calculate the cost of the ending inventory and the cost of goods sold for each cost
flow assumption, using a perpetual inventory system. Assume a sale of 570 units
occurred on June 15 for a selling price of $8 and a sale of 600 units on June 27 for $9.
(Note: For the average-cost method, round unit cost to three decimal places.)
(b)Why is the average unit cost not $6 [($5 + $6 + $7) / 3 = $6]?
The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
a.$40,000.
b.$44,000.
c.$43,600.
d.$40,400.
Cey, Inc. issued 8,000 shares of stock at a stated value of $10/share. The total issue of
stock sold for $15/share. The journal entry to record this transaction would include a
a.debit to Cash for $80,000.
b.credit to Common Stock for $80,000.
c.credit to Paid-in Capital in Excess of Par Value for $40,000.
d.credit to Common Stock for $120,000.
Selected financial information for Raynor Corporation as of December are presented
below.
Additional Information: Net sales and net income for 2014 were $450,000 and $36,000
respectively. Dividends of $4,000 were declared for common stockholders and $6,000
for preferred shareholders in 2014.
Instructions: Compute the indicated ratios at December 31, 2014, or for the year ended
December 31, 2014, as appropriate. Display answers to two decimal places.
1)Return on assets ______________
2)Profit margin _______________
3)Payout ratio ________________
4)Debt to assets ratio _________________
5)Current ratio ________________
6)Return on common stockholders’ equity _______________
Kendrick Company was organized on January 1. During the first year of operations, the
following expenditures and receipts were recorded in random order.
Debits
Credits
Instructions
Analyze the foregoing transactions using the following tabular arrangement. Insert the
number of each transaction in the Item space and insert the amounts in the appropriate
columns.
The Garvey Sign Company uses the allowance method in accounting for uncollectible
accounts. Past experience indicates that 6% of accounts receivable will eventually be
uncollectible. Selected account balances at December 31, 2013, and December 31,
2014, appear below:
Instructions
Anslaw Electronics purchased packaging equipment for $600,000 cash on July 1, 2014.
Management estimates the equipment can package 800,000 inventory units and will be
productive for 5 years. Its salvage value is estimated at $50,000. During 2014, the
equipment packaged 130,000 units, with another 140,000 units in 2014.
Instructions: Compute the annual depreciation expense for 2014 and 2015, and book
value at December 31, 2015, under the straight-line method.
2014 depreciation = $_______________
2015 depreciation = $_______________
December 31, 2015 book value = $_______________.
On November 1, 2014, Kalen Corporation’s stockholders’ equity section is as follows:
On November 1, Kalen declares and distributes a 15% stock dividend when the market
value of the stock is $16 per share.
Instructions
Indicate the balances in the stockholders’ equity accounts after the stock dividend has
been distributed.
O’Conner Company had total operating expenses of $135,000 in 2014, which included
depreciation expense of $22,000. Also during 2014, prepaid expenses increased by
$9,000 and accrued expenses decreased by $5,500.
Instructions
Calculate the amount of cash payments for operating expenses in 2014 using the direct
method.
Benson and Jencks is a manufacturing company that specializes in writing instruments.
The past year was a difficult one for the company, as it sought to retain its share in a
market in which the largest competitors were also rapid innovators. Benson and Jencks
introduced a new product late in the year, even though testing was not complete. It was
a pen designed with two cartridges: one supplying ink and the other correction fluid. A
person could then switch easily between writing and correcting errors. It was priced
fairly high, and was never heavily advertised. Even so, the Correct-O-Pen, as the
product was named, was an overwhelming success.
The success of the product has Fern Donald, the manager of the New Products division,
worried, however. She was concerned that quality problems would begin occurring,
since the longevity of the pen and stability of the correction fluid formulation had not
been tested. She did not want sales personnel to get the bonuses that appeared to be
indicated, since they might aggressively promote a product that would fail in use. She
preferred to complete testing of the pen first, so that more confidence could be placed in
the results.
Top management, however, declined the tests. Ms. Donald then instructed you, the
accountant, not to prorate payroll taxes or rent expense for the rest of the year, but to
show them as current expenses in total. In this way, the new product would appear to be
only slightly profitable.
Required:
1>Describe the alternatives that you as an accountant would have in this situation.
2>Indicate which alternative is best.
On January 1, 2014, Wooden Company issued 16,000 shares of $2 par value common
stock for $120,000. On March 1, 2014, the company purchased 2,000 shares of its
common stock for $15 per share for the treasury.
Instructions
Journalize the stock transactions of Wooden Company in 2014.