Solved by verified expert :1.
Wesley Hospital installs a new parking lot. The paving cost
$30,000 and the lights to illuminate the new parking area cost $15,000. Which
of the following statements is true with respect to these additions?
$45,000 should be
debited to Land Improvements.
$30,000 should be
debited to the Land account.
$45,000 should be
debited to the Land account.
$15,000 should be
debited to Land Improvements.
2.
Equipment was purchased for $75,000. Freight charges amounted to
$3,500 and there was a cost of $10,000 for building a foundation and installing
the equipment. It is estimated that the equipment will have a $15,000 salvage
value at the end of its 5-year useful life. Depreciation expense each year
using the straight-line method will be
$17,700.
$12,300.
$14,700.
$12,000.
3.
On May 1, 2010, Pinkley Company sells office furniture for $90,000
cash. The office furniture originally cost $225,000 when purchased on January
1, 2003. Depreciation is recorded by the straight-line method over 10 years
with a salvage value of $22,500. What gain should be recognized on the sale?
$6,750.
$27,000.
$13,500.
$14,250.
4.
Equipment with an invoice price
of $20,000 was purchased and freight costs were $900. The cost of the equipment
would be $.
5.
Simon Company issued 4,000 shares of its $5 par value common stock
in payment of its attorney’s bill of $35,000. The bill was for services
performed in helping the company incorporate. Simon should record this
transaction by debiting
Legal Expense for
$35,000.
6.
Organization Expense
for $35,000.
7.
Legal Expense for
$20,000.
8.
Organization Expense
for $20,000.
6. S. Lawyer performed
legal services for E. Corp. Due to a cash shortage, an agreement was reached
whereby E. Corp. would pay S. Lawyer a legal fee of approximately $10,000 by
issuing 5,000 shares of its common stock (par $1). The stock trades on a daily
basis and the market price of the stock on the day the debt was settled is
$1.80 per share.
Given this information, the journal entry for E. Corp. to record this
transaction is:
Legal Expense
9,000
Common Stock
5,000
Paid-in Capital in Excess of Par – Common
4,000
Legal Expense
9,000
Common Stock
9,000
Legal Expense
10,000
Common Stock
10,000
Legal Expense
9,000
Common Stock
5,000
Paid-in Capital in Excess of Par – Common
5,000
7. Rancho Corporation
sold 200 shares of treasury stock for $40 per share. The cost for the shares
was $30. The entry to record the sale will include a
debit to Paid-in
Capital in Excess of Par Value for $2,000.
credit to Treasury
Stock for $8,000.
credit to Gain on Sale
of Treasury Stock for $6,000.
credit to Paid-in
Capital from Treasury Stock for $2,000.
8.
Match the items below by entering the appropriate code letter in
the space provided.
Treasury stock
– –
1
2
3
4
5
6
7
8
9
10
Legal capital
– –
1
2
3
4
5
6
7
8
9
10
Par value
– –
1
2
3
4
5
6
7
8
9
10
Preemptive right
– –
1
2
3
4
5
6
7
8
9
10
Retained earnings
– –
1
2
3
4
5
6
7
8
9
10
Cumulative feature
– –
1
2
3
4
5
6
7
8
9
10
Paid-in capital
– –
1
2
3
4
5
6
7
8
9
10
Board of directors
– –
1
2
3
4
5
6
7
8
9
10
Capital stock
– –
1
2
3
4
5
6
7
8
9
10
Limited liability
– –
1
2
3
4
5
6
7
8
9
10
1.
Unit of ownership in a
corporation.
2.
Total amount paid-in
on capital stock.
3.
Enables stockholders
to maintain their same percentage ownership when new shares are issued.
4.
The amount that must
be retained in the business for the protection of creditors.
5.
Creditors only have
corporate assets to satisfy their claims.
6.
Responsible to
stockholders for corporate activity.
7.
Corporation’s own
stock that has been reacquired by the corporation but not retired.
8.
Net income retained in
the corporation.
9.
Preferred stockholders
have a right to receive current and unpaid prior-year dividends before common
stockholders receive any dividends.
10.
The amount assigned to
each share of stock in the corporate charter.
9.
The effect of the declaration of a cash dividend by the board of
directors is to
Increase
Decrease
a.
Stockholders’ equity
Assets
b.
Assets
Liabilities
c.
Liabilities
Stockholders’ equity
d.
Liabilities
Assets
a
b
c
d
10.
Indicate the respective effects of the declaration of a cash
dividend on the following balance sheet sections:
Total Assets
Total Liabilities
Total Stockholders’
Equity
a.
Increase
Decrease
No change
b.
No change
Increase
Decrease
c.
Decrease
Increase
Decrease
d.
Decrease
No change
Increase
a.
b.
c.
d.
11.
Jennifer Company reports the following amounts for 2010:
Net income
$135,000
Average stockholders’
equity
500,000
Preferred dividends
35,000
Par value preferred
stock
100,000
The 2010 rate of return
on common stockholders’ equity is
27.0%.
25.0%.
22.5%.
33.8%.
12.
Norman Corporation had 250,000 shares of common stock outstanding
during the year. Norman declared and paid cash dividends of $200,000 on the
common stock and $160,000 on the preferred stock. Net income for the year was
$880,000. What is Norman’s earnings per share?
$3.52
$2.88
$2.08
$2.72
13. On January 1, 2010,
Grant Corporation issued $4,000,000, 10-year, 8% bonds at 102. Interest is
payable semiannually on January 1 and July 1. The journal entry to record this transaction
on January 1, 2010 is
Cash
4,080,000
Bonds Payable
4,080,000
Cash
4,000,000
Bonds Payable
4,000,000
Cash
4,080,000
Bonds Payable
4,000,000
Premium on Bonds Payable
80,000
Premium on Bonds Payable
80,000
Cash
4,000,000
Bonds Payable
4,080,000
14.
Four thousand bonds with a face value of $1,000 each, are sold at
103. The entry to record the issuance is
Cash
4,120,000
Premium on Bonds Payable
120,000
Bonds Payable
4,000,000
Cash
4,120,000
Discount on Bonds Payable
120,000
Bonds Payable
4,000,000
Cash
4,120,000
Bonds Payable
4,120,000
Cash
4,000,000
Premium on Bonds Payable
120,000
Bonds Payable
4,120,000
15.
If bonds with a face value of $150,000 are converted into common
stock when the carrying value of the bonds is $135,000, the entry to record the
conversion will include a debit to
discount on bonds
payable for $15,000.
bonds payable for
$150,000.
bonds payable equal to
the market price of the bonds on the date of conversion.
bonds payable for
$135,000.
16.
Match the items below by entering the appropriate code letter in
the space provided.
Operating lease
– –
1
2
3
4
5
6
7
8
9
10
11
12
Debenture bonds
– –
1
2
3
4
5
6
7
8
9
10
11
12
Premium on bonds
payable
– –
1
2
3
4
5
6
7
8
9
10
11
12
Straight-line method
of amortization
– –
1
2
3
4
5
6
7
8
9
10
11
12
Bonds
– –
1
2
3
4
5
6
7
8
9
10
11
12
Discount on bonds
payable
– –
1
2
3
4
5
6
7
8
9
10
11
12
Registered bonds
– –
1
2
3
4
5
6
7
8
9
10
11
12
Debt to total assets
ratio
– –
1
2
3
4
5
6
7
8
9
10
11
12
Effective-interest
method of amortization
– –
1
2
3
4
5
6
7
8
9
10
11
12
Serial bonds
– –
1
2
3
4
5
6
7
8
9
10
11
12
Bond indenture
– –
1
2
3
4
5
6
7
8
9
10
11
12
Capital lease
– –
1
2
3
4
5
6
7
8
9
10
11
12
1.
Produces a periodic
interest expense that is the same amount each interest period.
2.
A legal document that
sets forth the terms of a bond issue.
3.
Produces a periodic
interest expense equal to a constant percentage of the carrying value of the
bonds.
4.
A form of
interest-bearing notes payable used by corporations.
5.
Occurs when the
contractual interest rate is less than the market interest rate.
6.
Unsecured bonds issued
against the general credit of the borrower.
7.
A contractual
arrangement which is in effect a purchase of property.
8.
Bonds that mature in
installments.
9.
A contractual
arrangement that gives the lessee temporary use of property.
10.
Bonds issued in the
name of the owner.
11.
A solvency measure
that indicates the percentage of assets provided by creditors.
12.
Occurs when the
contractual interest rate is greater than the market interest rate.
17.
Bonds are frequently issued at
amounts greater or less than face value. Describe how the market interest rate,
relative to the contractual interest rate, affects the selling price of bonds.
Also explain the rationale for requiring an investor to pay accrued interest
when a bond is purchased between interest payment dates.
18.
On January 1, 2010, Milton Company purchased at face value, a
$1,000, 6% bond that pays interest on January 1 and July 1. Milton Company has
a calendar year end.
The entry for the receipt of interest on July 1, 2010, is
Interest Receivable
60
Interest Revenue
60
Cash
60
Interest Revenue
60
Cash
30
Interest Revenue
30
Interest Receivable
30
Interest Revenue
30
19.
Barr Company acquires 60, 10%, 5 year, $1,000 Community bonds on
January 1, 2010 for $61,250. This includes a brokerage commission of $1,250.
If Barr sells all of its Community bonds for $62,500 and pays $1,500 in
brokerage commissions, what gain or loss is recognized?
Gain of $2,500
Loss of $250
Gain of $1,250
Gain of $250
20.
Decker Corporation purchased 1,000 shares of Kent common stock at
$75 per share plus $3,000 brokerage fees as a short-term investment. The shares
were subsequently sold at $80 per share less $3,400 brokerage fees. The cost of
the securities purchased and gain or loss on the sale were
Cost
Gain or Loss
$78,000
$2,000 gain
$75,000
$5,000 gain
$75,000
$1,400 loss
$78,000
$1,400 loss
21.
Lanier industries owns 45% of McCoy Company. For the current year,
McCoy reports net income of $250,000 and declares and pays a $60,000 cash
dividend. Which of the following correctly presents the journal entries to
record Lanier’s equity in McCoy’s net income and the receipt of dividends from
McCoy?
Dec. 31
Stock Investments
85,500
Revenue from Investment in McCoy
Company
85,500
Dec. 31
Stock Investments
112,500
Revenue from Investment in McCoy
Company
112,500
Dec. 31
Cash
60,000
Stock Investments
60,000
Dec. 31
Revenue from Investment in
McCoy Company
112,500
Stock Investments
112,500
Dec. 31
Stock Investments
27,000
Cash
27,000
Dec. 31
Stock Investments
112,500
Revenue from Investment in McCoy
Company
112,500
Dec. 31
Cash
27,000
Stock Investments
27,000
22.
Joy Elle’s Vegetable Market had the following transactions during
2010:
1. Issued $50,000 of par value common stock for cash.
2. Repaid a 6 year note payable in the amount of $22,000.
3. Acquired land by issuing common stock of par value $100,000.
4. Declared and paid a cash dividend of $2,000.
5. Sold a long-term investment (cost $63,000) for cash of $6,000.
6. Acquired an investment in IBM stock for cash of $12,000.
What is the net cash provided by financing activities?
$50,000
$28,000
$18,000
$26,000
23.
In Rooney Company, Treasury Stock increased $30,000 from a cash
purchase, and Retained Earnings increased ,000 as a result of net income of
$124,000 and cash dividends paid of $44,000. Net cash used by financing
activities is:
$30,000.
$44,000.
$74,000.
$110,000.
