ACC 221 Mid-term

acc221.midterm.docx

Home >Business & Finance homework help >Accounting homework help >ACC 221 Mid-term

Question 1

Samson Company had the following transactions.

1.		Issued 5,000 shares of $100 par preferred stock at $107 for cash.
2.		Issued 8,000 share of common stock with a par value of $10 for $120,000.
3.		Purchased 500 shares of treasury common stock for $12,000.

Prepare the journal entries to record the above stock transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
1.


2.


3.

Question 2

The Sorrento Skies Corporation issues 16,000 shares of $100 par value preferred stock for cash at $120 per share. The entry to record the transaction will consist of a debit to Cash for $1,920,000 and a credit or credits to

Paid-in Capital from Preferred Stock for 1,920,000.

Preferred Stock for 1,600,000. and Paid-in Capital in Excess of Par—Preferred Stock for $320,000.

Preferred Stock for 1,600,000.and Retained Earnings for $320,000.

Preferred Stock for 1,920,000.

Question 3

Treasury stock should be reported in the financial statements of a corporation as a(n)

deduction from total paid-in capital and retained earnings.

investment.

liability.

deduction from total paid-in capital.

Question 4

Which of the following represents the largest number of common shares?

issued shares

authorized shares

treasury shares

outstanding shares

Question 5

If a corporation has only one class of stock, it is referred to as

classless stock.

common stock.

solitary stock.

preferred stock.

Question 6

On January 1, 2014, Mather Corporation had Retained Earnings of $625,000. During the year, Mather had the following selected transactions:

1.		Declared stock dividends of $40,000.
2.		Declared cash dividends of $50,000.
3.		A 2 for 1 stock split involving the issue of 200,000 shares of $5 par value common stock for 100,000 shares of $10 par value common stock.
4.		Suffered a net loss of $80,000.

Prepare a Retained Earnings Statement for the year.

MATHER CORPORATION Retained Earnings Statement For the Year Ended December 31, 2014
		$
:
	$



Question 7

Outstanding stock of the Larson Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 5%, $10 par noncumulative preferred stock. In 2013, Larson declared and paid dividends of $4,000. In 2014, Larson declared and paid dividends of $12,000. How much of the 2014 dividend was distributed to preferred shareholders?

$7,000

$5,000

None of these answer choices are correct

$6,000

Question 8

Dabney, Inc., has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2014. There were no dividends declared in 2013. The board of directors declares and pays a $60,000 dividend in 2014. What is the amount of dividends received by the common stockholders in 2014?

$10,000

$25,000

$35,000

Question 9

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

decrease total assets and stockholders' equity.

increase total assets and stockholders' equity.

increase total expenses and total liabilities.

decrease total liabilities and stockholders' equity.

Question 10

Outstanding stock of the Crevusse Corporation included 40,000 shares of $5 par common stock and 20,000 shares of 5%, $10 par noncumulative preferred stock. In 2013, Crevusse declared and paid dividends of $8,000. In 2014, Crevusse declared and paid dividends of $24,000. How much of the 2014 dividend was distributed to preferred shareholders?

$10,000

None of these answer choices are correct

$14,000

$8,000

Question 11

The board of directors of Lauber Corporation are considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $5,000,000, 6%, 20-year bonds at face value. Plan #2 would require the issuance of 200,000 shares of $5 par value common stock that is selling for $25 per share on the open market. Lauber Corporation currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30%. Assume that income before interest and income taxes is expected to be $500,000 if the new factory equipment is purchased. Prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering. (If answer is zero please enter 0, do not leave any fields blank. Round earnings per share to 2 decimal places, e.g. 5.25.)

		Plan #1 Issue Bonds		Plan #2 Issue Stock
		$		$



		$		$

		$		$

Question 12

A $1,000 face value bond with a quoted price of 98 is selling for

$908.

$980.

$1,000.

$98.

Question 13

The present value of a $10,000, 5-year bond, will be less than $10,000 if the

contractual interest rate is less than the market interest rate.

contractual interest rate is greater than the market interest rate.

bond is convertible.

contractual interest rate is equal to the market interest rate.

Question 14

Belle Corporation retires its bonds at 105 on January 1, following the payment of semi-annual interest. The face value of the bonds is $600,000. The carrying value of the bonds at the redemption date is $621,500. The entry to record the redemption will include a

credit of $21,500 to Loss on Bond Redemption.

debit of $21,500 to Premium on Bonds Payable.

debit of $30,000 to Premium on Bonds Payable.

credit of $8,500 to Gain on Bond Redemption.

Question 15

Lowe Company has $1,500,000 of bonds outstanding. The unamortized premium is $19,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

$4,600 loss

$15,000 gain

$15,000 loss

$4,600 gain

Question 16

On January 1, 2014, Brenner Company purchased at face value, a $1,000, 6% bond that pays interest on January 1 and July 1. Brenner Company has a calendar year end. The entry for the receipt of interest on July 1, 2014, is

Cash..................................	30
Interest Revenue........		30

Cash.................................	60
Interest Revenue........		60

Interest Receivable..............	30
Interest Revenue........		30

Interest Receivable..............	60
Interest Revenue........		60

Question 17

On January 2, Angle Corporation acquired 40% of the outstanding common stock of Bobbe Company for $550,000. For the year ended December 31, Bobbe reported net income of $90,000 and paid cash dividends of $30,000 on its common stock. At December 31, the carrying value of Angle's investment in Bobbe under the equity method is

$574,000.

$538,000.

$586,000.

$550,000.

Question 18

If a company acquires a 40% common stock interest in another company,

the ability to exert significant influence over the activities of the investee does not exist.

the equity method is usually applicable.

all influence is classified as controlling.

the cost method is usually applicable.

Question 19

If one company owns more than 50% of the common stock of another company,

a parent-subsidiary relationship exists.

a partnership exists.

the company whose stock is owned must be liquidated.

the cost method should be used to account for the investment.

Question 20

On January 1, Ollinger Company purchased a 25% equity investment in Fava Company for $300,000. At December 31 Fava declared and paid a $20,000 dividend and reported net income of $120,000.

Journalize the transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit


	(To record purchase of Fava Company stock)


	(To record dividends received)


	(To record 25% equity in Fava Company's net income)

SHOW LIST OF ACCOUNTS

Determine the amount to be reported as an investment in Fava stock at December 31.

Investment in Fava company

Question 21

Which of the following would not be an adjustment to net income using the indirect method?

An increase in Prepaid Insurance

An increase in Land

Amortization Expense

Depreciation Expense

Question 22

In Alona Company, net income is $285,000. If accounts receivable increased $140,000 and accounts payable decreased $40,000, net cash provided by operating activities using the indirect method is:

$385,000.

$465,000.

$185,000.

$105,000.

Question 23

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

ignored because it does not affect expenses.

deducted from net income.

ignored because it does not affect income.

added to net income.

Question 24

Each of the following is added to net income in computing net cash provided by operating activities except

amortization expense.

an increase in accrued expenses payable.

a gain on sale of equipment.

a decrease in inventory.

Question 25

Annapolis Company reported net income of $365,000 for the current year. Depreciation recorded on buildings and equipment amounted to $73,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

	End of Year	Beginning of Year
Cash	$22,000	$15,000
Accounts receivable	17,000	32,000
Inventory	55,000	65,000
Prepaid insurance	7,500	5,000
Accounts payable	11,000	18,000
Income taxes payable	600	1,200

Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

ANNAPOLIS COMPANY Partial Statement of Cash Flows
		$
Adjustments to reconcile net income to
:






		$