Accounting Exam-Chapter 12

Which of the following is not an estimated liability?

Allowance for bad debts

Recording estimated warranty expense in the year the related products are sold best follows which accounting principle?

Expense Recognition (Matching)

Accounts payable turnover for Big Blue inc. increased from 10 to 12 during 2014. Which of the following statements best describes what this means?

The company paid its accounts payable more quickly in 2014, signaling a stronger liquidity position

Camping Co. was organized to sell a single product that carries 45-day warranty against defects. Engineering estimates indicate that 4% of the units sold will prove defective and require an average repair cost of $20 per unit. During camping first month of operations total sales were 1,100 units; by the end of the month, 11 defective units had been repaired. the liability for product warranties at month-end should be

$660

Contingent liability should be recorded in the accounts

If the amount can be reasonably estimated, if the related future even will probably occur.

For the purpose of classifying liabilities as current or non current, the term operating cycle refers to

the time period between purchase of merchandise and the conversion of this merchandise back to cash

Failure to accrue interest expense results in

an overstatement of net income and an understatement of liabilities

Tennis shoe warehouse operates in a state with 6.5% sales tax. For convenience, tennis shoe warehouse credits sales revenue for the total amount (selling price plus sales tax) collected from each customer if tennis shoe warehouse fails to make an adjustment for sales taxes

net income will be overstated and liabilities will be understated.

What kid of account is Unearned revenue

Liability account

An end of period adjusting entry that debits unearned revenue most likely will credit

a revenue

An unsecured bond is a

debenture bond

The discount on bonds payable

is a contra account to bonds payable

the discount on a bond payable becomes

additional interest expense over the life of the bonds.

A bond that matures in installments is called at

serial bond

The carrying value of bonds payable equals

Bonds payable – discount on bonds payable

McCoy corporation issued $100,000 of 6.5% 10-year bonds. the bonds are dated and sold on January 1, 2015 interest payment dates are January and July 1 the bonds are issued to yield the market interest rate of 7%

96,447

Maridell’s fashions has a debt that has been properly reported as a long-term liability up to the present year, some of this debt comes due in 2014, if maridell’s fashions continues to report the current position as a long-term liability the effect will be able to

overstate the current ratio

A bond with the face amount of 16,000 has a current price quote of 101.65 what is the bond’s price?

16264.00

Bond carrying value equals bonds payable

minus discount on bonds payable, plus premium on bonds payable.

What type of account is discount on bonds payable and what is ts normal balance

Contra liability; debit

Amortizing the discount on bonds payable

increases the recorded amount of interest expense

A journal entry on the maturity date to record the payment of 2,000,000 of bonds payable that were issued at a $80,00 discount includes

A debit to bonds payable for 2,000,000

is the payment of the face amount of a bond on its maturity date regarded as an operating activity, an investing activity or a financing activity

financing activity

Which of the following is a characteristic of a corporation?

1) Limited liability of stockholders 2 )Mutual agency 3) no income tax 4) both 1 and 3 answer is 1.

Loiselle company is authorized to issue 30,000 shares of $20 par common stock. On November 30, 2014, loiselle issued 5,000 shares at 25 per share. loiselle’s journal entry to record these facts should include a

credit to common stock for 100,000

Super spirit inc issues 260,000 shares of no-par common stock for 3 per share. The journal entry is which of the following?

Cash 780,000 common stock 780,000

par value

is an arbitrary amount that establishes the legal capital for each share

The paid-in capital portion of stockholders’ equity does not include

retained earnings

Preferred stock is least likely to have which of the following characteristics

Preference as to voting

Which of the following classifications represents the most shares of common stock

Authorized shares

trigg corporation purchased treasury stock in 2014 at a price of 22 per share and resold the treasury stock in 2015 at a price of 42 per share what amount should trigg report on its income statement of 2015?

$0

The stockholders equity section of a corporations balance sheet reports

No: discount on bonds payable. YES: treasury stock

the purchase of treasury stock

decreases total assets and decrease stockholders equity

a company paid 28 per share to purchase 800 shares of tis common stock as treasury stock. the stock was originally issued at 13 per share. which of the following is the journal entry to record the purchase of the treasury stock

Treasury stock 22,400 Cash 22,400

When treasury stock is sold for less than its cost, the entry should include a debit to

R/E

A company purchased 100 shares of its common stock at 57 per share, it then sells 45 of the treasury shares at 58 per share. the entry to sell the treasury stock includes a

Credit ot paid in capital from treasury stock transactions for 45

When does a cash dividend become a legal liability?

On date of declaration

When do dividends increase stockholders equity

NEVAAAAAH

Stock dividends

have no effect on total stock holders equity

What is the effect of a stock dividend and a stock split on total assets

no effect to either

A 2-for-1 stock split has the same effect on the number of shares being issued as a

%100 stock dividend

Stock holders are eligible for a dividend if the own the stock on the

date of record

marios foods has outstanding 450 shares of 7% preferred stock, 100 par value and 2,000 shares of common stock, 5 par value, marios declares dividends of 16,900 which of the following is the correct entry.

Retained earnings 16,900 Dividends payable, PFD 3,150 Dividends payable, CM 13,750

A corporation has 25,000 shares of 10% PFD stock outstanding. also there are 25,000 shares of common stock outstanding par value for each is 100. if a 550,000 dividend is paid how much goes to the preferred stockholders?

250,000

A corporation has 40,000 shares of 8% PFD stock outstanding, also there are 40,000 shares of common stock outstanding. par value for each is 100, if a 550,000 dividend is paid what is the amount of dividends per share of CM stock

$5.75

Which of the following is not true about a 10% stock dividend

Par value decreases

A company declares a 5% stock dividend. the debt to R/E is an amount equal to

the market value of the shares to be issued

which of the following statements is not true about a 3 for 1 stock split

Total stockholders equity increases

Income tax payable was 4,000 at the end of the year and 2,600 at the beginning. Income tax expense for the year totaled 59,700 what amount of cash did the company pay for income tax during the year

$58,300

Credit sales totaled 850,000, accounts receivable increased by 40,000, and accounts payable decreased by 20,000 how much cash did the company collect from customers

810,000

Westport farms LTD. made sales of 690,000 and had costs of goods sold at 420000. inventory decreased by 6,000 and accounts payable relates solely to the purchase of inventory. operating expenses were 155,000 how much cash did westport farms pay for inventory during the year

428,000

hampshire farms made sales of 70,000 and had cost of goods sold of 420,000 inventory decreased by 5,000 and accounts payable decreased by 8,000 operating expenses were 150,000 how much was hampshire farms’ net income for the year.

130,000

blue bunny ice cream began the year with 45,000 in accounts receivable and ended the year with 39,000 in accounts receivable. if credit sales for the year were 750,000 the cash collected form the customers during they year amounted to

756,000

Which of the following terms appears on a statement of cash flows indirect

Depreciation expense

on an indirect method statement of cash flows, an increase in a prepaid insurance would be

Deducted from net income

on an indirect method statement of cash flows an increase in accounts payable would be

added to net income in the operating activities section

on an indirect method statement of cash flows a gain on the sale of plant assets would be

deducted from net income in the operating activities section

photo ease camera sold equipment with a cost of 22,00 and accumulated depreciation of 9,000 for an amount that resulted in a gain of 2,000. what amount should photo ease report on the statement of cash flows as "proceeds from sale of plant assets"

15,000

How many items enter the computation of smiths net cash provided by operating activities (indirect)

7

how many items enter the computation of solomons net cash provided by operating activities?

7

how do freemans accrued liabilities affect the companies statement of cash flows for 2014

increase in cash provided by operating activities

how many items enter the computation of grucan’s net cash flow from investing activites

2

all except which of the following activities are reported on the statement of cash flows

Marketing activities

on the statement of cash flows, activities that create long term liabilities are ususally

financing activites

on the statement of cash flows, activities affecting long term assets are

investing activites

on the statement of cash flows, activites that obtain the cash needed to launch and sustain a company

financing activites

on the statement of cash flow, the exchange of stock for land would be reported as which of the following

noncash investing and financing activities

paying off bonds payable is reported on the statement of cash flows under

financing activites

the sale of inventory for cash is reported on the statement of cash flows under

operating activites

selling equipment for cash is reported on the statement of cash flows under

investing activites

receiving cash dividends is an

operating activity

paying cash dividends is an

financing activity

Statement of cash flows;

predicts future cash flows, evaluates management decisions, determines ability to pay dividends and interest, shows the relationship of net income to cash flows.

an auditor report by independent accountants

gives investors assurance that the company’s financial statements conform to GAAP

Which statement is true?

Auditors of public companies audit financial statements as well as internal controls

Earnings per share is not reported for

Comprehensive income

Which of the following items is most closely related to prior period adjustment

R/E

Which Statment is true?
1. extraordinary items are part of discontinued operations.
2. Extraordinary items are combined with continuing operations on the income statement
3. Discontinued operations are a separate category on the income statement.
4. all of the above

3

why is it important for companies to report their accounting changes to the public?

it is important for the results of operations to be compared between periods

Get me there systmes earned income before tax of 110,000. Taxable income was 105,000 and the income tax rate was 30% the journal entry to record get me there’s income tax expense and income tax liability.

income tax expense 33,000 income tax payable 31,500 deferred tax liability 1,500

Deferred tax liability is usually

Long term reported on the balance sheet

What is the most relevant net income figure on a corporate multi-step income statement for predicting future profits and for use in investment valuation

Continuing operations

Copyspot corporation has income before income tax of 120000 and taxable income of 160000 the income tax rate is 35% copyspots income statement will report net income of

78000

Quick copy corporation has income before income tax of 190000 and taxable income of 140000 the income tax rate is 40% quick copy corporation must immediately pay income tax of

56000

Copyspot corporation has income before income tax of 140000 and taxable income of 85000 the income tax rate is 25% at the end of its first year of operations copyspots deferred tax liability is

13750

mitchell county texas purchased earth moving equipment from a canidian compay, the coast was 14000000 canadian and the canadian dollar was quoted at .94 a month later mitchell county paid its debt and the canadian dollar was quoted at .99 what was mitchell county’s cost of the equipment

1316000

you are taking a vacation to italy and you buy euros for 1.50 on your return you cash in your unused euros for 1.20

the dollar rose against the euro

Sacramento systmes purchased inventory on account from megaplex the price was 160000 yen. and a yen was quoted at .0088 sacramento paid the debt in yen a month later when the price of a yen was .0094

Debited inventory for 1408

one way to hedge a foreign currency transaction loss is to

collect in your own currency

Foreign currency transaction gains and losses are reported on the

income statement

The quality of earnings suggests that

income from continuing operations is a more relevant predictor of future performance than income from one time transactions

kelley corporation earned 6.03 per share of its common stock,suppose you capitalize kelleys income at 3% how much are you willing to pay for a share of kelley stock

201.00