I need help for accounting hw

 

 

 

 

TRUE / FALSE   (1/2 point for each question)

 

 

 

  • T       F       In the vertical analysis of the income statement, each item is generally stated as a percentage of net income.

 

 

 

2.      T       F       The valuation of available-for-sale securities is similar to the procedures followed for

                        trading securities, except that changes in fair value are not recognized in current income.

 

 

 

  • T        F       The statement of cash flows is a required statement that must be prepared along with an

                        income statement, balance sheet, and retained earnings statement.

 

 

 

  • T                       F       Treasury stock purchased for $25 per share that is reissued at $20 per share, results in

                a Loss on Sale of Treasury Stock being recognized on the income statement.

 

 

 

  • T       F       Using the indirect method, an increase in accounts payable during a period is deducted  from net income in calculating cash provided by operations.

 

 

 

  • T       F       If $150,000 face value bonds are issued at 103, the proceeds received will be $103,000.

 

 

  • T               F        The stockholders’ equity section of a corporation’s balance sheet consists of (1) paid-in

                        capital, (2) retained earnings, and (3) drawings.

 

 

 

  • T       F       Under the equity method, the receipt of dividends from the investee company results in an increase in the Stock Investments account.

 

 

  • T               F        Calculating financial ratios is a financial reporting requirement under generally accepted

                                accounting principles.

 

 

 

10.      T         F      A 10% stock dividend will increase the number of shares outstanding but the book value

                        per share will decrease.

 

 

 

 

 

 

 

 

 

 

 

 

MULTIPLE CHOICE    (1/2 point for each question)

 

 

11.             Ralston Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ralston issues 6,000 shares of common stock to pay its recent attorney’s bill of $25,000 for legal services on a land access dispute, which of the following would be the journal entry for Ralston to record?

 

a.      Legal Expense   6,000

                Common Stock            6,000

 

b.      Legal Expense   25,000

                Common Stock            25,000

 

c.      Legal Expense    25,000

                Common Stock            6,000

                Paid-in Capital in Excess of Stated Value – Common              19,000

 

d.      Legal Expense    25,000

                Common Stock            6,000

                Paid-in Capital in Excess of Par – Preferred            19,000

 

 

 

 

12.             Locke Co. purchased 50, 6% Johnston Company bonds on January 1, 2012 for $50,000 cash plus brokerage fees of $500.

 

The journal entry to record this investment includes a debit to

 

a.      Debt Investments for $50,000.

 

b.      Debt Investments for $50,500.

 

c.      Cash for $50,500.

 

d.      Stock Investments for $50,000.

 

 

 

13.             If a stockholder receives a dividend that reduces retained earnings by the fair market value of the stock, the stockholder has received a

 

a.      large stock dividend.

 

b.      cash dividend.

 

c.      contingent dividend.

 

d.      small stock dividend.

 

 

 

 

14.             Which of the following statements concerning leases istrue?

 

a.      Capital leases are favored by lessees.

 

b.      The appearance of the account, Leased Asset, on the balance sheet, signifies an operating lease.

 

c.      The portion of a lease liability expected to be paid in the next year is reported as a current liability.

 

d.      Present value is irrelevant in accounting for leases.

 

 

15.     Winter Company purchased a building on January 2 by signing a long-term $600,000 mortgage with monthly payments of $5,400. The mortgage carries an interest rate of 10 percent.

 

The entry to record the first monthly payment will include a

 

a.      debit to the Cash account for $5,400.

 

b.      credit to the Cash account for $5,000.

 

c.      debit to the Interest Expense account for $5,000.

 

d.      credit to the Mortgage Payable account for $5,400.

 

 

16.             Library, Inc. has 2,500 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2011, and December 31, 2012. The board of directors declared and paid a $4,000 dividend in 2011. In 2012, $15,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2012?

        Preferred       Common

 

a.      $9,000  $6,000

 

b.      $7,500  $7,500

 

c.      $6,000  $9,000

 

d.      $5,000  $10,000

 

 

17.             Stock dividends and stock splits have the following effects on retained earnings:

        Stock Splits    Stock Dividends

 

a.      Increase        No change

 

b.      No change       Decrease

 

c.      Decrease        Decrease

 

d.      No change       No change

 

18.             Stout Corporation had net income of $200,000 and paid dividends to common stockholders of $40,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Stout Corporation’s common stock is selling for $75 per share on the New York Stock Exchange. Stout Corporation’s price-earnings ratio is

 

a.      3.8 times.

 

b.      15 times.

 

c.      18.8 times.

 

d.      12 times.

 

 

19.             If the cost method is used to account for a long-term investment in common stock, dividends received should be

 

a.      credited to the Stock Investments account.

 

b.      credited to the Dividend Revenue account.

 

c.      debited to the Stock Investments account.

 

d.      recorded only when 20% or more of the stock is owned.

 

 

20.             On January 1, Edison Corporation had 1,000,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 20% stock dividend. Market value of the stock was $15/share.  As a result of this event,

 

a.      Edison’s Paid-in Capital in Excess of Par account increased $1,000,000.

 

b.      Edison’s total stockholders’ equity was unaffected.

 

c.      Edison’s Stock Dividends account increased $3,000,000.

 

d       All of the above.

 

 

21.             The net income reported on the income statement for the current year was $240,000.  Depreciation was $50,000. Account receivable and inventories decreased by $10,000 and $30,000, respectively. Prepaid expenses and accounts payable increased, respectively, by $1,000 and $8,000. How much cash was provided by operating activities?

 

a.      $301,000

 

b.      $337,000

 

c.      $321,000

 

d.      $329,000

 

 

 

22.             Winston Corporation had 400,000 shares of common stock outstanding during the year. Winston 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 Winston’s earnings per share?

 

a.      $1.75

 

b.      $1.70

 

c.      $1.80

 

d.      $1.30

 

 

23.             Realistic Corporation’s December 31, 2012 balance sheet showed the following:

8% preferred stock, $20 par value, cumulative, 20,000 shares

        authorized; 10,000 shares issued        $     200,000

Common stock, $10 par value, 2,000,000 shares authorized;

        1,950,000 shares issued, 1,930,000 shares outstanding   19,500,000

Paid-in capital in excess of par—preferred stock        60,000

Paid-in capital in excess of par—common stock   27,000,000

Retained earnings       7,650,000

Treasury stock (20,000 shares)  630,000

 

Realistic’s total paid-in capital was:

 

a.      $46,760,000.

 

b.      $47,390,000.

 

c.      $46,130,000.

 

d.      $27,060,000.

 

 

24.             Darius, Inc. has the following income statement (in millions):

        DARIUS, INC.

        Income Statement

        For the Year Ended December 31, 2012

Net Sales       $300

Cost of Goods Sold         120

Gross Profit      180

Operating Expenses          44

Net Income      $136

 

Using vertical analysis, what percentage is assigned to Net Income?

 

a.      100%

 

b.      75.6%

 

c.      45.3%

 

d.      None of the above

 

 

25      .       Thirty $1,000 bonds with a carrying value of $39,600 are converted into 3,000 shares of $5 par value common stock. The common stock had a market value of $9 per share on the date of conversion. The entry to record the conversion is

 

a.      Bonds Payable            39,600

                Common Stock                     15,000

                Paid-in Capital in Excess of Par                        24,600

 

b.      Bonds Payable            30,000

        Premium on Bonds Payable                 9,600

                Common Stock                     27,000

                Paid-in Capital in Excess of Par                         12,600

 

c.      Bonds Payable            30,000

        Premium on Bonds Payable                 9,600

                Common Stock                     15,000

                Paid-in Capital in Excess of Par                        24,600

 

d.      Bonds Payable            39,600

                Common Stock                     27,000

                Paid-in Capital in Excess of Par                        12,600

 

 

 

26.             Karl Corporation was organized on January 2, 2010. During 2012, Karl issued 20,000 shares at $24 per share, purchased 3,000 shares of treasury stock at $26 per share, and had net income of $300,000. What is the total amount of stockholders’ equity at December 31, 2012?

 

a.      $640,000

 

b.      $702,000

 

c.      $708,000

 

d.      $720,000

 

 

 

27.             Nickel Company owns 30% interest in the stock of Finn Corporation. During the year, Finn pays $25,000 in dividends, and reports $200,000 in net income. Nickel Company’s investment in Finn will increase by

 

a.      $25,000.

 

b.      $60,000.

 

c.      $67,500.

 

d.      $52,500.

 

 

 

 

28.             Library, Inc. has 2,500 shares of 4%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2011, and December 31, 2012. The board of directors declared and paid a $4,000 dividend in 2011. In 2012, $15,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 2012?

        Preferred       Common

 

a.      $9,000  $6,000

 

b.      $7,500  $7,500

 

c.      $6,000  $9,000

 

d.      $5,000  $10,000

 

 

 

29.             Changes from cost are reported as part of net income for

 

a.      available-for-sale securities.

 

b.      held-to-maturity securities.

 

c.      debt securities.

 

d.      trading securities.

 

 

 

30.             Which of the following adjustments to convert net income to net cash provided by operating activities is incorrect?

                Add to Net Income      Deduct from Net Income

 

a.      Accounts Receivable     decrease        increase

 

b.      Prepaid Expenses        increase        decrease

 

c.      Inventory       decrease        increase

 

d.      Accounts Payable        increase        decrease

 

 

 

31.             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.

 

 

 

 

32.             During 2012, Korman Industries reported cash provided by operations of $690,000, cash used in investing of $1,029,000, and cash used in financing of $135,000. In addition, cash spent for fixed assets during the period was $414,000. No dividends were paid. Based on this information, what was Korman’s free cash flow?

 

a.      ($339,000)

 

b.       $1,440,000

 

c.       $276,000

 

d.      ($888,000)

 

 

 

33.             Long-term creditors are usually most interested in evaluating

 

a.      liquidity and solvency.

 

b.      solvency and marketability.

 

c.      liquidity and profitability.

 

d.      profitability and solvency.

 

 

 

34.             A major disadvantage resulting from the use of bonds is that

 

a.      earnings per share may be lowered.

 

b.      interest must be paid on a periodic basis.

 

c.      bondholders have voting rights.

 

d.      taxes may increase.

 

 

 

35.             The acid-test (quick) ratio

 

a.      is used to quickly determine a company’s solvency and long-term debt paying ability.

 

b.      relates cash, short-term investments, and net receivables to current liabilities.

 

c.      is calculated by taking one item from the income statement and one item from the balance sheet.

 

d.      is the same as the current ratio except it is rounded to the nearest whole percent.

 

 

 

 

 

 

36.             If a stockholder receives a dividend that reduces retained earnings by the fair market value of the stock, the stockholder has received a

 

 

 

 

d.      small stock dividend.

 

 

 

37.             A $600,000 bond was retired at 103 when the carrying value of the bond was $622,000. The entry to record the retirement would include a

 

a.      gain on bond redemption of $18,000.

 

b.      loss on bond redemption of $12,000.

 

c.      loss on bond redemption of $18,000.

 

d.      gain on bond redemption of $4,000.

 

 

 

38.             At December 31, 2012, Gammon Inc. has these data on its security investments:

 

                                Security                    Cost                 Fair Value 12/31/12

                                Trading          $ 140,000                      $192,000

                                Available-for-sale         137,000                        125,000

 

                If the available-for-sale securities are held as long-term investments, which of the following will be recorded to adjust the securities to fair value?

 

        a.       Securities                40,000

        Unrealized Gain¾Income                                   40,000

 

        b.      Unrealized Loss¾Income           12,000

        Securities               40,000

        Unrealized Gain¾Income                                   52,000

 

        c.      Market Adjustment¾Trading                52,000

        Unrealized Gain¾Income                                   52,000

        Unrealized Gain or Loss¾Equity           12,000

        Market Adjustment¾Available-for-Sale                                     12,000

 

        d.      Unrealized Gain¾Income           52,000

        Market Adjustment¾Trading                                        52,000

        Market Adjustment¾Available-for-Sale            12,000

        Unrealized Gain or Loss¾Equity                                  12,000

 

 

 

39.             The following data are available for Nemo Corporation.

Sale of land    $250,000

Sale of equipment        $125,000

Issuance of common stock        140,000

Purchase of equipment    60,000

Payment of cash dividends       120,000

 

Net cash provided by investing activities is:

 

a.      $315,000.

 

b.      $260,000.

 

c.      $335,000.

 

d.      $455,000.

 

 

40.             The following information pertains to Sampson Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets

Cash and short-term investments $  45,000

Accounts receivable (net)       25,000

Inventory       20,000

Property, plant and equipment     210,000

        Total Assets    $300,000

 

Liabilities and Stockholders’ Equity

Current liabilities     $  50,000

Long-term liabilities   90,000

Stockholders’ equity—common       160,000

        Total Liabilities and Stockholders’ Equity      $300,000

 

Income Statement

Sales           $  120,000

Cost of goods sold          66,000

Gross profit    54,000

Operating expenses         18,000

        Net income      $  36,000

 

Number of shares of common stock        6,000

Market price of common stock    $33

Dividends per share     .50

 

What is the price-earnings ratio for Sampson?

 

a.      5.5 times

 

b.      1.1 times

 

c.      6 times

 

 

 

 

 

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