ACCT 101-Financial Accounting-Economics for Managers

ACCT 101-Financial Accounting-Economics for Managers

Financial Accounting:Economics for Managers (Third Edition) by Paul G. Farnham.Questions cover material on Chapters 5 thru 13.Q1 Wallah Company agreed to accept $3,000 in cash along with an $8,000, 90­day, 11% note fromcustomer Judith Taylor to settle her $11,000 past­due account. How should Wallah record thistransaction?A.B.C.D.DR Cash 3,000 CR Note Receivable 8,000 CR Accounts Receivable – J. Taylor 11,000DR Note Receivable 8,000 CR Sales 8,000DR Cash 3,000 DR Note Receivable 8,000 CR Sales 11,000R Sales 11,000 CR Note Receivable 8,000 CR Cash 3,000Q2 Leo issued 25­year, 7% bonds with a par value of $400,000. Interest is paid semiannually. Themarket rate on the issue date was 6.5%. Leo received $429,856 in cash proceeds. Which of thefollowing statements is true?A.B.C.D.Leo must pay $400,000 at maturity plus 50 interest payments of $14,000 each.Leo must pay $429,856 at maturity plus 50 interest payments of $14,000 each.Leo must pay $429,856 at maturity and no interest payments.Leo must pay $400,000 at maturity plus 50 interest payments of $13,000 each.Q3 On December 1, Kaif Company signed a $9,500 3­month 7% note payable, with the principalplus interest due on March 1 of the following year. What amount of interest expense is accrued atDecember 31 on the note? Use a 360­day year for interest calculation. Round your answer to thenearest dollar.A.B.C.D.$55$665$166$0Q4 A corporation issued 5,000 shares of its $10 par value common stock in exchange for land thathas a market value of $91,000. The entry to record this transaction would include:A.B.C.D.A credit to Paid­in Capital in Excess of Par Value, Common Stock for $41,000.A credit to Common Stock for $91,000.A credit to Land for $50,000.A debit to Land for $50,000.Q5 A company’s board of directors votes to declare a cash dividend of 75¢ per share. The companyhas 12,000 shares authorized, 10,000 issued, and 9,800 shares outstanding. The total amount of thecash dividend is:A.B.C.D.$7,350$7335$1,650$7,500Page 1 of 10Q6 A company issued 12%, 10­year bonds with a par value of $750,000. The current market rate is12%. The journal entry to record each semiannual interest payment is:A.B.C.D.DR Bond Interest Expense 45,000 CR Cash 45,000No entry is needed, since no interest is paid until the bond is dueDR Bond Interest Expense 90,000 CR Cash 90,000DR Bond Interest Expense 750,000 CR Cash 750,000Q7 A machine with a cost of $150,000 and accumulated depreciation of $87,000 is sold for $57,000cash. The amount that should be reported as a source of cash under cash flows from investingactivities is:A.B.C.D.$57,000Zero. This is a financing activity.Zero. This is an operating activity.$63,000Q8 Smith Company uses the allowance method of accounting for uncollectible accounts. On May 3,the Smith Company wrote off the $2,100 uncollectible account of its customer, P. Barney. On July10, Smith received a check for the full amount of $2,100 from Barney. On July 10, the entry orentries Smith makes to record the recovery of the bad debt should include a:A.B.C.D.Credit to Allowance for Doubtful Accts 2,100Debit to Bad Debts Expense $2,100Debit to Allowance for Doubtful Accts 2,100Debit to Cash 2,100Q9 A company paid $115,000, plus a 9% commission and $6,000 in closing costs for a property. Theproperty included land appraised at $90,000, land improvements appraised at $36,000, and abuilding appraised at $54,000. What should be the allocation of this property’s costs in thecompany’s accounting records?A.B.C.D.Land $65,675; Land Improvements, $26,270; Building, $39,405Land $57,500; Land Improvements, $23,000; Building, $34,500Land $23,000; Land Improvements, $34,500; Building, $57,500Land $26,270; Land Improvements, $39,405; Building, $65,675Q10 Employees earn vacation pay at the rate of one day per month. During September, 26employees qualify for one vacation day each. Their average daily wage is $140 per day. What is theamount of vacation benefit expense for the month of September?A. $3,640B. $1,680Page 2 of 10C. $42,000D. $26Q11 A company estimates that warranty expense will be 5% of sales. The company’s sales for thecurrent period is $187,000. The current period’s entry to record the warranty expense includes a:A.B.C.D.Debit to Warranty Expense for $9,350Credit to Warranty Expense for $9,350Debit to Estimated Warranty Liability for $9,350Credit to Inventory for $9,350Q12 Use the following information to calculate cash paid for wages and salaries:Salaries expense$163,000Salaries payable, January 16,600Salaries payable, December 3110,800A.B.C.D.$158,800$169,600$180,400$167,200Q13 Nelson Company had net income of $50,000. On January 1, the number of shares of commonstock outstanding was 7,000. On April 1, the company issued an additional 1,000 shares of commonstock. There were no other stock transactions. The company’s earnings per share is (rounded):A.B.C.D.$6.45$6.25$50.00$7.14Q14 A corporation sold 14,000 shares of its $10 par value common stock at a cash price of $13 pershare. The entry to record this transaction would include:A.B.C.D.A credit to Common Stock for $140,000.A debit to Paid­in Capital in Excess of Par Value, Common Stock for $14,000.A debit to Cash for $140,000.A credit to Paid­in Capital in Excess of Par Value, Common Stock for $182,000.Q15 A bondholder that owns a $6,000, 19%, 19­year bond has:A. The right to receive $6,000 at maturity.B. Ownership rights.C. The right to receive dividends of $6,000 per year.Page 3 of 10D. The right to receive $19 per year until maturity.Q16 A company had average total assets of $892,000. Its gross sales were $1,086,000 and its netsales were $1,016,000. The company’s total asset turnover equals (rounded):A.B.C.D.1.141.071.22.88Q17 On January 1, 2010, Jacob issues $930,000 of 9%, 11­year bonds at a price of 96.5. All interestis accounted for and paid through December 31, 2015, the day before the purchase. The straight­line method is used to amortize any bond discount. What is the carrying value of the bond onJanuary 1, 2016?A.B.C.D.$915,210$897,450$963,390$912,240Q18 Stuart Inc. has an annual accounting period which ends on December 31. During the currentyear a depreciable asset which cost $43,000 was purchased on September 2. The asset has a$3,500 estimated salvage value. The company uses straight­line depreciation and expects the assetto have a 6 year life. What is the total depreciation expense(rounded) for the current year?A.B.C.D.$2,194.44$7,750.00$2,583.33$6,583.33Q19 On December 31 of the current year, a company’s unadjusted trial balance included thefollowing: Accounts Receivable, debit balance of $97,750; Allowance for Doubtful Accounts, creditbalance of $970. What amount should be debited to Bad Debts Expense, assuming 7% ofoutstanding accounts receivable at the end of the current year will be uncollectible?: (Round youranswer to the nearest dollar amount.)A.B.C.D.$5,873$6,842$7,813$970Q20 A company had a beginning balance in retained earnings of $57,000. It had net income of$9,000 and paid out cash dividends of $5,975 in the current period. The ending balance in retainedearnings equals:A. $60,025B. $(53,975)C. $53,975Page 4 of 10D. $(42,025)Q21 A company’s income statement showed the following: net income, $122,000; depreciationexpense, $31,000; and gain on sale of plant assets, $17,000. An examination of the company’scurrent assets and current liabilities showed the following changes as a result of operating activities:accounts receivable decreased $9,300; merchandise inventory increased $17,500; prepaidexpenses decreased $6,900; accounts payable increased $3,600. Calculate the net cash providedor used by operating activities.A.B.C.D.$138,300$105,900.$124,200.$62,500.Q22 A corporation issued 3,000 shares of $20 par value common stock in exchange for some landwith a market value of $70,000. The entry to record this exchange includes a:A.B.C.D.Credit to Paid in Capital in Excess of Par $10,000Credit to Common Stock $10,000Credit to Common Stock $70,000Credit to Paid in Capital in Excess of Par $60,000Q23 A company reported that its bonds with a par value of $46,000 and a carrying value of $53,000are retired for $62,000 cash, resulting in a loss of $9,000. The amount to be reported under cashflows from financing activities is:A.B.C.D.$(62,000).Zero. This is an operating activity.Zero. This is an investing activity.$(53,000).Page 5 of 10Q24 Temper Company has credit sales of $2.50 million for year 2010. Temper estimates that 1.70%of the credit sales will not be collected. On December 31, 2010, the company’s Allowance forDoubtful Accounts has an unadjusted credit balance of $2,238. Temper prepares a schedule of itsDecember 31, 2010, accounts receivable by age. Based on past experience, it estimates the percentof receivables in each age category that will become uncollectible. This information is summarizedhere:December 31, 2010Accounts Receivable$636,000264,00051,20026,4005,120Age of AccountsReceivableNot yet due1 to 30 days past due31 to 60 days past due61 to 90 days past dueOver 90 days past dueExpected PercentUncollectible1.85%2.607.1032.5566.80Assuming the company uses the percent of sales method, what is the amount that Temper will enteras the Bad Debt Expense in the December 31, adjusting journal entry?A.B.C.D.$42,500.00$34,278.56$32,040.56$36,516.56Q25 Pete’s outstanding stock consists of (a) 12,000 shares of noncumulative 7.50% preferred stockwith a $10 par value and (b) 42,500 shares of common stock with a $3 par value. During its first fouryears of operation, the corporation declared and paid the following total cash dividends.2010201120122013$036,000110,000199,000What is the amount of dividends that the Common Stockholders receive in 2011?Page 6 of 10A.B.C.D.$27,000$36,000$35,100$0Q26 A company paid $.80 in cash dividends per share. Its earnings per share is $3.60 and itsmarket price per share is $35. Its dividend yield equals (rounded):A.B.C.D.2.29%10.29%12.57%8.00%Q27 A company purchased a tract of land for its natural resources at a cost of $1,520,000. It expectsto mine 2,400,000 tons of ore from this land. The salvage value of the land is expected to be$290,000. The depletion expense per ton of ore is:A.B.C.D.$.512$8.28$.633$1.58Q28 XtremeSports has $60,000 of 7% noncumulative, nonparticipating, preferred stock outstanding.Xtreme Sports also has $30,000 of common stock outstanding. In the company’s first year ofoperation, no dividends were paid. During the second year, Xtreme Sports paid cash dividends of$40,000. This dividend should be distributed as follows:A.B.C.D.$4,200 preferred; $35,800 common.$0 preferred; $40,000 common.$20,000 preferred; $20,000 common.$3,700 preferred; $36,300 common.Q29 A credit sale of $2,000 to a customer would result in:A. A debit to the Accounts Receivable account in the general ledger and a debit to thecustomer’s account in the accounts receivable ledgerB. A credit to the Accounts Receivable account in the general ledger and a debit to thecustomer’s account in the accounts receivable ledgerC. A credit to the Accounts Receivable account in the general ledger and a debit to thecustomer’s account in the accounts receivable ledgerD. A credit to the Accounts Receivable account in the general ledger and a credit to thecustomer’s account in the accounts receivable ledgerQ30 A company’s income statement showed the following: net income, $124,000; depreciationexpense, $30,000; and gain on sale of plant assets, $10,000. An examination of the company’sPage 7 of 10current assets and current liabilities showed the following changes as a result of operating activities:accounts receivable decreased $9,600; merchandise inventory increased $18,500; prepaidexpenses decreased $6,900; accounts payable increased $3,600. Calculate the net cash providedor used by operating activities.A.B.C.D.$145,600.$112,600.$131,500.$202,600.Q31 An employee earned $49,000 during the year working for an employer. The FICA tax for socialsecurity is 6.2% and the FICA tax for Medicare is 1.45%. The employee’s share of FICA taxes is:A.B.C.D.$3,748.50.$710.50.$4,459.00.Zero, since the employee’s pay exceeds the FICA limit.Q32 A company has net sales of $850,000 and average accounts receivable of $173,000. What is itsaccounts receivable turnover for the period (rounded)?A.B.C.D.4.91.20473.9774.29Q33 January 2010, Giant Green Company pays $3,400,000 for a tract of land with two buildings onit. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a companyoffice; it is appraised at $782,000, with a useful life of 25 years and a $79,000 salvage value. Alighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $440,500that are expected to last another 18 years with no salvage value. Without the buildings andimprovements, the tract of land is valued at $2,420,600. Giant Green also incurs the followingadditional costs:Cost to demolish building 1Cost of additional land gradingCost to construct new building (building 3), having a useful life of 25 years and a$362,000 salvage valueCost of new land improvements (land improvements 2) near building 2 having a20-year useful life and no salvage valueWhat is the amount that should be recorded for Land?Page 8 of 10$440,200240,0004,251,000126,000A.B.C.D.$2,939,160$3,400,000$2,258,960$4,251,000Q34 A company receives a 9%, 60­day note for $1,600. The total interest due on the maturity date is(Use a 360­day year):A.B.C.D.$24.00$50.36$29.44$144.00Q35 A company sold a machine that originally cost $115,000 for $70,000 cash. The accumulateddepreciation on the machine was $45,000. The company should recognize a:A.B.C.D.$0 gain or loss$80,000 gain$70,000 gain$80,000 lossQ36 The purchase of Land results in a cash flow from which type of activity?A.B.C.D.InvestingFinancingOperatingNone of the aboveQ37 A collection of cash from a customer results in which of the following cash flows?A.B.C.D.OperatingFinancingInvestingNeitherQ38 If a bond with a par value of $100,000 is issued at 107, what does this mean?A.B.C.D.That the company receives $107,000 upon issuanceThe company pays $107 of interest each periodThe company will pay the bondholder $107,000 back at maturityNone of the abovePage 9 of 10Q39 If a bond with a stated rate of 5% is issued when the market rate is 8%, which of the following istrue?A.B.C.D.The bond will be issued at a discountThe bond will be issued at a discountThe bond will be issued at a premiumNone of the aboveQ40 Which of the following is not a method for reporting depreciation?A.B.C.D.Allowance MethodStraight LineDouble Declining BalanceUnits of ProductionPage 10 of 10


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