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Question
Question 1
A company buys a new parcel of land. Which of the following items is properly debited to the
land account?
paving a road to access the land
demolishing an existing structure
the fees on a mortgage loan on the land
planting of trees and shrubs
Question 2
What type of asset is subject to depletion?
natural resources
an intangible asset
a literary work
a computer
Question 3
Which is NOT an intangible asset?
a patent on a new invention
a copyright on a musical work
a contract granting the company a right-of-way
an estimated amount of coal in a piece of owned land that has not yet been mined
Question 4
Which is NOT an advantage of a corporation compared with a partnership or sole
proprietorship?
The corporation`s existence is unaffected by the death of an owner.
It is easier to raise large amounts of capital.
The total tax burden is lower.
Owners enjoy limited liability.
Question 5
If a corporation`s stock is purchased by the corporation on the open market but is held in
treasury and not retired, which of the following is correct?
A debit will be recorded to the treasury stock account, which is a liability account.
A debit will be recorded to the treasury stock account, which is an equity account.
A credit will be recorded to the treasury stock account, which is an equity account.
A credit will be recorded to the treasury stock account, which is a liability account.
Prepare the following journal entries. Dates and descriptions are not required.
Question 6
A company sells a fixed asset (equipment) for $30,000. The asset originally cost $80,000 and
had accumulated depreciation of $55,000 at the time of the sale. Record the journal entry to
recognize the sale.
Question 7
A company scraps a fully depreciated piece of equipment originally costing $20,000. They did
not receive any proceeds. Record the journal entry.
Question 8
A company sells a piece of plant equipment for $2,000. The original cost was $10,000, and
the accumulated depreciation through the date of the sale was $6,500. Record the journal
entry.
Question 9
A company buys a new pickup truck for $35,000 on the first day of the month. They will
assume a 5-year life with a salvage value equal to 10% of the original cost. Record the first
monthly depreciation journal entry.
Question 10
A company sells 200,000 shares of newly issued common stock having a par value of $1 for
$8.50 per share. Record the journal entry.
Question 11
A company has net income of $4,580,000. There are 200,000 shares of $50 par, 6% preferred
stock outstanding and 800,000 shares of common stock. What is the net income per common
share (earnings per share)? Show your calculation.
Question 12
When would repair costs be capitalized?
Question 13
What will be the result to inventory values, cost of goods sold, and net income if the LIFO
method is used during times of inflation?
Question 14
What is a contra account? Give an example.
Question 15
A mining company pays $10,000,000 for a piece of land that they estimate has a recoverable
reserve of oil equal to 1,500,000 barrels. They estimate that they will be able to sell the land
for $500,000 after they have extracted all of the oil. In year one, the company extracts
300,000 barrels of oil. They have made no prior entries for the removal of this oil. Record the
journal entry to recognize the removal of this oil.
Question 16
A company has 800,000 shares of common stock outstanding and no preferred stock. On
February 21, the board of directors declares a 25-cents-per-share dividend, payable on March
31 to shareholders of record as of March 15. Record the journal entry for the declaration of
the dividend.
Question 17
A company has 800,000 shares of common stock outstanding and no preferred stock. On
February 21, the board of directors declares a 25-cents-per-share dividend payable on March
31 to shareholders of record as of March 15. Record the journal entry for the payment of the
dividend.
Question 18
A corporation has 50,000 shares of $10 par common stock. A 10% stock dividend is declared
and the market value of the stock is $80 immediately before the declaration. Record the
journal entry made on the date the dividend is declared but not paid.
Question 19
What is the difference between a stock split and a stock dividend?
Question 20
A company has 150,000 shares of common stock outstanding and 10,000 shares of $100 par
value, 5% preferred stock outstanding. The company`s net income was $387,500.
What are the earnings per common share? (Show your calculation.)
