Accounting Third Exam

Question 1

Journal Entries for probable liabilities and estimable damages

Answer 1

Contingent Loss XX
Contingent Liability XX

Question 2

For warranties: after we sell we make an estimate

Answer 2

Product Warranty Expense XXX
Estimated Warranty Liability XXX

Question 3

Warranty Exercised by costumer

Answer 3

Estimated Warranty Liability XXX
Cash/Supplies XXX

Question 4

if IP<FV>MR</FV>

Answer 4

Premium

Question 5

Bond Issues Entry

Answer 5

Cash XX
Discount XX
Premium XX
B/P

Question 6

Amortization

Answer 6

Interest Expense XX
Premium XX
Discount XX
Cash XX

Question 7

Redeem bond before maturity

Answer 7

CV-CP

Question 8

Declare Cash Dividends

Answer 8

Cash Dividends
Dividends Payable XX

Question 9

Close Cash Dividends

Answer 9

Retained Earnings XXX
Cash Dividends XXX

Question 10

Small Stock Dividends Declared

Answer 10

Stock Dividends XXX
Stock Dividend Distributable XX
APIC-CS XXX

Question 11

Small Stock Distribution

Answer 11

Stock Div Distributable
Common Stock

Question 12

Small Stock Closing

Answer 12

Retained Earnings XXX
Stock Dividends XXX

Question 13

Large Stock Declare

Answer 13

Stock Dividends (outstanding x par value x dividend rate)
Stock Dividends Distributable XXX

Question 14

Large Stock Distribute

Answer 14

Stock Div Distributable XXX
Common Stock XXX

Question 15

Large Stock Closing

Answer 15

Retained Earnings XXX
Stock Dividends XXX

Question 16

mailroom

Answer 16

match amount owed, separate coupon & check

Question 17

treasurer

Answer 17

handle payment/check

Question 18

controller

Answer 18

record reciepts

Question 19

internal audit

Answer 19

recieve monthly bank statement w/cash balance

Question 20

5 components of internal controls

Answer 20

1. Control Environment (culture)
2. Assess Risk (internal: trustworthy manager, external: economic conditions)
3. Control Activities (prevention, detection)
   - clear lines of authority
   - segregation of duties
   - competent personnel
   - control numbers
   - plans & budgets
   - adequate accounting records
4. Information & communication
5. Monitor Activities (internal / external audits)

control failures (occur because reasonable assurance, fidelity bond)
Sarbanes-Oxley (reduce fraud)

Question 21

forward stock split

Answer 21

increase outstanding shares, decrease shares

Question 22

benefits of preferred stock

Answer 22

1) dividends preference
2) liquidation
3) cumulative to get arrears

Question 24

if carrying value is less than face value

Answer 24

discount

Question 25

entry for retirement on bond

Answer 25

B/P FV
Loss CV - CP
Discount FV - CV
Cash CP