Exam pre-quiz + important info Flashcards
On October 31, 2025, Blossom Service Company issues a $9000, 6%, 6-month note to Jackson County Bank. Blossom accrued interest on December 31, 2024. How much will Blossom record as a decrease to Cash for the payment of the note at maturity?
$9270
9000+(90000.066/12)=9270
(Face +(Face Int.Rate6/12 months)
Current liabilities are obligations that are reasonably expected to be paid from:
Existing Current Assets, Creation of other current liabilities
Yes, Yes
Arnold Hardware recorded the following in its tabular analysis. What is the nature of the transaction recorded on January 9?
Liabilities: Div. Payable +800
SHE: Div. -800
Declare cash dividends
On October 1, Blossom’s Painting Service borrows $190,000 from National Bank on a 3-month, $190,000, 4% note. Blossom’s Painting Service’s adjustment on December 31 before financial statements are prepared includes a(n)
Increase to Interest Expense & an increase to Interest Payable for $1,900
190,0000.043/12= 1900
amnt. borrowed* 4%* 3/12 months
Shamrock Corporation issues 780, 10-year, 5%, $1000 bonds dated January 1, 2026, at 96. Recording the issuance will show a(n):
Increase to Cash for $748,800
(780 * 1000) * 0.96= 748,800
(# of bonds*1000) * 96%
If Teal Mountain Company issues 7200 shares of $5 par value common stock for $190,000:
Paid-in Capital in Excess of Par Value will be increased for $154,000
190,000 - (7200*5)= 154,000
Issued price - ( shares issued * Par Value)
The date on which a cash dividend becomes a binding legal obligation is on the:
declaration date
The board of directors of Crane & Swifty Enterprises declared a cash dividend of $1.60 per share on 40,000 shares of common stock on July 15, 2026. The dividend is to be paid on August 15, 2026, to stockholders of record on July 31, 2026. Use the following tabular analysis to record the payment of the dividend on August 15, 2026:
Jul. 15: L: Div. Payable: +64,000 SHE: Div: -64,000
Aug. 15:
Decrease cash & dividends payable $64,000
40,000*1.60=64,000
Novak Corp. Dec 31, 2026 balance sheet showed the following:
6% preferred stock, $20 par value, cumulative, 40,000 shares authorized; 25,000 shares issues: $500,000
Common stock, $10 par value, 4,000,000 shares authorized; 2,780,000 shares issued, 2,740,000 shares outstanding: 27,800,000
Paid-in capital in excess of par value- preferred stock: 70,000
Paid-in capital in excess of par value- common stock: 36,300,000
R/E: 11,600,000
Treasury stock (80,000 shares): 840,000
Novak’s total SHE was?
$75,430,000
500,000+ 27,800,000+ 70,000+36,300,000+ 11,600,000- 840,000=75,430,000
Treasury stock goes against SHE
Cullumber Corp. had the following transactions during 2027:
1. issued $255,000 of par value common stock for cash
2. Recorded and paid wages expense of $122,400
3. Acquired land by issuing common stock at par value of $102,000
4. Declared and paid a cash dividend of $20,400
5. Sold a long-term investment (cost $6,120) for cash of $6,120
6. Recorded Cash sales of $816,000
7. Bought inventory for cash of $326,400
8. Acquired an investment in Zynga stock for cash of $ 42,840
9. Converted bonds payable to common stock in the amount of $1,020,000
10. Repaid a 6-year note payable in the amount of $448,800
What is the net cash provided(used) by operating activities?
$367,200
Operating Activities- Income statement items
Inflow (+) :
-from the sale of goods/services
-from interest received & div. received
Outflow (-) :
-to suppliers for inv.
-to employees for wages
-to gov. for taxes
-to lenders for interest
- to others for expenses
816,000- 326,400-122,400=367,200
(cash sales- inv. purchased- wages paid)
Assume that the Fitzgerald Corp. uses the indirect method to report cash flows. Indicate where, if at all, a stock dividend declared & issued would be classified on the statement of cash flows.
This does not represent a cash flow.
Assume that the Charleston, Inc. uses the indirect method to report cash flows. Indicate where, if at all, an inventory increase would be classified on the statement of cash flows.
Operating activities section
Which one of the following is not a typical current liability?
Bonds Payable
Bonds payable are long-term liabilities until the period in which they become due.
Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1. What amount should Sensible report as a current liability for Unearned Insurance Revenue on December 31?
$4,500
The portion of the premium not yet earned should be recognized as a liability by Sensible. Since there are 3 months remaining on the insurance policy, the remaining liability is 3/12 of $18,000 or $4,500.
18,000*3/12=4,500
On January 1, 2027, Slice Corp. issues $200,000 of 5-year, 7% bonds at face value. Which one of the following is one effect on the date of the issuance of the bonds?
increase Bonds Payable for $200,000
The issuance of the bonds is recorded as an increase to Cash for $200,000 and an increase to Bonds Payable for $200,000.
Cuso Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, what does this indicate?
The contractual interest rate exceeds the market interest rate.
When bonds are sold at a premium, the contractual interest rate is higher than the market interest rate.
Hanlin Enterprises issued 2,000 bonds with a face value of $1,000 each at 97. The effect of the issuance will include
an increase to Bonds Payable for $2,060;000.
The increase to Cash is $1,000 × 2,000 bonds x 97%, which is $1,940,000. Discount on Bonds Payable is increased for $60,000, and Bonds Payable is increased for $2,000,000, the face amount of the bonds.
If a corporation issues 1,000 shares of $3 par common stock for $7 a share by how much will the Common Stock account increase?
$3,000
1,000*3=3,000
shares issued * par value
If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders’ equity be decreased?
$12,000
Stockholders’ equity is reduced by the cost of acquiring the treasury stock: 1,000 shares x $12 = $12,000.
Which of the following would be classified as an operating activity?
Payment of interest
Operating activities include cash outflows to
suppliers for inventory
Cash flow activities that include acquiring and disposing of investments and property, plant, and equipment are classified as
investing activities
In converting net income to net cash provided (used) by operating activities, under the indirect method,
decreases in inventory and increases in accrued liabilities are added
Indirect Method for calculating cash flows from operating activities:
N/I + non-cash exp.( depreciation) + changes to current liabilities - Changes to current assets (other than cash) (opposite)
Items that are added back to net income in determining cash provided by operating activities under the indirect method do not include
An increase in inventory
An increase in inventory is subtracted, not added, to net income
Issuing bonds at Face value/ at par
market rate of interest = stated rate on the bond of interest
Stated rate
the amount of interest the bond pays
market rate of interest > stated rate of interest
Investors won’t buy unless we sell the bond at discount
sell at a percentage less than 100% of face value
market rate of interest < stated rate of interest
we sell the bond at premium
sell at a percentage greater than 100% of face value
Authorized shares
the # of shares a corp may sell according to its articles of incorporation, usually a large #
Issued shares
the # of shares the corp. has sold
Treasury stock
the shares the corp. has repurchased, goes against SHE
Par value vs. no par value stock
par/stated value is purely for bookkeeping purposes
Classes of stock
common and preferred
Outstanding shares
the # or shares issued that are still out in the market
# issued- # treasury
Common stock
of shares issued * par value
Operating activities- Income statement items
Cash Inflows:
- from sale of goods/services
-from interest received and dividends received
Cash Outflows:
-to suppliers for inv.
-to employees for wages
-to gov. for taxes
-to lenders for interest
- to others for expenses
Investing activities- Changes in investments & long-term assets
Cash Inflows:
- From sale of property, plant, and equipment
- from sale of investments in debt or equity securities of other entities
- from collection of principal on loans to other entities
Cash outflows:
- To purchase property, plant, and equipment
- to purchase investments in debt or equity securities of other entities
- to make loans to other entities
Financing activities- changes in long-term liabilities & SHE
Cash Inflows:
- from sale of common and preferred stock
- from issuance of debt (bonds & notes)
Cash outflows:
- To stockholders as dividends
- to redeem long-term debt or reacquire capital stock (treasury stock)
Calculate cash flows from Operating activities: Indirect method
N/I
+ non-cash expenses (depreciation is the big one)
+ losses from investing or financing activities/ gains
+ changes to current liabilities
- changes to current assets (other than cash) (opposite)
Calculate cash flows from investing activities: Indirect method
subtract cash paid to purchase long-term assets
add cash received on sale of long term assets
Calculate cash flows from financing activities: Indirect method
add cash received from sale of stock or issuance of bonds
subtract cash paid as dividends or repayment of bonds
Free cash flow
Net cash provided by operating activities
- capital expenditures (purchases of Property, plant, equip.)
-cash dividends
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Free cash flow
