Final Exam 101 -- MyAccountingLab Test 3 Flashcards
Double Taxation means that the
corporation pays tax on its earnings and the shareholders pay tax on dividends
The present value of a $10,000, 5-year bond will be less than $10,000 if the
stated interest rate is less than the market interest rate
In 2012, ABC Corporation purchased treasury stock with a cost of $25,000. During the year, the company paid dividends of $15,000 and issued bonds payable for $750,000. Cash flows from financing activities for 2012 are
$710,000 cash flow
When a company issues common stock greater than its par value, the excell should be credited to
paid-in capital in excess of par
Wolverine Corporation issued 5,000 shares of its $5 par value common stock in payment for attorney services of $40,000. Wolverine stock has been actively trading at $20 per share. This transaction would include a
debit to legal expense $40,000
If the market rate is greater than the stated interest rate, bonds will sell
at a discount
Income tax expense appears on the
income statement
What is considered to be a cash equivalent
investments in short-term US Government securitites
If ABC Corporation has net sales of $600,000 and cost of goods sold of$390,000 the gross profit percentage is
35%
Sales revenue less cost of goods sold is called
gross profit
The main purpose of the statement of cash flows is to
provide information about the cash receipts and cash payments during a period
On January 1, Multichip Corporation issued $2,000,000, 10-year, 8% bonds at 102. The journal entry to record this transaction would include a
credit to premium bonds payable at $40,000
A company has a contingent loss that can be estimated and has a probably chance of occurrence. What reporting does FASB require regarding this contingency?
it should be accrued, reported on the financial statements and disclosed in the notes to the financial statements
A current liability is a debt that can reasonably be expected to be paid
within one year of the company’s normal operating cycle (if it is longer than one year) – I always just went with the first part : within one year
Tyler Company paid $1,500 cash to replace a wheel on equipment sold under warranty. The entry to record the payment would be to
Debit warrant payable and credit cash
Treasury stock has a
Debit balance, the opposite of other equity accounts
Ironwood Company’s sales for May 24 were $29,000. Ironwood is required to collect 6% state sales tax. The total cash received from customers was
$30,740
Cash received from the issuance of bonds would be reported on a statement of cash flows under
financing activities
On June 15, Central Computers, Inc. sold twenty-five computers on account to a company located in Argentina for $,000,000 pesos. On that date, the peso is worth $0.079. On July 15, when the peso was worth $0.070, payment was received. The journal entry to record the sale on June 15 would include a
Debit to Accounts Receivable $237,000
In preparing a statement of cash flows, converting bonds into common stock would be reported in
a separate schedule or note to the financial statements
The current ratio is
current assets divided by current liabilities
Westside, Inc. reported Cost of Goods Sold for the current year of $320,000. During the same period, the inventory account decreased $15,000 and theaccounts payable account increased $25,000. the amount of cash paid to suppliers is
$280,000
Omaha Bank lends Nebraska Paper Company $100,000 on January 1. Nebraska Paper Company signs a $100,000, 8%, 6-month note. The entry made by Nebraska paper Company on January 1 to record the proceeds and issuance of the note would include
a credit to Notes Payable of $100,000
When a business receives cash from a customer before earning the revenue, they have a(n)
unearned revenue
Burton, Inc. had the following transactions:
Sale of land $300,000
Sale of equipment 150,000
Purchaser of Treasury stock 40,000
Purchase of equipment 45,000
Issuance of common stock 100,000
Net cash provided by investing activities is
$465,000
If a corporation has only one class of stock, it is understood to be
common stock
The discontinued operations section of the income statement refers to the
disposal of a segment of a business
Earnings per share (EPS) is calculated as
net income divided by the average number of shares of common stock outstanding throughout the year
Liberty Corporation has the following information as of December 31, 2012
Common stock,
$10 par value (authorized 20,000 shares) $70,000
Treasury Stock (2,000 shares)
$30,000
Based on the information above, how many shares of common stock have been issued?
7,000
$70,000 were issued at a par value of $10
70,000 / 10 = 7000
A type of financial statement fraud that is accomplished by shipping more to customers than they ordered, with the expectation that they may return some or all of the items is called
channel stuffing
If a corporation issues 4,000 shares of $1 par value common stock for $8,000, the entry would include a credit to
Common stock for $4,000 and
Paid-in Capital in Excess of Par for $4,000
A statement of responsibility, issued along with a company’s financial statements, indicates that the financial statements are the responsibility of
management
Casey’s Computers purchased 4,000 shares of its own $10 par value common stock for $92,000. As a result of this transaction
Casey’s Stockholders’ Equity decreased $92,000
The operating expense section of an income statement would include
Utilities expense
Salaries expense
Supplies expense
(NOT interest expense)
The declaration of a cash dividend
increases liabilities and decreases stockholders’ equity
Increases and decreases in the long-term assets available to a company are reported on the statement of cash flows as
investing activities
The characteristic of earnings that makes it most useful for decision making is called
earnings quality
Pretzel, Inc. paid $54,000 to buy back 9,000 shares of its $1 par value common stock. The stock was sold later at a selling price of $10 per share. The entry to record the sale would include a
Credit to Paid-In Capital-Treasury Stock $36,000
The three sections contained in the statement of cash flows are presented in the following order
Operating
Investing
Financing
The financial statement that reports cash receipts and cash payments classified according to the company’s major activities of operating, investing, and financing is the
Statement of Cash Flows
