Final Exam 101 -- MyAccountingLab Test 3

Question 1

Double Taxation means that the

Answer 1

corporation pays tax on its earnings and the shareholders pay tax on dividends

Question 2

The present value of a $10,000, 5-year bond will be less than $10,000 if the

Answer 2

stated interest rate is less than the market interest rate

Question 3

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

Answer 3

$710,000 cash flow

Question 4

When a company issues common stock greater than its par value, the excell should be credited to

Answer 4

paid-in capital in excess of par

Question 5

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

Answer 5

debit to legal expense $40,000

Question 6

If the market rate is greater than the stated interest rate, bonds will sell

Answer 6

at a discount

Question 7

Income tax expense appears on the

Answer 7

income statement

Question 8

What is considered to be a cash equivalent

Answer 8

investments in short-term US Government securitites

Question 9

If ABC Corporation has net sales of $600,000 and cost of goods sold of$390,000 the gross profit percentage is

Answer 9

35%

Question 10

Sales revenue less cost of goods sold is called

Answer 10

gross profit

Question 11

The main purpose of the statement of cash flows is to

Answer 11

provide information about the cash receipts and cash payments during a period

Question 12

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

Answer 12

credit to premium bonds payable at $40,000

Question 13

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?

Answer 13

it should be accrued, reported on the financial statements and disclosed in the notes to the financial statements

Question 14

A current liability is a debt that can reasonably be expected to be paid

Answer 14

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

Question 15

Tyler Company paid $1,500 cash to replace a wheel on equipment sold under warranty. The entry to record the payment would be to

Answer 15

Debit warrant payable and credit cash

Question 16

Treasury stock has a

Answer 16

Debit balance, the opposite of other equity accounts

Question 17

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

Answer 17

$30,740

Question 18

Cash received from the issuance of bonds would be reported on a statement of cash flows under

Answer 18

financing activities

Question 19

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

Answer 19

Debit to Accounts Receivable $237,000

Question 20

In preparing a statement of cash flows, converting bonds into common stock would be reported in

Answer 20

a separate schedule or note to the financial statements

Question 21

The current ratio is

Answer 21

current assets divided by current liabilities

Question 22

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

Answer 22

$280,000

Question 23

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

Answer 23

a credit to Notes Payable of $100,000

Question 24

When a business receives cash from a customer before earning the revenue, they have a(n)

Answer 24

unearned revenue

Question 25

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

Answer 25

$465,000

Question 26

If a corporation has only one class of stock, it is understood to be

Answer 26

common stock

Question 27

The discontinued operations section of the income statement refers to the

Answer 27

disposal of a segment of a business

Question 28

Earnings per share (EPS) is calculated as

Answer 28

net income divided by the average number of shares of common stock outstanding throughout the year

Question 29

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?

Answer 29

7,000

$70,000 were issued at a par value of $10

70,000 / 10 = 7000

Question 30

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

Answer 30

channel stuffing

Question 31

If a corporation issues 4,000 shares of $1 par value common stock for $8,000, the entry would include a credit to

Answer 31

Common stock for $4,000 and

Paid-in Capital in Excess of Par for $4,000

Question 32

A statement of responsibility, issued along with a company’s financial statements, indicates that the financial statements are the responsibility of

Answer 32

management

Question 33

Casey’s Computers purchased 4,000 shares of its own $10 par value common stock for $92,000. As a result of this transaction

Answer 33

Casey’s Stockholders’ Equity decreased $92,000

Question 34

The operating expense section of an income statement would include

Answer 34

Utilities expense
Salaries expense
Supplies expense

(NOT interest expense)

Question 35

The declaration of a cash dividend

Answer 35

increases liabilities and decreases stockholders’ equity

Question 36

Increases and decreases in the long-term assets available to a company are reported on the statement of cash flows as

Answer 36

investing activities

Question 37

The characteristic of earnings that makes it most useful for decision making is called

Answer 37

earnings quality

Question 38

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

Answer 38

Credit to Paid-In Capital-Treasury Stock $36,000

Question 39

The three sections contained in the statement of cash flows are presented in the following order

Answer 39

Operating
Investing
Financing

Question 40

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

Answer 40

Statement of Cash Flows