Midterm Review

Question 1

An advantage of the partnership form of business organization is

Answer 1

ease of formation

Question 2

Partnership income and losses are usually divided on the basis of interest, salaries and stated ratios because

Answer 2

partners seldom contribute time and resources equally

Question 3

John and Mary are forming a partnership. John will invest a piece of equipment with a book value of $10000 and a fair market value of $30000. Mary will invest a building with a book value of $60,000 and a fair market value of $70,000. At what amount will the building be recorded?

Answer 3

$70,000 (FMV)

Question 4

A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a result of this transaction, the capital account balance of the other parners is

Answer 4

will remain the same

Question 5

Sam and Mark are partners in a business. Sam’s original capital was $40,000 and Mark’s was $60,000. They agree to salaries of $12,000 and $18,000 for Sam and Mark respectively, and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Sam’s share of the income be if the income for the year was $15,000?

Answer 5

$1,000

Question 6

A partnership liquidation occurs when

Answer 6

the assets are sold, liabilities paid, and business operations terminated

Question 7

The balance sheet of a company prior to being liquidated: cash $20,000, other assets $160,000; liabilities, $40,000; A, capital, $60,000; B capital, $80,000. The other assets were sold for $139,000. The partners share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation partner A will receive cash of

Answer 7

$46,000

Question 8

A change in the ownership of a partnership results in the

Answer 8

dissolution of the partnership.

Question 9

When a partnership is formed, assets contributed by the partners shoudl be recorded on the partnership books at their

Answer 9

fair market value at the time of the contribution

Question 10

Accounting for the day-to-day activities for a partnership or LImited Liability Company

Answer 10

is the same as the accounting for any other form of business

Question 11

What is the advantage of a partnershp when compared to a corporation

Answer 11

the partnership is relatively inexpensive to organize.

Question 12

Those most responsible for the major policy decisions of corporation are the

Answer 12

Board of directors

Question 13

What account is reported int he paid-in-capital/stockholders’ equity section of the corporate balance sheet?

Answer 13

Preferred Stock

Question 14

The excess of issue price over par of common stock is termed

Answer 14

Premium

Question 15

The entry to record the issuance of common stock at a price above par includes a debit to

Answer 15

Cash

Question 16

When common stock is issued in exchange for a noncash asset, the transaction should be recorded

Answer 16

at the fair market value of the asset acquired or the fair market value of the sstock, whichever can be determined more objectively.

Question 17

Treasury stock shares are

Answer 17

issued shares that are held by the treasurer of the corporation

Question 18

Treasury stock which ws purchased for $6,000 is sold for $6,500. As a result of these two transactions comnbined

Answer 18

stockholders’ equity will be increased by $500.

Question 19

The primary purpose of a stock split is to

Answer 19

reduce the market price of the stock per share

Question 20

What is not an advantage of issuing bonds instead of common stock?

Answer 20

Earnings per share on common stock may be lower.

Question 21

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

Answer 21

a discount.

Question 22

The entry to record the amortization of a premium on bonds payable on an interest payment date includes

Answer 22

debit Interest Expense, debit Premium on Bonds Payable, credit cash

Question 23

The journal entry a company records for the payment of interest, interest expense, and amortization of bond discount is

Answer 23

debit Interest Expense, credit Cash and Discoutn on Bonds Payable

Question 24

The interest expense recorded on an interest payment date is increased

Answer 24

by the amortization of discount on bonds payable

Question 25

the balance in Discount on Bonds Payable

Answer 25

would be subracted from the related bonds payable on the balance sheet

Question 26

Temporary investments are

Answer 26

recorded at cost but reported at fair market value

Question 27

Robin Company owns 80% of the outstanding stock of Eggs Company. Eggs Company is referred to as the

Answer 27

subsidiary.

Question 28

A ten-year bond was issued at par for $500,000 cash. This transaction should be shown on a statement of cash flows under

Answer 28

financing activities

Question 29

What is a noncash investing and financing activity?

Answer 29

issuance of common stock to acquire land.

Question 30

The order of presentation of activities on the statement of cash flows is

Answer 30

operating, investing, and financing

Question 31

What should be added to net income in calculating net cash flow from operating activities using the indirect method?

Answer 31

a decrease in accounts receivable

Question 32

In calculating cash flows from operating activities a gain on the sale of equipment is

Answer 32

deducted from net income

Question 33

The relationship of $275,000 to $125,000 is

Answer 33

2.2 to 1

Question 34

If comparative balance sheets indicate no notes receivable on the preceding year and a $25,000 note receivable on the current year, the increase of $25,000

Answer 34

cannot be stated as a percentage

Question 35

The ability of a business to pay it debts as they come due and to earn a reasonable amount of income is referred to as

Answer 35

solvency and profitability

Question 36

Corporate annual reports typically do not contain what

Answer 36

SEC statement expressing an opinion

Question 37

If net income is $115,000 and interest expense is $30,000 for 2011, what ar eth earnings per share on common stock for 2011?

Answer 37

calculation problem

Question 38

Determine working capital

Answer 38

ratio problem

Question 39

The numberator used to calculate accounts receivable turnover is

Answer 39

net sales

Question 40

Determine the cash flows from operating activities given net income, depreciation expense, increase in accounts receivable and decrease in accounts payable

Answer 40

calculation problem

Question 41

Determine the amount of cash flows from operating activities given the beginning and end for cash, accounts receivable, inventories, prepaid expense and accounts payable.

Answer 41

calcualtion

Question 42

Determine the cash balance at the end of the period give cash at the beginning, cash from operating activities, cash used in investing activities and cas used in financing activities.

Answer 42

calculation

Question 43

A building with a book value of $46,000 is sold for $51,000. It should be shown on the SOCF for

Answer 43

an increase of $51,000 from investing activities and a deduction from net income of $5,000

Question 44

Determine the amount of gain or loss on a sale of common stock.

Answer 44

calculation

Question 45

Determine the carrying amount on an installment note

Answer 45

calculation