BMGT 220
Practice Exam on Chapters 10-13
May 7, 2013
Practice Question 1:
Gary’s Gas station includes an 8.50% sales tax
in the amount credited to the sales account. If
the sales account has a balance of $675,250,
the amount of the sales tax payable to the
state is:
1.
2.
3.
4.
$54,020
$50,019
$57,396
$52,900
Practice Question 2:
On December 1, 2012, UMD Company purchased
$15,000 of equipment by issuing a 120-day, 10%
note payable to Bank of Maryland. Assuming the
company’s accounting period ends on December
31, the journal entry recorded by UMD Company on
the note maturity date will include:
1. Debit to Interest Expense for $375
2. Debit to Interest Payable for $375
3. Debit to Interest Payable for $250
4. Debit to Interest Expense for $125
Practice Question 3:
Thompson Corporation issued $1,000,000 of
ten-year, 10 percent bonds payable dated
January 1, 2010. The market rate of interest
at that time was 11 percent. Thompson
Company’s journal entry to record this
transaction will include
1.
2.
3.
4.
debit to Premium on Bonds Payable
credit to Premium on Bonds Payable
debit to Discount on Bonds Payable
credit to Discount on Bonds Payable
Practice Question 4:
On January 1, 2000, Terps Company issued
$500,000 of 6%, 20 year bonds at a price of 95. On
January 1, 2012, the unamortized discount on the
bonds is $10,000, and the company retires these
bonds by buying them in the open market at a price
of 97.5. At retirement of these bonds, Terps
Company will recognize:
1.
2.
3.
4.
A loss on bond retirement of $7,500
A gain on bond retirement of $7,500
A loss on bond retirement of $2,500
A gain on bond retirement of $2,500
Practice Question 5:
Universe Corporation has two types of equity, described as follows:
1.
Preferred Stock 6%, $100 par, cumulative, 10,000 shares
authorized, 3,000 shares issued and outstanding.
2.
Common Stock, $2 par, 500,000 shares authorized,
240,000 shares issued and outstanding.
If Universe did not pay a dividend for the last two years, but declared
a dividend this year, how much total dividends will the company
need to declare in order for the common stockholders to receive $.45
per share?
1.
2.
3.
4.
$162,000
$144,000
$108,000
$126,000
Practice Question 6:
The stockholders' equity section of the balance sheet for Johnstone Corporation appeared as
follows before its recent stock dividend:
Common stock, $5 par, 100,000 shares issued and outstanding
$500,000
Additional paid-in capital
100,000
Retained earnings
725,000
Total Stockholders’ Equity
$1,325,000
Johnstone declared a 10% stock dividend when the market price per share was $8. After the
stock dividends were distributed, the components of the stockholders' equity section were:
Common Stock
1.
2.
3.
4.
Add'l. Paid-in Capital
Retained Earnings
$580,000
$100,000
$645,000
$550,000
$100,000
$675,000
$550,000
$130,000
$645,000
There would be no change in the components of stockholders’ equity.
Practice Question 7:
Mariam Company had 20,000 shares of $4 par-value common stock
outstanding on January 1, 2010. On March 1, 2010, they purchased
2,000 of its outstanding shares for $18 per share. On May 1, 2010, it
reissued 1,000 shares at $22 per share. On August 1, 2010, they
reissued the other 1,000 shares at $8 per share. Given this
information, the entry to record the reissuance of the stock on
August 1, 2010 would include:
1.
2.
3.
4.
Credit Treasury Stock for $36,000
Debit Paid-in-Capital, Treasury Stock for $4,000
Debit Paid-In Capital, Treasury Stock for $10,000
Debit Retained Earnings for $10,000
Practice Question 8:
The following items were found in the Stockholders’ Equity section of the
Balance Sheet of a company on December 31, 2012:
Preferred Stock, 6%, $10 par value, 100,000 shares
authorized, 20,000 shares issued, cumulative
$ 200,000
Contributed Capital in excess of par, Preferred Stock
300,000
Common Stock, $1 par value, 200,000 shares
authorized, 100,000 shares issued
100,000
Contributed Capital in Excess of Par, Common Stock
500,000
Paid-in-Capital, Treasury Stock
5,000
Retained Earnings
250,000
Treasury Stock (20,000 shares of common stock)
120,000
The company did not pay any dividends in 2010. In 2011, they paid total
dividends of $12,000, and in 2012, they paid total dividends of $40,000. How
much dividends will be paid to common stockholders in 2012 on a per share
basis?
A.
B.
C.
D.
$0.16 per share
$0.20 per share
$0.35 per share
$0.28 per share
Practice Question 9:
On March 1, 2013, Apple Company purchased 3,400
shares of Microsoft Corporation for $24.78 per share,
and paid brokerage fees of $510. On April 1, 2013, they
sold 1,400 of the above shares and paid $210 brokerage
fees. The realized gain on this transaction was $2,520.
What must have been the market price of Microsoft
Company’s stock per share on April 1, 2013?
A.
B.
C.
D.
$26.58
$26.88
$27.18
$26.73
Practice Question 10:
Terps Company purchased several investments in December
2012. Costs and market values of those investments on
December 31, 2012, are presented below:
ABC stock
DEF Stock
XYZ Stock
Cost
$200,000
400,000
600,000
Market Value
$180,000
420,000
540,000
Assuming all of the securities are classified as available for
sale, the journal entry required on December 31, 2012, the end
of Terp's fiscal year, would include a
A.
B.
C.
D.
Debit to Unrealized Loss/Gain – Equity of $60,000
Credit to Unrealized Loss/Gain – Equity of $60,000
Debit to Market Adjustment – AFSS for $80,000
Credit to Market Adjustment – AFSS for $80,000
Practice Question 11:
Buckstar Company reported the following short term investments on its balance
sheet as of December 31, 2012 (all amounts in millions of dollars):
Cost
Market Value
Short-term Investments – Trading Securities
$3.0
$3.2
Short-term investments – Available for Sale Securities
$8.2
$7.5
TOTAL
$11.2
$10.7
Which of the following statements is NOT true?
A. The company’s balance sheet reports short term investments of $10.7
millions
B. Unrealized gains of $0.2 million are included in net income
C. Unrealized losses of $0.7 million are included as comprehensive income in
the stockholders’ equity section
D. The company recognized unrealized loss of $0.5 million in its balance sheet
Practice Question 12:
On January 6, 2013, Lebron Company acquired 25% (5,000
shares) of Miami Corporation's common stock at $30 per
share. On October 24, 2003, Miami Company declared and
paid a cash dividend of $4 per share. On December 31,
2013, the Lebron Company reported Investment in Miami
Company at $200,000. What was Miami Company’s Net
Income for 2013?
A.
B.
C.
D.
$70,000
$200,000
$280,000
Cannot be determined
Practice Question 13:
Smiley Corp.'s transactions for the year ended December 31, 2013
included the following:
• Purchased real estate for $550,000 cash which was borrowed from
a bank.
• Sold available-for-sale securities for $500,000.
• Paid dividends of $600,000.
• Issued 500 shares of common stock for $250,000.
• Purchased machinery and equipment for $125,000 cash.
• Paid $450,000 toward a bank loan.
• Reduced accounts receivable by $100,000.
• Increased accounts payable $200,000.
• Smiley's net cash used in investing activities for 2013 was:
A.
B.
C.
D.
$675,000.
$375,000.
$175,000.
$50,000.
Practice Question 14:
Smiley Corp.'s transactions for the year ended December 31, 2013
included the following:
• Purchased real estate for $550,000 cash which was borrowed from
a bank.
• Sold available-for-sale securities for $500,000.
• Paid dividends of $600,000.
• Issued 500 shares of common stock for $250,000.
• Purchased machinery and equipment for $125,000 cash.
• Paid $450,000 toward a bank loan.
• Reduced accounts receivable by $100,000.
• Increased accounts payable $200,000.
• Smiley's net cash used in financing activities for 2013 was:
A.
B.
C.
D.
$50,000.
$250,000.
$450,000.
$500,000.
Practice Question 15:
Creble Company reported Net Income for 2012 in the
amount of $40,000 and its Net Cash provided by Operating
Activities of $38,000. The balance Sheet for the company as
of December 31, 2012 showed the following:
Increase in accounts receivable
$4,000
Decrease in inventory
2,000
Increase in Wages Payable
3,000
Gain on sale of equipment
5,000
Determine the missing Depreciation Expense for 2012.
A.
B.
C.
D.
$1,000.
$2,000.
$3,000.
$4,000.
Practice Question 16:
French Corporation
Statement of Cash Flows
For the Year Ended December 31, 2013
Net cash used by operating activities
Net cash used by investing activities
Net cash provided by financing activities
(21,000)
(63,000)
38,000
From the above Statement of Cash Flows, it appears that French Company is:
A. Using Cash from Operations and borrowing to purchase investments.
B. Using Cash from borrowing and selling investments to pay for purchase
of inventories and wages.
C. Using cash from operations and sale of equipment to pay off debt.
D. Using funds from selling common stock to pay for purchasing
inventories and other Investments.
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ANSWERS
Practice Question 1:
Gary’s Gas station includes an 8.50% sales tax
in the amount credited to the sales account. If
the sales account has a balance of $675,250,
the amount of the sales tax payable to the
state is:
1.
2.
3.
4.
$54,020
$50,019
$57,396
$52,900
Practice Question 2:
On December 1, 2012, UMD Company purchased
$15,000 of equipment by issuing a 120-day, 10%
note payable to Bank of Maryland. Assuming the
company’s accounting period ends on December
31, the journal entry recorded by UMD Company on
the note maturity date will include:
1. Debit to Interest Expense for $375
2. Debit to Interest Payable for $375
3. Debit to Interest Payable for $250
4. Debit to Interest Expense for $125
Practice Question 3:
Thompson Corporation issued $1,000,000 of
ten-year, 10 percent bonds payable dated
January 1, 2010. The market rate of interest
at that time was 11 percent. Thompson
Company’s journal entry to record this
transaction will include
1.
2.
3.
4.
debit to Premium on Bonds Payable
credit to Premium on Bonds Payable
debit to Discount on Bonds Payable
credit to Discount on Bonds Payable
Practice Question 4:
On January 1, 2000, Terps Company issued
$500,000 of 6%, 20 year bonds at a price of 95. On
January 1, 2012, the unamortized discount on the
bonds is $10,000, and the company retires these
bonds by buying them in the open market at a price
of 97.5. At retirement of these bonds, Terps
Company will recognize:
1.
2.
3.
4.
A loss on bond retirement of $7,500
A gain on bond retirement of $7,500
A loss on bond retirement of $2,500
A gain on bond retirement of $2,500
Practice Question 5:
Universe Corporation has two types of equity, described as follows:
1.
Preferred Stock 6%, $100 par, cumulative, 10,000 shares
authorized, 3,000 shares issued and outstanding.
2.
Common Stock, $2 par, 500,000 shares authorized,
240,000 shares issued and outstanding.
If Universe did not pay a dividend for the last two years, but declared
a dividend this year, how much total dividends will the company
need to declare in order for the common stockholders to receive $.45
per share?
1.
2.
3.
4.
$162,000
$144,000
$108,000
$126,000
Practice Question 6:
The stockholders' equity section of the balance sheet for Johnstone Corporation appeared as
follows before its recent stock dividend:
Common stock, $5 par, 100,000 shares issued and outstanding
$500,000
Additional paid-in capital
100,000
Retained earnings
725,000
Total Stockholders’ Equity
$1,325,000
Johnstone declared a 10% stock dividend when the market price per share was $8. After the
stock dividends were distributed, the components of the stockholders' equity section were:
Common Stock
1.
2.
3.
4.
Add'l. Paid-in Capital
Retained Earnings
$580,000
$100,000
$645,000
$550,000
$100,000
$675,000
$550,000
$130,000
$645,000
There would be no change in the components of stockholders’ equity.
Practice Question 7:
Mariam Company had 20,000 shares of $4 par-value common stock
outstanding on January 1, 2010. On March 1, 2010, they purchased
2,000 of its outstanding shares for $18 per share. On May 1, 2010, it
reissued 1,000 shares at $22 per share. On August 1, 2010, they
reissued the other 1,000 shares at $8 per share. Given this
information, the entry to record the reissuance of the stock on
August 1, 2010 would include:
1.
2.
3.
4.
Credit Treasury Stock for $36,000
Debit Paid-in-Capital, Treasury Stock for $4,000
Debit Paid-In Capital, Treasury Stock for $10,000
Debit Retained Earnings for $10,000
Practice Question 8:
The following items were found in the Stockholders’ Equity section of the
Balance Sheet of a company on December 31, 2012:
Preferred Stock, 6%, $10 par value, 100,000 shares
authorized, 20,000 shares issued, cumulative
$ 200,000
Contributed Capital in excess of par, Preferred Stock
300,000
Common Stock, $1 par value, 200,000 shares
authorized, 100,000 shares issued
100,000
Contributed Capital in Excess of Par, Common Stock
500,000
Paid-in-Capital, Treasury Stock
5,000
Retained Earnings
250,000
Treasury Stock (20,000 shares of common stock)
120,000
The company did not pay any dividends in 2010. In 2011, they paid total
dividends of $12,000, and in 2012, they paid total dividends of $40,000. How
much dividends will be paid to common stockholders in 2012 on a per share
basis?
A.
B.
C.
D.
$0.16 per share
$0.20 per share
$0.35 per share
$0.28 per share
Practice Question 9:
On March 1, 2013, Apple Company purchased 3,400
shares of Microsoft Corporation for $24.78 per share,
and paid brokerage fees of $510. On April 1, 2013, they
sold 1,400 of the above shares and paid $210 brokerage
fees. The realized gain on this transaction was $2,520.
What must have been the market price of Microsoft
Company’s stock per share on April 1, 2013?
A.
B.
C.
D.
$26.58
$26.88
$27.18
$26.73
Practice Question 10:
Terps Company purchased several investments in December
2012. Costs and market values of those investments on
December 31, 2012, are presented below:
ABC stock
DEF Stock
XYZ Stock
Cost
$200,000
400,000
600,000
Market Value
$180,000
420,000
540,000
Assuming all of the securities are classified as available for
sale, the journal entry required on December 31, 2012, the end
of Terp's fiscal year, would include a
A.
B.
C.
D.
Debit to Unrealized Loss/Gain – Equity of $60,000
Credit to Unrealized Loss/Gain – Equity of $60,000
Debit to Market Adjustment – AFSS for $80,000
Credit to Market Adjustment – AFSS for $80,000
Practice Question 11:
Buckstar Company reported the following short term investments on its balance
sheet as of December 31, 2012 (all amounts in millions of dollars):
Cost
Market Value
Short-term Investments – Trading Securities
$3.0
$3.2
Short-term investments – Available for Sale Securities
$8.2
$7.5
TOTAL
$11.2
$10.7
Which of the following statements is NOT true?
A. The company’s balance sheet reports short term investments of $10.7
millions
B. Unrealized gains of $0.2 million are included in net income
C. Unrealized losses of $0.7 million are included as comprehensive income in
the stockholders’ equity section.
D. The company recognized unrealized loss of $0.5 million in its balance sheet
Practice Question 12:
On January 6, 2013, Lebron Company acquired 25% (5,000
shares) of Miami Corporation's common stock at $30 per
share. On October 24, 2013, Miami Company declared and
paid a cash dividend of $4 per share. On December 31,
2013, the Lebron Company reported Investment in Miami
Company at $200,000. What was Miami Company’s Net
Income for 2013?
A. $70,000
B. $200,000
C. $280,000
D. Cannot be determined
Practice Question 14:
Smiley Corp.'s transactions for the year ended December 31, 2013
included the following:
• Purchased real estate for $550,000 cash which was borrowed from a
bank.
• Sold available-for-sale securities for $500,000.
• Paid dividends of $600,000.
• Issued 500 shares of common stock for $250,000.
• Purchased machinery and equipment for $125,000 cash.
• Paid $450,000 toward a bank loan.
• Reduced accounts receivable by $100,000.
• Increased accounts payable $200,000.
• Smiley's net cash used in investing activities for 2013 was:
A.
B.
C.
D.
$675,000.
$175,000.
$375,000.
$50,000.
Practice Question 14:
Smiley Corp.'s transactions for the year ended December 31, 2013
included the following:
• Purchased real estate for $550,000 cash which was borrowed from a
bank.
• Sold available-for-sale securities for $500,000.
• Paid dividends of $600,000.
• Issued 500 shares of common stock for $250,000.
• Purchased machinery and equipment for $125,000 cash.
• Paid $450,000 toward a bank loan.
• Reduced accounts receivable by $100,000.
• Increased accounts payable $200,000.
• Smiley's net cash used in financing activities for 2013 was:
A.
B.
C.
D.
$50,000.
$250,000.
$450,000.
$800,000.
Practice Question 15:
Creble Company reported Net Income for 2012 in the
amount of $40,000 and its Net Cash provided by Operating
Activities of $38,000. The balance Sheet for the company as
of December 31, 2012 showed the following:
Increase in accounts receivable
$4,000
Decrease in inventory
2,000
Increase in Wages Payable
3,000
Gain on sale of equipment
5,000
Determine the missing Depreciation Expense for 2012.
A.
B.
C.
D.
$1,000.
$2,000.
$3,000.
$4,000.
Practice Question 16:
French Corporation
Statement of Cash Flows
For the Year Ended December 31, 2013
Net cash provided by operating activities
Net cash used by investing activities
Net cash provided by financing activities
(21,000)
(63,000)
38,000
From the above Statement of Cash Flows, it appears that French Company is:
A. Using Cash from Operations and borrowing to purchase investments.
B. Using Cash from borrowing and selling investments to pay for purchase
of inventories and wages.
C. Using cash from operations and sale of equipment to pay off debt.
D. Using funds from selling common stock to pay for purchasing
inventories and other Investments.