ACCT 20100 Review
1.
If a company has an accounts payable turnover of 11.0, what is the average age of payables, and what is
the interpretation for this figure?
11 days, the average amount of time it takes to pay creditors.
33 days, the average amount of time it takes to pay creditors.
33 days, the average amount of time it takes to collect cash from credit sales.
181 days, the average amount of time it takes to pay creditors.
2.
3.
The Mogatu Company borrowed $1,340,000 on January 1, 2011, signing a $1,340,000, 8% annual rate, 9month note payable for the loan, with principal and interest payable at maturity. What adjusting entry is
required if the company has a fiscal year ending on June 30, assuming that no adjusting entries have been
made during the year?
Interest expense
Interest payable
$53,600
Interest expense
Interest payable
$80,400
Interest payable
Interest expense
$53,600
Interest expense
Cash
$53,600
$53,600
$80,400
$53,600
$53,600
An investment will pay $120,000 each year, starting at the end of this year and continuing for 20 years. If
the interest rate of this investment is 7 percent, what is the present value of the investment? (Round "PV
Factor" to 4 decimal places.)
$2,400,000
$31,010
$1,271,280
$1,360,270
4.
San Antonio Outdoor Furniture issues bonds with a face value of $1,000,000 having an 11 percent coupon
rate of interest. The market rate for similar bonds is 8 percent. The bonds were issued:
At coupon.
At par.
At a premium.
At a discount.
5.
A company issues bonds with a face value of $11,000,000 having an 8 percent coupon rate of interest.
The market rate for similar bonds is 8 percent. What were the proceeds from the bond issue?
$11,000,000
$11,880,000
$12,000,000
$10,120,000
6.
A company issues bonds with a face value of $5,000,000 having a 10 percent coupon rate when the
market rate for similar bonds is 10 percent. What journal entry would the company make to record interest
when it is paid every six months (assuming that no adjusting entries have been made)?
Cash
Interest expense
$200,000
Interest expense
Cash
$500,000
Bonds payable
Cash
$250,000
Interest expense
Cash
$250,000
$200,000
$500,000
$250,000
$250,000
7.
What type of account is the discount on bonds payable?
A contra-liability account.
A contra-equity account.
An expense account.
A loss account.
8.
DC Waste uses the effective interest method to amortize the bond discount on $3,600,000 of bonds issued
with a coupon rate of 5%, when the market rate was 7%. The bonds mature in 10 years and pay interest
every six months. If the discount at the time the bonds was issued was $511,646 what amount of interest
expense is recognized by the company on the first interest payment?
$108,092
$90,000
$126,000
$143,908
9.
When bonds with a face value of $6,280,000 having a 7 percent stated rate of interest are issued at
$5,940,000, the journal entry to record the transaction would be:
Cash
Discount on bonds payable
Bonds payable
$5,940,000
$340,000
Cash
Loss on bonds payable
Bonds payable
$5,940,000
$340,000
Cash
Bonds payable
$5,940,000
Cash
Interest payable
Bonds payable
$5,940,000
$340,000
$6,280,000
$6,280,000
$5,940,000
$6,280,000
10. A company issued $1,060,000 of 15 year bonds, having a coupon rate of 8%. If the bonds are issued at a
premium, the total interest expense of the bond issue over the entire 15 years is equal to:
$1,272,000
$1,272,000 minus the amount of bond premium on the date of the sale.
$1,590,000
$1,272,000 plus the amount of bond premium on the date of the sale.
11. Owning stock of a corporation has certain benefits. Which of the following is not one of those benefits?
The right to receive interest revenue at a stated rate.
The ability to vote on major issues concerning management of the corporation.
The right to receive a proportional share of profits distributed.
A residual claim to assets remaining upon distribution of the company.
12. River City Publications incorporated on February 1, 2011. The following information related to their
common stock during the first month of the company's operations:
Feb-1
Feb-5
Feb-16
Feb-20
Feb-24
Shares authorized
Shares issued
Shares issued
Treasury stock purchased
Shares issued
5,160,000
1,580,000
774,000
217,600
312,800
How many shares of stock are outstanding at the end of February 2011?
2,449,200 shares
2,884,400 shares
7,609,200 shares
8,044,400 shares
13. Northwest Stove Company issued 11,100 shares of $5 par value common stock for $321,900. Recording
this transaction will require:
Retained earnings to be credited for $321,900.
Cash to be credited for $321,900.
Common stock to be credited for $321,900.
Capital in excess of par to be credited for $266,400.
14. Which of the following is correct about treasury stock transactions?
Treasury stock is an asset.
Companies purchase shares of stock so that they can obtain the voting rights and vote on important issues.
Companies will repurchase their stock for employee bonus plans.
Selling treasury stock for more than the purchase price allows the company to experience gains that increase net
income.
15. Tubajo Manufacturing purchased 61,600 shares of its own $7 par stock on the open market when it had a
price of $33.6 per share. If these shares of stock were sold for $21.3 per share, what would the journal
entry be to record this transaction?
Cash
Capital in excess of par
Treasury stock
$1,312,080
$757,680
Cash
Retained Earnings
$2,069,760
Cash
Treasury stock
$2,069,760
Cash
Loss on the sale of treasury stock
Treasury stock
$1,312,080
$757,680
$2,069,760
$2,069,760
$2,069,760
$2,069,760
16. Some corporations have a relatively high dividend yield and others have a relatively low dividend yield.
Which of the following companies is likely to have a relatively low dividend yield?
A growth-oriented technology company with a rising stock price.
A mature consumer goods manufacturer and distributor.
A mature wireless telecommunication provider.
A banking and financial services company that has been in existence 70 years.
17. What effect does a stock dividend have on a corporation's balance sheet?
Total liabilities increases and shareholders' equity decreases by the same amount.
Retained earnings increases and common stock decreases by the same amount.
Shareholders' equity remains unchanged.
Assets increase and shareholders' equity decreases by the same amount.
18. Which of the following statements regarding a 3-for-1 split of common stock is not correct?
The total contributed capital increases by 3 times.
A shareholder owning 500 shares prior to the split will own 1,500 shares after the split.
The effect on Retained Earnings will not be the same as if a stock dividend was issued.
If the par value prior to the split was $3.00 per share, it will be $1.00 per share after the split.
19. Hunt Foods has the following stocks outstanding: 50,300 shares cumulative, 6% preferred stock, $20 par
value, and 101,500 shares of $1 par, common stock. The company has not been able to pay dividends the
last two years, however this year the company declared and paid a cash dividend of $206,500. How much
were the common shareholders paid?
$138,075
$146,140
$85,780
$25,420
REQUIRED:
1. Prepare a statement of cash flows using the INDIRECT METHOD.
2. Prepare the Cash Flows from Operating Activities using the DIRECT METHOD.
Bankhead, Inc
Statement of Cash Flows
For the year ending December 31, 2012
Cash flows from operating activities
Net Income
$159
Plus: Depreciation
$17
Adjustments for changes in operating assets and liabilities
Change in Accounts Receivable
($8)
Change in Inventory
$735
Change in Accounts Payable
($196)
Net Cash Flows from Operating Activities
Cash flows from investing activities
Purchase of Land
Net Cash flows from investing activities
($150)
Cash flows from financing activites
Dividends Paid
Payment of short-term notes payable
Payment of long-term bonds
Net Cash flows from finaning activities
($25)
($161)
($200)
($150)
($386)
Change in Cash
Beginning Cash Balance
Ending Cash Balance
$171
$612
$783
Bankhead, Inc
Statement of Cash Flows
For the year ending December 31, 2012
Cash flows from operating activities
Cash Received from customers
$1,442
Cash Paid to Suppliers
($491)
Cash paid for Selling & admin
Expenses
($110)
Cash paid for other expenses
($81)
Cash paid for taxes
($53)
Net Cash flows from Operating Activities
$707
$707