ACCT 5301 Boot Camp
Homework Modules 6 and 8
The following information is for the next two questions:
Given the following selected list of accounts from the general ledger of Morrison Company at
12/31/08:
Common Stock
$20,000
Retained Earnings
18,000
Wages Payable
1,000
Income Tax Payable
4,000
Cash
8,000
Accounts Receivable
5,000
Inventory
10,000
Equipment
30,000
Accounts Payable
7,000
Estimated Warranty Liability 3,000 (for next 12 months)
___1. What are Morrison’s current liabilities on the 2008 balance sheet?
A. $ 5,000
B. $12,000
C. $15,000
D. $27,000
___2. What is Morrison’s working capital from the 2008 balance sheet?
A.
$38,000
B.
$28,000
C.
$23,000
D.
$ 8,000
___3. Unearned revenues are liabilities.
A. True
B.
False
___4. A contingent liability is recorded in an adjusting journal entry when the amount can be
estimated and it is probable that the liability will be owed.
A. True
B.
False
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___5. Company Z is involved in a lawsuit. It is reasonably possible that the lawsuit will be settled
against Company Z, and Company Z has estimated the amount of the loss to be $10,000.
Company Z should prepare an adjusting journal entry to recognize the $10,000 contingent
liability.
A.
True
B.
False
The following information is for the next two questions:
Pecos Company sold 100 computers in January of 2008 for $500 each, and included a 1 year
warranty on the computers. Engineers expect that 20% of the computers will need repair in the
next 12 months, and that the average repair cost will be $80 per computer.
___6. The journal entry to record the estimated warranty liability for the January sales would
include:
A.
A debit to Estimated Warranty Liability for $8,000
B.
A debit to Warranty Expense for $1,600
C.
A credit to Cash for $1,600
D.
No entry is required under GAAP to record estimated warranty liability.
Present Value. For the following questions, you may use the Tables provided in your class
notes). Your calculators will yield similar numbers, but the rounding in the tables will not
necessarily give you the same dollar amount.
Round your answers to the nearest whole dollar, and choose the answer closest to your result.
___7.
Assume you want to accumulate $100,000 for your retirement at the end of 30 years.
What amount would you need to deposit today, assuming you would earn a 4 % interest rate,
compounded annually?
A. $100,000
B. $ 24,300
C. $ 30,832
D. $324,300
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___8. You have just won the lottery, and the lottery will pay you $10,000 per year for the next 10
years. At an interest rate of 4% compounded annually, what would be the value today of that
annuity?
A. $ 81,110
B. $100,000
C. $ 6,760
D. $ 93,240
___9. Assume that the lottery offers to pay you $5,000 every six months (semiannually) for the
next 10 years. At an annual interest rate of 4%, compounded semi-annually, what would be the
value today of that annuity?
A. $100,000
B. $ 81,757
C. $100,000
D. $ 3,365
The following information is for the next two questions:
On January 1, 2006, Hartley Motorcycles issued $100,000 of its 10 year bonds payable to
generate cash for expansion. The bonds will retire in 10 years, and have a stated rate of 5
percent. Interest will be paid annually each December 31, starting December 31, 2006.
___10 If Hartley issued the bonds to yield an effective rate of 6 percent, compounded annually,
what amount of cash would Hartley receive at issue (round to nearest whole dollar)?
A. $ 55,840
B. $107,720
C. $100,000
D. $ 92,639
___11. If Hartley issued the bonds to yield an effective rate of 4 percent, compounded annually,
what amount of cash would Hartley receive at issue (round to nearest whole dollar)?
A. $100,000
B. $108,111
C. $ 67,560
D. $ 92,277
___12. The Discount on Bonds Payable account is:
A) A liability.
B) A contra liability.
C) An expense.
D) A contra expense.
E) A contra equity.
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___13. Millington Company issued 5-year, 7% bonds with a face value of $100,000. The company
received $97,947 for the bonds. The journal entry to record this bond issue on the books of
Millington would be:
A)
Cash
100,000
Bonds Payable
97,947
Premium on Bonds Payable 2,053
B)
Bonds Payable
100,000
Cash
97,947
Premium on Bonds Payable 2,053
C)
Cash
Discount on Bonds Pay.
Bonds Payable
97,947
2,053
Bonds Payable
Discount on Bonds Pay.
Cash
97,947
2,053
D)
100,000
100,000
___14. A company received cash proceeds of $206,948 on a bond issue with a face value of
$200,000. At the date of issue, the difference between face value and issue price for
this bond is recorded as a:
A) Credit to Interest Income.
B) Credit to Premium on Bonds Payable.
C) Credit to Discount on Bonds Payable.
D) Debit to Premium on Bonds Payable.
E) Debit to Discount on Bonds Payable.
___15. If a corporation is authorized to issue 1,000 shares of $50 common stock, it is said to
have $50,000 of stock outstanding.
A)
True
B)
False
___16. Par value per share is the price at which a share of stock is bought or sold.
A) True
B) False
___17. The declaration of cash dividends reduces retained earnings.
A) True
B) False
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___18. Purchasing treasury stock reduces the corporation's assets and stockholders' equity by
equal amounts.
A) True
B) False
___19. If a company resells treasury stock below the acquisition cost, then the income
statement must report a loss from the sale of treasury stock.
A) True
B) False
___20. At January 1, 2007, Baxter Company has $1 par value common stock, 200,000 shares
authorized, 90,000 shares issued and 80,000 shares outstanding. How many shares of
treasury stock does the company have at January 1, 2007?
A) 30,000 shares
B) 110,000 shares
C) 120,000 shares
D) 10,000 shares
E) cannot be determined from the information above
___21. Izzy Corporation repurchased some of its own common stock from the marketplace in January
of 2007. Izzy paid $20 per share to purchase 1,000 shares of its $10 par value stock. Note that
this is the first treasury stock transaction that Izzy has undertaken. Assume that, on December
1, 2007, Izzy reissued all 1,000 shares of treasury stock at $19 per share. The journal entry to
record this reissue would include:
A.
a credit to Treasury Stock for $19,000
B.
a credit to Treasury Stock for $10,000
C.
a debit to Retained Earnings for $1,000
D.
a credit to Cash for $19,000
E.
a debit to Loss on Sale of Stock for 1,000
___22. Treasury stock is classified as:
A) An asset account.
B) A contra asset account.
C) A revenue account.
D) A contra equity account.
E) A liability account.
___23. Parker Pharmaceuticals issued 10,000 shares of $1 par value common stock. At the date of
issue, the market price per share was $20. The journal entry to record the issue would include:
A)
a debit to Common Stock for $200,000
B)
a credit to Cash for $200,000
C)
a credit to Additional Paid in Capital on Common Stock for $190,000
D)
a credit to Common Stock for $200,000
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The following information is for the next 3 questions:
Given the following excerpt from the 2008 balance sheet of Poser Corporation:
Common stock, $5 par value, 500,000 shares authorized, ? shares issued,
? shares outstanding
$ 100,000
Additional paid-in capital on Common Stock
400,000
Retained earnings
500,000
Less treasury stock, 2,000 shares at cost
(36,000)
Total stockholders' equity
$ 964,000
___24. How many shares of common stock of Poser Corporation are issued at December 31, 2008?
a.
100,000 shares
b.
500,000 shares
c.
18,000 shares
d.
20,000 shares
___25. How many shares of common stock of Poser Corporation are outstanding at December 31, 2008?
a.
100,000 shares
b.
500,000 shares
c.
18,000 shares
d.
20,000 shares
___26. What was the average market price per share of Poser’s common stock at its issue?
a.
$5 per share
b.
$20 per share
c.
$25 per share
d.
$50 per share
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