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ACCT221 Principles of Accounting _II_mid_term_exam_summer_2014




Question;University of;Maryland University College;ACCT221 Principles of Accounting;II Instructor: Anita Doherty;MID-TERM EXAM;Multiple;Choice (2 points each);1. Which one of the following is not necessary in order for a;corporation to pay a cash dividend?;a. Adequate cash;b. Approval of stockholders;c. Declaration of dividends by the board of directors;d.;Retained earnings;2. Which one of the following events would not require a formal journal entry;on a corporation's books?;a. 2 for 1 stock split;b. 100% stock dividend;c. 2% stock dividend;d. $1 per share cash dividend;3. Norton, Inc. has 5,000 shares of 6%, $100 par value, noncumulative;preferred stock and 100,000 shares of $1 par value common stock outstanding at;December 31, 2012, and December 31, 2013.;The board of directors declared and paid a $20,000 dividend in 2012. In 2013;$40,000 of dividends are declared and paid. What are the dividends received by;the preferred and common shareholders in 2013?;Preferred Common;????????? ???????;a. $0 $40,000;b. $30,000 $10,000;c. $20,000 $20,000;d. $40,000 $0;4. A prior period adjustment that corrects income of a prior period;requires that an entry be made to;a. an income statement account.;b. a current year revenue or expense;account.;c. the retained earnings account.;d. an asset account.;5. The discontinued operations section of the income statement refers to;a. discontinuance of a product line.;b. the income or loss on products that;have been completed and sold.;c. obsolete equipment and discontinued;inventory items.;d. the disposal of a significant segment;of a business.;6. Indicate the circumstances under which an item would be classified as;an extraordinary item on the income statement.;Unusual in Nature Infrequent in Occurrence;?????????????????;a.;Yes No;b.;No Yes;c. Yes Yes;d.;No No;7. From the standpoint of the issuing company, a disadvantage of using;bonds as a means of long-term financing is that;a. bond interest is deductible for tax;purposes.;b. interest must be paid on a periodic basis regardless of earnings.;c. income to stockholders may increase as;a result of trading on the equity.;d. the bondholders do not have voting;rights.;8. Bonds that are secured by real estate are termed;a. mortgage bonds.;b. serial bonds.;c. debentures.;d. bearer bonds.;9. The contractual interest rate is always stated as a(n);a. monthly rate.;b. daily rate.;c. semiannual rate.;d. annual rate.;10. If the market interest rate is greater;than the contractual interest rate, bonds will sell;a. at a premium.;b. at face value.;c. at a discount.;d. only after the stated interest rate is;increased.;11. If twenty $1,000 convertible bonds with a;carrying value of $25,000 are converted into 3,000 shares of $5 par value;common stock, the journal entry to record the conversion is;a. Bonds Payable........................... 25,000;Common Stock.........................;25,000;b. Bonds Payable........................... 20,000;Premium on Bonds Payable................ 5,000;Common Stock.........................;25,000;c. Bonds Payable........................... 20,000;Premium on Bonds Payable................ 5,000;Common Stock.........................;15,000;Paid-in Capital in;Excess of Par..... 10,000;d. Bonds Payable........................... 25,000;Discount on Bonds Payable............ 5,000;Common Stock.........................;15,000;Paid-in Capital in Excess of Par..... 5,000;--Page 3;12. Which of the following is not a condition;which would require the recording of a lease contract as a capital lease?;a. The lease transfers ownership of the;property to the lessee.;b. The lease contains a bargain purchase;option.;c. The lease term is less than 75% of the economic life of the leased;property.;d. The present value of the lease payments;equals or exceeds 90% of the fair market value of the leased property.;13. If the cost method is used to account for;a long-term investment in common stock, dividends received should be;a. credited to the Stock Investments account.;b. credited to the Dividend Revenue account.;c. debited to the Stock Investments;account.;d. recorded only when 20% or more of the;stock is owned.;14. When an investor owns between 20% and 50%;of the common stock of a corporation, it is generally presumed that the;investor;a. has insignificant influence on the;investee and that the cost method should be used to account for the investment.;b. should apply the cost method in;accounting for the investment.;c. will prepare consolidated financial;statements.;d. has significant influence on the investee and that the equity method;should be used to account for the investment.;15. If the equity method is being used, cash;dividends received;a. are credited to Dividend Revenue.;b. require no entry because investee net;income has already been recorded at the proper proportion on the investor's;books.;c. are credited to the Stock Investments account.;d. are credited to the Revenue from;Investment in Stock account.;16. If the cost of an available-for-sale;security exceeds its fair value by $40,000, the entry to recognize the loss;a. is not required since the share prices;will likely rebound in the long run.;b. will show a debit to an expense;account.;c. will show a credit to a contra-asset;account that appears in the stockholder's equity section of the balance sheet.;d. will show a debit to an unrealized loss account that is deducted in;the stockholders' equity section of the balance sheet.;17. Short-term investments are securities that;are readily marketable and intended to be converted into cash within the next;a. year.;b. two years.;c. year or operating cycle, whichever is;shorter.;d. year or operating cycle, whichever is longer.;18. The primary purpose of the statement of;cash flows is to;a. provide information about the investing;and financing activities during a period.;b. prove that revenues exceed expenses if;there is a net income.;c. provide information about the cash receipts and cash payments during;a period.;d. facilitate banking relationships.;19. The acquisition of land by issuing common;stock is;a. a noncash transaction which is not reported in the body of a statement;of cash flows.;b. a cash transaction and would be;reported in the body of a statement of cash flows.;c. a noncash transaction and would be;reported in the body of a statement of cash flows.;d. only reported if the statement of cash;flows is prepared using the direct method.;20. The order of presentation of activities on;the statement of cash flows is;a. operating, investing, and financing.;b. operating, financing, and investing.;c. financing, operating, and investing.;d. financing, investing, and operating.;21. Cash receipts from interest and dividends;are classified as;a.;financing activities.;b. investing activities.;c. operating activities.;d. either financing or investing;activities.;22. When equipment is sold for cash, the;amount received is reflected as;a cash;a. inflow in the operating section.;b. inflow in the financing section.;c. inflow in the investing section.;d. outflow in the operating section.;23. Assume the following sales data for a;company;2013 $1,200,000;2012 960,000;2011 840,000;2010 600,000;If 2010 is the base year, what is the;percentage increase in sales from 2010 to 2012?;a. 100%;b. 160%;c. 70%;d. 60.0%;24. In performing a vertical analysis, the;base for cost of goods sold is;a. total selling expenses.;b. net sales.;c. total revenues.;d. total expenses.;------------------------------;Terry Corporation had net income of;$200,000 and paid dividends to common stockholders of $40,000 in 2013. The;weighted average number of shares outstanding in 2013 was 50,000 shares. Terry;Corporation's common stock is selling for $60 per share on the New York Stock Exchange.;25. Terry Corporation's price-earnings ratio;is;a. 3.8 times.;b. 15 times.;c. 18.8 times.;d. 6 times.;26. Klein Corporation's stockholders' equity;section at December 31;2012 appears below: (15 Points);Stockholders' equity;Paid-in capital;Common stock, $10 par, 50,000;outstanding $500,000;Paid-in capital in excess of par 150,000;????????;Total paid-in capital $650,000;Retained earnings 150,000;????????;Total stockholders' equity $800,000;On June 30, 2013, the board of directors;of Klein Corporation declared a 15% stock dividend, payable on July 31, 2013;to stockholders of record on July 15, 2013.;The fair market value of Klein Corporation's stock on June 30, 2013, was;$12.;On December 1, 2013, the board of;directors declared a 2 for 1 stock split effective December 15, 2013. Klein;Corporation's stock was selling for $20 on December 1, 2013, before the stock;split was declared. Par value of the stock was adjusted. Net income for 2013;was $240,000 and there were no cash dividends declared.;INSTRUCTIONS;(a);Prepare;the journal entries on the appropriate dates to record the stock dividend and;the stock split.;(b) Fill in the amount that would appear;in the stockholders' equity section for Klein Corporation at December 31, 2013;for the following items;1. Common stock $;2. Number of shares outstanding;3. Par value per share $;4. Paid-in capital in excess of;par $;5. Retained earnings $;6. Total stockholders' equity $;27. On January 1, 2013, Leary Corporation;issued $800,000, 9%, 5-year bonds dated January 1, 2013, at 96. The bonds pay;semiannual interest on January 1 and July 1.;The company uses the straight-line method of amortization and has a;calendar year end. (10 points);INSTRUCTIONS;Prepare all the journal entries that Leary;Corporation would make related to this bond issue through January 1, 2014. Be;sure to indicate the date on which the entries would be made.;28. Boyle Corporation had the following;comparative current assets and current liabilities: (15 points);Dec.;31, 2013 Dec. 31, 2012;?????????????;Current assets;Cash $ 60,000 $ 30,000;Marketable securities 40,000 10,000;Accounts receivable 55,000 95,000;Inventory 110,000 90,000;Prepaid expenses 35,000 20,000;????? ????;Total current asset 300,000 $245,000;Current liabilities;Accounts payable $140,000 $110,000;Salaries payable 40,000 30,000;Income tax payable 20,000 15,000;?????? ????;Total current liabilities $200,000 $155,000;During 2013, credit sales and cost of;goods sold were $750,000 and $400,000, respectively.;INSTRUCTIONS;Compute the following liquidity measures;for 2013;1. Current ratio.;2. Working capital.;3. Acid-test ratio.;4. Receivables turnover.;5. Inventory turnover.;6.;29. Annapolis;Company reported net income of $365,000 for the current year. Depreciation;recorded on buildings and equipment amounted to $73,000 for the year. Balances;of the current asset and current liability accounts at the beginning and end of;the year are as follows: (10 points);End of Year;Beginning of Year;Cash;$22,000;$15,000;Accounts;receivable;17,000;32,000;Inventory;55,000;65,000;Prepaid;insurance;7,500;5,000;Accounts;payable;11,000;18,000;Income taxes;payable;600;1,200;Prepare the cash flows from the operating activities section of the statement;of cash flows using the indirect method


Paper#41608 | Written in 18-Jul-2015

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