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accounts Week 7 quiz




Question;1.;A partnership business is;a;?;private firm in which all owners have equal ownership and;limited liabilities in the event of a bankruptcy.;?;corporation in which the owners have limited liability for;the corporation?s liabilities.;?;firm listed in a stock exchange, in which no owner owns a;majority of equity to control the firm.;?;business with two or;more owners that is not organized as a corporation.;2.;Rick Co. purchases 7,000;shares of its own $2 par value common stock for $160 per share. Which of the following is the correct journal;entry to record this transaction?;?;Debit Cash $2,240,000, and credit Paid-In Capital in Excess;of Par ? Common $2,240,000.;?;Debit Treasury Stock ?;Common $1,120,000 and credit Cash $1,120,000.;?;Debit Common Stock - $2 Par Value $2,240,000 and credit Cash;$2,240,000.;?;Debit Cash $2,240,000 and credit Treasury Stock ? Common;$2,240,000.;3.;On the ________, cash;dividends become a liability of a corporation.;?;end of the fiscal year;?;declaration date;?;payment date;?;date of record;?;When a partner sells his;interest to another party, the journal entry simply credits the withdrawing;partner?s capital account and debits the new partner?s capital.;?;True;?;False;4. Aries and Eros start a partnership firm with capital;contributions of $40,000 and $60,000, respectively. In the course of the;year, Aries withdraws $5,000 from the business in order to meet his personal;expenses. Which of the following is the correct journal entry to close;the relevant Withdrawals account at the end of the year?;Aries;Withdrawals $5,000;Eros, Capital;$5,000;Aries, Withdrawals;$5,000;Cash;$5,000;No Entry.;Aries, Capital;$5,000;Aries, Withdrawals;$5,000;5. Bradley Corporation issued 10,000 shares of common stock on;January 1, 2015. The stock has a par value of $0.01 per share and was;sold for cash at par. Which of the following is the correct journal entry;to record this transaction?;?;Cash debited for $100 and;Common Stock - $0.01 Par Value credited for $100;?;Cash credited for $10,000 and Common Stock - $0.01 Par Value;debited for $ 10,000;?;Paid ? In Capital in Excess of Par ? Common debited for $9,900;and Common Stock - $0.01 Value credited for $9,900;?;Cash debited for $10,000, Common Stock - $0.01 Par Value;credited for $100, and Paid-In Capital;in Excess of Par ? Common credited for $9,900.;6. The statement of retained earnings reports how the company?s;retained earnings balance changed from the beginning of the period to the end;of the period. TRUE or FALSE;7. In a partnership business, George has an ownership of 60% and;Ben has an ownership of 40%. For;developing the business, they purchased equipment for $10,000. George;contributes a sum of $7,000 and Ben makes a contribution of $3,000 on July;1. Based on the information provided, which of the following is true of;the partnership balance sheet?;?;George, Capital will increase by $7,000 and Ben, Capital will;increase by $3,000.;?;Both George, Capital and Ben, Capital will increase by $10,000.;?;George, Capital will increase by $10,000 and Ben, Capital will;remain unchanged.;?;George, Capital will;increase by $6,000 and Ben, Capital will increase by $4,000.;8. Mathew, Patrick, and Robin have capital balances of $75,000;$120,000, and $93,000, respectively. As per the partnership agreement;Mathew gets a profit share of 2/9, Patrick gets 4/9, and Robin gets 3/9.;Partnership agrees to pay $66,000 as final settlement to Mathew. How much;bonus will Robin receive as a result of this transaction?;?;$5,142;?;$4,000;?;$5,000;?;$3,857;9. Which of the following is a disadvantage of partnership firms?;?;These are taxed at;multiple levels: corporate level and individual level.;?;These have more difficulty in raising capital as compared to a;sole proprietorship.;?;These have a mutual agency which creates personal obligations;for each partner.;?;These cannot be dissolved without permission of SEC.;11. Preferred shareholders;?;have the first claim on;dividend funds.;?;are guaranteed that they will not take a loss on their;investment.;?;have higher voting rights than common shareholders.;?;are sold for price lower than that of common stock.;12.;Which of the following;explains the term ?lack of mutual agency? of a corporation?;?;Shareholders are not;authorized to sign contracts or make business commitments on behalf of the;corporation.;?;Corporations pay income tax on corporate earnings, and;shareholders pay personal income tax on corporate dividends and gains from sale;of stock.;?;The liabilities of the corporation cannot be extended to the;personal assets of the shareholders.;?;Shares of stock can be readily bought and sold by investors on;the open market.;13.;Capital deficiency occurs when a partner?s capital account has a;credit balance.;?;True or False;14.;Shaun and Rick are partners. Shaun has a capital balance of;$0,000 and Rick has a capital balance of $8,000. Edwin invests a building;with a current market value of $6,000 to acquire an interest in the new;partnership. Which of the following is true of the effect of the;transaction on the balance sheet? (Assume no bonus to any partner.);?;Both assets and equity will decrease by $6,000.;?;Both assets and equity;will increase by $6,000.;?;Both assets and liabilities will decrease by $6,000.;?;Both assets and liabilities will increase by $6,000.;15. Alex, Brad, and Carl are;partners. The profit and rule sharing rule between them is 4:3:3 in the;alphabetical order. The partnership incurs a net loss of $100,000.;Before preparing the closing journal entry the;?;Alex, Capital account will have a credit balance of $40,000.;?;Carl, Capital account will have a debit balance of $30,000.;?;Alex, Capital account will have a debit balance of $40,000.;?;Income Summary account;will have a debit balance of $100,000.


Paper#43668 | Written in 18-Jul-2015

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