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Saint MBA560 module 4 quiz (May 31, 2014)

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Question;Question 1.1.Quayle Company has been sued by a customer who claims injury from use of Quayle?s product. The company?s lawyers and a consultant believe the likelihood of a judgment against Quayle is remote. What should Quayle do to account for this potential liability? (Points: 2) Recognize the liability and report it on the balance sheet.Provide disclosure in the footnotes to the financial statements.Report an allowance account on the balance sheet.Do nothing.Question 2.2.Long-term debt would likely be used for which of the following? (Points: 2) Acquisition of inventoryPaying premiums for insurancePurchasing a buildingPaying salariesQuestion 3.3.Applegate Company experienced an accounting event that affected its financial statements as indicated below:Assets=Liab.+ EquityRev.? Exp.= Net Inc.Cash Flow???NA+?-F/A - OAWhich of the following accounting events could have caused these effects on Knight's statements? (Points: 2) Made a payment on a term loanBorrowed funds through a line of creditPaid interest on bondsRepaid principal on bonds at maturityQuestion 4.4.In accounting for a contingent liability, if the likelihood of the obligation is probable and the amount can be estimated, a company must: (Points: 2) report the liability on the balance sheet.provide disclosure in the footnotes to the financial statements.not recognize the liability until it is certain and the exact amount is known.do nothing.Question 5.5.On January 1, 2010, Hays Corporation arranged a $3,000 line of credit with the Barnett Bank. It agreed to accept the bank's offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and payments on principal are to take place on January 1 of each year. Hays began its loan transactions with Barnett Bank by borrowing $1,000 on January 1, 2010. On January 1, 2011, Hays borrowed an additional $1,000 from Barnett Bank, bringing the total amount borrowed to $2,000. On January 1, 2012, Hays paid $500 on the principal of the loan. On December 31, 2012, Hays records the 2012 interest payment. The prime rate for 2012 was 5%. Which of the following answers shows the effect of the 2012 interest payment on the financial statements?RowAssets=Liabilities+EquityRevenue-Expenses=Net Inc.CashOne(75)=(75)+NANA-NA=NA(75) FATwo(75)=NA+(75)NA-75=(75)(75) OAThree(90)=(90)+NANA-NA=NA(90) FAFour(90)=NA+(90)NA-90=(90)(90) OA(Points: 2) Row OneRow TwoRow ThreeRow FourQuestion 6.6.Borrowing by issuing a note payable is a(n): (Points: 2) asset source transaction.asset use transaction.asset exchange transaction.claims exchange transaction.Question 7.7.A current asset is a(n): (Points: 2) asset that will be used in the operating activities of a business.asset generated by the operations of a business within the past year.asset that is expected to be used or converted to cash within one year or the operatingcycle, whichever is longer.miscellaneous asset that is small in dollar amount.Question 8.8.In accounting for a contingent liability, if the likelihood of the obligation is probable but the amount can not be estimated, a company must: (Points: 2) recognize the liability and report it on the balance sheet.provide disclosure in the footnotes to the financial statements.not recognize or disclose the liability until it is certain and the exact amount is known.do nothing.Question 9.9.Regardless of the specific type of long-term debt, which of the following are normally required with debt transactions? (Points: 2) To repay the debtTo pay dividendsTo pay interestBoth A and CQuestion 10.10.In accounting for a contingent liability, if the likelihood of the obligation is possible, a company must: (Points: 2) recognize the liability and report it on the balance sheet.provide disclosure in the footnotes to the financial statements.not recognize or disclose the liability until it is certain and the exact amount is known.do nothing.Question 11.11.Which form of business organization is established as a separate legal entity from its owners? (Points: 2) Sole proprietorshipCorporationPartnershipNone of the aboveQuestion 12.12.Which of the following statements about the Treasury Stock account is correct? (Points: 2) Treasury Stock is a liability.The balance in the Treasury Stock account reduces total Stockholders' Equity.Treasury Stock is an asset.The balance in Treasury Stock reduces Retained Earnings.Question 13.13.Flynn Company issued 2,000 shares of $10 par value common stock at a market price of $16. As a result of this accounting event, total paid-in capital would: (Points: 2) increase by $12,000.be unaffected by the event.increase by $32,000.increase by $20,000.Question 14.14.Purchase of treasury stock for cash is what kind of transaction? (Points: 2) Asset sourceAsset useAsset exchangeClaims exchangeQuestion 15.15.The price-earnings ratio is the: (Points: 2) total average stockholder's equity divided by the number of shares.interest rate on borrowed money divided by the current prime rate.price of a company's products as compared to its net income.market price of a share of stock divided by the earnings per share.Question 16.16.Which of the following entities would have a "Paid-in Capital in Excess" account in the equity section of the balance sheet? (Points: 2) A sole proprietorshipA corporationA partnershipAll of the aboveQuestion 17.17.The difference between the corporate form of business organization and other forms is most clearly shown in which of the following sections of the financial statements? (Points: 2) Equity section of the balance sheetExpenses section of the income statementAssets section of the balance sheetOperating activities section of the statement of cash flowsQuestion 18.18.The declaration of a cash dividend will: (Points: 2) decrease assets and equity.increase liabilities and decrease equity.decrease liabilities and increase equity.increase assets and liabilities.Question 19.19.The issuance of a stock dividend will: (Points: 2) not affect total equity.increase retained earnings.decrease total paid-in capital.decrease net income.Question 20.20.Grant Corporation declared a 2-for-1 stock split when it had 12,000 shares of $5 par value common stock outstanding. If the market price of the stock had been $20 a share before the split, the par value, number of shares, and approximate market value after the split would be:RowPar ValueNo. of SharesMarket ValueOne$2.5024,000$10.00Two$2.5024,000$ 5.00Three$2.5012,000$10.00Four$5.0024,000$20.00(Points: 2) Row OneRow TwoRow ThreeRow Four

 

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