ACC - Second Test One Web 2014

Accounting II – Test #1

QUESTION #1
Dick Acer and George Dooley decide to form a partnership. Acer invests $25,000 cash
and accounts receivable of $30,000 less allowance for doubtful accounts of $2,000.
Dooley contributes $20,000 cash and equipment having a $6,000 book value. It is
agreed that the allowance account should be $3,000 and the fair market value of the
equipment is $10,000.
Instructions
Prepare the necessary journal entry to record the formation of the partnership.

QUESTION #2
Hope & Crosby Co. reports net income of $34,000. The partnership agreement provides
for annual salaries of $24,000 for Hope and $15,000 for Crosby and interest allowances
of $4,000 to Hope and $6,000 to Crosby. Any remaining income or loss is to be shared
70% by Hope and 30% by Crosby.
Instructions
Compute the amount of net income distributed to each partner.

QUESTION #3
The Howell and Parks Partnership has partner capital account balances as follows:
Howell, Capital
Parks, Capital

$550,000
250,000

The partners share income and losses in the ratio of 60% to Howell and 40% to Parks.
Instructions
Prepare the journal entry on the books of the partnership to record the admission of
Tyler as a new partner under the following two independent circumstances.
1. Tyler pays $350,000 to Howell and $150,000 to Parks for one-half of each of their
ownership interest in a personal transaction.
2. Tyler invests $850,000 in the partnership for a one-third interest in partnership
capital.

QUESTION #4
The corporate charter of Preston Corporation allows the issuance of a maximum of
2,500,000 shares of $1 par value common stock. During its first three years of operation,
Hunter issued 1,500,000 shares at $15 per share. It later acquired 30,000 of these
shares as treasury stock for $25 per share.
Instructions
Based on the above information, answer the following questions:
(a) How many shares were authorized?
(b) How many shares were issued?
(c) How many shares are outstanding?
(d) What is the balance of the Common Stock account?
(e) What is the balance of the Treasury Stock account?

QUESTION #5
Quaker Corporation is authorized to issue 1,000,000 shares of $5 par value common
stock. During 2018, its first year of operation, the company has the following stock
transactions.
Jan. 1 Paid the state $2,000 for incorporation fees.
Jan. 15 Issued 500,000 shares of stock at $7 per share.
Jan. 30 Attorneys for the company accepted 500 shares of common stock as
payment for legal services rendered in helping the company incorporate. The
legal services are estimated to have a value of $8,000.
July 2 Issued 100,000 shares of stock for land. The land had an asking price of
$900,000. The stock is currently selling on a national exchange at $8 per
share.
Sept. 5 Purchased 15,000 shares of common stock for the treasury at $10 per share.
Dec. 6 Sold 11,000 shares of the treasury stock at $11 per share.
Instructions
Journalize the transactions for Quaker Corporation.

QUESTION #6
The stockholders' equity section of Perry Corporation at December 31, 2017, included
the following:
6% preferred stock, $100 par value, cumulative,
10,000 shares authorized, 8,000 shares issued and outstanding.......

$ 800,000

Common stock, $10 par value, 250,000 shares authorized,
200,000 shares issued and outstanding .............................................

$2,000,000

Dividends were not declared on the preferred stock in 2017 and are in arrears.
On September 15, 2018, the board of directors of Ellis Corporation declared dividends
on the preferred stock for 2017 and 2018, to stockholders of record on October 1, 2018,
payable on October 15, 2018.
On November 1, 2018, the board of directors declared a $.90 per share dividend on the
common stock, payable November 30, 2018, to stockholders of record on November 15,
2018.
Instructions
Prepare the journal entries that should be made by Ellis Corporation on the dates
indicated below:
September 15, 2018
November 1, 2018
October 1, 2018
November 15, 2018
October 15, 2018
November 30, 2018

QUESTION #7
Detroit Corporation has 120,000 shares of $5 par value common stock outstanding. It
declared a 15% stock dividend on June 1 when the market price per share was $12. The
shares were issued on June 30.
Instructions
Prepare the necessary entries for the declaration and payment of the stock dividend.

QUESTION #8
Presented below are three independent situations:
(a) Howell Corporation purchased $250,000 of its bonds on June 30, 2018, at 102 and
immediately retired them. The carrying value of the bonds on the retirement date
was $229,500. The bonds pay semiannual interest and the interest payment due on
June 30, 2018, has been made and recorded.
(b) Justice, Inc. purchased $200,000 of its bonds at 97 on June 30, 2018, and
immediately retired them. The carrying value of the bonds on the retirement date
was $196,500. The bonds pay semiannual interest and the interest payment due on
June 30, 2018, has been made and recorded.
(c) Starr Company has $80,000, 10%, 12-year convertible bonds outstanding. These
bonds were sold at face value and pay semiannual interest on June 30 and December
31 of each year. The bonds are convertible into 40 shares of Starr $5 par value
common stock for each $1,000 par value bond. On December 31, 2018, after the
bond interest has been paid, $30,000 par value of bonds were converted. The market
value of Starr's common stock was $38 per share on December 31, 2018.
Instructions
For each of the independent situations, prepare the journal entry to record the retirement
or conversion of the bonds.
QUESTION #9
Unruh Company issued $900,000, 10%, 20-year bonds on January 1, 2018, at 104.
Interest is payable semiannually on July 1 and January 1. Unruh uses the straight-line
method of amortization and has a calendar year end.
Instructions
Prepare the January 1, 2018 and the July 1, 2018 journal entries related to the bond issue.
QUESTION #10
Karly Company issued $250,000, 11%, 10-year bonds on December 31, 2018, for
$230,000. Interest is payable semiannually on June 30 and December 31. Karly uses the
straight-line method of amortization and has a calendar year end.
Instructions
Prepare the appropriate journal entries on
(a) December 31, 2018.
(b) June 30, 2019.

QUESTION #11
The adjusted trial balance for Payne Corporation at the end of the current year (2014)
contained the following accounts:
Bonds payable, 10%...............................................................
Bond interest payable.............................................................
Discount on bonds payable....................................................
Lease liability.........................................................................
Mortgage notes payable, 9%, due 2015.................................
Accounts payable...................................................................

$800,000
20,000
40,000
60,000
80,000
120,000

Instructions
(a) Prepare the long-term liabilities section of the balance sheet.
(b) Indicate the proper balance sheet classification for the accounts listed above that do
not belong in the long-term liabilities section.