Accounting

Question 1

1. Every asset in the Property, Plant & Equipment category must be depreciated over its useful life.Answer

   	a.	True
   	b.	False

1 points

Question 2

1. The depreciable cost of an asset is the asset's cost minus its residual value.Answer

   	a.	True
   	b.	False

1 points

Question 3

1. The primary purpose of depreciating a plant asset is to match the cost of the asset to the period of benefit.Answer

   	a.	True
   	b.	False

1 points

Question 4

1. The primary cause for depreciation of assets in using the straight-line basis is time or age.Answer

   	a.	True
   	b.	False

1 points

Question 5

1. The impact on the financial statements of a business from amortizing intangible assets is the same as that of depreciating plant assets.Answer

   	a.	True
   	b.	False

1 points

Question 6

1. Goodwill must be amortized over its useful life not to exceed 40 years.Answer

   	a.	True
   	b.	False

1 points

Question 7

1. The par value of common stock is the value it must be sold at by the company.Answer

   	a.	True
   	b.	False

1 points

Question 8

1. There is a minimum amount of stockholder equity that a corporation must have that is referred to as legal capital.Answer

   	a.	True
   	b.	False

1 points

Question 9

1. If the corporation has only one class of stock it cannot be common stock.Answer

   	a.	True
   	b.	False

1 points

Question 10

1. Holders of cumulative preferred stock are not guaranteed that they will be paid a dividend every year.Answer

   	a.	True
   	b.	False

1 points

Question 11

1. Retained Earnings can never be a negative value.Answer

   	a.	True
   	b.	False

1 points

Question 12

1. If a company that has issued 7%, $100 par value, preferred stock, declares a dividend, then it must pay the preferred shareholders 7% of the total amount of dividends declared.Answer

   	a.	True
   	b.	False

1 points

Question 13

1. Treasury stock purchased by the company will reduce the companies outstanding shares.Answer

   	a.	True
   	b.	False

1 points

Question 14

1. If the company resells treasury stock for more than it cost to purchase the gain should be recorded as other revenue on the income statement.Answer

   	a.	True
   	b.	False

1 points

Question 15

1. If the company is liquidated, the preferred shareholders must receive their investment back before common shareholders.Answer

   	a.	True
   	b.	False

1 points

Question 16

1. Cash dividends declared by a corporation must be recorded as a liability to the shareholders until paid.Answer

   	a.	True
   	b.	False

1 points

Question 17

1. If the corporation declares a stock dividend, when the shares are issued, the shareholders receiving the additional shares owns more of the corporationAnswer

   	a.	True
   	b.	False

1 points

Question 18

1. If the corporation issues a 3 for 1 stock split there will be 3 times as many outstanding shares afterwards.Answer

   	a.	True
   	b.	False

1 points

Question 19

1. Match the depreciation method to the descriptionAnswer

   - A. B. C. D. E. F. G. H. I. J. assumes depreciation based upon wear and tear from usageRead Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. will cause an leveling of expenses over the life of an asset where it is assumed that repair cost will increase significantly as an asset gets olderRead Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. assumes depreciation is based upon time passingRead Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. is similar to the method used for depletion of natural resourcesRead Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. will allocate cost better than the other methods where obsolescence can be a problem for the asset.Read Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. is generally used to take advantage of tax benefits pertaining to depreciationRead Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. is similar to the method generally used to amortize intangible assetsRead Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. is the method that is easiest to allocate cost correctly where the value the asset provides will be consistent from period to period over the asset lifeRead Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. is the method that will best allocate the asset cost when the value the asset will provide fluctuates from period to period.Read Answer Items for Question 19 - A. B. C. D. E. F. G. H. I. J. is the method which initially ignores the salvage value the asset may haveRead Answer Items for Question 19

   Answer A. Straight-line B. Double declining balance C. Double declining balance D. Units-of-production E. Units-of-production F. Double declining balance G. Straight-line H. Units-of-production I. Double declining balance J. Straight-line

10 points

Question 20

1. The book value of an asset is based on?Answer

   	a.	cost - residual value
   	b.	resale value - cost
   	c.	cost - accumulated depreciation
   	d.	resale value - accumulated depreciation

1 points

Question 21

1. A fully depreciated assetAnswer

   	a.	must be removed from the books
   	b.	should continue to be depreciated until it is disposed of.
   	c.	remains on the books but is no longer depreciated.
   	d.	remains on the books and is recorded as a gain on the income statement.

1 points

Question 22

1. The accumulated depreciation account is:Answer

   	a.	an asset account because it reflects the asset value accumulated for replacement.
   	b.	an equity account because it reflects the portion of the asset(s) that the owner(s) of the business can claim.
   	c.	a liability account since it shows the obligation the company has to replace the assets.
   	d.	an expense account since it shows the asset value used up
   	e.	none of the above

1 points

Question 23

1. A capital expenditure would appear on theAnswer

   	a.	income statement under operating expenses
   	b.	balance sheet under plant assets
   	c.	balance sheet under current assets
   	d.	income statement under other expenses

1 points

Question 24

1. The par value of stock isAnswer

   	a.	the same as its market value
   	b.	always greater than its market value
   	c.	required for every stock issued
   	d.	the value assigned by the corporation which defines legal capital
   	e.	the highest value the stock can have

1 points

Question 25

1. If a corporation issues no-par stock instead of par value stockAnswer

   	a.	total stockholder will be greater.
   	b.	total contributed capital will be greater but not the total stockholder equity.
   	c.	total legal capital will be greater.
   	d.	total legal capital will be lower.
   	e.	total stockholder equity will be lower.

1 points

Question 26

1. An increase in retained earnings during the period can be the result ofAnswer

   	a.	net income
   	b.	cash dividends
   	c.	sales of common stock
   	d.	stock splits
   	e.	treasury stock purchases

1 points

Question 27

1. If a corporation issued 100,000 shares of $1 par value in exchange for land with a current value of $800,000, the journal entry for the transaction would include which of the followingAnswer

   	a.	credit to land for $800,000
   	b.	debit to common stock for $100,000
   	c.	credit to common stock for $800,000
   	d.	credit to additional paid in capital for $700,000
   	e.	debit to land for $100,000

1 points

Question 28

1. A cash dividend would have which of the following effects on the corporation declaring it?Answer

   	a.	Total stockholder equity decreases.
   	b.	Total stockholder equity increases.
   	c.	Paid-in-capital increases, but total stockholder equity remains the same.
   	d.	Paid-in-capital decreases, but total stockholder equity remains the same.
   	e.	Stockholder equity remains the same.

1 points

Question 29

1. Heston Inc. has 1,000,000 share of $1 par value common stock and 20,000 share of $100 par value 7% preferred stock. If Heston board of directors releases $1,000,000 for dividends to the shareholders, how much will each common share receive?Answer

   	a.	$.86
   	b.	$.93
   	c.	$7
   	d.	$1
   	e.	$8.60

1 points

Question 30

1. A stock split would have which of the following effects on the corporation issuing it?Answer

   	a.	Total stockholder equity decreases.
   	b.	Total stockholder equity increases.
   	c.	Paid-in-capital increases, but total stockholder equity remains the same.
   	d.	Paid-in-capital decreases, but total stockholder equity remains the same.
   	e.	Stockholder equity remains unchanged.

1 points

Question 31

1. ABC Corporation issued a 5% stock dividend that involved issuing 10,000 shares of $1 par value common stock when the market value of the stock was $25 per share. The journal entry for the transaction would includeAnswer

   	a.	debiting cash for $10,000
   	b.	crediting retained earnings for $10,000
   	c.	debiting retained earnings for $250,000
   	d.	crediting retained earnings for $250,000
   	e.	crediting common stock for $250,000

1 points

Question 32

1. Retained earnings can best be described asAnswer

   	a.	cash receipts minus expenses after adjustments
   	b.	net income minus expenses after adjustments
   	c.	net income plus dividends
   	d.	undistributed profits
   	e.	net income minus cash disbursements

1 points

Question 33

1. A feature common to both stock dividends and stock splits is:Answer

   	a.	a reduction in total stockholders' equity.
   	b.	a reduction in the book value per share amount.
   	c.	a reduction in retained earnings .
   	d.	inclusion as financing activities on the cash flow statement.
   	e.	they are both distributions from treasury stock held.

1 points

Question 34

1. The declaration of a small stock dividendAnswer

   	a.	increases the ownership of each shareholder.
   	b.	will cause a decrease in retained earnings equal to the par value of the shares issued.
   	c.	is a warning that the corporation has cash flow problems.
   	d.	is accounted for in the same manner as a stock split.
   	e.	will cause a decrease in retained earnings equal to the fair market value of the shares issued.

1 points

Question 35

1. The stock dividends declared account is a(n)Answer

   	a.	asset
   	b.	liability
   	c.	stockholder equity
   	d.	revenue
   	e.	expense

1 points

Question 36

1. A corporation may purchase treasury stock for all of the following reasonsexcept:Answer

   	a.	to support the market price of the stock
   	b.	to issue to employees in stock option plans
   	c.	to prevent a hostile takeover.
   	d.	to generate more capital from the same stock.
   	e.	no exception, for all of the reasons stated.

1 points

Question 37

1. If the corporation repurchases treasury stockAnswer

   	a.	total assets of the corporation increase
   	b.	paid-in-capital increases but total stockholder equity remains the same
   	c.	total stockholder equity decreases
   	d.	paid-in-capital decreases but total stockholder equity remains the same
   	e.	total liabilities of the corporation decrease

1 points

Question 38

1. Additional paid-in-capital from treasury stock is recorded:Answer

   	a.	when treasury stock is purchased for less than the amount of its original issue.
   	b.	when treasury stock is reissued for more than the amount at which it was purchased.
   	c.	when treasury stock is reissued for an amount greater that the amount at which it was originally issued.
   	d.	only when the treasury stock is issued to employees.

1 points

Question 39

1. Treasury stock which is repurchased by the corporation for $100 per share is later reissued for $105 per share. The effect of the reissuance willAnswer

   	a.	decrease the paid-in-capital portion of stockholder
   	b.	decrease retained earnings
   	c.	increase a revenue account from the sale
   	d.	increase retained earnings
   	e.	increase the paid-in-capital portion of stockholder equity

1 points

Question 40

1. Support Corporation, which has issued 3,000,000 shares of common stock, entered into several treasury stock transactions:
   1- repurchased 90,000 shares at $14 per share.
   2- reissued 20,000 shares of the treasury stock at $15 per share.
   Show the balance, and describe how the treasury stock account will be presented on the December 31 balance sheet.Answer

   	a.	$960,000, it is added in the stockholder equity section.
   	b.	$980,000, it is deducted from the stockholder equity section.
   	c.	$980,000, it is added in the stockholder equity section.
   	d.	$960,000, it is deducted from the stockholder equity section.
   	e.	$1,260,000, it is deducted from the stockholder equity section.

1 points

Question 41

1. Which of the following transactions will increase a shareholder's ownership interest in a corporation?Answer

   	a.	a stock dividend
   	b.	a cash dividend
   	c.	the corporation issues stock to new investors
   	d.	the corporation repurchases treasury stock
   	e.	a stock split

1 points

Question 42

1. Red and Green each own common stock in the Blue company. If Red sells her stock directly to Green, which of the following statements is true?Answer

   	a.	Blue's contributed capital increases
   	b.	Blue's contributed capital decreases
   	c.	Blue's contributed capital remains the same
   	d.	Blue's cash account increases
   	e.	Blue's cash account decreases

1 points

Question 43

1. Which of the following is aFALSEstatement?Answer

   	a.	common stock can be issued at a price greater than its par value
   	b.	treasury stock can be sold at a price less than its cost
   	c.	the claims of stockholders are honored before those of creditors
   	d.	retained earnings is profit reinvested in a corporation

1 points

Question 46

1. The stockholders' equity section of Patrick Corporation's balance sheet at December 31 is presented here:

   PATRICK CORPORATION
   Balance Sheet (partial)
   Stockholders' equity
   Paid-in capital
   Preferred stock, cumulative, 10,000
   shares authorized,6,000 shares issued
   and outstanding $ 300,000
   Common stock, no par, 750,000 shares
   authorized, 600,000 shares issued3,000,000
   Total paid-in capital 3,300,000
   Retained earnings1,358,000
   Total paid-in capital and retained earnings 4,658,000
   Less: Treasury stock (6,000 common shares)
   (32,000)
   Total stockholders' equity $4,626,000
   Instructions
   From a review of the stockholders' equity section, answer the following questions.
   (a) How many shares of common stock are outstanding? (show all work)
   (b) Assuming there is a stated value, what is the stated value of the common stock? (show all work)
   (c) What is the par value of the preferred stock? (show all work)
   (d) If the annual dividend on preferred stock is $18,000, what is the dividend rate on preferred stock? (show all work)
   (e) If dividends of $36,000 were in arrears on preferred stock, what would be the balance reported for retained earnings? (show all work)