ACCT 220 Quiz 3 1. A company buys a new parcel of land. Which of the following items

ACCT 220 Quiz 3

1. A company buys a new parcel of land. Which of the following items is properly debited to the land account?

	paving a road to access the land
	demolishing an existing structure
	the fees on a mortgage loan on the land
	planting of trees and shrubs

2. What type of asset is subject to depletion?

	natural resources
	an intangible asset
	a computer
	a literary work

3. Which is NOT an intangible asset?

	a patent on a new invention
	an estimated amount of coal in a piece of owned land that has not yet been mined
	a copyright on a musical work
	a contract granting the company a right-of-way

4. Which is NOT an advantage of a corporation compared with a partnership or sole proprietorship?

	The corporation's existence is unaffected by the death of an owner.
	It is easier to raise large amounts of capital.
	Owners enjoy limited liability.
	The total tax burden is lower.

5. If a corporation's stock is purchased by the corporation on the open market but is held in treasury and not retired, which of the following is correct?

	A debit will be recorded to the treasury stock account, which is an equity account.
	A credit will be recorded to the treasury stock account, which is a liability account.
	A credit will be recorded to the treasury stock account, which is an equity account.
	A debit will be recorded to the treasury stock account, which is a liability account.

Prepare the following journal entries. Dates and descriptions are not required.

6. A company sells a fixed asset (equipment) for $30,000. The asset originally cost $80,000 and had accumulated depreciation of $55,000 at the time of the sale. Record the journal entry to recognize the sale.

7. A company scraps a fully depreciated piece of equipment originally costing $20,000. They did not receive any proceeds. Record the journal entry.

8. A company sells a piece of plant equipment for $2,000. The original cost was $10,000, and the accumulated depreciation through the date of the sale was $6,500. Record the journal entry.

9. A company buys a new pickup truck for $35,000 on the first day of the month. They will assume a 5-year life with a salvage value equal to 10% of the original cost. Record the first monthly depreciation journal entry.

10. A company sells 200,000 shares of newly issued common stock having a par value of $1 for $8.50 per share. Record the journal entry.

11. A company has net income of $4,580,000. There are 200,000 shares of $50 par, 6% preferred stock outstanding and 800,000 shares of common stock. What is the net income per common share (earnings per share)? Show your calculation.

12. When would repair costs be capitalized?

13. What will be the result to inventory values, cost of goods sold, and net income if the LIFO method is used during times of inflation?

14. What is a contra account? Give an example.

15. A mining company pays $10,000,000 for a piece of land that they estimate has a recoverable reserve of oil equal to 1,500,000 barrels. They estimate that they will be able to sell the land for $500,000 after they have extracted all of the oil. In year one, the company extracts 300,000 barrels of oil. They have made no prior entries for the removal of this oil. Record the journal entry to recognize the removal of this oi

16. A company has 800,000 shares of common stock outstanding and no preferred stock. On February 21, the board of directors declares a 25-cents-per-share dividend, payable on March 31 to shareholders of record as of March 15. Record the journal entry for the declaration of the dividend.

17. A company has 800,000 shares of common stock outstanding and no preferred stock. On February 21, the board of directors declares a 25-cents-per-share dividend payable on March 31 to shareholders of record as of March 15. Record the journal entry for the payment of the dividend.

18. A corporation has 50,000 shares of $10 par common stock. A 10% stock dividend is declared and the market value of the stock is $80 immediately before the declaration. Record the journal entry made on the date the dividend is declared but not paid.

19. What is the difference between a stock split and a stock dividend?

20. A company has 150,000 shares of common stock outstanding and 10,000 shares of $100 par value, 5% preferred stock outstanding. The company's net income was $387,500.

What are the earnings per common share? (Show your calculation.)