ACCT 221 Directions: This quiz tests how well you understand the concepts covered in Weeks

ACCT 221
Directions: This quiz tests how well you understand the concepts covered in Weeks 1 and 2. Quiz 1
contains 10 multiple­choice questions worth 5 points each. Problem 1 is worth 20 points. Problem 2 is
worth 30 points (15 points for Part A and 15 points for Part B). The computer will automatically grade the
multiple­choice questions, but grading will not be complete until your instructor manually grades the short­
answer questions. Your instructor may grant partial credit on short­answer questions for less than complete
answers. You can take the quiz only once. You can save each question after answering, and you can save
the quiz before submitting. Once you have submitted the quiz, you will receive a score and be able to
compare your answers to the correct answers.

Multiple Choice Questions
Select the best answer for the following questions. Each question is worth 5 points.

Question 1 (5 points)

A corporation has the following account balances: Common Stock, $10 par value, $740,000; Paid­in
Capital in Excess of Par, $1,850,000. Based on this information, the _______________.
Question 1 options:
legal capital is $2,590,000

shares issued are 1,850,000

shares outstanding are 740,000

legal capital is $740,000

Question 2 (5 points)

On January 2, 2015, Easton Corporation issued 50,000 shares of 5% cumulative preferred stock at $100 par
value. No dividends have been paid to any shareholders since the formation of the corporation.
Management wants to issue a dividend to common shareholders on December 31, 2016. What dividend
amount, if any, must be paid to the preferred stockholders entitled before any distribution is made to
common stockholders?

Question 2 options:
$0

$500,000

$250,000

$125,000

Question 3 (5 points)

The Frederick Company has 100,000 shares of $5 par common stock outstanding. Management declares
(not pays) a 10% stock dividend. The market value of a share of common stock was $32 immediately prior
to the stock dividend declaration. The journal entry is:
Question 3 options:
debit retained earnings, $320,000; credit stock dividend distributable, $10,000; credit paid in capital in
excess of par, $310,000.

debit retained earnings, $320,000; credit stock dividend distributable, $50,000; credit paid in capital in
excess of par, $270,000.

debit stock dividends distributable, $320,000; credit common stock, $320,000.

debit stock dividends distributable, $50,000; credit common stock, $50,000.

Question 4 (5 points)

Cambridge Hat Company previously purchased 20,000 shares of treasury stock on the open market for $12
per share. Later, the company resells 10,000 shares for $14 per share. What is the journal entry for the sale?
Question 4 options:

debit cash, $140,000; credit treasury stock, $120,000; credit additional paid­in capital—treasury
stock, $20,000

debit cash, $140,000; credit treasury stock, $140,000

debit cash, $140,000; credit treasury stock, $20,000; credit additional paid­in capital, $120,000

debit cash, $140,000; credit treasury stock, $120,000; credit retained earnings, $20,000

Question 5 (5 points)

On January 1, 2016, Towson Inc. issued $500,000, 20­year, 6% bonds at 101. Interest is payable
semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2016, is
Question 5 options:
debit cash, $500,000; credit bonds payable, $500,000.

debit cash, $505,000; credit bonds payable, $505,000.

debit cash, $500,000; debit premium on bonds payable, $5,000; credit bonds payable, $505,000.

debit cash, $505,000; credit bonds payable, $500,000; credit premium on bonds payable, $5,000.

Question 6 (5 points)

Smith Ventures Inc. purchased 10% of the outstanding stock of Jones Company. Smith paid $15 per share
to acquire 8,000 shares and will treat this purchase as available­for­sale securities. Par value of the stock is
50 cents. Smith uses a calendar year, and on December 31, the market value of Jones stock is $17 per share.
What is the entry Smith needs to make on December 31?
Question 6 options:

debit unrealized gain on available­for­sale securities, $16,000; credit available­for­sale securities,
$16,000.

no entry is required because the stock has not been sold.

debit available­for­sale securities, $16,000; credit unrealized gain on available­for­sale securities,
$16,000.

debit available­for­sale securities, $8,000; credit unrealized gain on available­for­sale securities,
$8,000.

Question 7 (5 points)

Richmond Corporation has issued an outstanding common stock of 50,000 shares, $5 par value. On July 1,
the company pays a 2­for­1 stock split. What are the legal capital and the par value of the stock
immediately after the split?
Question 7 options:
Legal capital, $250,000; par value, $5.

Legal capital, $250,000; par value, $2.50.

Legal capital, $125,000; par value, $5.

Legal capital, $500,000; par value, $2.50.

Question 8 (5 points)

On January 10, Acme Ventures Inc. purchased 30% of the outstanding stock of Gamma Ray Manufacturing
Corp. The purchase was 30,000 shares at $10 per share. Acme received dividends from Gamma Ray in the
amount of $15,000 on June 15 and again on December 15. Gamma reported net income for the year ended
December 31 in the amount of $250,000. What is the journal entry, if any, that Acme needs to make dated
December 31?

Question 8 options:
No entry on December 31 because the dividends were paid on different dates.

Debit investment in Gamma Ray Corp., $45,000; credit income from Gamma Ray Corp., $45,000.

Debit investment in Gamma Ray Corp., $75,000; credit income from Gamma Ray Corp., $75,000.

Debit investment in Gamma Ray Corp., $75,000; credit income from Gamma Ray Corp., $45,000;
credit dividends income, $30,000.

Question 9 (5 points)

High Adventure Corp. issues $100,000 of 7%, 10­year bonds for 98. High Adventure uses the straight­line
method to amortize any bond discounts or premiums. The bonds pay interest semiannually. On the maturity
date of the bond, what is the journal entry for the final interest payment and the redemption of the bonds?
Question 9 options:
Debit bonds payable, $98,000; debit interest expense, $3,600; credit cash, $101,500; credit discount
on bonds payable, $100.

Debit bonds payable, $100,000; debit interest expense, $3,500; credit cash, $103,500.

Debit bonds payable, $100,000; debit interest expense, $3,430; credit cash, $103,430.

Debit bonds payable, $100,000; debit interest expense, $3,600; $103,500; credit discount on bonds
payable, $100.

Question 10 (2 points)

On January 1, 2016, Towson Inc. issued $500,000, 20­year, 6% bonds at 101. Interest is payable
semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2016, is:
Question 10 options:

debit cash, $500,000; credit bonds payable, $500,000.

debit cash, $505,000; credit bonds payable, $505,000.

debit cash, $500,000; debit premium on bonds payable, $5,000; credit bonds payable, $505,000.

debit cash, $505,000; credit bonds payable, $500,000; credit premium on bonds payable, $5,000.

Journal Entries
For this part of the quiz, you will be uploading your work through answer sheets. The instructions for how
to upload your answer sheets are provided within each question.

Question 11 (20 points)

Salisbury Corporation formed a corporation on January 3, 2016, and is authorized to issue 500,000 shares
of $10 par value common stock. The company has the following stock transactions.

1/10/2016 – Issued 200,000 shares of stock at $16 per share.
1/25/2016 – The law firm that helped the company incorporate and file all forms for the stock issue
accepts 1,000 shares of newly issued stock in lieu of cash for its legal bill rendered. The amount of the
legal bill was $20,000.
6/10/2016 – Salisbury Corporation declares a 50 cent per share dividend payable July 15 to shareholders
of record as of June 30, 2016.
6/30/2016 – The record date for the dividend declared on June 10.
7/15/2016 – The dividend declared on June 10 is paid.
9/15/2016 – Salisbury Corporation declares a 10% stock dividend payable on September 30 to
shareholders of record as of September 20. The market value of the stock was $15 immediately prior to
the declaration of the stock dividend.
9/30/2016 – The stock dividend declared on September 15 is paid.
10/15/2016 – Salisbury Corporation buys 5,000 shares of its own stock on the open market for $18 per

share.
12/18/2016 – Salisbury Corporation resells 2,000 shares of the treasury stock for $20 per share.

Instructions: Journalize the above transactions for Salisbury Corporation.

Problem 1 Answer Sheet Instructions
To submit your answers for this part of the exam, fill in the answer sheet and upload it to the exam.
Download: Quiz 1 Problem 1 Answer Sheet


To upload your answer sheet, follow these instructions:



Click the Insert Stuff icon (first on the left).



Click Upload to retrieve the file from your computer and upload it.



For Link Text: (Your Name) Final Exam Answer Sheet



Click Add. (Ignore the Choose Destination prompt.)



Click OK.

Question 11 options:
Skip Toolbars for .
More Insert actions.


Question 12 (30 points)

On January 2, 2016, Alpha Company purchased 25,000 shares of Bravo Company stock on the open market
for $50 per share as a long­term investment. On both June 15 and December 15, Bravo Company paid
$50,000 in dividends for a total annual dividend of $100,000. On December 31, Bravo Company reported
net income of $400,000 and the stock had a market value of $75 per share. Both Alpha and Bravo operate
on a calendar year.
Part A – Assume that at all times during the year there were 250,000 shares of Bravo Company stock
outstanding.

 Record the journal entries for the purchase of the stock, the dividends, and the reporting of income
at year end on Alpha Company books.
State what the year­end value of the stock investment account is on the Alpha Company books.
Part B – Assume that at all times during the year there were 100,000 shares of Bravo Company stock
outstanding.
Record the journal entries for the purchase of the stock, the dividends, and the reporting of income
at year end on Alpha Company books.
State what the year­end value of the stock investment account is on the Alpha Company books.

Problem 2 Answer Sheet Instructions
To submit your answers for this part of the exam, fill in the answer sheet and upload it to the exam.
Download: Quiz 1 Problem 2 Answer Sheet To upload your answer sheet, follow these
instructions:


Click the Insert Stuff icon (first on the left).



Click Upload to retrieve the file from your computer and upload it.



For Link Text: (Your Name) Final Exam Answer Sheet



Click Add. (Ignore the Choose Destination prompt.)



Click OK.


Question 12 options:
Skip Toolbars for .
More Insert actions.