Exam 3 Review

Chapter 8

1. Obtain an $8,000, 6 month loan from the bank on November 1, 2015 1. Obtain an $8,000, 6 month loan from the bank on November 1, 2015. 6% interest is payable at maturity. Record the entry on November 1, 2015. 1b. Record the adjusting entry on Dec. 31, 2015

2. Expenditures related to warranties on sales of $2,500,000 are expected to total 4% of sales in 2015. Record the warranty liability for 2015. 2b. In 2016, $74,000 is paid related to the warranties from 2015. What is the remaining balance in the warranty liability account?

3. Sold $10,000 worth of goods with a 6% sales tax 3. Sold $10,000 worth of goods with a 6% sales tax. Record the sales and sales tax journal entry.

4. A company has $100,000,000 of long-term notes payable outstanding 4. A company has $100,000,000 of long-term notes payable outstanding. A $10,000,000 principal payment on these notes payable will be made next year. What is the journal entry to record the reclassification of long-term debt?

ABC company receives $10,000 on March 1st to perform music services on June 20th. Record the journal entry.

Violet Inc., can estimate the amount of loss that will occur due to a riot against the company, and the likelihood of the loss is reasonably possible. A contingent liability should be: a. Reported b. Recorded c. No action is taken d. Recorded as a liability, but not reported.

Chapter 9

5. $100,000 worth of 10 year, 7% bonds were issued on January 1st, 2014 for $90,200 when the market rate was 9%. Interest is paid semiannually Record the issuance of the bonds Record first payment of interest Record second payment of interest

6. Issue 100 bonds on January 1, 2014 with a par value of $1,000 each and a stated interest rate of 7% paid semiannually for $107,439. The market rate on the date of issuance was 5% Record the issuance of the bonds Record first payment of interest Record second payment of interest

Bond A and Bond B are issued by the same company with a face value of $100,000 each. Bond A pays a stated rate of 10% while Bond B pays 5% interest. The current market rate of interest is 6%. Which of the following is correct? Bond A sells for a discount and sell for less than Bond B. Bond A sells for a premium and sell for more than Bond B. Bond A sells for a discount and sell for more than Bond B. Bond A sells for a premium and sell for less than Bond B.

General Terms from Chapter 9 Bond Pricing: Premium/Discount Capital Lease vs. Operating Lease

Sample Question #3 Under the effective-interest method of amortization for bond premiums and discounts, the interest expense is calculated by multiplying the: a. carrying value of the bonds times the stated interest rate b. carrying value of the bonds times the market interest rate c. face value of the bonds times the market interest rate d. face value of the bonds times the stated interest rate

Chapter 10

7. Issue 10,000 shares of $0.01 par value stock for $50 each 7b. How would the journal entry change if this was no-par common stock?

8a. Repurchase 100 shares of company stock at $20 each on March 1st, 2014 8b. Reissue 50 shares back on the open market at a price of $40 per share on May 15, 2014

9a. Repurchase 1,000 shares of company stock for $10 each on June 1st, 2014 9b. Reissue 700 shares at a price of $8 each November 15, 2014

10. Company ABC has 700,000 shares authorized and 550,000 issued 10. Company ABC has 700,000 shares authorized and 550,000 issued. The company has reacquired 50,000 shares as treasury stock. At the end of the year 2015, the company declares a dividend of $1 per share for all shareholders of record on January 10, 2016 to be paid on January 22, 2016. December 31, 2015 January 10, 2016 January 22, 2016

Sample Question #1 If ABC company purchased treasury stock and then reissued it at sales price per share lower than its repurchase cost, the difference is: a. credited to Paid-in Capital b. credited to Retained Earnings c. debited to Retained Earnings d. debited to Paid-in Capital

Sample Question #2 When preferred stock is issued above the par value, the recording of the transaction requires a: a. credit to Cash. b. debit to Preferred Stock. c. credit to additional paid in capital d. debit to additional paid in capital

Sample Question #4 The number of shares of stock issued less the number of treasury stock shares equals: a. the number of shares issued b. the number of shares issued that have not been reacquired by the company c. the number of shares outstanding. d. the number of shares authorized that have not been issued.

Sample Question #7 ABC Corporation began operations on January 3, 2013. There are 100,000 shares of $5 par value common stock authorized to issue. During 2013, ABC had the following transactions relating to shareholders' equity: Issued 10,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is total paid-in capital at the end of 2012? A. $280,000. B. $230,000. C. $330,000. D. $180,000.

Chapter 11

Operating Cash Flows Formula Net Income + Depreciation expense + Losses on sale Gains on sale Increase in current assets + Decrease in current assets + Increase in current liabilities Decrease in current liabilities Operating Cash Flows

Account Title Jan 1, 2013 Dec 31, 2013 Increase / (Decrease) Accounts Receivable 100,000 105,000 5000 Inventory 24,000 22,000 (2,000) Accounts Payable 40,000 42,000 2,000 Net income for the period totals $100,000. Depreciation of $14,000 was taken. Total losses amounted to $4,000. Determine net cash flows from operating activities

Under what section of the Statement of Cash Flows would you classify Issuance of common stock? Financing Investing Operating Not reported on the statement of cash flows Under what section of the Statement of Cash Flows would you classify purchase of long-term assets? Financing Investing Operating Not reported on the statement of cash flows

Investing Activities – Purchase/Sale of long term assets or investments Financing Activities – Issue bonds/notes/stock. Repayment of bonds/note or DIVIDENDS PAID

Sample Question #5 Which statement is TRUE for the cash flow statement? a. An increase in current assets (other than the cash account) increases cash. b. A decrease in current assets (other than the cash account) decreases cash. c. An increase in a current liability increases cash d. A decrease in a current liability increases cash

Sample Question #6 The following data is provided for last year. Net income was $40,000. Current assets (other than cash) decreased by $10,000 and current liabilities increased by $20,000. The cash flows from operating activities would be: a. $10,000 b. $60,000 c. $50,000 d. $70,000