Deck 15: Recording and Evaluating Capital Resource Process Activities: Financing

Question 1

Hunter Corporation beginning of year retained earnings balance was $28,300.The corporation declared and paid dividends of $19,400 during the year and ended the year with a $36,500 balance.The net income or loss for the year was:

A)$(11,200)
B)$ 8,200
C)$ 17,100
D)$ 27,600

Answer 1

$ 27,600

Question 2

The journal entry to record the issuance of nopar common stock could include all of the following except a:

A)debit to Cash
B)debit to Equipment
C)credit to Common Stock
D)credit to Paid-in-Capital in Excess of Par--Common Stock

Answer 2

credit to Paid-in-Capital in Excess of Par--Common Stock

Question 3

The entry to record the declaration and the entry to record the payment of a cash dividend would include all the following except:

A)Credit to dividend payable
B)Debit to Retained Earnings
C)Debit to dividend payable
D)Debit to dividend expense

Answer 3

Debit to dividend expense

Question 4

Carolina Corporation just issued 10,000 shares of $2 par value common stock for $7.50 per share.The journal entry to record this transaction will include a:

A)debit to Donated Capital for $75,000
B)credit to Common Stock for $75,000
C)debit to Retained Earnings for $20,000
D)credit to Paid-in-Capital in Excess of Par--Common Stock for $55,000

Question 5

Quality Corporation has 500,000 shares of $1 par value common stock authorized and 200,000 shares issued and outstanding.Land worth $100,000 received in exchange for 10,000 shares of common stock of the corporation would do all the following except:

A)increase the number of shares of common stock issued and outstanding to 210,000 shares
B)increase the total in the common stock account by $10,000
C)increase paid in capital in excess of par by $90,000
D)increase Retained Earnings by $100,000

Question 6

Noncash assets given to a corporation in exchange for stock would be recorded at:

A)their book value when owned directly by the stockholder
B)cost less accumulated depreciation
C)fair market value
D)depreciable cost

Question 7

All of the following would reduce the balance in Retained Earnings except:

A)cash dividends
B)large stock dividends
C)small stock dividends
D)the acquisition of treasury stock

Question 8

Olio Corporation has 900,000 shares of $1 par value common stock authorized,and 550,000 shares issued and outstanding.The market value of the stock is $18 per share.The journal entry to record the declaration of a 10% stock dividend would include a:

A)credit to dividend payable for $90,000
B)credit to Common Stock Dividends Distributable for $90,000
C)debit to Retained Earnings for $990,000
D)credit to Paid-in-Capital in Excess of Par for $55,000

Question 9

Carolina Corporation just issued 10,000 shares of $2 par value common stock for $7.50 per share.The journal entry to record this transaction will include all of the following except:

A)debit to cash for $75,000
B)credit to Common Stock for $20,000
C)Credit to Retained Earnings for $75,000
D)credit to Paid-in-Capital in Excess of Par--Common Stock for $55,000

Question 10

Which of the following is true about a stock dividend.

A)Assets decrease and owners' equity decreases
B)Assets increase and Liabilities increase
C)Contributed Capital increases and Retained earnings decreases
D)Liabilities decrease and Contributed Capital Increases

Question 11

E&F Corporation issued 3,000 shares of $10 par value common stock in exchange for a tract of land valued at $135,000.Since all company stock is privately held,there is no market value for the stock.The journal entry to record this exchange includes a:

A)credit to Paid-in-Capital in Excess of Par--Common Stock for $105,000
B)credit to Common Stock for $135,000
C)debit to Donated Capital for $105,000
D)debit to Land for $30,000

Question 12

The journal entry to record the distribution of a small common stock dividend would include a:

A)credit to Paid-in-Capital in Excess of Par--Common Stock
B)debit to Stock Dividends Distributable
C)credit to Retained Earnings
D)debit to Common Stock

Question 13

A common stock dividend results in a decrease in:

A)assets
B)common stock
C)retained earnings
D)both assets and retained earnings

Question 14

The account "Stock Dividends Distributable" would be shown on a company's financial statements as:

A)contributed capital
B)an expense
C)a liability
D)revenue

Question 15

A Deficit in Retained Earnings can be created by all of the following except.

A)Net losses exceeding net income
B)Paying more in dividends than earnings generated
C)Receiving less than the par value when stock is issued
D)All of the above can create a deficit

Question 16

PAC Corporation has 500,000 shares of $5 par value common stock authorized,and 300,000 shares issued and outstanding.The market value of the stock is $14 per share.The journal entry to record the declaration of a 15% stock dividend would include a:

A)credit to dividend payable for $1,050,000
B)credit to Common Stock for $375,000
C)debit to Retained Earnings for $630,000
D)Credit to Stock Dividends Distributable for $375,000

Question 17

The journal entry to record the declaration of a cash dividend would include a:

A)credit to Cash
B)debit to Dividend Expense
C)debit to Retained Earnings
D)debit to Dividends Payable

Question 18

Mustang Corporation issued 5,000 shares of $1 par value common stock in exchange for a some equipment with an asking price of $75,000.The stock was sold the day before at a price of $13 per share.The journal entry to record this exchange includes a:

A)credit to Paid-in-Capital in Excess of Par--Common Stock for $60,000
B)credit to Common Stock for $60,000
C)debit to equipment for $5,000
D)debit to equipment for $75,000

Question 19

Foster Corporation has 800,000 shares of $3 par value common stock authorized,and 350,000 shares issued and outstanding.The market value of the stock is $22 per share.The journal entry to record the declaration of a 75% stock dividend would include a:

A)credit to dividend payable for $1,800,000
B)credit to Common Stock Dividends Distributable for $787,500
C)debit to Retained Earnings for $5,775,000
D)credit to Common Stock Dividends Distributable for $4,987,500

Question 20

When the Retained Earnings account has a debit balance,it is referred to as a:

A)loss
B)deficit
C)cumulative loss
D)donation of capital

Question 21

Bobber Corporation purchased 1,000 shares of its own $1 par value common stock at $10 per share.This was the first time the company had ever purchased treasury stock.Shortly thereafter,Bobber sold 100 shares of this treasury stock at $13 per share.The journal entry to record the sale of the treasury stock would include a:

A)credit to Gain on Sale of Treasury Stock $300
B)debit to Treasury Stock for $100
C)debit to Retained Earnings for $1,300
D)credit to Paid-in-Capital from Treasury Stock Transactions for $300

Question 22

What type of account is Stock Dividend Distributable?

A)contra contributed capital
B)contributed capital
C)contra asset
D)liability

Question 23

Which of the following would tend to cause the market price of common stock to decrease?

A)declaration of reverse stock split
B)declaration of stock dividend
C)issuance of additional shares
D)purchase of treasury stock

Question 24

A stockholder who received a 10% common stock dividend would have an increase in her/his ownership percentage equal to:

A)10%
B)20%
C)cannot be determined from the information given
D)there would be no change in the ownership percentage

Question 25

Where in the balance sheet is preferred stock usually reported?

A)long-term liabilities
B)stockholders' equity
C)contra stockholders' equity
D)After long-term liabilities but before stockholders' equity

Question 26

If stock with a $2 par value was issued for $12 per share,

A)common stock would be credited for $12 per share
B)common stock cannot be issued for more than par value
C)paid-in capital in excess of par should be credited for $10 per share
D)gain on sale of common stock should be credited for $10 per share

Question 27

A 100% stock dividend and a 2 for 1 stock split are similar in that:

A)the par value of the company's stock will be cut in half
B)the number of shares of stock outstanding will double
C)total stockholders' equity will remain unchanged
D)both b and c are correct

Question 28

Treasury stock is shown in a company's financial statements as a(n):

A)intangible asset
B)contra equity
C)current asset
D)contra asset

Question 29

When a corporation issues its own stock in payment for goods or services,the least appropriate value to use in recording the transaction is

A)appraised value of the goods or services
B)market value of the goods or services
C)market value of the stock
D)par value of the stock

Question 30

All the following except one are true statements about the declaration and distribution of stock dividends.

A)Stock dividends reduce the assets of the firm.
B)Stock dividends do not increase or decrease liabilities
C)Stock dividends increase contributed capital
D)Stock dividends decrease retained earnings.

Question 31

Retained earnings represent

A)total cash accumulated by a firm over its existence
B)earnings not available for payment of dividends
C)earnings to date less dividends paid to date
D)cash restricted for payment of dividends

Question 32

How would the purchase of treasury stock affect the market price of a firm's common stock?

A)increase
B)decrease
C)no effect
D)increase or decrease depending on the number of shares purchased

Question 33

Callisto began 2008 with 100,000 shares of $3 par common stock.The firm declared a 3-for-1 stock split on March 1,2008.How will the stock split affect Callisto's stockholders' equity?

A)$300,000 will be transferred from paid-in capital to retained earnings
B)$300,000 will be transferred from retained earnings to paid-in capital
C)neither total paid-in capital nor retained earnings will change
D)stockholders' equity will be decreased by $300,000

Question 34

Which of the following would not appear in the stockholders' equity section of the balance sheet?

A)gain on sale of treasury stock
B)additional paid-in capital
C)retained earnings
D)treasury stock

Question 35

The issuance of common stock for cash would appear on the

A)income statement and statement of cash flows
B)statement of cash flows and statement of stockholders' equity
C)income statement,balance sheet and statement of stockholders' equity
D)income statement,statement of cash flows and statement of stockholders' equity

Question 36

How does the declaration and distribution of a stock dividend affect a firm?

A)decreases stockholders' equity
B)increases stockholders' equity
C)no change in total stockholders' equity or assets
D)decreases total stockholders' equity and total assets

Question 37

How does the declaration and payment of a cash dividend affect a firm?

A)decreases stockholders' equity
B)increases stockholders' equity
C)no effect on stockholders' equity or assets
D)decreases stockholders' equity and total assets

Question 38

The two major elements of stockholders' equity are

A)retained earnings and distributable earnings
B)contributed capital and donated capital
C)paid-in capital and contributed capital
D)paid-in capital and retained earnings

Question 39

J&C Corporation purchased for the treasury 1,000 shares of its own $1 par value common stock at $20 per share.This was the first time the company had ever purchased treasury stock.Shortly thereafter,J&C sold 400 shares of this treasury stock at $17 per share.The journal entry to record the sale of the treasury stock would include a:

A)credit to Cash for $8,000
B)debit to Treasury Stock for $6,800
C)debit to Retained Earnings for $1,200
D)debit to Loss from Treasury Stock Transactions for $1,200

Question 40

Reissuing treasury stock at a price higher than the price paid to acquire the stock results in a(n):

A)increase in contributed capital
B)decrease in contributed capital
C)loss reported on the income statement
D)gain reported on the income statement

Question 41

The interest expense recognized on a noninterest-bearing note is calculated using the:

A)face rate of interest
B)market rate of interest
C)both b and d are correct
D)prime rate of interest

Question 42

The premium on Notes Payable account is a(n):

A)adjunct liability account
B)contra liability account
C)contributed liability account
D)equity account

Question 43

The Discount on Notes Payable account is always used when accounting for a:

A)noninterest-bearing note
B)interest bearing note
C)contra payment note
D)installment note

Question 44

As the Premium on Notes Payable account is reduced:

A)Interest Expense is increased
B)the market value of the note is also reduced
C)the carrying value of the note is decreased
D)the face rate of interest is increased

Question 45

The journal entry recorded by a company when it signs a noninterest-bearing note in exchange for a tract of land would include a:

A)debit to Discount on Notes Payable
B)credit to Interest Payable
C)debit to Notes Payable
D)credit to Land

Question 46

Each payment on a periodic payment note payable includes:

A)interest only
B)principal only
C)interest and discount
D)interest and principal

Question 47

The journal entry to record the issuance of bonds when the market rate of interest is equal to the face rate of interest would include a:

A)both b and d are correct
B)credit to Bonds Payable
C)debit to Discount on Bonds Payable
D)credit to Premium on Bonds Payable

Question 48

In a noninterest-bearing note,the amount borrowed is which of the following?

A)face value of the note
B)face value of the note less the discount on note payable
C)face value of the note plus a premium on the note payable
D)face value of the note less interest expense calculated at the face rate of interest

Question 49

In a periodic payment note,the amount borrowed is equal to the:

A)face value of the note plus interest expense calculated at market rate
B)face value of the note less interest expense calculated at market rate
C)face value of the note less the discount on note payable
D)face value of the note

Question 50

The cash payment on an installment note would appear on the statement of cash flows in the:

A)operating activities section
B)investing activities section
C)financing activities section
D)operating and financing activities sections

Question 51

The face value of a noninterest-bearing note less the discount on notes payable is called the ________ of the note.

A)contra value
B)market value
C)interest value
D)carrying value

Question 52

The balance due on a 5-year installment note due in 3 years would appear on the balance sheet in the:

A)other liabilities section
B)current liabilities section
C)long-term liabilities section
D)current and long-term liabilities sections

Question 53

During 2010,Delenn Company issued common stock for cash.Which part of the statement of cash flows would be affected by the sale of the common stock?

A)operating activities
B)financing activities
C)operating and financing activities
D)investing activities

Question 54

As a premium on notes payable is amortized:

A)the carrying value of the note and interest expense are increased.
B)both the carrying value of the note is and interest expense are unchanged
C)the carrying value of the note decreases and interest expense decreases
D)the carrying value of the note increases and the interest expense decreases

Question 55

As the Discount on Notes Payable account is reduced:

A)a credit is made to the Interest Expense account
B)the market value of the note is also reduced
C)the carrying value of the note is increased
D)the face rate of interest is increased

Question 56

The journal entry to record the purchase of equipment by making a down payment and signing an installment note for the balance would include a:

A)credit to Installment Notes Payable
B)debit to Interest Expense
C)credit to Equipment
D)debit to Cash

Question 57

As a discount on notes payable is amortized:

A)the carrying value of the note and interest expense are increased.
B)both the carrying value of the note is and interest expense are unchanged
C)the carrying value of the note decreases and interest expense increases
D)the carrying value of the note increases and the interest expense decreases

Question 58

The journal entry to record a payment on an installment note would include all of the following except:

A)credit to Cash
B)debit to Interest Expense
C)debit to Notes Payable
D)credit to Discount on Notes Payable

Question 59

The journal entry to record the year end accrual of interest expense on a noninterest-bearing note could include all of the following except:

A)credit to Cash
B)debit to Interest Expense
C)credit to Interest Payable
D)credit to Discount on Notes Payable

Question 60

The final cash payment of the face value of a noninterest-bearing note would appear on the statement of cash flows in the:

A)operating activities section
B)investing activities section
C)financing activities section
D)operating and financing activities sections

Question 61

Bonds are issued at a premium when the:

A)proceeds from the issuance of the bonds are greater than the face value of the bonds
B)market rate of interest is lower than the face rate of interest on the bonds
C)face rate of interest on the bonds is equal to the market rate of interest
D)both a and b are correct

Question 62

When the face rate of interest is higher than the market rate of interest on the date bonds are issued:

A)the proceeds from the issuance of the bonds are less than the face value of the bonds
B)the bonds are issued at a premium
C)the bonds are issued at a discount
D)both a and c are correct

Question 63

The cash payments made during the fifth year of a 10-year interest bearing note would be reported on the statement of cash flows in the:

A)both b and c are correct
B)operating activities section
C)investing activities section
D)financing activities section

Question 64

The journal entry to record the interest expense of a bond payable issued at a premium would include a:

A)debit to Cash
B)credit to Bonds Payable
C)credit to Interest Expense
D)debit to Premium on Bonds Payable

Question 65

On the maturity date of bonds issued at a premium:

A)the Premium on Bonds Payable account is zero
B)the carrying value of the bonds is greater than face value
C)the carrying value of the bonds is less than face value
D)both a and b are correct

Question 66

The amortization of a premium on bonds payable:

A)increases the carrying value of the bonds
B)increases the amount of interest expense recorded for the bonds
C)decreases the amount of interest expense recorded for the bonds
D)has no effect on the amount of interest expense recorded for the bonds

Question 67

The amortization of a premium on bonds payable:

A)has no effect on the cash payments for interest reported in the operating activities section of the statement of cash flows
B)increases the cash payments for interest reported in the operating activities section of the statement of cash flows
C)decreases the cash payments for interest reported in the operating activities section of the statement of cash flows
D)is reported in the financing activities section of the statement of cash flows

Question 68

The total cash payments made in the year of maturity relative to an interest bearing note would be reported on the statement of cash flows in the:

A)operating activities section
B)investing activities section
C)financing activities section
D)both a and c are correct

Question 69

Bonds are issued at a discount when the:

A)proceeds from the issuance of the bonds are smaller than the face value of the bonds
B)market rate of interest is higher than the face rate of interest on the bonds
C)face rate of interest on the bonds is equal to the market rate of interest
D)both a and b are correct

Question 70

When the market rate of interest on the date bonds are issued is lower than the face rate of interest on the bonds:

A)the proceeds from the issuance of the bonds will be less than the face value of the bonds
B)the bonds are issued at a premium
C)the bonds are issued at a discount
D)both a and c are correct

Question 71

On the maturity date of bonds issued at a discount:

A)the Discount on Bonds Payable account has been fully amortized
B)the amount of the liability is equal to the face value of the bonds
C)the carrying value of the bonds is less than face value
D)both a and b are correct

Question 72

The amortization of a premium on bonds payable:

A)decreases the carrying value of the bonds
B)increases the amount of interest expense recorded for the bonds
C)decreases the amount of cash paid at the interest date
D)has no effect on the amount of interest expense recorded for the bonds

Question 73

The amortization of a discount on bonds payable:

A)has no effect on the cash payments for interest reported in the operating activities section of the statement of cash flows
B)decreases the cash payments for interest reported in the operating activities section of the statement of cash flows
C)increases the cash payments for interest reported in the operating activities section of the statement of cash flows
D)is reported in the financing activities section of the statement of cash flows

Question 74

Bonds payable have a face amount of $1,000,000 and a discount of $10,000.The face interest rate is 9 percent and the effective interest rate is 10 percent.If the annual interest payment is due today,what amount of interest expense should be recorded?

A)$100,000
B)$ 99,000
C)$ 90,000
D)$ 89,100

Question 75

The journal entry to record the interest payment of a bond payable issued at a discount would include a:

A)debit to Discount on Bonds Payable
B)debit to Interest Expense
C)credit to Bonds Payable
D)debit to Cash

Question 76

How does the amount of premium and discount amortized in each period change over the term of bonds? Discount Premium

A)Increase Increase
B)Decrease Increase
C)Increase Decrease
D)Decrease Decrease

Question 77

The amortization of a discount on bonds payable:

A)decreases the carrying value of the bonds
B)increases the amount of interest expense recorded for the bonds
C)decreases the amount of interest expense recorded for the bonds
D)has no effect on the amount of interest expense recorded for the bonds

Question 78

When the market rate of interest on the date bonds are issued is higher than the face rate of interest on the bonds:

A)the proceeds from the issuance of the bonds will be greater than the face value of the bonds
B)the bonds are issued at a premium
C)the bonds are issued at a discount
D)both a and c are correct

Question 79

When the face rate of interest is lower than the market rate of interest on the date bonds are issued:

A)the proceeds from the issuance of the bonds are greater than the face value of the bonds
B)the bonds are issued at a premium
C)the bonds are issued at a discount
D)both a and b are correct

Question 80

How does the amortization of discounts and premiums affect the carrying value of bonds? Discount Premium

A)Increase Increase
B)Decrease Increase
C)Increase Decrease
D)Decrease Decrease