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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

Fetzer Company declared a $0.50 per share cash dividend.
The company has 460,000 shares authorized, 437,000 shares issued, and 18,400 shares
in treasury stock. The journal entry to record the payment of the dividend is:
 
Debit Common Dividends Payable $218,500; credit Cash $218,500.
Debit Common Dividends Payable $209,300; credit Cash $209,300
Debit Retained Earnings $218,500; credit Common Dividends Payable $218,500.
Debit Retained Earnings $209,300; credit Common Dividends Payable $209,300.
Debit Retained Earnings $230,000; credit Common Dividends Payable $230,000
   
Sweet Company’s outstanding stock consists of 1,600 shares of noncumulative 4% preferred stock with a $100
par value and 10,600 shares of common stock with a $10 par value. During the first three years of operation,
the corporation declared and paid the following total cash dividends.
 
                                Dividend Declared
year 1    $             2,600
year 2    $             7,200
year 3    $             35,000
 
The total amount of dividends paid to preferred and common shareholders over the three-year period is:
 
$12,800 preferred; $32,000 common.
$6,400 preferred; $38,400 common.
$15,400 preferred; $29,400 common.
$19,200 preferred; $25,600 common
$13,600 preferred; $31,200 common
   
Ultimate Sportswear has $130,000 of 7% noncumulative, nonparticipating, preferred
stock outstanding. Ultimate Sportswear also has $530,000 of common stock outstanding.
In the company's first year of operation, no dividends were paid. During the second year,
the company paid cash dividends of $33,000. This dividend should be distributed as follows:
 
$17,000 preferred; $16,000 common.
$0 preferred; $33,000 common.
$9,100 preferred; $23,900 common
$16,500 preferred; $16,500 common.
$8,250 preferred; $24,750 common.
   
Sweet Company's outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with
a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three
years of operation, the corporation declared and paid the following total cash dividends. Dividends Declared & Paid
 
Year 1   $              2,000
Year 2   $              6,000
Year 3   $              32,000
 
The amount of dividends paid to preferred and common shareholders in year 3 is:
 
$7,000 preferred; $25,000 common.
$6,400 preferred; $38,400 common.
$15,400 preferred; $29,400 common.
$19,200 preferred; $25,600 common
$13,600 preferred; $31,200 common
   
Percy Corporation was formed on January 1. The corporate charter authorized 100,000
shares of $10 par value common stock. During the first month of operation, the
corporation issued 250 shares to its attorneys in payment of a $4,500 charge for
drawing up the articles of incorporation. The entry to record this transaction would include:
 
A credit to Common Stock for $4,500.
A debit to Organization Expenses for $2,500.
A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.
A credit to Paid-in Capital in Excess of Par Value, Common Stock for $4,500.
A debit to Organization Expenses for $4,500
   
A corporation sold 15,000 shares of its $10 par value common stock at a cash price of $15
per share. The entry to record this transaction would include:
 
A credit to Common Stock for $150,000
A debit to Cash for $150,000.
A debit to Paid-in Capital in Excess of Par Value, Common Stock for $75,000.
A credit to Common Stock for $225,000.
A credit to Paid-in Capital in Excess of Par Value, Common Stock for $225,000
   
A company had a beginning balance in retained earnings of $44,000. It had net income of
$7,000 and paid out cash dividends of $5,875 in the current period.
The ending balance in retained earnings equals:
 
$12,875.
$5,875.
$56,875.
$45,125
$42,875.
   
A company issued 70 shares of $100 par value common stock for $8,000 cash. The total amount
of paid-in capital is:
 
$8,000.
$100.
$1,000
$7,000.
$700.
   
Torino Company has 1,700 shares of $20 par value, 4.5% cumulative and nonparticipating preferred
stock and 17,000 shares of $10 par value common stock outstanding. The company paid total cash
dividends of $500 in its first year of operation. The cash dividend that must be paid to preferred
stockholders in the second year before any dividend is paid to common stockholders is:
 
$500.
$1,030.
$2,560
$1,530.
$3,060.
   
Wiggins Company has 2,000 shares of $100 par preferred stock, which were issued at par. It also
has 35,000 shares of common stock outstanding, and its total stockholders' equity equals $795,000.
The book value per common share is:
 
$16.08.
$17.00
$21.49.
$100.00.
$22.71.
----------------------------
Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1.
Later that day the board of directors declared a 10% stock dividend when the market value
of each share was $27. The entry to record the dividend declaration is:
 
Debit Retained Earnings $135,000;
Credit Common Stock Dividend Distributable $100,000;
Credit Paid-In Capital in Excess of Par Value, Common Stock $35,000
 
Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $135,000.
Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable $100,000.
Debit Retained Earnings $135,000; credit Cash $135,000.
No entry is made until the stock is issued.
   
A company has 600 shares of $50 par value preferred stock outstanding, and the call price
of its preferred stock is $64 per share. It also has 24,000 shares of common stock outstanding,
and the total value of its stockholders' equity is $828,000.
The company's book value per common share equals:
 
$32.10.
$33.66.
$34.50.
$33.25.
$32.90
   
Eastline Corporation had 17,000 shares of $10 par value common stock outstanding when
the board of directors declared a stock dividend of 5,780 shares. At the time of the
stock dividend, the market value per share was $16. The entry to record this dividend is:
 
Debit Retained Earnings $92,480; credit Common Stock $34,680.
Debit Common Stock Dividend Distributable $92,480; credit Retained Earnings $92,480.
Debit Retained Earnings $57,800; credit Common Stock Dividend Distributable $57,800
Debit Retained Earnings $92,480; credit Common Stock Dividend Distributable $92,480.
No entry is needed
   
Fetzer Company declared a $0.20 per share cash dividend.
The company has 140,000 shares authorized, 133,000 shares issued, and 5,600 shares
in treasury stock. The journal entry to record the dividend declaration is:
 
Debit Retained Earnings $28,000; credit Common Dividends Payable $28,000.
Debit Retained Earnings $26,600; credit Common Dividends Payable $26,600.
Debit Retained Earnings $25,480; credit Common Dividends Payable $25,480.
Debit Common Dividends Payable $26,600; credit Cash $26,600.
Debit Common Dividends Payable $25,480; credit Cash $25,480
   
A company paid $0.86 in cash dividends per share. Its earnings per share is $4.58 and
its market price per share is $25.25. Its dividend yield equals:
 
18.78%
18.14%.
3.41%.
2.94%.
5.33%.
   
A company has 38,000 shares of common stock outstanding. The stockholders' equity applicable
to common shares is $469,300, and the par value per common share is $10. The book value per share is:
 
$0.08.
$2.35.
$10.00.
$46.93.
$12.35
   
Fargo Company's outstanding stock consists of 850 shares of noncumulative 5% preferred stock with
a $10 par value and 4,600 shares of common stock with a $1 par value. During the first three
years of operation, the corporation declared and paid the following total cash dividends.
 
                                Dividend Declared
year 1    $             32,000
year 2    $             4,000
year 3    $             41,000
 
The amount of dividends paid to preferred and common shareholders in year 1 is:
 
$27,2500 preferred; $4,750 common.
$32,000 preferred; $0 common.
$425 preferred; $31,575 common
$16,000 preferred; $16,000 common.
$8,500 preferred; $23,500 common.
   
The following data were reported by a corporation:
 
Authorized shares            26,000
Issued shares                     21,000
Treasury shares                 6,500
 
The number of outstanding shares is:
 
19,500.
14,500
26,000.
21,000.
32,500.
   
Prior to May 1, Fortune Company has never had any treasury stock transactions.
A company repurchased 220 shares of its common stock on May 1 for $11,000. On July 1,
it reissued 110 of these shares at $52 per share. On August 1, it reissued the remaining
treasury shares at $49 per share. What is the balance in the Paid-in Capital,
Treasury Stock account on August 2?
 
$11,110.
$13,420.
$5,720.
$0.
$110
   
Halverstein Company's outstanding stock consists of 11,550 shares of cumulative 5% preferred
stock with a $10 par value and 4,950 shares of common stock with a $1 par value. During the
first three years of operation, the corporation declared and paid the following total cash dividends.
 
                                Dividend Declared
Year 1   $             0
Year 2   $             9,900
Year 3   $             42,000
 
The amount of dividends paid to preferred and common shareholders in Year 2 is:
 
$9,900 preferred; $0 common.
$0 preferred; $9,900 common.
$5,775 preferred; $4,125 common.
$4,950 preferred; $4,950 common.
$6,930 preferred; $2,970 common.
   
Halverstein Company's outstanding stock consists of 7,000 shares of cumulative 5% preferred stock with
a $10 par value and 3,000 shares of common stock with a $1 par value. During the first three years of
operation, the corporation declared and paid the following total cash dividends.
 
Dividends Declared & Paid
Year 1   $              0
Year 2   $              6,000
Year 3   $              32,000
 
The amount of dividends paid to preferred and common shareholders in Year 2 is:
 
$6,000 preferred; $0 common.
   
A company has net income of $870,000; its weighted-average common shares outstanding are
174,000. Its dividend per share is $1.25, its market price per share is $104, and its book
value per share is $100.00. Its price-earnings ratio equals:
 
20.00.
20.80
4.00.
2.75.
5.25.
   
During August, Boxer Company sells $352,000 in merchandise that has a one year warranty. Experience shows
that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance
of $11,400 before adjustment. Customers returned merchandise for warranty repairs during the month that used
$8,000 in parts for repairs. The entry to record the estimated warranty expense for the month is:
 
Debit Warranty Expense $17,600; credit Estimated Warranty Liability $17,600.
Debit Warranty Expense $11,600; credit Estimated Warranty Liability $17,600.
Debit Warranty Expense $17,600; credit Cash $12,600.
Debit Warranty Expense $10,600; credit Estimated Warranty Liability $7,600.
Debit Warranty Expense $17,700; credit Cash $17,600.
   
Prior to June 30, a company has never had any treasury stock transactions.
A company repurchased 100 shares of its $1 par common stock on June 30 for $40 per share.
On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at
$38 per share. What is the journal entry necessary to record the repurchase of stock on June 30?
 
Debit Treasury Stock, Common $4,000; credit Cash $4,000.
   
A company made an error in calculating and reporting amortization expense in Year 1.
The error was discovered in Year 2. The item should be reported as a prior period adjustment:
 
on the Year 2 statement of retained earnings.
   
A corporation issued 5,300 shares of $10 par value common stock in exchange for some land with
a market value of $76,000. The entry to record this exchange is:
 
Debit Land $76,000; credit Common Stock $53,000
Credit Paid-In Capital in Excess of Par Value, Common Stock $23,000.
   
A corporation declared and issued a 15% stock dividend on October 1.
The following information was available immediately prior to the dividend:
 
Retained earnings                                            $750,000
Shares issued and outstanding                   60,000
Market value per share                                  $15
Par value per share                                          $5
 
The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:
 
$135,000.
   
A company paid $0.65 in cash dividends per share. Its earnings per share is $2.65, and its market
price per share is $26.75. Its dividend yield equals:
 
2.4%
   
Global Corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later
that day the board of directors declared a 10% stock dividend when the market value of each share
was $27. The entry to record the dividend declaration is:
 
Debit Retained Earnings $135,000;
credit Common Stock Dividend
Distributable $100,000;
credit Paid-In Capital in Excess of Par Value, Common Stock $35,000.
   
Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100
shares of its $1 par common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share.
On August 1, it reissued 20 of the shares at $38 per share.
What is the journal entry necessary to record the reissuance of treasury stock on July 20?
 
Debit Cash $2,300; credit Paid-in Capital, Treasury Stock $300;
Credit Treasury Stock $2,000.
   
Charger Company's most recent balance sheet reports total assets of $30,600,000, total liabilities of $17,850,000
and total equity of $12,750,000. The debt to equity ratio for the period is (rounded to two decimals):
 
1.40
 
17,850,000 / 12,750,000 = 1.40
   
Morgan Company issues 8%, 20-year bonds with a par value of $770,000 that pay interest semiannually.
The amount paid to the bondholders for each semiannual interest payment is.
 
$30,800
 
770,000 × 0.08 × 6 / 12 = 30,800
   
A company issued 9%, 15-year bonds with a par value of $460,000 that pay interest semiannually.
The market rate on the date of issuance was 9%.
The journal entry to record each semiannual interest payment is:
 
$20,700
Debit Bond Interest Expense $20,700; credit Cash $20,700.
 
460,000 × 0.09 × 6 / 12 = $20,700
   
On January 1, Parson Freight Company issues 9.0%, 10-year bonds with a par value of $3,400,000.
The bonds pay interest semiannually.
The market rate of interest is 10.0% and the bond selling price was $3,168,967.
The bond issuance should be recorded as:
 
Debit Cash $3,168,967
Debit Discount on Bonds Payable $231,033
Credit Bonds Payable $3,400,000.
   
On January 1 of Year 1, Congo Express Airways issued $3,100,000 of 8% bonds that pay interest semiannually on
January 1 and July 1. The bond issue price is $2,850,000 and the market rate of interest for similar bonds is 9%.  The bond
premium or discount is being amortized at a rate of $8,333 every six months. After accruing interest at year end, the
company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:
 
$2,990,666.
   
A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference
between par value and issue price for this bond is recorded as a:
 
Credit to Premium on Bonds Payable.
   
A company issued 5-year, 8% bonds with a par value of $94,000. The company received $91,947 for the bonds.
Using the straight-line method, the amount of interest expense for the first semiannual interest period is:
 
$3,965.30.
   
Cumulative preferred stock carries the right to be paid both current and all prior periods' unpaid dividends before
any dividends are paid to common shareholders.
 
True
   
A company has earnings per share of $6.50. Its dividend per share is $0.50, and its market price per share is $80.
Its price-earnings ratio equals 13.
 
False
   
Stated value stock is no-par stock that is assigned a "stated" value per share.
 
True
   
Book value per share reflects the value per share if a company is liquidated at balance sheet amounts.
 
True
   
A stock dividend decreases the market price of the company's stock.
 
True
   
Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are
not declared is referred to as:
 
Noncumulative preferred stock.
   
On January 1, Parson Freight Company issues 8.0%, 10-year bonds with a par value of $3,200,000.
The bonds pay interest semiannually. The market rate of interest is 9.0% and the bond selling price was $2,991,873.
The bond issuance should be recorded as:
 
Debit Cash $2,991,873
Debit Discount on Bonds Payable $208,127
Credit Bonds Payable $3,200,000.
   
When preparing a statement of cash flows using the indirect method, each of the following should be
classified as an operating cash flow except:
 
Proceeds from the disposal of a long-term asset with no gain or loss.
   
Activities that involve the production or purchase of merchandise and the sale of goods and services to
customers, including expenditures related to administering the business, are classified as:
 
Operating activities.
   
An estimated liability:
 
Is a known obligation of an uncertain amount that can be reasonably estimated.
   
Which of the following do not apply to unearned revenues?
 
Amounts to be received in the future from customers for delivery of products or services in the current period.
   
Fetzer Company declared a $0.20 per share cash dividend. The company has 140,000 shares authorized,
133,000 shares issued, and 5,600 shares in treasury stock.
The journal entry to record the payment of the dividend is:
 
Debit Common Dividends Payable $25,480; credit Cash $25,480.
   
The primary purpose of the statement of cash flows is to report all major cash receipts (inflows)
and cash payments (outflows) during a period.
 
True
   
A short-term note payable is a written promise to pay a specified amount on a definite future date within
one year or the operating cycle, whichever is shorter.
 
False
   
A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.
True
   
When preparing the operating activities section of the statement of cash flows using the indirect method,
decreases in current operating liabilities are added to net income.
 
False
   
Preparation of the statement of cash flows does not involve:
 
Computing the profit compared to the net increase or decrease in cash.
   
A liability for a dividend does not exist until the directors declare a dividend.
 
True
   
When no-par stock is not assigned a stated value, the total amount received is recorded in the Common Stock account.
 
True
   
Organization expenses of a corporation often include legal fees and promoter fees.
 
True
   
Preferred stock which confers rights to prior periods' unpaid dividends even if they were not declared is called:
 
Cumulative preferred stock.
   
The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation is called a:
 
Preemptive right.
   
When the contract rate on a bond issue is less than the market rate, the bonds sell at a discount.
 
True
   
A bond with a par value of $1,000 trading at 98 sells for a discount.
 
True
   
Interest on bonds is tax deductible, while dividend payments are not tax deductible.
 
True
   
Obligations not expected to be paid within the longer of one year or the company's operating cycle are reported as
 
Long-term liabilities
   
Unearned revenues are current liabilities.
 
True
   
A company's income statement showed the following: net income, $130,000; depreciation expense, $38,000;
and gain on sale of plant assets, $12,000. An examination of the company's current assets and current liabilities
showed the following changes as a result of operating activities: accounts receivable decreased $11,000;
merchandise inventory increased $26,000; prepaid expenses increased $7,800; accounts payable increased $5,000.
Calculate the net cash provided or used by operating activities.
 
$138,200.
   
Treasury stock is shown as a reduction in total stockholders' equity on the balance sheet.
 
True
   
Legal Restrictions for Retained Earnings
 
Most states restrict the amount of treasury stock purchases to the amount of retained earnings.
   
Contractual Restriction Retained Earnings
 
Loan agreements can include restrictions on paying dividends beyond a certain amount of retained earnings

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2