1.Crestfield leases office space for $4,000 per month. On January 3, the company incurs $30,000 to improve the leased office space. These improvements are expected to yield benefits for 4 years. Crestfield has 2 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?
Multiple Choice
•
Debit Depletion Expense $30,000; credit Accumulated Depletion $30,000.
•
Debit Depletion Expense $15,000; credit Accumulated Depletion $15,000.
•
Debit Amortization Expense $7,500; credit Accumulated Amortization $7,500.
•
Debit Depreciation Expense $7,500; credit Accumulated Depreciation $7,500.
•
Debit Amortization Expense $15,000; credit Accumulated Amortization $15,000.
- On January 1, a company issues bonds dated January 1 with a par value of $440,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 12% and the bonds are sold for $423,810. The journal entry to record the first interest payment using the effective interest method of amortization is:
Multiple Choice
•
Debit Interest Expense $25,429; credit Discount on Bonds Payable $1,229; credit Cash $24,200.
•
Debit Interest Expense $22,971; debit Premium on Bonds Payable $1,229; credit Cash $24,200.
•
Debit Interest Expense $22,971; debit Discount on Bonds Payable $1,229; credit Cash $24,200.
•
Debit Interest Payable $24,200; credit Cash $24,200.
•
Debit Interest Expense $25,429; credit Premium on Bonds Payable $1,229; credit Cash $24,200. - On January 1, a company issues bonds dated January 1 with a par value of $650,000. The bonds mature in 3 years. The contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The bonds are sold for $626,000. The journal entry to record the first interest payment using straight-line amortization is:
Multiple Choice
•
Debit Interest Expense $23,500; credit Discount on Bonds Payable $4,000; credit Cash $19,500.
•
Debit Interest Expense $19,500; credit Cash $19,500.
•
Debit Interest Payable $19,500; credit Cash $19,500.
•
Debit Interest Expense $15,500; debit Discount on Bonds Payable $4,000; credit Cash $19,500.
•
Debit Interest Expense $19,500; credit Premium on Bonds Payable $4,000; credit Cash $15,500. - A machine originally had an estimated useful life of 6 years, but after 2 complete years, it was decided that the original estimate of useful life should have been 11 years. At that point the remaining cost to be depreciated should be allocated over the remaining:
Multiple Choice
•
9 years.
•
11 years.
•
7 years.
•
6 years.
•
4 years. - A company issued 9%, 15-year bonds with a par value of $520,000 that pay interest semiannually. The market rate on the date of issuance was 9%. The journal entry to record each semiannual interest payment is:
Multiple Choice
•
No entry is needed, since no interest is paid until the bond is due.
•
Debit Bond Interest Payable $34,667; credit Cash $34,667.
•
Debit Bond Interest Expense $23,400; credit Cash $23,400.
•
Debit Bond Interest Expense $470,000; credit Cash $470,000.
•
Debit Bond Interest Expense $46,800; credit Cash $46,800. - The following data has been collected about Keller Company's stockholders' equity accounts:
Common stock $10 par value 20,000 shares
authorized and 10,000 shares issued, 9,000 shares outstanding $100,000
Paid-in capital in excess of par value, common stock 50,000
Retained earnings 25,000
Treasury stock 11,500
Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:
Multiple Choice
•
575.
•
11,000.
•
1,150.
•
1,000.
•
21,000.
- Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $140,000; Chris, $100,000; and Molly, $120,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $180,000. The balance in Paul’s capital account immediately after his admission is:
Multiple Choice
•
$360,000
•
$108,000
•
$180,000
•
$540,000
•
$72,000 - Charger Company's most recent balance sheet reports total assets of $27,938,000, total liabilities of $15,738,000 and total equity of $12,200,000. The debt to equity ratio for the period is (rounded to two decimals):
Multiple Choice
•
0.78
•
0.56
•
1.29
•
0.44
•
1.78 - Wallace, Simpson, and Prince are partners and share income and losses in a 2:6:2 ratio. The partnership's capital balances are Wallace, $74,360; Simpson, $85,800; and Prince, $82,940. Royal is admitted to the partnership on July 1 with a 15% equity and invests $42,900. The partnership would record the admission of Royal into the partnership as:
Multiple Choice
•
Debit Cash $12,870; credit Prince, Capital $12,870.
•
Debit Wallace, Capital $8,580; debit Simpson, Capital, $25,740; debit Prince, Capital $8,580; credit Royal, Capital $42,900.
•
Debit Cash $42,900; credit Royal, Capital $42,900.
•
Debit Cash $42,900; credit Simpson, Capital $6,435, credit Royal, Capital $36,465.
•
Debit Cash $32,900; debit Wallace, Capital $2,000; debit Simpson, Capital, $6,000; debit Prince, Capital $2,000; credit Royal, Capital $42,900. - The following data has been collected about Keller Company's stockholders' equity accounts:
Common stock $10 par value 29,000 shares
authorized and 14,500 shares issued, 1,900 shares outstanding $145,000
Paid-in capital in excess of par value, common stock 59,000
Retained earnings 34,000
Treasury stock 23,560
Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is:
Multiple Choice
•
145,000.
•
59,000.
•
29,000.
•
12,600.
•
34,000.
- A company has net income of $885,000; its weighted-average common shares outstanding are 177,000. Its dividend per share is $1.10, its market price per share is $101, and its book value per share is $95.50. Its price-earnings ratio equals:
Multiple Choice
•
5.50.
•
20.20.
•
6.60.
•
4.40.
•
19.10. - On January 1, a company issues bonds dated January 1 with a par value of $200,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $208,531. The journal entry to record the first interest payment using the effective interest method of amortization is: (Rounded to the nearest dollar.)
Multiple Choice
•
Debit Bond Interest Expense $6,256.00; debit Discount on Bonds Payable $744.00; credit Cash $7,000.00.
•
Debit Interest Payable $7,000.00; credit Cash $7,000.00.
•
Debit Interest Expense $6,256; debit Premium on Bonds Payable $744; credit Cash $7,000.
•
Debit Bond Interest Expense 7,853.00; credit Premium on Bonds Payable $853.00; credit Cash $7,000.00.
•
Debit Bond Interest Expense $6,147.00; debit Premium on Bonds Payable $853.00; credit Cash $7,000.00.
13.
A company purchased equipment and signed a 5-year installment loan at 10% annual interest. The annual payments equal $10,900. The present value of an annuity factor for 5 years at 10% is 3.7908. The present value of a single sum factor for 5 years at 10% is .6209. The present value of the loan is:
Multiple Choice
•
$17,555.
•
$10,900.
•
$41,320.
•
$6,768.
•
$54,500.
14
A corporation sold 19,000 shares of its $10 par value common stock at a cash price of $13 per share. The entry to record this transaction would include:
Multiple Choice
•
A debit to Cash for $190,000.
•
A credit to Paid-in Capital in Excess of Par Value, Common Stock for $247,000.
•
A credit to Common Stock for $247,000.
•
A credit to Common Stock for $190,000.
•
A debit to Paid-in Capital in Excess of Par Value, Common Stock for $57,000.
15.
On January 1, a company issues bonds dated January 1 with a par value of $290,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 6% and the bonds are sold for $302,371. The journal entry to record the first interest payment using straight-line amortization is: (Rounded to the nearest dollar.)
Multiple Choice
•
Debit Interest Payable $10,150; credit Cash $10,150.
•
Debit Bond Interest Expense $8,913; debit Discount on Bonds Payable $1,237; credit Cash $10,150.
•
Debit Bond Interest Expense $11,387; credit Discount on Bonds Payable $1,237; credit Cash $10,150.
•
Debit Bond Interest Expense $11,387; credit Premium on Bonds Payable $1,237; credit Cash $10,150.
•
Debit Bond Interest Expense $8,913; debit Premium on Bonds Payable $1,237; credit Cash $10,150.
16.
A company borrowed cash from the bank by signing a 3-year, 8% installment note. The present value of an annuity factor at 8% for 3 years is 2.5771. The present value of a single sum at 8% for 3 years is .7938. Each annual payment equals $77,500. The present value of the note is:
Multiple Choice
•
$30,072.56.
•
$90,217.69.
•
$97,631.65.
•
$232,500.00
•
$199,725.25.
17.
On July 1, Shady Creek Resort borrowed $440,000 cash by signing a 10-year, 10% installment note requiring equal payments each June 30 of $71,608. What is the journal entry to record the first annual payment?
Multiple Choice
•
Debit Interest Expense $44,000; debit Notes Payable $27,608; credit Cash $71,608.
•
Debit Cash $440,000; debit Interest Expense $71,608; credit Notes Payable $511,608.
•
Debit Interest Expense $44,000; credit Cash $44,000.
•
Debit Interest Expense $44,000; debit Interest Payable $27,608; credit Cash $71,608.
•
Debit Interest Expense $71,608; credit Cash $71,608.
18.
Mohr Company purchases a machine at the beginning of the year at a cost of $37,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 8 years with a $6,000 salvage value. Depreciation expense in year 2 is:
Multiple Choice
•
$0.
•
$31,000.
•
$9,250.
•
$3,875.
•
$4,625.
19.
Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $278,000, and Atkins' beginning partnership capital balance for the current year is $242,000. The partnership had net income of $236,000 for the year. Barber withdrew $40,000 during the year and Atkins withdrew $88,000. What is Barber's return on equity?
Multiple Choice
•
39.5%
•
37.2%
•
33.1%
•
18.6%
•
42.4%
20.
Fellows and Marshall are partners in an accounting firm and share net income and loss equally. Fellows' beginning partnership capital balance for the current year is $235,000, and Marshall's beginning partnership capital balance for the current year is $338,000. The partnership had net income of $356,000 for the year. Fellows withdrew $55,000 during the year and Marshall withdrew $117,000. What is Marshall's return on equity?
rev: 08_29_2018_QC_CS-135059
Multiple Choice
•
44.6%
•
48.3%
•
56.2%
•
24.2%
•
52.7%
21.
Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $342,000; the partnership assumes responsibility for a $121,000 note secured by a mortgage on the property. Monroe invests $96,000 in cash and equipment that has a market value of $71,000. For the partnership, the amounts recorded for total assets and for total capital account are:
Multiple Choice
•
Total assets $630,000; total capital $630,000.
•
Total assets $388,000; total capital $388,000.
•
Total assets $509,000; total capital $509,000.
•
Total assets $388,000; total capital $509,000.
•
Total assets $509,000; total capital $388,000.
22.
A company bought new heating system for $62,000 and was given a trade-in of $3,200 on an old heating system, so the company paid $58,800 cash with the trade-in. The old system had an original cost of $55,900 and accumulated depreciation of $50,600. If the transaction has commercial substance, the company should record the new heating system at:
Multiple Choice
•
$5,300.
•
$64,100.
•
$62,000.
•
$3,200.
•
$58,800.
23.
Cox, North, and Lee form a partnership. Cox contributes $198,000, North contributes $165,000, and Lee contributes $297,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $153,000 for its first year, what amount of income is credited to Lee's capital account?
Multiple Choice
•
$48,250.
•
$51,000.
•
$54,850.
•
$40,000.
•
$49,900.
24
Dalworth and Minor have decided to form a partnership. Minor is going to contribute a depreciable asset to the partnership as her equity contribution to the partnership. The following information regarding the asset to be contributed by Minor is available:
Historical cost of the asset $ 82,000
Accumulated depreciation on the asset $ 43,000
Note payable secured by the asset* $ 25,000
Agreed-upon market value of the asset $ 48,000
Based on this information, Minor's beginning equity balance in the partnership will be:
rev: 01_30_2019_QC_CS-156078
Multiple Choice
•
$48,000
•
$23,000
•
$82,000
•
$25,000
•
$39,000
25.
Eastline Corporation had 12,000 shares of $10 par value common stock outstanding when the board of directors declared a stock dividend of 4,080 shares. At the time of the stock dividend, the market value per share was $16. The entry to record this dividend is:
Multiple Choice
•
Debit Retained Earnings $65,280; credit Common Stock Dividend Distributable $65,280.
•
No entry is needed.
•
Debit Retained Earnings $40,800; credit Common Stock Dividend Distributable $40,800.
•
Debit Retained Earnings $65,280; credit Common Stock Dividend Distributable $40,800; credit Paid-In Capital in Excess of Par Value, Common Stock $24,480.
•
Debit Common Stock Dividend Distributable $65,280; credit Retained Earnings $65,280.
26.
On January 1, a company issues bonds dated January 1 with a par value of $490,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $470,146. The journal entry to record the first interest payment using straight-line amortization is:
Multiple Choice
•
Debit Interest Expense $17,150.00; credit Cash $17,150.00.
•
Debit Interest Expense $19,135.40; credit Premium on Bonds Payable $1,985.40; credit Cash $17,150.00.
•
Debit Interest Payable $17,150.00; credit Cash $17,150.00.
•
Debit Interest Expense $15,164.60; debit Discount on Bonds Payable $1,985.40; credit Cash $17,150.00.
•
Debit Interest Expense $19,135.40; credit Discount on Bonds Payable $1,985.40; credit Cash $17,150.00.
27
- On January 1, a company issues bonds dated January 1 with a par value of $500,000. The bonds mature in 5 years. The contract rate is 11%, and interest is paid semiannually on June 30 and December 31. The market rate is 12% and the bonds are sold for $481,603. The journal entry to record the issuance of the bond is:
Multiple Choice
•
Debit Cash $481,603; debit Discount on Bonds Payable $18,397; credit Bonds Payable $500,000.
•
Debit Cash $500,000; credit Discount on Bonds Payable $18,397; credit Bonds Payable $481,603.
•
Debit Bonds Payable $500,000; debit Bond Interest Expense $18,397; credit Cash $518,397.
•
Debit Cash $481,603; credit Bonds Payable $481,603.
•
Debit Cash $481,603; debit Premium on Bonds Payable $18,397; credit Bonds Payable $500,000.
28.
Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 38,000 shares authorized, 19,800 shares issued, and 15,200 shares of common stock outstanding. The journal entry to record the dividend declaration is:
Multiple Choice
•
Debit Retained Earnings $9,900; credit Common Dividends Payable $9,900.
•
Debit Retained Earnings $19,000; credit Common Dividends Payable $19,000.
•
Debit Retained Earnings $7,600; credit Common Dividends Payable $7,600.
•
Debit Common Dividends Payable $7,600; credit Cash $7,600.
•
Debit Common Dividends Payable $9,900; credit Cash $9,900.
29.
Merchant Company purchased property for a building site. The costs associated with the property were:
Purchase price $ 181,000
Real estate commissions 15,600
Legal fees 1,400
Expenses of clearing the land 2,600
Expenses to remove old building 1,600
What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?
Multiple Choice
•
$198,000 to Land; $1,600 to Building.
•
$202,200 to Land; $0 to Building.
•
$196,600 to Land; $5,600 to Building.
•
$182,400 to Land; $21,200 to Building.
•
$200,600 to Land; $0 to Building.
30.
Marwick Corporation issues 10%, 5 year bonds with a par value of $1,160,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%. What is the bond's issue (selling) price, assuming the following Present Value factors:
n= i= Present Value of an Annuity Present value of $1
5 10 % 3.7908 0.6209
10 5 % 7.7217 0.6139
5 8 % 3.9927 0.6806
10 4 % 8.1109 0.6756
Multiple Choice
•
$1,160,000
•
$1,254,128
•
$949,244
•
$689,568
•
$1,630,432
31.
Hunter Sailing Company exchanged an old sailboat for a new one. The old sailboat had a cost of $250,000 and accumulated depreciation of $150,000. The new sailboat had an invoice price of $263,000. Hunter received a trade in allowance of $116,000 on the old sailboat, which meant the company paid $147,000 in addition to the old sailboat to acquire the new sailboat. If this transaction lacks commercial substance, what amount of gain or loss should be recorded on this exchange?
Multiple Choice
•
$16,000 loss
•
$116,000 gain
•
$100,000 loss
•
$16,000 gain
•
$0 gain or loss
32.
Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $93,000. The machine's useful life is estimated to be 20 years, or 390,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 15,600 units of product. Determine the machines' second year depreciation under the units-of-production method. (Do not round intermediate calculations.)
Multiple Choice
•
$5,000.
•
$4,300.
•
$4,650.
•
$3,720.
•
$3,440.
33.
Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $63,500, and Martin's capital balance $60,500. Hewlett and Martin have agreed to share equally in income or loss. The existing partners agree to accept Black with a 20% interest. Black will invest $35,100 in the partnership. The bonus that is granted to Hewlett and Martin equals:
Multiple Choice
•
$0, because Hewlett and Martin actually grant a bonus to Black.
•
1,797 to Hewlett; $1,755 to Martin.
•
$1,640 each.
•
$1,797 each.
•
$3,510 each.
34.
A company issued 11%, 5-year bonds with a par value of $55,000. The market rate when the bonds were issued was 12%. The company received $52,976 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:
Multiple Choice
•
$6,050.00.
•
$3,178.56.
•
$3,300.00.
•
$3,025.00.
•
$6,357.12.
35.
Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $123,000; Chris, $83,000; and Molly, $103,000. Paul is admitted to the partnership on July 1 with a 10% equity and invests $163,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:
Multiple Choice
•
$137,740
•
$129,320
•
$157,740
•
$88,260
•
$163,000
36.
The partnership agreement for Wilson, Pickett & Nelson, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Wilson contributed $65,000, Pickett contributed $39,000 and Nelson contributed $13,000. In the partnership's first year of operation, it incurred a loss of $184,500. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Nelson?
Multiple Choice
•
$0
•
$92,250
•
$20,500
•
$46,125
•
$61,500
37.
On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 3 years. The contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The market rate is 11%. Using the present value factors below, the issue (selling) price of the bonds is:
n= i= Present Value of an Annuity Present value of $1
3 10.0 % 2.4869 0.7513
6 5.0 % 5.0757 0.7462
3 11.0 % 2.4437 0.7312
6 5.5 % 4.9955 0.7252
Multiple Choice
•
$300,000.
•
$292,493.
•
$217,560.
•
$74,933.
•
$307,508.
38.
The following information is available on TGR Enterprises, a partnership, for the most recent fiscal year:
Total partnership capital at beginning of the year $ 156,000
Partnership net income for the year $ 126,000
Withdrawals by partners during the year $ 66,000
Additional investments by partners during the year $ 36,000
There are three partners in TGR Enterprises: Tracey, Gregory and Rodgers. At the end of the year, the partners' capital accounts were in the ratio of 2:1:2, respectively. Compute the ending capital balances of the three partners.
Multiple Choice
•
Tracey = $100,800; Gregory = $50,400; Rodgers = $100,800.
•
Tracey = $84,000; Gregory = $84,000; Rodgers = $84,000.
•
Tracey = $153,600; Gregory = $76,800; Rodgers = $153,600.
•
Tracey = $66,400; Gregory = $76,800; Rodgers = $66,400.
•
Tracey = $50,400; Gregory = $25,200; Rodgers = $50,400.
39.
The following data were reported by a corporation:
Authorized shares 23,000
Issued shares 18,000
Treasury shares 4,500
The number of outstanding shares is:
Multiple Choice
•
13,500.
•
18,500.
•
27,500.
•
18,000.
•
23,000.
40.
Martin Company purchases a machine at the beginning of the year at a cost of $115,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $9,500 salvage value. Depreciation expense in year 4 is:
Multiple Choice
•
$9,750.
•
$26,688.
•
$7,188.
•
$57,500.
•
$4,875.
41.
Wallace and Simpson formed a partnership with Wallace contributing $76,000 and Simpson contributing $56,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $165,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is: (Do not round intermediate calculations.)
Multiple Choice
•
Debit Income Summary $165,000; credit Wallace, Capital $95,000; credit Simpson, Capital $70,000.
•
Debit Income Summary $165,000; credit Wallace, Capital $82,500; credit Simpson, Capital $82,500.
•
Debit Cash $165,000; credit Wallace, Capital $95,000; credit Simpson, Capital $70,000.
•
Debit Wallace, Capital $82,500; debit Simpson, Capital $82,500; credit Income Summary $165,000.
•
Debit Wallace, Capital $95,000; debit Simpson, Capital $76,000; credit Cash $165,000.
42.
Granite Company purchased a machine costing $137,000, terms 3/10, n/30. The machine was shipped FOB shipping point and freight charges were $3,700. The machine requires special mounting and wiring connections costing $11,700. When installing the machine, $3,200 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.
Multiple Choice
•
$147,790.
•
$148,290.
•
$148,490.
•
$154,490.
•
$158,600.
43.
Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $59,000, and Martin's capital balance $56,000. Hewlett and Martin have agreed to share equally in income or loss. Hewlett and Martin agree to accept Black with a 25% interest. Black will invest $30,000 in the partnership. The bonus that is granted to Black equals:
Multiple Choice
•
$0, because Black must actually grant a bonus to Hewlett and Martin.
•
$3,125.
•
$3,021.
•
$6,042.
•
$6,250.
44.
A company issued 5-year, 8.50% bonds with a par value of $121,000. The market rate when the bonds were issued was 8.00%. The company received $123,546 cash for the bonds. Using the effective interest method, the amount of recorded interest expense for the first semiannual interest period is:
Multiple Choice
•
$9,820.76.
•
$4,941.84.
•
$10,285.00.
•
$2,571.25.
•
$5,142.50.
45.
On August 1, a $32,400, 8%, 3-year installment note payable is issued by a company. The note requires equal payments of principal plus accrued interest be paid each year on July 31. The present value of an annuity factor for 3 years at 8% is 2.5771. The present value of a single sum factor for 3 years at 8% is 0.7938. The payment each July 31 will be:
Multiple Choice
•
$1,772.29.
•
$10,800.00.
•
$12,572.29.
•
$11,200.00.
•
$11,600.00.
46.
Fargo Company's outstanding stock consists of 750 shares of noncumulative 5% preferred stock with a $10 par value and 4,400 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 Declaredyear 1 $ 31,000
year 2 $ 9,000
year 3 $ 40,000
The amount of dividends paid to preferred and common shareholders in year 1 is:
Multiple Choice
•
$31,000 preferred; $0 common.
•
$7,500 preferred; $23,500 common.
•
$375 preferred; $30,625 common.
•
$15,500 preferred; $15,500 common.
•
$25,7500 preferred; $5,250 common.
47.
Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $51,600, Davis contributing $43,000 and Singer contributing $34,400. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $54,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer's capital account?
Multiple Choice
•
$18,000.
•
$34,400.
•
$14,400.
•
$21,600.
•
$54,000.
48.
A company discarded a computer system originally purchased for $8,800. The accumulated depreciation was $6,400. The company should recognize a (an):
Multiple Choice
•
$8,800 gain.
•
$6,400 loss.
•
$2,400 gain.
•
$2,400 loss.
•
$0 gain or loss.
49.
A company has 39,000 shares of common stock outstanding. The stockholders' equity applicable to common shares is $479,700, and the par value per common share is $10. The book value per share is:
Multiple Choice
•
$47.97.
•
$10.00.
•
$12.30.
•
$2.30.
•
$0.08.
50.
Mace and Bowen are partners and share equally in income or loss. Mace's current capital balance is $159,000 and Bowen's is $140,000. Mace and Bowen agree to accept Kent with a 30% interest in the partnership. Kent invests $139,000 in the partnership. The balances in Mace's and Bowen's capital accounts after admission of the new partner equal:
Multiple Choice
•
Mace $159,000; Bowen $147,600.
•
Mace $159,000; Bowen $140,000.
•
Mace $162,800; Bowen $143,800.
•
Mace $166,600; Bowen $140,000.
•
Mace $155,200; Bowen $136,200.
51.
An asset's book value is $18,100 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,100 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,100, the company should record:
Multiple Choice
•
A gain on sale of $3,000.
•
A gain on sale of $1,650.
•
A loss on sale of $3,000.
•
Neither a gain nor a loss is recognized on this type of transaction.
•
A loss on sale of $1,650.
52.
Mohr Company purchases a machine at the beginning of the year at a cost of $36,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $4,000 salvage value. The machine’s book value at the end of year 2 is:
Multiple Choice
•
$21,600.
•
$12,960.
•
$14,400.
•
$9,600.
•
$19,200.
53
The following information is available regarding Grace Smit's capital account in Enterprise Consulting Group, a general partnership, for a recent year:
Beginning of the year balance $ 22,000
Share of partnership income $ 8,500
Withdrawals made during the year $ 6,000
What is Smit's partner return on equity during the year in question?
Multiple Choice
•
10.8%
•
36.6%
•
34.7%
•
55.7%
•
11.4%
54.
Mohr Company purchases a machine at the beginning of the year at a cost of $26,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $5,000 salvage value. The book value of the machine at the end of year 2 is:
Multiple Choice
•
$4,200.
•
$21,000.
•
$17,600.
•
$8,400.
•
$12,600.
55.
Prior to May 1, Fortune Company has never had any treasury stock transactions. A company repurchased 190 shares of its common stock on May 1 for $9,500. On July 1, it reissued 95 of these shares at $53 per share. On August 1, it reissued the remaining treasury shares at $48 per share. What is the balance in the Paid-in Capital, Treasury Stock account on August 2?
Multiple Choice
•
$95.
•
$0.
•
$5,035.
•
$9,595.
•
$8,930.
56.
Farmer and Taylor formed a partnership with capital contributions of $260,000 and $310,000, respectively. Their partnership agreement calls for Farmer to receive a $94,000 per year salary. The remaining income or loss is to be divided equally. Assuming net loss for the current year is $27,000, the journal entry to allocate the net loss is:
Multiple Choice
•
Debit Taylor, Capital, $60,500; Credit Income Summary, $27,000; Credit Farmer, Capital, $33,500.
•
Debit Income Summary, $27,000; DebitTaylor, Capital, $33,500; Credit Taylor, Capital, $60,500.
•
Debit Income Summary, $27,000; Credit Taylor, Capital, $13,500; Credit Farmer, Capital, $13,500.
•
Debit Income Summary, $27,000; Debit Farmer, Capital, $33,500; Credit Taylor, Capital, $60,500.
•
Debit Income Summary, $27,000; Credit Farmer, Capital, $13,500; Credit Taylor, Capital, $13,500.
57.
A company borrowed $41,800 cash from the bank and signed a 3-year note at 8% annual interest. The present value of an annuity factor for 3 years at 8% is 2.5771. The present value of a single sum factor for 3 years at 8% is .7938. The annual annuity payments equal:
Multiple Choice
•
$41,800.00.
•
$52,658.10.
•
$107,722.78.
•
$16,219.78.
•
$33,180.84.
58.
An asset's book value is $54,000 on January 1, Year 6. The asset is being depreciated $750 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $38,500, the company should record:
Multiple Choice
•
A loss on sale of 2,000
•
Neither a gain or loss is recognized on this type of transaction.
•
A gain on sale of 1,000
•
A gain on sale of 2,000
•
A loss on sale of 1,000
59.
Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $82,000. However, the building carries a $54,000 mortgage that will be assumed by the partnership. Smart is investing $24,000 cash. The balance of Maxwell's Capital account will be:
Multiple Choice
•
$28,000.
•
$58,000.
•
$54,000.
•
$82,000.
•
$52,000.
60.
Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer's capital account?
Multiple Choice
•
$30,000.
•
$40,000.
•
$25,000.
•
$20,000.
•
$75,000.
61.
On July 1, Shady Creek Resort borrowed $340,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $50,670. What amount of interest expense will be included in the first annual payment?
rev: 01_08_2018_QC_CS-113322
Multiple Choice
•
$23,470
•
$50,670
•
$34,000
•
$316,530
•
$27,200
62.
A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $45,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:
Multiple Choice
•
$100,000.
•
$0.
•
$36,000.
•
$45,000.
•
$42,000.
63.
A corporation declared and issued a 5% stock dividend on October 1. The following information was available immediately prior to the dividend:
Retained earnings $ 790,000
Shares issued and outstanding 64,000
Market value per share $ 19
Par value per share $ 5
The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:
Multiple Choice
•
$(60,800).
•
$0.
•
$16,000.
•
$60,800.
•
$(16,000).
64.
Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $1,000 cash, $2,100 equipment and a $900 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $4,000. These amounts are the values agreed on by both partners. The journal entry to record Plant's investment is:
Multiple Choice
•
Debit Bloom, Capital $4,000; credit Cash $4,000.
•
Debit Cash $3,100; debit Note Payable $900; credit Plant, Capital $4,000.
•
Debit Cash $4,000; credit Plant, Capital $4,000.
•
Debit Cash $4,900; credit Note Payable $900; credit Plant, Capital $4,900.
•
Debit Cash $4,000; credit Note Payable $900, credit Plant, Capital $3,100.
65.
On January 1, a company issued and sold a $300,000, 5%, 10-year bond payable, and received proceeds of $293,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the first interest payment is:
Multiple Choice
•
$300,350.
•
$300,000.
•
$293,350.
•
$299,650.
•
$292,650.
66.
A company has 850 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $64 per share. It also has 16,000 shares of common stock outstanding, and the total value of its stockholders' equity is $596,800. The company's book value per common share equals:
Multiple Choice
•
$35.42.
•
$34.64.
•
$33.90.
•
$32.19.
•
$37.30.
67.
A company issued 120 shares of $100 par value common stock for $13,000 cash. The total amount of paid-in capital is:
Multiple Choice
•
$1,200.
•
$1,000.
•
$100.
•
$13,000.
•
$12,000.
68.
A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $5,100. The company retired these bonds by buying them on the open market at 91. What is the gain or loss on this retirement?
Multiple Choice
•
$3,900 gain.
•
$9,000 loss.
•
$9,000 gain.
•
$3,900 loss.
•
$0 gain or loss.
69.
A company purchased equipment valued at $200,000. It traded in old equipment for a $121,000 trade-in allowance and the company paid $79,000 cash with the trade-in. The old equipment cost $170,000 and had accumulated depreciation of $68,000. This transaction has commercial substance. What is the recorded value of the new equipment?
Multiple Choice
•
$121,000.
•
$200,000.
•
$181,000.
•
$102,000.
•
$79,000.
70.
A total asset turnover ratio of 3.4 indicates that:
Multiple Choice
•
For every $1 in assets, the firm earned $3.4 in net income.
•
For every $1 in assets, the firm paid $3.4 in expenses during the period.
•
For every $1 in assets, the firm produced $3.4 in net sales during the period.
•
For every $1 in assets, the firm earned gross profit of $3.4 during the period.
•
For every $1 in sales, the firm acquired $3.4 in assets during the period.
71.
A company issued 150 shares of $100 par value common stock for $17,800 cash. The total amount of paid-in capital in excess of par is:
Multiple Choice
•
$1,500.
•
$2,800.
•
$17,800.
•
$15,000.
•
$100.
72.
Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $286,000, and Atkins' beginning partnership capital balance for the current year is $132,000. The partnership had net income of $120,000 for the year. Barber withdrew $56,000 during the year and Atkins withdrew $79,000. What is Barber's ending equity?
Multiple Choice
•
$350,000
•
$346,000
•
$290,000
•
$136,000
•
$406,000
73.
A company issued 9.0%, 5-year bonds with a par value of $80,000. The market rate when the bonds were issued was 10.0%. The company received $76,911.31 cash for the bonds. Using the effective interest method, the amount of interest expense for the second semiannual interest period is:
Multiple Choice
•
$7,703.41.
•
$7,200.00.
•
$3,857.84.
•
$3,600.00.
•
$3,845.57.
74.
On January 1 of Year 1, Congo Express Airways issued $3,770,000 of 7% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,440,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $11,000 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:
Multiple Choice
•
$4,209,950.
•
$3,462,000.
•
$4,078,000.
•
$3,330,050.
•
$3,593,950.
75.
Mohr Company purchases a machine at the beginning of the year at a cost of $46,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 8 years with a $4,000 salvage value. Depreciation expense in year 2 is:
Multiple Choice
•
$10,500.
•
$8,625.
•
$11,500.
•
$34,500.
•
$5,750.
76.
Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $340,000; the partnership assumes responsibility for a $120,000 note secured by a mortgage on the property. Monroe invests $95,000 in cash and equipment that has a market value of $70,000. For the partnership, the amounts recorded for Fontaine's Capital account and for Monroe's Capital account are:
Multiple Choice
•
Fontaine, Capital $220,000; Monroe, Capital $165,000.
•
Fontaine, Capital $220,000; Monroe, Capital $70,000.
•
Fontaine, Capital $220,000; Monroe, Capital $95,000.
•
Fontaine, Capital $340,000; Monroe, Capital $165,000.
•
Fontaine, Capital $340,000; Monroe, Capital $95,000.
77.
Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $214,000, and Atkins' beginning partnership capital balance for the current year is $391,000. The partnership had net income of $213,000 for the year. Barber withdrew $25,000 during the year and Atkins withdrew $20,000. What is Atkins's return on equity?
Multiple Choice
•
24.5%
•
27.2%
•
22.3%
•
30.8%
•
12.3%
78.
The following information is available regarding Grace Smit's capital account in Enterprise Consulting Group, a general partnership, for a recent year:
Beginning of the year balance $ 58,000
Share of partnership income $ 17,500
Withdrawals made during the year $ 9,600
What is Smit's partner return on equity during the year in question?
Multiple Choice
•
41.1%
•
13.6%
•
28.2%
•
12.8%
•
26.6%
79.
A corporation issued 8% bonds with a par value of $1,130,000, receiving a $46,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is:
Multiple Choice
•
$11,300 loss.
•
$38,900 gain.
•
$11,300 gain.
•
$0.
•
$38,900 loss.
80.
On January 1, Parson Freight Company issues 7.5%, 10-year bonds with a par value of $2,100,000. The bonds pay interest semiannually. The market rate of interest is 8.5% and the bond selling price was $1,957,302. The bond issuance should be recorded as:
Multiple Choice
•
Debit Cash $2,100,000; credit Bonds Payable $1,957,302; credit Discount on Bonds Payable $142,698.
•
Debit Cash $1,957,302; credit Bonds Payable $1,957,302.
•
Debit Cash $2,100,000; credit Bonds Payable $2,100,000.
•
Debit Cash $1,957,302; debit Interest Expense $142,698; credit Bonds Payable $2,100,000.
•
Debit Cash $1,957,302; debit Discount on Bonds Payable $142,698; credit Bonds Payable $2,100,000.
81.
Wiggins Company has 2,800 shares of $100 par preferred stock, which were issued at par. It also has 17,000 shares of common stock outstanding, and its total stockholders' equity equals $582,600. The book value per common share is:
Multiple Choice
•
$100.00.
•
$15.28.
•
$34.27.
•
$29.42.
•
$17.80.
82.
Cox, North, and Lee form a partnership. Cox contributes $204,000, North contributes $170,000, and Lee contributes $306,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $183,000 for its first year, what amount of income is credited to Lee's capital account? (Do not round your intermediate calculations.)
Multiple Choice
•
$61,000.
•
$54,900.
•
$82,350.
•
$62,400.
•
$45,750.
83.
Sweet Company’s outstanding stock consists of 1,700 shares of cumulative 4% preferred stock with a $100 par value and 11,700 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 DeclaredYear 1 $ 3,700
Year 2 $ 7,700
Year 3 $ 40,500
The total amount of dividends paid to preferred and common shareholders over the three-year period is:
Multiple Choice
•
$20,400 preferred; $31,500 common.
•
$6,800 preferred; $45,100 common.
•
$17,300 preferred; $34,600 common.
•
$14,500 preferred; $37,400 common
84.
On January 1, a company issues bonds dated January 1 with a par value of $420,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $402,982. The journal entry to record the second interest payment using the effective interest method of amortization is:
Multiple Choice
•
Debit Interest Expense $13,280.71; debit Premium on Bonds Payable $1,419.29; credit Cash $14,700.00.
•
Debit Interest Expense $16,119.29; credit Discount on Bonds Payable $1,419.29; credit Cash $14,700.00.
•
Debit Interest Expense $13,280.71; debit Discount on Bonds Payable $1,419.29; credit Cash $14,700.00.
•
Debit Interest Payable $14,700.00; credit Cash $14,700.00.
•
Debit Interest Expense $16,176.06; credit Discount on Bonds Payable $1,476.06; credit Cash $14,700.00.
85.
Farmer and Taylor formed a partnership with capital contributions of $260,000 and $310,000, respectively. Their partnership agreement calls for Farmer to receive a $82,000 per year salary. The remaining income or loss is to be divided equally. If the net income for the current year is $207,000, then Farmer and Taylor's respective shares are:
Multiple Choice
•
$130,000; $5,000.
•
$144,500; $144,500.
•
$144,500; $62,500.
•
$103,500; $103,500.
•
$138,000; $69,000.
- Flask Company reports net sales of $1,190 million; cost of goods sold of $1,010 million; net income of $200 million; and average total assets of $870 million. Compute its total asset turnover.
Multiple Choice
•
0.73.
•
1.18.
•
1.37.
•
1.16.
•
0.86.
Sample Solution