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    42 multiple choice 1st year accounting problems.

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    Question 1
    Moss County Bank agrees to lend the Blackwood Brick Company $100,000 on January 1. Blackwood Brick Company signs a $100,000, 6%, 9-month note.
    The entry made by Blackwood Brick Company on January 1 to record the proceeds and issuance of the note is

    a. Debit Interest Expense 4,500
    Debit Cash 95,500
    Credit Notes Payable 100,000
    b. Debit Cash 100,000
    Credit Notes Payable 100,000
    c. Debit Cash 100,000
    Debit Interest Expense 4,500
    Credit Notes Payable 104,500
    d. Debit Cash 100,000
    Debit Interest Expense 4,500
    Credit Notes Payable 100,000
    Credit Interest Payable 4,500

    Question 2
    What is the adjusting entry required if Blackwood Brick Company prepares financial statements on June 30?

    a. Debit Interest Expense 3,000
    Credit Interest Payable 3,000
    b. Debit Interest Expense 3,000
    Credit Cash 3,000
    c. Debit Interest Payable 3,000
    Credit Cash 3,000
    d. Debit Interest Payable 3,000
    Credit Interest Expense 3,000

    Question 3
    What entry will Blackwood Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?

    a. Debit Notes Payable 104,500
    Credit Cash 104,500
    b. Debit Notes Payable 100,000
    Debit Interest Payable 4,500
    Credit Cash 104,500
    c. Debit Interest Expense 4,500
    Debit Notes Payable 100,000
    Credit Cash 104,500
    d. Debit Interest Payable 3,000
    Debit Notes Payable 100,000
    Debit Interest Expense 1,500
    Credit Cash 104,500

    Question 4
    A cash register tape shows cash sales of $1,000 and sales taxes of $60. The journal entry to record this information is

    a. Debit Cash 1,000
    Credit Sales 1,000
    b. Debit Cash 1,060
    Credit Sales Tax Revenue 60
    Credit Sales 1,000
    c. Debit Cash 1,000
    Debit Sales Tax Expense 60
    Credit Sales 1,060
    d. Debit Cash 1,060
    Credit Sales 1,000
    Credit Sales Taxes Payable 60

    Question 5
    Use the following information to answer the following four questions.
    Totals taken from the payroll register of Main Company:
    Salaries..................................$12,000
    FICA taxes withheld.................... 550
    Income taxes withheld...............2,500
    Medical insurance deductions.......450

    Tax Rates:
    Federal unemployment Taxes .8%
    State Unemployment Taxes....1.8%
    None of the employees have yet exceeded the $7,000 maximum annual limit.

    The journal entry to record the monthly payroll on April 30 would include a

    a. debit to Salaries Expense for $12,000.
    b. credit to Salaries Payable for $12,000.
    c. debit to Salaries Payable for $12,000.
    d. debit to Salaries Expense for $8,500.

    Question 6
    The entry to record the payment of net payroll would include a

    a. debit to Salaries Payable for $8,050.
    b. debit to Salaries Payable for $8,500.
    c. debit to Salaries Payable for $7,950.
    d. credit to Cash for $9,050.

    Question 7
    The entry to record accrual of employer's payroll taxes would include a

    a. debit to Payroll Tax Expense for $312.
    b. debit to Payroll Tax Expense for $862.
    c. credit to FICA Taxes Payable for $1,100.
    d. credit to Payroll Tax Expense for $312.

    Question 8
    The entry to record the payment of federal unemployment tax would include a

    a. debit to Federal Unemployment Taxes Payable for $96.
    b. credit to Federal Unemployment Taxes Expense for $960.
    c. debit to Payroll Tax Expense for $960.
    d. credit to Federal Unemployment Taxes Payable for $96.

    Question 9
    Which of the following is not an advantage of issuing bonds instead of common stock?

    a. Stockholder control is not affected.
    b. Earnings per share on common stock may be lower.
    c. Income to common shareholders may increase.
    d. Tax savings result

    Question 10
    Bonds that may be exchanged for common stock at the option of the bondholders are called

    a. options.
    b. stock bonds.
    c. convertible bonds.
    d. callable bonds.

    Question 11
    A bond with a face value of $100,000 and a quoted price of 103 ¼ has a selling price of

    a. $130,325.
    b. $103,025.
    c. $100,325.
    d. $103,250.

    Question 12
    If the market rate of interest is greater than the contractual rate of interest, bonds will sell

    a. at a premium.
    b. at face value.
    c. at a discount.
    d. only after the stated rate of interest is increased.

    Question 13
    A corporation issues $100,000, 10%, 5-year bonds on January 1, 2003, for $95,800. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense (include the discount amortizaton) to be recognized on July 1, 2003, is

    a. $10,420.
    b. $5,000.
    c. $5,420.
    d. $4,580.

    Question 14
    If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

    a. less than face value.
    b. equal to the face value.
    c. greater than face value.
    d. that cannot be determined.

    Question 15
    The Torrez Corporation issues 1,000, 10-year bonds, 8%, $1,000 bonds dated January 1, 2004, at 97. The journal entry to record the issuance will show a

    a. debit to Cash of $1,000,000.
    b. credit to Discount on Bonds Payable for $30,000.
    c. credit to Bonds Payable for $970,000.
    d. debit to Cash for $970,000.

    Question 16
    One thousand bonds with a face value of $1,000 each, are sold at 103. The entry to record the issuance is

    a. Debit Cash 1,030,000
    Credit Bonds Payable 1,030,000
    b. Debit Cash 1,000,000
    Debit Premium on Bonds Payable 30,000
    Credit Bonds Payable 1,030,000
    c. Debit Cash 1,030,000
    Credit Premium on Bonds Payable 30,000
    Credit Bonds Payable 1,000,000
    d. Debit Cash 1,030,000
    Credit Discount on Bonds Payable 30,000
    Credit Bonds Payable 1,000,000

    Question 17
    If bonds have been issued at a discount, then over the life of the bonds the

    a. carrying value of the bonds will decrease.
    b. carrying value of the bonds will increase.
    c. interest expense will increase, if the discount is being amortized on a straight-line basis.
    d. unamortized discount will increase.

    Question 18
    In a recent year Night Corporation had net income of $130,000, interest expense of $30,000, and tax expense of $20,000. What was Night Corporation's times interest earned ratio for the year?

    a. 4.33
    b. 6.50
    c. 9.00
    d. 6.00

    Question 19
    Sunwood Company issued $200,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

    a. $196,000
    b. $196,400
    c. $196,800
    d. $197,600

    Question 20
    Terrance Company issued $200,000 of 8%, 5-year bonds at 106, which pays interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds (don't forget the premium)?

    a. $92,000
    b. $68,000
    c. $56,000
    d. $80,000

    Question 21
    Terrance Company issued $200,000 of 8%, 5-year bonds at 106, which pays interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

    a. $212,000
    b. $210,800
    c. $209,600
    d. $213,200

    Question 22
    Terrance Company issued $200,000 of 8%, 5-year bonds at 106. Assuming straight-line amortization and annual interest payments, what is the amount of the amortization at each interest payment point?

    a. $1,200
    b. $2,400
    c. $16,000
    d. $13,600

    Question 23
    Under the corporate form of business organization

    a. a stockholder is personally liable for the debts of the corporation.
    b. stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.
    c. the corporation's life is stipulated in its charter.
    d. stockholders wishing to sell their corporation shares must get the approval of other stockholders.

    Question 24
    Which of the following statements is not considered a disadvantage of corporate form of organization?

    a. Additional taxes
    b. Government regulations
    c. Limited liability of stockholders
    d. Separation of ownership and management

    Question 25
    The amount of stock that may be issued according to the corporation's charter is referred to as the

    a. authorized stock.
    b. issued stock.
    c. unissued stock.
    d. outstanding stock.

    Question 26
    If Lesser Company issues 1,000 shares of $5 par value common stock for $70,000, the account

    a. Common stock will be credited for $70,000.
    b. Paid-in capital in excess of par value will be credited for $5,000.
    c. Paid-in capital in excess of par value will be credited for $65,000.
    d. Cash will be debited for $65,000.

    Question 27
    New Corp. issues 1,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:

    a. Common stock $10,000 and Paid-in capital in excess of state value $4,000.
    b. Common stock $14,000.
    c. Common stock $10,000 and Paid-in capital in excess of par value $4,000.
    d. Common stock $10,000 and Retained earnings $4,000.

    Question 28
    Treasury stock is

    a. stock issued by the U.S. Treasury Department.
    b. stock purchased by a corporation and held as an investment in its treasury.
    c. corporate stock issued by the treasurer of a company.
    d. a corporation's own stock, which has been reacquired and held for future use.

    Question 29
    The acquisition of treasury stock by a corporation

    a. increases its total assets and total stockholders' equity.
    b. decreases its total assets and total stockholders' equity.
    c. has no effect on total assets and total stockholders' equity.
    d. requires that a gain or loss be recognized on the income statement.

    Question 30
    Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

    a. Debit Retained earnings
    Credit Cash
    b. Debit Dividends payable
    Credit Cash
    c. Debit Paid-in capital
    Credit Dividends payable
    d. Debit Retained earnings
    Credit Dividends Payable

    Question 31
    The board of directors of Weston Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2005. The dividend is to be paid on August 15, 2005, to stockholders of record on July 31, 2005. The effects of the journal entry to record the declaration of the dividend on July 15, 2005, are to

    a. decrease stockholders' equity and increase liabilities.
    b. decrease stockholders' equity and decrease assets.
    c. increase stockholders' equity and increase liabilities.
    d. increase stockholders' equity and decrease assets.

    Question 32
    The board of directors of Weston Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2005. The dividend is to be paid on August 15, 2005, to stockholders of record on July 31, 2005. The correct entry to be recorded on August 15, 2005, will include a

    a. debit to Retained Earnings.
    b. credit to Retained Earnings.
    c. credit to Dividends Payable.
    d. debit to Dividends Payable.

    Question 33
    Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:
    Total Assets ............Total Liabilities ........Total Stockholders' Equity

    a. Increase................ Decrease ............................No change
    b. No change ..............Increase............................... Decrease
    c. Decrease............... Increase............................... Decrease
    d. Decrease............... No change ............................Increase

    Question 34
    Sun Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2005. What is the annual dividend on the preferred stock?

    a. $50 per share
    b. $25,000 in total
    c. $600 in total
    d. $0.50 per share

    Question 35
    Cuther Inc., has 1,000 shares of 8%, $50 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2004, and December 31, 2005. The board of directors declared and paid a $3,000 dividend in 2004. In 2005, $12,000 of dividends are declared and paid. What are the dividends received by the common stockholders in 2005?

    a. $7,000
    b. $6,000
    c. $5,000
    d. $4,000

    Question 36
    Which of the following show the proper effect of a stock split and a stock dividend?
    .................Item........................ Stock Split...........Stock Dividend

    a. Total paid-in capital ..............Increase................ Increase
    b. Total retained earnings.......... Decrease.............. Decrease
    c. Total par value (common) .....Decrease ................Increase
    d. Par value per share .................Decrease .............No change

    Question 37
    What is the total stockholders' equity based on the following account balances?
    Common Stock ..............................................$550,000
    Paid-In Capital in Excess of Par ......................... 50,000
    Retained Earnings .............................................180,000
    Treasury Stock ................................................. 30,000

    a. $600,000
    b. $810,000
    c. $780,000
    d. $750,000

    Question 38
    Paid-in capital in excess of stated value would appear on a balance sheet under the category

    a. capital stock.
    b. retained earnings.
    c. additional paid-in capital.
    d. contra to stockholders' equity.

    Question 39
    Two classifications appearing in the paid-in capital section of the balance sheet are

    a. preferred stock and common stock.
    b. paid-in capital and retained earnings.
    c. capital stock and additional paid-in capital.
    d. capital stock and treasury stock.

    Question 40
    On January 1, Runner Corporation had 60,000 shares of $10 par value common stock outstanding. On March 17 the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The entry to record the transaction of March 17 would include a

    a. debit to Retained Earnings for $78,000.
    b. credit to Cash for $78,000.
    c. credit to Common Stock Distributable for $78,000.
    d. credit to Common Stock Distributable for $18,000.

    Question 41
    On January 1, Runner Corporation had 60,000 shares of $10 par value common stock outstanding. On March 17 the company declared a 10% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17. The stock was distributed on March 30. The entry to record the transaction of March 30 would include a

    a. credit to Common stock for $60,000.
    b. debit to Common stock distributable for $60,000.
    c. credit to Paid-in capital in excess of par value for $18,000.
    d. debit to Retained earnings for $18,000.

    Question 42
    Which one of the following events would not require a journal entry on a corporation's books?

    a. 2 for 1 stock split
    b. 100% stock dividend
    c. 2% stock dividend
    d. $1 per share cash dividend

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    https://brainmass.com/business/accounting/42-multiple-choice-1st-year-accounting-problems-98499

    Solution Preview

    Moss County Bank agrees to lend the Blackwood Brick Company $100,000 on January 1. Blackwood Brick Company signs a $100,000, 6%, 9-month note.
    The entry made by Blackwood Brick Company on January 1 to record the proceeds and issuance of the note is

    a. Debit Interest Expense 4,500
    Debit Cash 95,500
    Credit Notes Payable 100,000
    b. Debit Cash 100,000
    Credit Notes Payable 100,000
    c. Debit Cash 100,000
    Debit Interest Expense 4,500
    Credit Notes Payable 104,500
    d. Debit Cash 100,000
    Debit Interest Expense 4,500
    Credit Notes Payable 100,000
    Credit Interest Payable 4,500

    Question 2
    What is the adjusting entry required if Blackwood Brick Company prepares financial statements on June 30?

    a. Debit Interest Expense 3,000
    Credit Interest Payable 3,000
    b. Debit Interest Expense 3,000
    Credit Cash 3,000
    c. Debit Interest Payable 3,000
    Credit Cash 3,000
    d. Debit Interest Payable 3,000
    Credit Interest Expense 3,000

    $100,000 x 6% x 6/12 = 3,000
    As interest expense is not yet paid, so we need to credit to interest payable account.

    Question 3
    What entry will Blackwood Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?

    a. Debit Notes Payable 104,500
    Credit Cash 104,500
    b. Debit Notes Payable 100,000
    Debit Interest Payable 4,500
    Credit Cash 104,500
    c. Debit Interest Expense 4,500
    Debit Notes Payable 100,000
    Credit Cash 104,500
    d. Debit Interest Payable 3,000
    Debit Notes Payable 100,000
    Debit Interest Expense 1,500
    Credit Cash 104,500

    Total accrued interest expense is $100,000 x 6% x 9/12 = 4,500

    Question 4
    A cash register tape shows cash sales of $1,000 and sales taxes of $60. The journal entry to record this information is

    a. Debit Cash 1,000
    Credit Sales 1,000
    b. Debit Cash 1,060
    Credit Sales Tax Revenue 60
    Credit Sales 1,000
    c. Debit Cash 1,000
    Debit Sales Tax Expense 60
    Credit Sales 1,060
    d. Debit Cash 1,060
    Credit Sales 1,000
    Credit Sales Taxes Payable 60

    Question 5
    Use the following information to answer the following four questions.
    Totals taken from the payroll register of Main Company:
    Salaries..................................$12,000
    FICA taxes withheld...................... 550
    Income taxes withheld.................2,500
    Medical insurance deductions..........450

    Salaries Expense 12,000
    FICA taxes payable 550
    Income taxes payable 2,500
    Medical insurance payable 450
    Salaries Payable 8,500
    Tax Rates:
    Federal unemployment Taxes .8%
    State Unemployment Taxes....1.8%
    None of the employees have yet exceeded the $7,000 maximum annual limit.

    Payroll Tax Expense 312
    Federal Unemployment Taxes Payable (12,000 x .8%) 96
    State Unemployment Taxes Payable (12,000 x 1.8%) 216

    The journal entry to record the monthly payroll on April 30 would include a

    a. debit to Salaries Expense for $12,000.
    b. credit to Salaries Payable for $12,000.
    c. debit to Salaries Payable for $12,000.
    d. debit to Salaries Expense for $8,500.

    Question 6
    The entry to record the payment of net payroll would include a

    a. debit to Salaries Payable for $8,050.
    b. debit to Salaries Payable for $8,500.
    c. debit to Salaries Payable for $7,950.
    d. credit to Cash for $9,050.

    Question 7
    The entry to record accrual of employer's payroll taxes would include a

    a. debit to Payroll Tax Expense for $312.
    b. debit to Payroll Tax Expense for $862.
    c. credit to FICA Taxes Payable for $1,100.
    d. credit to Payroll Tax Expense for $312.

    Question 8
    The entry to record the payment of federal unemployment tax would include a

    a. debit to Federal Unemployment Taxes Payable for $96.
    b. credit to Federal Unemployment Taxes Expense for $960.
    c. debit to Payroll Tax Expense for $960.
    d. credit to Federal Unemployment Taxes Payable for $96.

    Question 9
    Which of the following is not an advantage of issuing bonds instead of common stock?

    a. Stockholder control is not affected.
    b. Earnings per share on common stock may be lower.
    c. Income to common shareholders may increase.
    d. Tax savings result

    Question 10
    Bonds that may be exchanged for common stock at the option of the bondholders are called

    a. options.
    b. stock bonds.
    c. convertible bonds.
    d. callable bonds.

    Question 11
    A bond with ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer 42 multiple choice 1st year accounting problems.

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