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Multiple Choice

Following are some examples from a practice book that I have. I am kind of confused with the answers, if somebody could help me, I will really appreciate it.

Thanks,

1. The maturity value of a $15,000, 60-day, 5% note payable is _______.
$15,750
$750
$15,125
$125

2. The following totals for the month of June were taken from the payroll register of ABC Company:

Salaries expense

$13,000

Social security and Medicare Taxes withheld

975

Income Taxes withheld

2,600

Retirement Savings

500

The entry to record the payment of net pay would include a ________.
debit to Salaries Payable for $13,000
Debit to Salaries Payable for $8,925
Credit to Salaries Expense for $8,925
Credit to Salaries Payable for $8,925

3. During its first year of operations, a company granted employees vacation privileges and pension rights estimated at a cost of $20,500 and $15,000. The vacations are expected to be taken in the next year and the pension rights are expected to be paid in the future 5-30 years. What is the total cost of vacation pay and pension rights to be recognized in the first year?
$29,500
$35,500
$23,500
$20,500

4. A corporation issues 2,000 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for ________.
$20,000
$32,000
$12,000
$2,000

5. The journal entry to issue 1,000,000 shares of $5 par common stock for $7.00 per share on January 2nd would be: _______.

Jan 2 Cash 7,000,000
Common Stock 5,000,000
Paid-In Capital in Excess
of Par - C/S 2,000,000

Jan 2 Cash 5,000,000
Common Stock 5,000,000

Jan 2 Cash 5,000,000
Paid-In Capital in Excess
of Par - C/S 2,000,000
Common Stock 5,000,000

Jan 2 Cash 1,000,000
Common Stock 1,000,000

6. When Bunyan Corporation was formed on January 1, 20xx, the corporate charter provided for 100,000 share of $10 par value common stock. The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 8,000 shares of stock at a price of $22.00 per share.

The entry to record the above transaction would include a ________.

debit to Cash for $80,000
credit to Common Stock for $176,000
credit to Paid in Capital in Excess of Par- for $96,000
debit to Common Stock for $80,000

7. On January 1, 20xx, Sunshine Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Sunshine purchased 2,000 shares of treasury stock for $23 per share and later sold the treasury shares for $21 per share on March 1, 20xx.

The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a ________
credit to Treasury Stock for $46,000
debit to Treasury Stock for $46,000
debit to a loss account for $6,000
credit to a gain account for $6,000

8. The journal entry to issue 1,000,000 shares of $5 par common stock for $6.25 per share on January 2nd would be: _______

Jan 2 Cash 6,250,000
Common Stock 5,000,000
Paid-In Capital in Excess
of Par - C/S 1,250,000

Jan 2 Cash 5,000,000
Common Stock 5,000,000

Jan 2 Cash 5,000,000
Paid-In Capital in Excess of Par - C/S 1,250,000
Common Stock 6,250,000

Jan 2 Cash 1,000,000
Common Stock 1,000,000

9. Day 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, 2006. What is the annual dividend on the preferred stock?
$50 per share
$25,000 in total
$600 in total
$0.50 per share

10. What is the total stockholders' equity based on the following account balances?

Common Stock

$400,000

Paid-In Capital in Excess of Par

40,000

Retained Earnings

190,000

Treasury Stock

20,000

$640,000
$630,000
$610,000
$650,000

11. A corporation purchases 10,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders' equity?
increase, $100,000
increase, $250,000
decrease, $100,000
decrease, $250,000

12. What is the total stockholders' equity based on the following data?

Common Stock

$800,000

Excess of Issue Price Over Par

375,000

Retained Earnings (deficit)

50,000

$1,100,000
$1,125,000
$1,175,000
$1,225,000

13. Based on the following information, calculate the dividend yield on common stock

Market price per share

$40.00

Earnings per share

4.00

Dividends per share

1.00

Investor's cost per share

30.00

0.075
0.025
0.133
0.033

14. What is the total stockholders' equity based on the following data?

Common Stock

$500,000

Excess of Issue Price Over Par

375,000

Retained Earnings (deficit)

40,000

$915,000
$875,000
$835,000
$540,000

15. A corporation has 50,000 shares of $28 par value stock outstanding that has a current market value of $160. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately ________.
$7
$112
$40
$640

16. The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar) ________.
$37,736
$42,400
$40,000
$2,400

17. The Mansur Company issued $100,000 of 12% bonds on May 1, 2007 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2007, and mature on January 1, 2011. The total interest expense related to these bonds for the year ended December 31, 2007 is ______.
$2,000
$4,000
$8,000
$12,000

18. On January 1, 2007, the Queen Corporation issued 10% bonds with a face value of $100,000. The bonds are sold for $98,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 2011. Queen records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31, 2007, is ________.
$9,600
$9,800
$10,400
$10,200

19. When the market rate of interest was 11%, Welch Corporation issued $100,000, 8%, 10-year bonds that pay interest semiannually. Using the straight-line method, the amount of discount or premium to be amortized each interest period would be ________.
$4,000
$896
$17,926
$1,793

20. On January 1, 2007, the Kings Corporation issued 10% bonds with a face value of $100,000. The bonds are sold for $96,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, 2011. Kings records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31, 2007, is _______.
$9,200
$9,800
$10,400
$10,800

21. Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 102, what is the amount of gain or loss on redemption?
$1,100 loss
$1,100 gain
$8,000 loss
$8,000 gain

22. On the statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include ________.
receipts from the sale of investments
amortization of premium on bonds payable
payments for cash dividends
receipts from the issuance of capital stock

23. A building with a book value of $ 45,000 is sold for $50,000 cash Using the indirect method, this transaction should be shown on the statement of cash flows as follows: ________.
an increase of $45,000 from investing activities
an increase of $50,000 from investing activities and a deduction from net income of $5,000
an increase of $50,000 from investing activities
an increase of $45,000 from investing activities and an addition to net income of $5,000

24. Land costing $47,000 was sold for $78,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
$78,000
$47,000
$109,000
$31,000

25. Land costing $68,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
$50,000
$78,000
$118,000
$68,000

26. The net income reported on the income statement for the current year was $250,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

End

Beginning

Cash

$ 50,000

$ 60,000

Accounts receivable

112,000

108,000

Inventories

105,000

93,000

Prepaid expenses

4,500

6,500

Accounts payable (merchandise creditors)

75,000

89,000

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
$271,000
$279,000
$327,000
$256,000

26. The following selected account balances appeared on the financial statements of the Franklin Company:

Accounts Receivable, Jan. 1

$13,000

Accounts Receivable, Dec. 31

9,000

Accounts Payable, Jan 1

4,000

Accounts payable Dec. 31

7,000

Merchandise Inventory, Jan 1

10,000

Merchandise Inventory, Dec 31

15,000

Sales

56,000

Cost of Goods Sold

31,000

The Franklin Company uses the direct method to calculate net cash flow from operating activities. Cash collections from customers are ________.
$56,000
$52,000
$60,000
$45,000

Solution Summary

The solution explains various multiple choice questions in accounting

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