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Accounting Questions

1).The par value of the common stock of a large listed corporation
A)Tends to establish a ceiling for the market price of the stock(B) Tend to establish a floor for the market price of the stock (C) Represents the legal capital and is not related to the market price of the stock.(D) Is increased by net income and decrease by dividends

Shown below is information relating to the stockholders equity of lakeside corporation as of December 31, 2006:

8% cumulative preferred stock, $100 par........................................$300,000
Common stock, $10 par, 500,000 shares authorized 90,000 share
Issued and outstanding ..............................................................$900,000
Additional paid -in capital :common stock.......................................$300,000
Retained earning (Deficit) ...........................................................($20,000)
Dividends in arrears....................................................................$16,000

2) Ref to the above data, How many shares of preferred stock are issued and outstanding
A) 24,000 share (B) 3,000 share (C) 30,000 share (D) some other amount

3) Ref to the above data .What was the original issue price per share of common stock?
A)$10.00 per share (B) $11.25 per share (C) $13.33 per share (D) some other amount

4) Ref to the above data. Total stockholders' equity is:
A) $1,500,000 (B) $1,520,000 (C) $1,480,000 (D) some other amount

5) The market price of a preferred stock will be affected by:
A) Dividend rate (B) The change that the company will not operate profitable (C) The level of interest rate (D) All of the above

6) A small stock dividend is recorded at
A) Market value (B) Book value (C) Par value (D) none of the above , just memorandum entry required

7) Galaxy Corporation was organized on January 1 and issue 500,000 shares of common stock on that date . On July 1 an additional 200,000 shares were issued for cash. Net income for the year was $2,160,000. Net earning per share amounted to:
A) $4.32 (B) $3.75 (C) $3.09 (D) $3.60

The stockholders equity section of the balance sheet of Modern Corporation at December 31, 2006, appears as the following ( The company engaged in no treasury stock transaction prior to 2006)

Stockholders equity:
$2 preferred stock, $100 par
10,000 shares authorized 7,000 shares issued......................... $700,000
Common stock, $2 par 100,000 shares authorized
80,000 shares issues of which 8,000 are held in treasury................$160,000
Additional paid -in capital
From issuance of preferred stock.................................................$70,000
From issuance of common stocks................................................$210,000
From treasury stock transaction ..................................................$5,000
From common stock dividends ...................................................$20,000
Total paid in capital................................................................$1,210,000
Retained earning ($64,000 equal to cost of treasury stock is not
Available for dividends .............................................................$500,000
_________
$1,710,000
Less: Treasury stock(at cost: 8,000 common Shares )
Total stockholders' equity .......................................................$1,646,000

8) Refer to the above data. What was the average issue price per share of preferred stock?
A)$100. (B) $110 (C)$115 (D) $120

9) Refer to the above data. How many shares of common stock are outstanding
A) 80,000 (B) 88,000 (C) 92,000 (D) 72,000

10) Large stock dividends tend to keep stock prices down
A) True (B) False

11) Mirage Corporation financial statements for the current year include the following:
Income from continuing operations..............$620,000
Prior period adjustment (increase in prior year
Net $190,000
Income, net of taxes)
Cash dividends paid to preferred stockholders..$202,000
Gain from discontinued operations(net of.........410,000
taxes
Cumulative effect of accounting charge
(reduction in 320,000
Net income, net of tax benefit
Extraordinary loss(net of tax benefit 95,000

On the basis of this information, net income for the current year is :
A)$1,007,000 (B) 620,000 (C) $1,445,000 (D) $615,000

12) Interest paid belongs in the financing section of the statement of cash flows
A) True (B) False

13)Rent expense in Olympic Company's 2006 income statement is $340,000. If prepaid rent was $40,000 at December 31,2005, and is $65,000 at December 31,2006, the cash paid for rent during 2006 is:
A) $340,000 (B) $365,000 (C) $315,000 (D) $405,000

14) The principal purpose of a statement of cash flows is to measure the profitability of a business that maintain its accounting records on the cash basis
A) True (B) False

15) The accountant for Earth Institute ,Inc ., determine the cash flow for several transaction to be as the follows:

Payment to pay notes payable .....................................$175,000
Proceeds from issuance of bond payment ......................$615,000
Payment to purchase equipment...................................$255,000
Payment of wages.......................................................$95,000
Payment of dividends .................................................$135,000

On the basis of the above transaction alone determine the net cash flow from financing activities
A) $255,000 net cash used for financing activities
B) $440,000 net cash provided by financing activities
C) Zero : cash inflows equal cash outflows from financing activities.
D) $305,000 net cash provided by financing activities

16) The comparative balance sheet of Marvin Inc, show a net increase in accounts receivable of $550 and a net decrease in inventory of $200. To determine net cash flow from operating activities under the indirect method, net income should be:
A) Reduced by $750 (B) Increase by $750 (C) Reduce by $350(D) Reduce by $150

17)The comparative balance sheet of Sanford Games Inc., show a net decrease in unexpired insurance of $500 and a net decrease in interest payable of $350. In order to reconcile net income with net cash flow from operating activities, net income should be :
A) Increase by $850 (B)Reduced by $850 (C)Increase by $150(D) Reduced by $150

18) The purchase of equipment for manufacturing of inventory belong in the operations section of the statement of cash flow
A) True (B) False

19) Net income differs from net cash flows from operation because of all the following except
A) Non-cash expenses such as depreciation (B) Timing difference between recognizing revenue and expenses and their cash flows (C) Gains and losses included in net income but classified as investing or financing activities (D) All of the above will cause a difference between net income and cash flows

20) The return on assets usually is compute as
A) Net sales divided by average total assets (B) Gross profit divided by average total assets (C) Operating income divided by average total assets. (D) Net income divided by average total assets

21) The debit ratio is used primarily as a measure of
A) Short-term liquidity (B) Creditors' long-term risk (C) Profitability (D)ROI.

Shown below are selected data from the balance sheet of HiTech, a small electronics store( dollar amounts are in thousand)

Cash............................................................$25
Accounts receivable .....................................$45
Inventory......................................................$80
Total assets...................................................$400
Current Liabilities...........................................$100
Non Current Liabilities......................................$240

22) Ref to the above data The Quick ratio is:
A)1.5 to 1 (B) .7 to 1 (C) .45 to 1. (D) some other amount

23) Ref to the above data . The current ratio is
A) 5.0 to 1 (B) 1.5 to 1 (C) .7 to 1 (D) some other amount

24) Ref to above data Working capital amount to
A)$150,000 (B) $250,000 (C) $50,000 (D) some other amount

25) Refer to above data Hi -tech debt ratio is
A)85% (B) 25% (C) 60% (D) some other amount

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1).The par value of the common stock of a large listed corporation
A)Tends to establish a ceiling for the market price of the stock(B) Tend to establish a floor for the market price of the stock (C) Represents the legal capital and is not related to the market price of the stock.(D) Is increased by net income and decrease by dividends

Answer C

Shown below is information relating to the stockholders equity of lakeside corporation as of December 31, 2006:

8% cumulative preferred stock, $100 par........................................$300,000
Common stock, $10 par, 500,000 shares authorized 90,000 share
Issued and outstanding ..............................................................$900,000
Additional paid -in capital :common stock.......................................$300,000
Retained earning (Deficit) ...........................................................($20,000)
Dividends in arrears....................................................................$16,000

2) Ref to the above data, How many shares of preferred stock are issued and outstanding
A) 24,000 share (B) 3,000 share (C) 30,000 share (D) some other amount

The total amount is $300,000 and the par value is $100.
Number of shares outstanding = 300,000/100=3,000

3) Ref to the above data .What was the original issue price per share of common stock?
A)$10.00 per share (B) $11.25 per share (C) $13.33 per share (D) some other amount

The total common stock capital is 900,000+300,000=1,200,000
Number of shares issued are 90,000
Price per share = 1,200,000/90,000 = $13.33

4) Ref to the above data. Total stockholders' equity is:
A) $1,500,000 (B) $1,520,000 (C) $1,480,000 (D) some other amount

Total stockholders equity is
300,000+900,000+300,000-20,000=1,480,000

5) The market price of a preferred stock will be affected by:
A) Dividend rate (B) The change that the company will not operate profitable (C) The level of interest rate (D) All of the above

Answer D

6) A small stock dividend is recorded at
A) Market value (B) Book value (C) Par value (D) none of the above , just memorandum entry required

Answer A

7) Galaxy Corporation was organized on January 1 and issue 500,000 shares of common stock on that date . On July 1 an additional 200,000 shares were issued for cash. Net income for the year was $2,160,000. Net earning per share amounted to:
A) $4.32 (B) $3.75 (C) $3.09 (D) $3.60

The weighted average number of shares are
500,000 X 6/12
700,000 X 6/12 = 600,000
EPS = Net income/Weighted average shares outstanding = 2,160,000/600,000=$3.60

The stockholders equity section of the balance sheet of ...

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The solution explains variouse multiple choice questions relating to accounting

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