LESSON 3 TEST

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Franklin University *

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2

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Accounting

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Jan 9, 2024

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LESSON 3 TEST 1 GAAP require that the ________ of the stock dividend determine how the total amount of the dividend is recorded. size 2 Which of the following statements is true concerning a company's stock? The cash dividend rate on common stock is expressed as a dollar amount. 3 Retained earnings ________. are less permanent than paid-in capital 4 Which of the following statements is incorrect with regard to stock dividends? An asset is recorded on the date stock dividends are declared. 5 Corporation A issued 10,000 shares of common stock on January 1, 20XX. The stock has par value of $0.01 per share and was sold for cash at $1.00 per share. The journal entry to record this transaction would ________. debit cash $10,000, credit common stock $100, and credit additional paid in capital $9,900 6 When bonds are issued at a discount, which of the following statements is correct? The interest expense will be greater than the interest payment 7 In regards to an extraordinary gain or loss, which of the following statements is correct? An extraordinary gain or loss must be unusual and infrequent. 8 Company A is considering a new project and needs to raise $800,000 of capital. The company's after-tax net income would be $75,000 if they do not implement the new project. If the new project is implemented, it will add an additional $50,000 of profits before tax and interest. If the company uses debt financing, the interest will be at 5%. Company A has 25,000 shares of common stock outstanding and no preferred stock. They would have to issue an additional 10,000 shares of common stock to finance the project with equity capital. Assuming an income tax rate of 40%, if the company decides to use equity financing for the project, what would its earnings per share be? 3.00 $3.24 $3.50 $3.57 $2.14 9 On January 1, 2013, Company A issued $140,000 of 4-year bonds with a stated rate of 9%. The market rate at time of issue was 8%, so the bonds were issued with a premium and sold for $144,758. The company uses the effective-interest method to amortize bond premium. Semiannual interest payments are made on June 30 and December 31 of each year. How much interest expense will be recorded when the first interest payment is made? $5,790 11 Which of the following is a true statement?. Neither a stock split nor a stock dividend will affect total assets or total liabilities.
12 Company A has 2,000 shares of common stock outstanding. A stockholder has 500 shares. If Company A distributes a 20% stock dividend, how many shares of Company A will the stockholder have? 600 13 Which of the following best defines the term outstanding stock? the shares held by the shareholders 14 Large stock dividends are those that represent ________ or more of the issued and outstanding stock. 20-25% 16 Which of the following describes the term maturity date as it relates to bonds payable?. The maturity date is the date on which final payment is due. 17 On October 15, 2013, Company A had bonds payable equal to $80,000 reported on its balance sheet. The unamortized premium attributable to the bonds equaled $4,600 on this date. If Company A retires the bonds for $82,000, which of the following would NOT appear in the journal entry to record the retirement? debit to gain on retirement of bonds for $2,600 18 Which of the following is NOT an issue faced by a company when bonds payable are issued? determining the appropriate market interest rate 19 Which of the following is true of a discount on bonds payable?. A discount on bonds payable is subtracted from the bonds payable balance and shown with long-term liabilities on the balance sheet. 20 A corporation had 30,000 shares of $10 par value common stock outstanding on January 1. The board of directors declared a 10% stock dividend when the market value of each share was $15. The entry to record this dividend would include: debit retained earnings $45,000, credit common stock dividend distributable $30,000, credit additional paid-in capital $15,000 21 Which of the following would be included in the entry to record a 2-for-1 stock split? There is no journal entry to record a stock split. 22 On January 1, 2014, Company A issued $50,000 of 6-year bonds with a stated rate of 3%. The market rate at time of issue was 4%, so the bonds were discounted and sold for $47,331. The company uses the effective-interest rate of amortization for bond discounts. Semiannual interest payments are made on June 30 and December 31 of each year. Which of the following is the correct journal entry to record the first interest payment? (Round all amounts to the nearest whole dollar.) debit interest expense $947, credit discount on bonds payable $197, and credit cash $750
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