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PRATICE QUIZ AND FINAL EXAM
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1
. Practice Question 01
In every corporation the one class of stock that represents the basic ownership interest is called
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common stock. |
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preferred stock. |
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cumulative stock. |
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owners’ stock. |
Practice Question 0
3
Presented below is information related to Schoenthaler Corporation:
|
Common Stock , $5 par |
$1,100,000 |
||
|
Paid-in Capital in Excess of Par – Common Stock |
400,000 |
||
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Preferred 5 ½% Stock, $100 par |
1, 500,000 |
||
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Paid-in Capital in Excess of Par—Preferred Stock |
500,000 | ||
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Retained Earnings |
2 ,000,000 |
||
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Paid-in Capital from Treasury Stock |
150,000 |
The total stockholders’ equity of Schoenthaler Corporation is
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$5,500,000. |
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$3, 650,000 . |
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$5, 350,000 . |
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$5,650,000. |
Practice Question 05
Which of the following type of stock will not increase Additional Paid-in Capital when issued?
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No -par value stock. |
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No-par with a stated value stock. |
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Preferred stock . |
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Par value stock. |
Practice Question 07
Treasury stock sold for less than its cost decreases net income.
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True |
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False |
Practice Question 09
Cumulative preferred dividends in arrears should be shown in a corporation’s financial statements as
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an increase in stockholders’ equity. |
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an increase in current liabilities for the current portion and long-term liabilities for the long-term portion. |
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a footnote. |
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an increase in current liabilities. |
Practice Question 11
Which of the following statements related to dividends is incorrect?
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Before declaring a dividend, management must consider availability of funds to pay the dividend. |
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Dividends must be paid in the period declared. |
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Distributions to owners must be in compliance with the state laws. |
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Dividends must be declared by the Board of Directors. |
Practice Question 13
Cash
dividends are paid on the basis of the number of shares
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outstanding less the number of treasury shares. |
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issued. |
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outstanding. |
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authorized. |
Practice Question 15
Redeemable
preferred stock should be classified as a liability on the balance sheet.
True
False
Practice Question 17
Blowing Rock Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 30,000 shares of $1 par value common stock outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a
$45,000
dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017?
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$0 |
| $45,000 |
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$15,000 |
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$25,000 |
Practice Question 19
Which one of the following is not a right of common stockholders?
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To share proportionately in corporate assets upon liquidation. |
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To share proportionately in any new issues of stock of the same class. |
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To share proportionately in all management decisions. |
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To share proportionately in profits and losses. |
Practice Question 21
Presented below is information related to Kaenzig Corporation:
|
Common Stock , $1 par |
$2,100,000 |
|
|
550,000 |
||
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Preferred 8 ½% Stock, $50 par |
1,700,000 |
|
|
950,000 |
||
|
2,350,000 |
||
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Treasury Common Stock (at cost) |
250,000 |
The total stockholders’ equity of Kaenzig Corporation is
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$2, 300,000 . |
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$7,400,000. |
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$7,900,000. |
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$5,300,000. |
Practice Question 23
Gulfport Corporation was organized in January 2017 with authorized capital of $.0001 par value common stock. On February 1, 2017, shares were issued at par for cash. On March 1, 2017, the corporation’s attorney accepted 5,000 shares of common stock in settlement for legal services with a fair value of $25,250.
Additional paid-in capital
would increase on
|
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2/1/2017 |
3/1/2017 |
||||||
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1) |
Yes |
No | ||||||
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2) |
||||||||
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3) |
||||||||
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4) |
| 2 |
| 4 |
| 3 |
| 1 |
Practice Question 25
On September 14, 2017, Gayot Company reacquired 12,000 shares of its $1 par value common stock for $40 per share. Gayot uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit
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Treasury Stock for $480,000. |
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Common Stock for $24,000 and Paid-in Capital in Excess of Par for $456,000. |
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Treasury Stock for $24,000. |
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Common Stock for $480,000. |
Practice Question 27
Hise Inc., has 4,000 shares of 9%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. The board of directors declared and paid a $25,000 dividend in 2016. In 2017,
$74,000
of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2017?
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$47,000 |
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$36,000 |
| $74,000 |
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$11,000 |
Practice Question 29
Which of the following features of preferred stock makes the security more like debt than an equity instrument?
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Noncumulative |
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Participating |
| Redeemable |
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Voting |
Practice Question 31
McCaffrey Corporation owned 15,000 shares of Harper Corporation’s $5 par value common stock. These shares were purchased in 2015 for $326,000. On May 4, 2017, McCaffrey declared a property dividend of one share of Harper for every twenty shares of McCaffrey stock held by a stockholder. On that date, when the market price of Harper was $34 per share, there were 280,000 shares of McCaffrey outstanding. What net reduction in retained earnings would result from this property dividend?
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$150,000 |
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$304,220 |
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$176,000 |
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$476,000 |
Practice Question 33
Stock splits increase total stockholders’ equity.
True
False
Practice Question 35
At the date of declaration of a large common stock dividend, the entry should include
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a credit to Paid-in Capital in Excess of Par. |
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a credit to Common Stock Dividend Payable. |
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a debit to Retained Earnings. |
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a credit to Cash. |
Practice Question 37
Terpsichore Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 200,000 shares of $1 par value common stock outstanding at December 31, 2017, and December 31, 2016. No dividends were paid in 2016. In 2017,
$75,000
of dividends are declared and paid. If the preferred stock is nonparticipating, what are the dividends received by the preferred stockholders in 2017?
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$10,000. |
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$42,500. |
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$65,000. |
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$5,000. |
Practice Question 39
The accounting for treasury stock retirements under IFRS
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is to charge the entire amount to paid-in capital. |
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is to charge the excess of the cost of treasury stock over par value to retained earnings. |
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is to allocate the difference between paid-in capital and retained earnings. |
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may have the excess charged to paid-in capital, depending on the original transaction related to the issuance of the stock. |
CPA Question 01
In analyzing an entity’s annual financial report, which financial statement would an analyst primarily use to assess the entity’s liquidity?
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Statement of Profit or Loss. |
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Statement of Cash Flows. |
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Statement of Changes in Equity. |
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Balance Sheet. |
CPA Question 01
On September 1, 2017, Hyde Corp., a newly formed company, had the following stock issued and outstanding:
•
Common stock
, no par, $1 stated value, 5,000 shares originally issued at $15 per share.
• Preferred stock, $10 par value, 1,500 shares originally issued for $25 per share.
Hyde’s September 1, 2017 statement of stockholders’ equity should report
| Common stock | Preferred stock |
Additional Paid-in capital |
|
$5,000 $37,500 $70,000 |
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$75,000 $37,000 $0 |
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$5,000 $15,000 $92,500 |
CPA Question 01
FASB ASC 606, commonly referred to as the revenue recognition standard, includes all of the following in its five step process to recognize revenue except:
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Recognize revenue when (or as) the entity is paid for a performance obligation. |
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Identify the performance obligations in the contract. |
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Allocate the transaction price to the performance obligations in the contract. |
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Identify the contract with the customer. |
CPA Question 01
How many of the following four aspects of accounting for pension gains and losses contribute to the reduction in volatility of reported pension expense: (1) use of corridor amortization as an acceptable method, (2) gains and losses cancel, (3) spreading the amount subject to amortization over the average remaining service period of plan participants, (4) the use of expected return for component 3 of pension expense?
4
1
2
3
CPA Question 01
Bain Co. entered into a 10-year lease agreement for a new piece of equipment worth $500,000. At the end of the lease, Bain will have the option to purchase the equipment. Which of the following would require the lease to be accounted for as a capital lease?
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The estimated useful life of the leased asset is 12 years. |
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The purchase option at the end of the lease is at fair market value. |
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The lease includes an option to purchase stock in the company. |
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The present value of the minimum lease payments is $400 ,000. |
CPA Question 01
New England Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000.
New England’s cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000, and proceeds of $40,000 were received from the sale.
What was New England’s cash balance at the end of the year?
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$ 27,000 |
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$248,000 |
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$208,000 |
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$ 40,000 |
CPA Question 02
The following trial balance of Trey Co. at December 31, 2017 has been adjusted except for income tax expense.
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Dr. |
Cr. |
||
| Cash |
$550,000 |
||
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Accounts Receivable, net |
1,650,000 |
||
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Prepaid taxes |
300,000 | ||
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Accounts payable |
$120,000 |
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| Additional paid-in capital |
680,000 |
||
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Retained earnings |
630,000 |
||
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Foreign currency translation adjustment |
430,000 |
||
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Revenues |
3,600,000 |
||
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Expenses |
2,600,000 |
||
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$5,530,000 |
Additional information:
•During 2017, estimated tax payments of
$300
,000 were charged to prepaid taxes. Trey has not yet recorded income tax expense. There were no differences between the financial statement and the income tax income, and Trey’s tax rate is 30%.
•Included in accounts receivable is $500,000 due from a customer. Special terms granted to this customer require payments in equal, semiannual installments of $
125,000
every April 1 and October 1.
In Trey’s December 31, 2017 Balance Sheet, what amount should be reported as total current assets?
|
$2,500,000 |
|
$2,200,000 |
|
$1,950,000 |
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$2,250,000 |
CPA Question 02
Beck Corp. issued 200,000 shares of common stock when it began operations in year 1 and issued an additional 100,000 shares in year 2. Beck also issued preferred stock convertible to 100,000 shares of common stock. In year 3, Beck purchased 75,000 shares of its common stock and held it in Treasury. At December 31, year 3, how many shares of Beck’s common stock were outstanding?
|
225,000 |
|
325,000 |
CPA Question 02
The following information is available about a signed agreement between two entities:
• The entities have agreed to specific performance obligations.
• The entities have agreed on a price related to the performance obligations.
• No work has begun on the performance obligations and the contract is cancelable without payment of penalty or other consideration.
• It is probable that the company completing the work will collect the agreed upon consideration.
Does a contract exist between the entities to which the revenue recognition criteria may be applied?
|
A contract to which the revenue recognition criteria applies exists because the contract includes important terms such as the agreed upon price and specific performance obligations. |
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A contract to which the revenue recognition criteria applies does not exist because the transaction price has not yet been allocated to the specific performance obligations. |
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A contract to which the revenue recognition criteria applies does not exist because it is cancelable without penalty and no work on the performance obligations has begun. |
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A contract to which the revenue recognition criteria applies exists because it identifies specific performance obligations and collectibility of the consideration is probable. |
CPA Question 02
The following information pertains to Seda Co.’s pension plan:
|
Actuarial estimate of projected benefit obligation at January 1, 2017 |
$72,000 |
|
Assumed discount rate |
10% |
|
Service costs for 2017 |
$18,000 |
|
Pension benefits paid during 2017 |
If no change in actuarial estimates occurred during 2017, Seda’s projected benefit obligation at December 31, 2017 was
| $75,000 |
|
$64,200 |
|
$79,200 |
|
$82,200 |
CPA Question 02
Cott, Inc. prepared an interest amortization table for a 5-year lease payable with a bargain purchase option of $2,000, exercisable at the end of the lease. At the end of the 5 years, the balance in the leases payable column of the spreadsheet was zero. Cott has asked Grant, CPA, to review the spreadsheet to determine the error. Only one error was made on the spreadsheet.
Which of the following statements represents the best explanation for this error?
|
Cott subtracted the annual interest amount from the lease payable balance instead of adding it. |
|
The beginning present value of the lease did not include the present value of the bargain purchase option. |
|
The present value of the bargain purchase option was subtracted from the present value of the annual payments. |
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Cott discounted the annual payments as an ordinary annuity, when the payments actually occurred at the beginning of each period. |
CPA Question 02
Which of the following information should be disclosed as supplemental information in the Statement of Cash Flows?
|
Cash flow per share |
Conversion of debt to equity |
|
Yes
No |
|
No
Yes |
|
Yes
Yes |
|
No
No |
CPA Question 03
The following trial balance of JB Company at December 31, Year five, has been adjusted except for income taxes. The income tax rate is 30%.
|
Accounts receivable, net |
$725,000 |
|
|
Accumulated depreciation |
125,000 | |
|
185,000 |
||
|
Contributed capital |
650,000 | |
|
3,750,000 |
||
|
Goodwill |
140,000 |
|
|
Property, plant, and equipment |
850,000 |
|
|
Retained earnings, 1/1/year five |
350,000 | |
|
4,500,000 |
||
| 5,875,000 |
During year five, estimated tax payments of $225,000 were paid and debited to prepaid taxes. There were no differences between financial statement and taxable income for year five.
Included in accounts receivable is $400,000 due from a loyal customer. Special terms were granted to this customer to make payments of $100,000 semi-annually every March 1 and September 1.
In JB Company’s December 31, Year five Balance Sheet, what amount should be reported as total assets?
|
1,775,000 |
|
1,575,000 |
CPA Question 03
Lem Co., which accounts for treasury stock under the par value method, acquired 100 shares of its $6 par value common stock for $10 per share. The shares had originally been issued by Lem for $7 per share. By what amount would Lem’s additional paid-in capital from common stock decrease as a result of the acquisition?
| $400 |
$0
| $100 |
| $300 |
CPA Question 03
Improper revenue recognition is the most common form of fraudulent financial reporting and is the most prevalent reason for accounting restatements for all of the following reasons except:
|
Revenue recognition is a complex process. |
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Identification of performance obligations may require judgment. |
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Revenue recognition is not prone to error because of management’s focus on proper revenue recognition. |
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Management faces pressure to meet revenue expectations. |
CPA Question 03
Data for a defined benefit pension plan for the current year are as follows:
|
PBO, January 1, |
$200mn |
|
Assets, January 1, |
$160mn |
|
Pension expense, |
$60mn |
|
Funding contribution, |
|
|
$50mn |
|
|
PBO gain (year-end), |
$14mn |
|
Amortization of PSC for year, |
$4mn |
The ending pension liability balance is
|
$36mn |
|
$32mn |
|
$46mn |
|
CPA Question 03 $66,500 $62,160 $69,720 $64,860 |
CPA Question 03
The primary purpose of a Statement of Cash Flows is to provide relevant information about:
|
Differences between net income and associated cash receipts and disbursements. |
|
The cash receipts and cash disbursements of an enterprise during a period. |
|
An enterprise’s ability to generate future positive net cash flows. |
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An enterprise’s ability to meet cash operating needs. |
CPA Question 04
The following is Gold Corp.’s June 30, 2017, trial balance:
Cash overdraft
$10,000
Accounts receivable, net
$35,000
Inventory
58,000
Prepaid expenses
12,000
Land held for resale
100,000
Property, plant, and equipment, net.
95,000
Accounts payable and accrued expenses
32,000
Common stock
25,000
Additional paid-in capital
150,000
Retained earnings
83,000
$300,000
$300,000
Additional information:
•Checks amounting to $30,000 were written to vendors and recorded on June 29, 2017, resulting in a cash overdraft of $10,000. The checks were mailed on July 9, 2017.
•Land held for resale was sold for cash on July 15, 2017.
•Gold issued its financial statements on July 31, 2017.
In its June 30, 2017, balance sheet, what amount should Gold report as current assets?
$225,000
$125,000
$205,000
$195,000
CPA Question 04
A property dividend should be recorded in retained earnings at the property’s
|
Book value at date of declaration. |
|
Book value at date of issuance (payment). |
|
Market value at date of declaration. |
|
Market value at date of issuance (payment). |
