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Kirk_CPA, Master's in Acctg
Category: Multiple Problems
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Experience:  CPA, CIA, CISA; 15 years with Big 4 and other corporations
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11) If a corporation issued $3,000,000 in bonds which pay 10%

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11) If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%? A. $3,000,000 B. $90,000 C. $300,000 D. $210,000 12) Hilton Company issued a four-year interest-bearing note payable for $300,000 on January 1, 2011. Each January the company is required to pay $75,000 on the note. How will this note be reported on the December 31, 2012 balance sheet? A. Long-term debt, $300,000. B. Long-term debt, $225,000. C. Long-term debt, $150,000; Long-term debt due within one year, $75,000. D. Long-term debt, $225,000; Long-term debt due within one year, $75,000. 13) A corporation issued $600,000, 10%, 5-year bonds on January 1, 2011 for 648,666, which reflects an effective-interest rate of 8%. Interest is paid semiannually on January 1 and July 1. If the corporation uses the effective-interest method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2011, is A. $30,000 B. $24,000 C. $32,434 D. $25,946 14) When the effective-interest method of bond discount amortization is used A. the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date B. the carrying value of the bonds will decrease each period C. interest expense will not be a constant dollar amount over the life of the bond D. interest paid to bondholders will be a function of the effective-interest rate on the date the bonds were issued 15) If a corporation has only one class of stock, it is referred to as A. classless stock B. preferred stock C. solitary stock D. common stock 16) Capital stock to which the charter has assigned a value per share is called A. par value stock B. no-par value stock C. stated value stock D. assigned value stock 17) ABC, Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2011. What is the annual dividend on the preferred stock? A. $50 per share B. $5,000 in total C. $500 in total D. $.50 per share 18) Manner, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2011. There were no dividends declared in 2010. The board of directors declares and pays a $45,000 dividend in 2011. What is the amount of dividends received by the common stockholders in 2011? A. $0 B. $25,000 C. $45,000 D. $20,000 19) When the selling price of treasury stock is greater than its cost, the company credits the difference to A. Gain on Sale of Treasury Stock B. Paid-in Capital from Treasury Stock C. Paid-in Capital in Excess of Par Value D. Treasury Stock 20) The purchase of treasury stock A. decreases common stock authorized B. decreases common stock issued C. decreases common stock outstanding D. has no effect on common stock
outstanding
21) Marsh Company has other operating expenses of $240,000. There has been an increase in prepaid expenses of $16,000 during the year, and accrued liabilities are $24,000 lower than in the prior period. Using the direct method of reporting cash flows from operating activities, what were Marsh's cash payments for operating expenses?
A.$228,000
B.$232,000
C.$200,000
D.$280,000

22) Where would the event purchased land for cash appear, if at all, on the indirect statement of cash flows?
A.Operating activities section
B.Investing activities section
C.Financing activities section
D.Does not represent a cash flow

23) In performing a vertical analysis, the base for cost of goods sold is
A.total selling expenses
B.net sales
C.total revenues
D.total expenses

24) Blanco, Inc. has the following income statement (in millions):
    BLANCO, INC.
    Income Statement
    For the Year Ended December 31, 2011
Net Sales..............................$200
Cost of Goods Sold..............................120
Gross Profit..............................80
Operating Expenses..............................44
Net Income..............................$ 36

Using vertical analysis, what percentage is assigned to Net Income?
A.100%
B.82%
C.18%
D.25%

25) Dawson Company issued 500 shares of no-par common stock for $4,500. Which of the following journal entries would be made if the stock has a stated value of $2 per share?
A.
Cash ...........................................................$4,500
Common Stock 4,500

B.
Cash ....................................$4,500
Common Stock 1,000
Paid-In Capital in Excess of Par 3,500

C.
Cash ......................$4,500
Common Stock 1,000
Paid-In Capital in Excess of Stated Value 3,500

D.
Common Stock ...........................................................$4,500
Cash 4,500


26) Andrews, Inc. paid $45,000 to buy back 9,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $6 per share. The entry to record the sale includes a
A.credit to Paid-In Capital from Treasury Stock for $9,000
B.credit to Retained Earnings for $9,000
C.debit to Pain-In Capital from Treasury Stock for $45,000
D.debit to Retained Earnings for $45,000

27) Which of the following is a fundamental factor in having an effective, ethical corporate culture?
A.Efficient oversight by the company’s Board of Directors
B.Workplace ethics
C.Code of conduct
D.Ethics management programs

28) Two individuals at a retail store work the same cash register. You evaluate this situation as
A.a violation of establishment of responsibility
B.a violation of segregation of duties
C.supporting the establishment of responsibility
D.supporting internal independent verification

29) The Sarbanes-Oxley Act imposed which new penalty for executives?
A.Fines
B.Suspension
C.Criminal prosecution for executives
D.Return of ill-gotten gains

30) The Sarbanes-Oxley Act requires that all publicly traded companies maintain a system of internal controls. Internal controls can be defined as a plan to
A.safeguard assets
B.monitor balance sheets
C.control liabilities
D.evaluate capital stock
Submitted: 2 years ago.
Category: Multiple Problems
Expert:  Kirk_CPA replied 2 years ago.
Hi, no problem, I'm on these now! Will be back soon with answers!!
Customer: replied 2 years ago.
ok
Expert:  Kirk_CPA replied 2 years ago.
Hi there! I'm still here. Working through the other 20 q's.
Did you have any questions on the first 10?

Thanks!
Customer: replied 2 years ago.
no, nothing.
Expert:  Kirk_CPA replied 2 years ago.
Ok, these take some calculations and I'm writing in some short notes for you to explain how I determined the answer. Will have them to you soon!
Did you need by a certain time? (Please know I'm only working on your questions and they will be done) :)
Customer: replied 2 years ago.
need it within the next half hour or fourty minutes
Expert:  Kirk_CPA replied 2 years ago.
No problem!
Customer: replied 2 years ago.
ok then
Customer: replied 2 years ago.
I now have less than 20 minutes to finish this work. please send me what you have done so far
Expert:  Kirk_CPA replied 2 years ago.
Thanks for choosing me to assist with these. Lot's of calcs. that I wanted to add notes for you... Below are the answers. Best


11) If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%? A. $3,000,000 B. $90,000 C. $300,000 D. $210,000

Answer: D - $210,000

Calculation: $300k interest expense cash payment , minus tax benefit of interest expense ($300k x 30% tax rate = $90k). Annual net cash cost = $300k - $90k tax benefit = $210k

12) Hilton Company issued a four-year interest-bearing note payable for $300,000 on January 1, 2011. Each January the company is required to pay $75,000 on the note. How will this note be reported on the December 31, 2012 balance sheet? A. Long-term debt, $300,000. B. Long-term debt, $225,000. C. Long-term debt, $150,000; Long-term debt due within one year, $75,000. D. Long-term debt, $225,000; Long-term debt due within one year, $75,000.

Answer: C - Long-term debt, $150,000; Long-term debt due within one year, $75,000.

Calculation: $300k note payable on 1/1/11. On 1/1/12, payment of $75k on note payable, therefore total note payable liability = $225,000. At 12/31/12 – breaking out short term and long term notes payable liability - $75k short term, $150k long term.

13) A corporation issued $600,000, 10%, 5-year bonds on January 1, 2011 for 648,666, which reflects an effective-interest rate of 8%. Interest is paid semiannually on January 1 and July 1. If the corporation uses the effective-interest method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2011, is
A. $30,000 B. $24,000 C. $32,434 D. $25,946

Answer: D - $25,946

14) When the effective-interest method of bond discount amortization is used
A. the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date
B. the carrying value of the bonds will decrease each period
C. interest expense will not be a constant dollar amount over the life of the bond
D. interest paid to bondholders will be a function of the effective-interest rate on the date the bonds were issued

Answer: C - Interest expense will not be a constant dollar amount over the life of the bond

15) If a corporation has only one class of stock, it is referred to as A. classless stock B. preferred stock C. solitary stock D. common stock

Answer: D – Common stock

16) Capital stock to which the charter has assigned a value per share is called A. par value stock B. no-par value stock C. stated value stock D. assigned value stock

Answer: A – Par value stock

17) ABC, Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2011. What is the annual dividend on the preferred stock? A. $50 per share B. $5,000 in total C. $500 in total D. $.50 per share

Answer: B - $5,000 in total

Calculation: Since question asks for annual dividend on just the preferred stock.
$100 par value, with a 5% dividend rate. $100 x 5% = $5 per share x 1000 preferred shares = $5,000


18) Manner, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2011. There were no dividends declared in 2010. The board of directors declares and pays a $45,000 dividend in 2011. What is the amount of dividends received by the common stockholders in 2011? A. $0 B. $25,000 C. $45,000 D. $20,000

Answer: D - $20,000

Calculation: Preferred stockholders are paid dividends before common stockholders. Therefore preferred stock dividend = $100 par value x 5% = $5 per share. 5000 shares x $5 = $25,000. Total dividends paid were $45,000. So subtract $25,000 preferred dividend, and result is $20,000 paid to common stockholders.

19) When the selling price of treasury stock is greater than its cost, the company credits the difference to A. Gain on Sale of Treasury Stock B. Paid-in Capital from Treasury Stock C. Paid-in Capital in Excess of Par Value D. Treasury Stock

Answer: B – Paid-in Capital from Treasury Stock

20) The purchase of treasury stock A. decreases common stock authorized B. decreases common stock issued C. decreases common stock outstanding D. has no effect on common stock outstanding

Answer: C – Decreases common stock outstanding


21) Marsh Company has other operating expenses of $240,000. There has been an increase in prepaid expenses of $16,000 during the year, and accrued liabilities are $24,000 lower than in the prior period. Using the direct method of reporting cash flows from operating activities, what were Marsh's cash payments for operating expenses?
A. $228,000
B. $232,000
C. $200,000
D. $280,000

Answer: D - $280,000

Calc: $240k expenses is based on the accrual method of accounting. The increase in prepaid expenses (DR Prepaid, CR Cash), of $16k, and reduction of accrued liabilities (DR Accrued Liabilities, CR Cash), of $24k. The increase in prepaid expense and reduction of accrued liabilities would not be recorded in the $240k expense above based on the accrual method. Therefore, $240k + $16k + $24k = $280k


22) Where would the event purchased land for cash appear, if at all, on the indirect statement of cash flows?
A. Operating activities section
B. Investing activities section
C. Financing activities section
D. Does not represent a cash flow

Answer: B - Investing activities


23) In performing a vertical analysis, the base for cost of goods sold is
A. total selling expenses
B. net sales
C. total revenues
D. total expenses

Answer: B – Net sales

24) Blanco, Inc. has the following income statement (in millions):
BLANCO, INC.
Income Statement
For the Year Ended December 31, 2011
Net Sales .............................. $200
Cost of Goods Sold .............................. 120
Gross Profit .............................. 80
Operating Expenses .............................. 44
Net Income .............................. $ 36
Using vertical analysis, what percentage is assigned to Net Income?
A. 100%
B. 82%
C. 18%
D. 25%

Answer: C – 18%

25) Dawson Company issued 500 shares of no-par common stock for $4,500. Which of the following journal entries would be made if the stock has a stated value of $2 per share?
A.
Cash ........................................................... $4,500
Common Stock 4,500

B.
Cash .................................... $4,500
Common Stock 1,000
Paid-In Capital in Excess of Par 3,500

C.
Cash ...................... $4,500
Common Stock 1,000
Paid-In Capital in Excess of Stated Value 3,500

D.
Common Stock ........................................................... $4,500
Cash 4,500

Answer: A
Debit – Cash $4,500
Credit – Common Stock $4,500


26) Andrews, Inc. paid $45,000 to buy back 9,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $6 per share. The entry to record the sale includes a
A. credit to Paid-In Capital from Treasury Stock for $9,000
B. credit to Retained Earnings for $9,000
C. debit to Pain-In Capital from Treasury Stock for $45,000
D. debit to Retained Earnings for $45,000

Answer: A - Credit to Paid-In Capital from Treasury Stock for $9,000

27) Which of the following is a fundamental factor in having an effective, ethical corporate culture?
A. Efficient oversight by the company’s Board of Directors
B. Workplace ethics
C. Code of conduct
D. Ethics management programs

Answer – C – Code of conduct

28) Two individuals at a retail store work the same cash register. You evaluate this situation as
A. a violation of establishment of responsibility
B. a violation of segregation of duties
C. supporting the establishment of responsibility
D. supporting internal independent verification

Answer – A - A violation of establishment of responsibility


29) The Sarbanes-Oxley Act imposed which new penalty for executives?
A. Fines
B. Suspension
C. Criminal prosecution for executives
D. Return of ill-gotten gains

Answer: C - Criminal prosecution for executives

30) The Sarbanes-Oxley Act requires that all publicly traded companies maintain a system of internal controls. Internal controls can be defined as a plan to
A. safeguard assets
B. monitor balance sheets
C. control liabilities
D. evaluate capital stock

Answer: A – Safeguard assets
Kirk_CPA, Master's in Acctg
Satisfied Customers: 37
Experience: CPA, CIA, CISA; 15 years with Big 4 and other corporations
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