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college accounting
Questions and Answers of
College Accounting
Stock Dividends Distributable is classified on the balance sheet as a(n)(a) asset.(c) expense.(b) liability.(d) stockholders’ equity.
When retained earnings is appropriated, total retained earnings(a) remains the same. (c) decreases.(b) increases. (d) increases or decreases, depending on the amount.
Income taxes are a unique expense of the corporate form of business. True/False
The adjusting and closing process at the end of the period is virtually the same for corporations as for sole proprietorships and partnerships. True/False
A distribution of earnings by a corporation to its stockholders is known as a dividend. True/False
A dividend payable in cash is known as a stock dividend. True/False
When accounting for the declaration and payment of dividends, the date of record requires a journal entry. True/False
On January 1, 20-1, Grant Company’s retained earnings account had the following balances:During the year ended December 31, 20-1, Grant completed the following selected transactions:REQUIREDa.
The payment of a cash dividend will include a(a) debit to Dividends Declared.(b) credit to Dividends Payable.(c) credit to Cash.(d) debit to Retained Earnings.
Bonds that give the holder the option of exchanging the bonds for capital stock in the corporation are called(a) debenture bonds. (c) convertible bonds.(b) serial bonds. (d) callable bonds.
If bonds with a face value of $200,000 are sold at 102, Cash is debited for(a) $200,000. (c) $204,000.(b) $202,000. (d) $196,000.
Ten-year bonds with a face value of $300,000 are sold at a premium of $6,000. If the premium is amortized using the straight-line method, each semiannual interest payment and amortization of bond
If bonds are issued at a discount, the amortization of the discount over the life of the bonds causes the(a) interest expense to decrease each period.(b) interest expense to increase each period.(c)
Bond sinking fund earnings are(a) subtracted from the bond sinking fund.(b) added to the bond sinking fund.(c) subtracted from the current year interest expense.(d) added to the current year interest
A-secured bond is one that is backed by specific corporate assets. True/False
If the stated rate of interest on a bond is 9% and the current market rate on similar investments is 10%, the bond will sell at a premium. True/False
When bonds are issued at face value, the debit to Cash and credit to Bonds Payable are for the same amount. True/False
Amortization of the premium on bonds payable increases the bond interest expense and the carrying value of the bonds. True/False
To determine the amount of gain or loss on redemption of bonds, compare the redemption price with the carrying value of the bonds. True/False
Brooks Inc.’s fiscal year ends December 31. Selected transactions for the period 20-1 through 20-8 involving bonds payable issued by Brooks are as follows:The balance in the bond discount account
Define operating, investing, and financing activities and describe transactions for each type of activity.
Describe the information needed to prepare a statement of cash flows.
Describe the direct and indirect methods of reporting cash flows from operating activities.
Describe the effects of changes in current assets and current liabilities on cash from operating activities under the indirect method.
Prepare a statement of cash flows under the indirect method using T accounts and including adjustments for current assets and current liabilities related to operations.
Prepare a statement of cash flows under the indirect method including adjustments for the following conditions when the company:(a) defines cash as “cash and cash equivalents,”(b) reports
The purpose of the statement of cash flows is to provide information about total revenue and expenses. True/False
Investing activities are those transactions dealing with the exchange of cash between the company and its stockholders and creditors. True/False
An increase in accounts receivable is deducted from net income to compute cash from operating activities. True/False
A decrease in inventory is added to net income to compute cash from operating activities. True/False
Generally, cash from operating activities should be greater than net income. True/False
The acquisition of a building by signing a mortgage note payable is included on the statement of cash flows as a(n)(a) operating activity. (c) financing activity.(b) investing activity. (d) schedule
The receipt of dividends on an investment is included on the statement of cash flows as a(n)(a) operating activity. (c) financing activity.(b) investing activity. (d) schedule of noncash investing
The purchase of new equipment is included on the statement of cash flows as a(n)(a) operating activity. (c) financing activity.(b) investing activity. (d) schedule of noncash investing and financing
The payment of interest on a note payable is classified on the statement of cash flows as a(n)(a) operating activity. (c) financing activity.(b) investing activity. (d) schedule of noncash investing
The payment of a cash dividend to stockholders is classified on the statement of cash flows as a(n)(a) operating activity. (c) financing activity.(b) investing activity. (d) schedule of noncash
Enter the following transactions for Larry’s Lawn Service in a general journal:1. Added a second mower deck to tractor A for $550 cash to decrease mowing time.2. Replaced the engine in mower D for
Explain how a partnership is formed and account for the formation.
Explain how partners are compensated and account for the allocation of net income.
Prepare financial statements reporting the allocation of net income and partnership equity.
Describe the actions that result in the dissolution of a partnership and account for the dissolution.
Describe how a partnerships liquidated and prepare associated entries and a statement of partnership liquidation.
Mascha Schuurmans, Jolijn Brouwer, and Mirjam van Tuil are partners in Holland Law. They share profits and losses in a 50-30-20 ratio. The partnership agreement calls for annual salaries of
When two or more individuals engage in an enterprise as co-owners, the organization is known as a proprietorship. True/False
Mutual agency is a characteristic of a partnership in which any partner can bind the other partners to a contract if he/she is acting within the general scope of the business. True/False
Limited life is a characteristic of a partnership in which each partner is personally liable for all debts incurred by the partners. True/False
One advantage of a partnership is that the interest of a partner cannot be transferred without the consent of the other partners. True/False
When two or more sole proprietors form a partnership, their respective balance sheets serve as the basis for the opening entries for the investments of such partners. True/False
The basis on which profits and losses are to be shared among partners is(a) a matter of agreement among the partners.(b) the same as their withdrawal ratio.(c) the same as their investment ratio.(d)
In the absence of any agreement among partners, profits and losses must be shared(a) equally among all partners.(b) on the basis of their withdrawals.(c) on the basis of their investment ratio.(d) in
If the partnership agreement specifies how profits are to be shared but does not specify how losses are to be shared, the losses must be shared(a) equally among all partners.(b) on the basis of their
After closing the temporary owner’s equity accounts into Income Summary and after allocating the net income and closing the partners’ drawing accounts, assume the partners’ capital accounts had
After closing thé temporary owner’s equity accounts into Income Summary and after allocating the net income and closing the partners’ drawing accounts, assume the partners’ capital accounts
Identify eleven essential provisions of a partnership agreement.
Corporations do more dollar volume of business than sole proprietorships and partnerships combined. True/False
Owners of corporations have no personal liability for debts of the corporation. True/False
In a corporation, individual owners have mutual agency power. True/False
Dividends are not taxable because these earnings have already been taxed to the corporation. True/False
Organization costs are recorded as an intangible asset and are generally amortized over a period of five years. True/False
When par value stock is issued at a price above par, the amount above par is called a(a) discount.(b) market value.(c) stated value.(d) premium.
When par value stock is issued at a price below par, the amount below par is called a(a) discount.(b) market value.(c) stated value.(d) premium.
Shares of stock reacquired by the issuing company are called(a) par value stock.(b) no-par value stock.(c) treasury stock.(d) stock subscription.
Stock subscriptions receivable are listed as ________ on the balance sheet.(a) current liabilities (b) current assets(c) long-term assets (d) contra-stockholders’ equity
Treasury stock is listed as a(n) __________ on the balance sheet.(a) current liability (b) current asset(c) deduction from stockholders’ equity (d) addition to stockholders’ equity
What are the two main methods of accounting for uncollectible accounts?
Which method is generally required for financial reporting purposes? Why?
Under what conditions is the direct write-off method allowed?
There are two methods of accounting for uncollectible accounts: the allowance method and the direct write-off method. True/False
The matching principle states that debits should be matched with credits. True/False
Using the percentage of sales method, the balance in Allowance for Bad Debts must be taken into consideration before making the adjusting entry. True/False
When an account is written off under the allowance method, there should be a debit to Bad Debt Expense. True/False
Each time an account is written off under the direct write-off method, Bad Debt Expense is debited. True/False
The dollar difference between Accounts Receivable and Allowance for Bad Debts is called(a) book value. (c) carrying value.(b) interest value. (d) net realizable value.
A business has an ending balance in Accounts Receivable of $35,000; credit sales for the year of $300,000; and a credit balance in Allowance for Bad Debts of $800. If the percentage of sales method
A business has an ending balance in Accounts Receivable of \($35,000\); credit sales for the year of \($300,000\); and a credit balance in Allowance for Bad Debts of \($800\). If the percentage of
A business has an ending balance in Accounts Receivable of \($40,000;\) credit sales for the year of \($500,000;\) and a debit balance in Allowance for Bad Debts of \($300.\) If an aging analysis
Under the allowance method, when an account is determined to be worthless, the journal entry to write off the account will include aa) debit to Allowance for Bad Debts.b) debit to Bad Debt Expense.c)
Budke and Budke, a landscaping service, uses the allowance method to record the following transactions related to accounts receivable.Adjusting and closing entries completed during the current year
Apply the allowance method of accounting for uncollectible accounts.
Estimate and write off uncollectible accounts using the percentage of sales method and the percentage of receivables method.
Apply the direct write-off method of accounting for uncollectible accounts.
Describe a promissory note?
Calculate interest on and determine the due date of promissory notes.
Barbar Brothers, partners in a wholesale hardware business, completed the following transactions involving notes and interest during the first half of 20--:REQUIRED Record each transaction in a
The maturity value of a note includes both principal and interest. True/False
When a note is renewed at maturity, the old note is cancelled and a new note is issued. True/False
The difference between the maturity value of a note and the net proceeds is called discounting. True/False
When a note is dishonored, the interest is not credited to Interest Revenue because it is not earned. True/False
When a dishonored note is collected, interest is collected for the time between date of maturity and date of collection. True/False
Which account is debited for interest earned but not yet received?(a) Interest Revenue (c) Accrued Interest Payable(b) Accrued Interest Receivable (d) Interest Expense
When a note payable is paid at maturity, what account is debited for the amount of the interest?(a) Interest Revenue (c) Interest Expense(b) Notes Payable (d) Discount on Notes Payable
Accrued interest payable is reported as a on the balance sheet.(a) current asset (c) current liability(b) long-term asset (d) long-term liability
Principal plus interest equals of a note.(a) discount (c) interest rate(b) net proceeds (d) maturity value
The discount amount is calculated by multiplying the maturity value times times the discount period.(a) discount rate (c) term of note(b) interest rate (d) net proceeds
Movado Suppliers had the following transactions:REQUIRED Record the transactions in a general journal. Mar. 1 Sold merchandise on account to R. Sticca, $5,000. 20 30 Apr. 20 May 5 June 19 July 31
Milo Radio Shop had the following notes payable transactions:REQUIRED Record the transactions in a general journal. Apr. 1 5 10 May 10 20 June 4 9 30 Borrowed $5,000 from the Builder's Bank, signing
Using 360 days as the denominator, calculate interest for the following notes using the formula I = P x R X T. Principal Rate Time Interest $4,000 7.00% 60 days 3,000 9.50 30 7,500 8.00 150 850 7.90
M. L. DiMaurizio had the following notes receivable transactions:REQUIRED Record the transactions in a general journal. 20-3 June 20 July 20 25 Aug. 4 Sept. 3 10 Oct. 10 Nov. 9 10 25 Dec. 25 20-4
Madison Graphics had the following notes receivable transactions:REQUIRED Record the transactions in a general journal. May 1 20 30 June 20 July 5 Aug. 19 31 Sept. 1 12 Oct. 12 26 Dec. 11 Dec. 27
Explain the nature and purpose of depreciation.
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