118. Following is the shareholders' equity section of the balance sheet of the Everslim Company: $400,000 Share capital: Preferred shares, 420,000 shares authorized, 4,000 shares of $1.50 preferred issued Common shares, 100,000 shares authorized, 30,000 shares issued Total share capital Retained earnings Total shareholders' equity 150.000 $550,000 267.000 $817.000 The preferred shares are currently selling for $102.25 per share and the common shares are currently selling for $11.50 per share. The entry to record the distribution of a $66,000 dividend includes a: a. b. credit to Dividends Payable, Preferred for $6,000 credit to Dividends Payable, Preferred for $66,000 debit to Common Shares for $6,000 debit to Common Shares for $66,000 39. Recently, The Friendly Lake Inn contracted and paid for a relatively expensive advertisement in Good Living magazine. Despite the fact that the ad will appear in Good Living three months after the end of Friendly Lake's current fiscal year, the Inn's accountants recorded the advertising expense when the payment was made. If no adjusting entry is mado, how will this year's financial statements of Friendly Lake Inn be affected? & (a. Net income will be understated and total assets will be understated. Adv Exp b. Net income will be overstated and total assets will be overstated. (C.) Net income will be overstated and total assets will be understated. Original d. Net income will be understated and total assets will be overstated. X Cr. Cash operations? Jane decided to open up her own gift shop by investing $5.000 into a bank account and called her new venture, Jane's Gift Shop." Revenue for the first month was $5,000 of which 85% off it was received in cash (cost of inventory was $1.100). She bought a computer for $3,000 expects it to last for 3 years. What should Jane report as net income for the first month 5000 X (10o 200000 The following expenses were incurred: Materials $ 1.800.000: Salaries $600.000; Other operating expenses, $100,000. 30% of these expenses were paid in June 2019. Assume there were no taxes or other transactions for Berry Inc. during the month of June 2017 21. The cash balance on the June 30, 2019 balance sheet is: a. $450,000 too,000 - 3050 +1200000 b. $447,000 c. $950,000 d. $947,000 (1 800 000 + 600 000 +100000X30% = 75008 2500000 Total liabilities on the June 30, 2019 balance are: a. $750,000 30000-3090 = 27020 b. $1,777,000 c. $2,500,000 3000000-1200090 = 180000 d. $2,530,000 7 0000 - 760000 = 1750000 Practice Multiple Choice Problems (Chapters 4-10 (excl. 7)) 109] The Coffee Grinding Company reported the following Grinding Company reported the following asset and liability balances at the end of 2012 and 2013. 2012 2013 Assets $250,000 $500,000 Liabilities $120,000 $180,000 During 2013, dividends of $10.000 were declared and paid. Additional common shares were issued for $50,000 and additional preferred shares for $80,000. Net income for 2013, must have been: sok to kolo b. c. d. $200,000 $ 70,000 $150,000 S 60,000 17. JAG Company purchased inventory on account for $200. Just prior to the purchase, alances in current assets and current liabilities were $5.000 and $2,500, respectively. The inventory purchase (assuming the perpetual inventory system is used) had which one of the following effects? CAT 2 1925 a. Decrease in the current ratio CR=i zsin b. Increase in the current ratio c. Increase in working capital WA TA-TL d. Decrease in working capital Suviuw 28. Kelly Corporation presently has current assets totaling $300,000 and a current ratio of 2.5 to 1. Compute the current ratio immediately after the Kelly pays $30,000 of its accounts payable. CR: h =2.5 a. 3 to 1 b. 3.33 to 1 c. 2.2 to 1 d. 2.5 to 1 Izviuw quiuw 8 2014, Paulo Corporation discovered that the ending inventories reported on its financial statements were incorrect by the following amounts: 2012 2013 $60,000 understated $75,000 overstated Paulo uses the periodic inventory system to determine vear-end quantities that are converted to dollar amounts using the FIFO cost method. Prior to any adjustments for these errors and ignoring income taxes, Paulo's retained earnings at January 1, 2014, would be: 131-bwwo BI+75un a. Correct b. $75,000 overstated LOGS c. $15,000 overstated d. $135,000 overstated NS HAL E? 175 EL- COGS 39. Following is the shareholders' equity section of the balance sheet of the Proteck. Corporation: Shareholders' equity: Common shares, 100,000 shares authorized, 65,000 shares issued Retained earnings Total shareholders' equity $650,000 349,000 $999.000 The common shares are currently selling for $15.50 per share. The number of common shares authorized and issued after the distribution of a 15% common stock dividend is: a. 100,000 and 74,750 b. 115,000 and 65,000 c. 115,000 and 74,750 d. 100,000 and 65,000 Use the following information for questions 62-65. A company just starting business made the following four inventory purchases in June: Date Number of Units Total Cost June ! Unit last 150 $480 3.2 June 10 200 660 June 15 200 680 3.4 June 28 150 525 3.5 3.3 On June 25, the company fold 300 units for $3,500. The company uses a perpetual inventory system. Using the weighted average cost method, the cost of the ending inventory on June 30 is 04) a. b) $670.00 $690.45 S1,645.55 $1,675.00 c. d