Ernie and Bert agree to form a partnership. Because the two are great friends, no written partnership agreement is made. Ernie agrees to contribute $100,000 in assets and to devote half of his time to the partnership. Bert is to contribute $40,000 in assets and to devote full time to the partnership. Ernie and Bert will divide any net income or net loss in the following ratio:

5 : 2

1 : 2

1 : 1

1/2 : 1

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Question 24 pts

The proper steps to follow when liquidating a partnership are

sell assets, distribute gains or losses to partners based on income sharing ratio, pay the liabilities with the cash from sale of assets, distribute remaining cash based on capital account balances.

sell assets, pay liabilities off, distribute gains or losses based on income sharing ratio, distribute cash based on income sharing ratio.

sell assets, distribute gains or losses based on capital account balances, pay liabilities off, distribute remaining cash based on capital account balances.

sell assets, distribute cash based on income sharing ratio, pay liabilities off, distribute remaining cash based on income sharing ratio.

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Question 34 pts

Able and Baker invest $100,000 and $50,000, respectively, in a partnership and agree (in writing) to a division of net income/loss that provides for an allowance of interest at 10% on original investments, salary allowances of $12,000 and $24,000, respectively, and the remainder to be divided equally. Baker's share of a net income of $45,000 is

$29,000.

$26,000.

$22,000.

$19,000.

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Question 44 pts

If a bonus is to be paid to an incoming new partner, this indicates that the incoming partner

is contributing more to the partnership than the existing partners' capital accounts after admission of the new partner.

is contributing the same amount to the partnership as the existing partners' capital accounts after admission of the new partner.

is contributing less to the partnership than the existing partners' capital accounts after admission of the new partner.

The answer cannot be determined without additional information being provided.

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Question 54 pts

When a new partner is admitted to an existing partnership, whether by contributing cash, property, or expertise, an adjustment of the accounts of the partnership to current value should be made (if necessary). Any such adjustment should be made to the capital accounts of

the existing partners (only) in their income/loss sharing ratio.

the existing partners (only) in the ratio of their beginning-of-period capital accounts.

the existing partners AND the new partner in their income/loss sharing ratio.

the existing partners AND the new partner in the ratio of their beginning-of-period capital accounts.

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Question 64 pts

Which of the following is/are characteristics of an LLC?

An LLC may elect to be taxed like a partnership, so that the income/loss of the LLC "flows through" to the LLC's members.

Members of an LLC have limited liability, which means their personal assets are protected from the LLC's creditors' claims.

In general, an LLC has access to capital (funds) more easily than a partnership.

All of the above are characteristics of an LLC.

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Question 74 pts

Probably the major disadvantage of the standard corporation form of business is

limited liability.

lack of professionalism at the corporate manager level.

limited life.

double taxation of dividends paid to shareholders.

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Question 84 pts

The name of the stock that is allowed to vote in elections for the board of directors of a corporation is

preferred stock.

common stock.

treasury stock.

trade stock.

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Question 94 pts

Blatt, Inc. was incorporated on 01/01/2017. Blatt's article of incorporation specified that the corporation's par value of common stock was $10 per share. When Blatt sold common stock to its initial shareholders on 01/10/2017, it did so for $50 per common share. 10,000 shares were sold in this initial offering. The correct journal entry for Blatt to make when these shares were sold was

debit cash $500,000, credit common stock $500,000.

debit common stock $100,000, debit paid-in capital $400,000, credit cash $500,000.

debit cash $500,000, credit common stock $100,000, credit paid-in capital $400,000.

debit common stock $500,000, credit cash $500,000.

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Question 104 pts

The cost method is almost always used to record treasury stock purchases. This means that the corporation has purchased its own stock -- either from a shareholder or on the open market -- and debited the full purchase price to Treasury Stock. Which of the following is a reason for a corporation to purchase its own shares and put them in the treasury?

The cost of the treasury shares is a tax deductible item on the corporate income tax return.

The corporation is able to pay itself a dividend if it owns its own shares of stock.

The corporation is able to "stockpile" shares of its own stock to give to key employees as bonuses.

The corporation is required by the Securities and Exchange Commission to purchase its own shares periodically.

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Question 114 pts

Damion Enterprises, Inc. has the following stockholders' equity section:

Common stock, $10 par, 100,000 shares authorized, 20,000 shares

issued and outstanding $200,000

Paid-in capital-common stock 700,000

Retained earnings 3,600,000

Total stockholders' equity $4,500,000

Damion split its stock 4-for-1 on 08/31/2017 when the value of its stock on the open market was $60 per share. The entry that Damion should have made when this transaction took place is as follows:

Debit Stock Dividend Distributable $4,800,000, credit Common Stock $800,000, credit paid-in capital $4,000,000

Debit Cash $800,000, credit Common Stock $800,000

Debit Common Stock $800,000, credit Cash $800,000

No journal entry is necessary for a stock split.

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Question 124 pts

To pay a cash dividend, a corporation must have which of the following?

Sufficient retained earnings

Sufficient long-term debt to match the amount of the dividend

Approval of the Securities and Exchange Commission

Sufficient shares in the treasury to offset the amount of the dividend

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Question 134 pts

Royale, Inc. has preferred stock that is cumulative, in addition to its common stock, that was sold to stockholders at the corporation's inception (i.e., at the first of Year 1). The dividend due to the preferred shareholders each year is $50,000. Royale did not pay any dividends to its shareholders in Year 1 or Year 2. In year 3, a total dividend of $90,000 is declared and paid by Royale. The total dividend due to be paid to preferred shareholders in Year 4 is

$50,000.

$60,000.

$90,000.

$110,000.

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Question 144 pts

The option to convert a convertible bond rests with

the bondholder.

the issuing corporation.

either the bondholder or the issuing corporation, depending on the circumstances surrounding the issuance of the bond.

the Securities and Exchange Commission.

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Question 154 pts

When a corporation is in default and is forced into bankruptcy, bondholder claims on corporate assets for satisfaction of amounts due them are ranked

ahead of common stockholders but after preferred stockholders' claims are satisfied.

ahead of preferred stockholder claims but after common stockholders' claims are satisfied.

ahead of both common stockholders' claims and preferred stockholders' claims.

after both common stockholders' claims and preferred stockholders' claims are satisfied.

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Question 164 pts

A bond indenture is

a requirement that states the bond in question must be paid off in quarterly installments.

a contract between the corporate board of directors and the bondholders, stating that the board is indentured (i.e., bound) to the bondholders in case of default by the corporation.

a promise to bondholders to substitute preferred stock amount for the bond amount in case of corporate default.

a contract between the bondholders and the corporation issuing the bonds.

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Question 174 pts

If a bond is issued at a contract percentage (coupon rate) that is less than the market rate of interest, the bond will sell at

face amount - that is, the contractual amount of the bond issue.

a premium.

a discount.

A bond will not sell on the bond market with a coupon rate that is less than the market rate.

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Question 184 pts

Rawl Company issues a 10-year, $4,000,000 bond on 01/01/2017 with a premium of $100,000. The coupon rate of the bond is 10%, and interest is to be paid to the bondholders semiannually on 06/30 and 12/31. The journal entry that Rawl should make on 12/31/2017 with regard to this bond is

Debit cash $4,100,000, credit premium on bonds payable $100,000, credit bonds payable $4,000,000.

Debit cash $5,000, debit interest expense $195,000, credit bonds payable $200,000.

Debit premium on bonds payable $5,000, debit interest expense $195,000, credit bonds payable $200,000.

Deb it premium on bonds payable $5,000, debit interest expense $195,000, credit cash $200,000.

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Question 194 pts

When a note is secured by an asset of the corporation, it is called a(n)

mortgage.

asset note.

callable note.

serial bond.

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Question 204 pts

RoughRider Corporation owns $60,000 of the common stock of Pistola, Inc. This investment has been properly classified by RoughRider as a trading security. The $60,000 ownership of Pistola stock

should be classified as a current asset, and any unrealized gain/loss on the Pistola stock investment should be reported in the stockholders' equity section of RoughRider's balance sheet.

should be classified as a current asset, and any unrealized gain/loss on the Pistola stock investment should be reported on RoughRider's income statement for the period.

should be classified as a current asset, and any unrealized gain/loss on the Pistola stock investment should be reported on Pistola's income statement for the period.

should be reported as a non-current asset on RoughRider's balance sheet.

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Question 214 pts

Three different classifications of investments are possible on a company's balance sheet: (1) trading securities, (2) available-for-sale securities, and (3) held-to-maturity securities. Which of these investments are to be reported at fair value at period-end?

Held-to-maturity securities and available-for-sale securities

Trading securities only.

Trading securities and available-for-sale securities

All three classifications are to be reported at fair value.

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Question 224 pts

Comprehensive income is a concept that includes which of the following?

Dividends paid to stockholders, net income, paid-in capital in excess of par on a stock purchse

Infusion of capital from preferred stockholders, interest revenue, unrealized gain/loss on available-for-sale securities

Unrealized gain/loss on trading securities, dividends paid to stockholders, interest expense

Net income, revenue from sales, unrealized gain/loss on available-for-sale investments

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Question 234 pts

On 03/01/2017 ABC Company purchased 30% of the stock of XYZ Corporation for $6,000,000. How will ABC treat a 2017 cash dividend paid by XYZ to its shareholders?

ABC will record the dividend using the equity method. The dividend will therefore be reported as a reduction in the amount of the investment in XYZ.

ABC will record the dividend using the equity method. The dividend will therefore be reported as an increase in the amount of the investment in XYZ.

ABC will record the dividend using the equity method. The dividend will therefore be reported as dividend revenue.

ABC will record the dividend using the equity method. The dividend will therefore be reported as an increase in current assets.

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Question 244 pts

On 01/01/2017, Hanny Company acquired 60,000 shares of the 400,000 outstanding shares of Edwards Company common stock for $240,000. The investment was properly classified as an available-for-sale investment by Hanny. During 2017, Edwards declared a total of $100,000 cash dividends to its common shareholders. Edwards earned $200,000 in net income for the year ended 12/31/2017. The year-end valuation of Edwards Company on the stock market was $4.50 per share. What is the total valuation of the investment on Hanny's balance sheet at 12/31/2017?

$240,000

$255,000

$270,000

$340,000

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Question 254 pts

Dividend yield

measures the total dollar return to stockholders based on cash dividends.

measures the percentage rate of return to stockholders based on cash dividends.

measures the percentage increase/decrease on total assets based on cash dividends.

None of the above answers is correct.