multiple questions - Libby Chapters 8, 9, 10, 11

Question 1

2pts

A company acquires land by issuing 11,900 shares of its $15 par value common stock currently trading at $30 per share and the appraised value of the land is $269,000. Which of the following statements correctly describes the recording of the land?

Group of answer choices

Record the land at the $357,000 value of the consideration given up.

Record the land at the par value of the stock given up, $178,500.

Record the land at its appraised value of $269,000 and recognize a gain of $88,000 since the issued stock is currently worth $357,000.

Record the land at the average of its appraised value of $269,000 and the $357,000 value of the stock issued, thereby recognizing a $88,000 gain.

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Question 2

2pts

Which of the following journal entries is correct for Smith Company when Smith issues 10,300 shares of $10 par value common stock and pays $20,300 cash in exchange for a building? The market price of the Smith stock on the exchange date was $20 per share and the building's book value on the books of the seller was $203,000.

Group of answer choices

Building226,300Cash20,300Common stock103,000Additional paid-in capital103,000

Building123,300Cash20,300Common stock103,000

Building226,300Cash20,300Common stock206,000

Building226,300Common stock226,300

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Question 3

3pts

Amanda Company purchased a computer that cost $10,300. It had an estimated useful life of five years and a residual value of $1,150. The computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,120 cash. Which of the following statements correctly describes the computer sale?

Group of answer choices

Assetsdecrease$5,120andstockholders'equityisnotaffected.

Assetsandstockholders'equitybothincreaseby$310.

Assetsandstockholders'equitybothdecreaseby$310.

Assetsandstockholders'equitybothincreaseby$5,120.

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Question 4

3pts

Which of the following statements iscorrect?

Group of answer choices

Using straightline depreciation in comparison to an accelerated depreciation method will result in a lower reported amount of total assets at end of the first year of an asset's life.

Using accelerated depreciation in the first year of an asset's life will result in a higher net income during the first year compared to using the straightline depreciation method.

Using an accelerated depreciation method compared to the straight-line method will lead to a higher fixed asset turnover ratio for the first year

Using straightline depreciation in comparison to an accelerated depreciation method will lead to a higher book value at the end of an asset's life.

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Question 5

3pts

On January 1, Woodstock, Inc. purchased a machine costing $36,750. Woodstock also paid $1,250 for transportation and installation. The expected useful life of the machine is 5 years and the residual value is $5,500. How much is the annual depreciation expense assuming use of the straight-line depreciation method?

Group of answer choices

$6,500.

$7,600.

$7,350.

$5,208.

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Question 6

3pts

On January 1, Year 1, Wasson Company purchased a delivery vehicle costing $47,550. The vehicle has an estimated 7 year life and a $4,500 residual value. Wasson estimates that the vehicle will be driven 105,000 miles. What is the vehicle's book value as of December 31, Year 2 assuming Wasson uses the units of production depreciation method and the vehicle was driven 10,500 miles during Year 1 and 18,500 miles during Year 2?

(Donotroundyourintermediatecalculations.)

Group of answer choices

$35,250.

$30,750.

$35,660.

$31,160.

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Question 7

3pts

Warren Company plans to depreciate a new building using the double declining balance depreciation method. The building cost $860,000. The estimated residual value of the building is $56,000 and it has an expected useful life of 25 years. Assuming the first year's depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?

Group of answer choices

$34,400.

$37,331.

$68,800.

$63,296.

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Question 8

3pts

A company has some bottling equipment which cost $8.2 million, has a net book value of $3.8 million, estimated future cash flows of $3.55 million, and a fair value of $2.95 million. How much is the asset impairment loss?

Group of answer choices

$0.85million.

$0.25million.

$5.25million.

$3.80million.

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Question 9

2pts

Which one of the following wouldnotbe recorded as an intangible asset?

Group of answer choices

Patents

Copyrights

Internally generated goodwill

Franchises

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Question 10

2pts

The Wilson Company has provided the following information:

Net sales, $175,000

• Net operating income, $55,000
• Net income, $35,000
• Average total assets, $135,000
• Average net fixed assets $95,000

What is Wilson's fixed asset turnover ratio?

Group of answer choices

0.37

1.30

1.84

0.58

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Question 11

2pts

Which of the following statements regarding the fixed asset turnover ratio isincorrect?

Group of answer choices

The numerator is net operating income.

The denominator is average net fixed assets.

The ratio is used to assess a company's effectiveness in generating sales from its fixed assets.

The ratio increases when a company sells a factory building for a gain.

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Question 12

2pts

Rae Company purchased a new vehicle by paying $11,400 cash on the purchase date and agreeing to pay$4,400 every three months during the next five years. The first payment is due three months after the purchase date. Rae's incremental borrowing rate is 4%.

The liability reported on the balance sheet as of the purchase date, after the initial $11,400 payment was made, is closest to: (Table A.1(Links to an external site.)

,Table A.2(Links to an external site.)

,Table A.3(Links to an external site.)

, andTable A.4(Links to an external site.)

)

(Click on the tables forappropriatefactor(s)fromthetablesprovided.)

If a student uses Excel or a financial calculator to answer the problem, choose the closest answer as rounding will cause slightly different answers.

Group of answer choices

$90,801

$79,401

$88,000

$99,400

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Question 13

2pts

Rachel Corporation purchased a building by paying $99,500 cash on the purchase date, agreeing to pay$51,900 every year for the next eight years and one payment of $109,500 ten years from the purchase date. The first payment is due one year after the purchase date. Rachel's incremental borrowing rate is 9%.

The building reported on the balance sheet as of the purchase date is closest to: (Table A.1(Links to an external site.)

,Table A.2(Links to an external site.)

,Table A.3(Links to an external site.)

, andTable A.4(Links to an external site.)

)

(Click on the tables forappropriatefactor(s)fromthetablesprovided.)

If a student uses Excel or a financial calculator to answer the problem, choose the closest answer as rounding will cause slightly different answers.

Group of answer choices

$333,509

$433,009

$524,700

$287,256

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Question 14

2pts

Phipps Company borrowed $18,000 cash on October 1, Year 1, and signed a six-month, 10% interest bearing note payable with interest payable at maturity. Assuming that adjusting entries have not been made during the year, the amount of accrued interest payable to be reported on the December 31, Year 1 balance sheet is which of the following?

Group of answer choices

$900

$675

$450

$225

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Question 15

2pts

Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, Year 1. Alden financed $39,052,588, and the note agreement will require $10.04 million in annual payments starting on December 31, Year 1 and continuing for a total of five more years (final payment December 31, Year 5). Kenworthy will charge Alden Trucking Company the market interest rate of 9% compounded annually. How much is the Year 2 interest expense?

Group of answer choices

$3,614,400

$2,611,133

$3,062,933

$2,927,459

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Question 16

2pts

Smith Corporation entered into the following transactions:

• Purchased inventory on account.
• Collected an account receivable.
• Purchased equipment using cash.

Which of the following statements iscorrect?

Group of answer choices

The inventory purchase on account increased working capital.

Collecting an account receivable increases working capital.

The equipment purchase decreases working capital.

The inventory purchase on account decreases working capital.

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Question 17

2pts

The accrual of interest results in the following:

Group of answer choices

Increase in assets and liabilities.

Increase in assets and stockholders' equity.

Increase in liabilities and decrease in stockholders' equity.

Increase in liabilities and increase in stockholders' equity.

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Question 18

2pts

Which of the following statementsincorrectlydescribes the accounts payable turnover ratio?

Group of answer choices

A high ratio indicates that suppliers are being paid in a timely manner.

The ratio increases when inventory is sold on account regardless of the sales price.

The ratio can be manipulated by aggressively paying off accounts payable at year-end.

The ratio is not affected by the choice of inventory accounting methods.

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Question 19

2pts

On January1,BrokerCorp.issued$3,600,000parvalue11%,11yearbondswhichpayinteresteachDecember31.Ifthemarket rateofinterestwas13%,whatwastheissuepriceofthebonds?

(Thepresentvaluefactorfor$1in11periodsat11%is0.3173,andat13%is0.2607.Thepresentvalueofanannuityof$1factorfor11periodsat11%is6.2065,andat13%is5.6869.)

If a student uses Excel or a financial calculator to answer the problem, choose the closest answer as rounding will cause slightly different answers.

Group of answer choices

3,600,000

3,190,532

4,046,869.

3,394,249.

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Question 20

2pts

OnJanuary1,JasonCompanyissued$4.2millionof9 yearbondsata9%statedinterestratetobepaidannually.Thefollowingpresentvaluefactorshavebeenprovided:

TimePeriod

Interest

PVof$

PVofanAnnuity

9

9%

0.460

5.995

9

7%

0.544

6.515

9

11%

0.391

5.537

Calculatetheissuancepriceifthemarketrateofinterestis11%.

If a student uses Excel or a financial calculator to answer the problem, choose the closest answer as rounding will cause slightly different answers.

Group of answer choices

$4,200,000

$3,777,686

$3,735,186

$3,727,686

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Question 21

2pts

If a bond is issued at 98, the stated rate of interest was

Group of answer choices

higher than the market rate of interest.

lower than the market rate of interest.

equal to the market rate of interest.

not related to the market rate of interest.

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Question 22

2pts

A corporation retired $1,000,000 face value of bonds which have an unamortized discount of $40,000, by paying bondholders $1,030,000. How much was the gain or loss on the retirement of the bonds?

Group of answer choices

Therewasa$30,000loss.

Therewasa$10,000loss.

Therewasa$20,000gain.

Therewasa$70,000loss.

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Question 23

2pts

A corporation retired $670,000 face value of bonds, which have an unamortized discount of $27,000, by repurchasing them for $670,000. How much was the gain or loss on the retirement of the bonds?

Group of answer choices

A$27,000loss.

Nogainorloss.

A$670,000loss.

A$27,000gain.

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Question 24

3pts

On January 1, Tonika Corporation issued a seven-year, $10,000, 10% bond. The interest is payable annually each December 31. The issue price was $9,529 based on an 11% effective interest rate. Assuming effective-interest amortization is used, the book value of the bonds as of December 31 is closest to:

Group of answer choices

$9,744.

$9,655

$9,689.

$9,577.

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Question 25

3pts

On January 1,Tonika Corporation issued a four-year, $11,100, 7% bond. The interest is payable annually each December 31. The issue price was $10,732 based on an 8% effective interest rate. Assuming the effective-interest amortization is used, and rounding calculations to the nearest whole dollar, which of the following journal entries correctly records the current year interest expense?

Group of answer choices

Interest expense777Cash777

Interest expense751Discount on bonds payable26Cash777

Interest expense858Discount on bonds payable81Cash777

Interest expense960Discount on bonds payable183Cash777

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Question 26

3pts

On January 1, 2020, Tonika Corporation issued a five-year, $10,000, 10% bond. The interest is payable annually each December 31. The issue price was $9,631 based on an 11% effective interest rate. Assuming effective-interest amortization is used, the December 31, 2021 book value after the December 31, 2021 interest payment was made is closest to:

Group of answer choices

$9,624.

$9,690.

$9,631.

$9,756.

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Question 27

3pts

Which of the following statementscorrectlydescribes the accounting for bonds that were issued at a premium?

Group of answer choices

The interest expense over the life of the bond is less than the cash interest payments.

The interest expense over the life of the bonds increases as the bonds mature when the effective interest method is used.

The amortization of the premium on bonds payable account decreases as the bonds mature when the effective interest method is used.

The book value of the bond liability increases when interest payments are made on the due dates when the effective interest method of amortization is used.

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Question 28

3pts

Acompanypreparedthefollowingjournalentry:

Bonds payable

Premium on bonds payable

Gain on bond retirement

Cash

Whichofthefollowingstatementsisincorrect?

Group of answer choices

The book value of the bonds was less than the cash payment.

The increase in stockholders' equity equals the gain on the bond retirement.

The decrease in assets is less than the decrease in liabilities.

The net cash flow from financing activities decreases by the cash payment.

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Question 29

2pts

Which of the following is not a reason that a corporation would want to issue bonds instead of stock?

Group of answer choices

Interest payments can be deducted for income tax purposes.

Stockholders maintain control

The impact on earnings from using borrowed money may be positive.

There is less risk associated with a bond issue.

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Question 30

2pts

A company prepared the following journal entry:

Interest expense

Discount on bonds payable

Cash

Which of the following statementscorrectlydescribes the effect of this journal entry on the financial statements?

Group of answer choices

The bonds payable book value increases by the amount of the credit to discount on bonds payable.

The bonds payable book value decreases by the amount of the credit to cash.

Stockholders' equity decreases by the amount of the credit to cash.

The cash payment is reported as a cash flow from financing activities.

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Question 31

2pts

During the current year, Patty's Pizza reported net income of $5,012 million, interest expense of $175 million and income tax expense of $1,772 million.During the prior year, the Co. reported net income of $4,368 million, interest expense of $171 million and income tax expense of $1,824 million.The times interest earned ratios for the current year and prior year, respectively, are closest to:

Group of answer choices

39.77and37.21times.

38.77and36.21times.

37.21and39.77times.

37.77and35.21times.

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Question 32

2pts

Assume the following capital structure:

Preferred stock, 8%, $50 par value, 2,500 shares issued and outstanding.Preferred dividends were not declared for the three prior years.

Common stock, $100 par value, 3,500 shares issued and outstanding.

Total dividends declared and paid in the current year were $65,000. How much of the current year dividend will be paid to the common stockholders assuming the preferred stock is noncumulative?

Group of answer choices

$55,000.

$40,000.

$25,000.

$10,000.

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Question 33

2pts

On December 15, 2020, the board of directors of Cross Corporation declared a cash dividend, payable on January 8, 2021 of $.95 per share on the 2,000,000 common shares outstanding. On December 15, 2020, Cross Corporation should

Group of answer choices

not prepare a journal entry because the event had no effect on the corporation's financial position until 2016.

decrease retained earnings $1.90 million and increase expenses $1.90 million.

decrease retained earnings $1.90 million and increase liabilities by $1.90 million.

decrease cash $1.90 million and decrease retained earnings $1.90 million.

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Question 34

2pts

Which of the following statements isnotcorrect?

Group of answer choices

Issuance of common stock creates a financing activities cash inflow.

Payment of a common stock cash dividend creates an operating activities cash outflow.

Purchase of treasury stock creates a financing activities cash outflow.

Issuance of preferred stock creates a financing activities cash inflow.

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Question 35

2pts

A company has 20 million common shares authorized and 2.5 million shares issued and outstanding. The par value is $1 per share, and the market price is $30 when the company declares a 4-for-1 stock split. Which of the following iscorrect?

Group of answer choices

There will be a transfer of $2.5 million from retained earnings to contributed capital.

For every one share of stock owned, a shareholder will receive four shares and will now own 5 shares of stock.

The shares issued and outstanding will all quadruple while the par value will be reduced to $.25 per share.

The company will be unable to declare a 4 for 1 split because it does not have enough authorized shares to issue.

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Question 36

2pts

KirovaCompanyhasprovidedthefollowinginformation:

Numberofissuedcommonshares,880,000

Netincome,$908,500

Numberofauthorizedcommonshares,1,000,000

Numberofoutstandingcommonshares,790,000

Numberoftreasuryshares,90,000

WhatisKirova'searningspershare?

Group of answer choices

$1.03

$.91

$1.30

$1.15

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Question 37

2pts

During the current year, Thomas Corporation repurchased some shares of its own common stock. What effect did this transaction have on stockholders' equity and earnings per share, respectively?

Stockholders' EquityEarnings Per Share

A. DecreaseNo effect

B. IncreaseNo effect

C. DecreaseDecrease

D. DecreaseIncrease

Group of answer choices

Option A

Option B

Option C

Option D

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Question 38

3pts

Dora Company declared and distributed a 15% stock dividend on 14,000 shares of issued and outstanding $5 par value common stock. The market price per share was $16 on the declaration date and was $15 on the distribution date. Which of the followingcorrectlydescribes the accounting for the declaration and distribution of the stock dividend?

Group of answer choices

Retained earnings decreased $33,600.

Retained earnings decreased $31,500.

Common stock increased $33,600.

Capital in excess of par increased $21,000.

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Question 39

3pts

Wendell Company provided the following pertaining to its recent year of operation:

Common stock with a $10,000 par value was sold for $44,000 cash.

Cash dividends totaling $21,600 were declared, of which $16,600 were paid.

Net income was $64,000.

A 5% stock dividend resulted in a distribution of common stock with a par value of $5,000 and a market value of $24,600

Treasury stock costing $10,600 was sold for $8,600.

How much did Wendell's contributed capital increase during the recent year of operation?

Group of answer choices

$70,600.

$52,000.

$15,000.

$68,600.

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Question 40

3pts

A company reported total stockholders' equity of $163,000 asof the end of its prior fiscal year. During the current fiscal year, the company reported net income of $21,700, declared and paid a cash dividend of $5,700, declared and distributed a 10% stock dividend with a $6,700 total market value, and issued additional common stock for $33,000. What is total stockholders' equity as of the end of its current fiscal year?

Group of answer choices

$223,400.

$212,000.

$205,300.

$218,700.

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Question 41

3pts

A company purchased 2,300 shares of treasury stock for $39,300 cash. The treasury stock was initially issued for $25,300 and had a $10,300 par value. Which of the following statementsincorrectlydescribes the effect of the treasury stock purchase?

Group of answer choices

Net income is unchanged.

Earnings per share increases.

Total assets remain the same.

Stockholders' equity decreases.

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Question 42

3pts

A company purchased treasury stock for $19,800. The treasury stock was initially issued for $14,000 and had a $5,800 par value. Which of the following statements correctly describes the effects of the treasury stock purchase?

Group of answer choices

Net income increases by $8,200.

Net income decreases by $8,200.

Stockholders' equity increases $14,000.

Stockholders' equity decreases $19,800.