QZ1.

A company had 1,000,000 shares of $10 par value common stock outstanding. The amount of additional paid-in capital is $5,000,000, and Retained Earnings is $1,500,000. The company issues a 2-for-1 stock split. The market price of the stock is $12. What is the balance in the Common Stock account after this issuance?

$15,000,000

$10,000,000

$22,000,000

$20,000,000

2. For a business to be considered a corporation:

it must issue both common and preferred stock.

it must be organized as a separate legal entity.

it must pay dividends.

its stock must be sold in very large amounts.

3.

A corporate charter specifies that the company may sell up to 38 million shares of stock. The company sells 30 million shares to investors and later buys back 12.0 million shares. The number of authorized shares after these transactions are accounted for is:

38 million shares.

26 million shares.

18 million shares.

30 million shares.

4.

Phelps, Inc. had assets of $101,466, liabilities of $21,646, and 14,838 shares of outstanding common stock at December 31, 2015. Net income for 2015 was $10,980. The company had assets of $119,151, liabilities of $25,971, 12,031 shares of outstanding, and its stock was trading at a price of $10 per share at December 31, 2016. Net income for 2016 was $11,203.

Required:

a.

Calculate EPS for 2016. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. Calculate ROE for 2016. (Round your answer to 1 decimal place.)

c.

Calculate the Price/Earnings Ratio for 2016. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

5. When a company uses excess cash to buy back some of its outstanding common stock, which of the following ratios will be affected directly in the manner described below?

Return on equity (ROE) will decrease. There will not be any effect on the three ratios. The Price Earnings (PE) ratio will increase. Earnings per share (EPS) will increase.

6.

A company has outstanding 12.50 million shares of $5.50 par common stock and 2.3 million shares of $5.30 par preferred stock. The preferred stock has an 11% dividend rate. The company declares $430,000 in total dividends for the year. Which of the following is correct if the preferred stockholders only have a current dividend preference?

Preferred stockholders will receive the entire $430,000, and they must also be paid $153,000 before the end of the current accounting period. Common stockholders will receive nothing.

Preferred stockholders will receive $47,300 or 11% of the total dividends. Common stockholders will receive the remaining $382,700.

Preferred stockholders will receive the entire $430,000, but will receive nothing more relating to this dividend declaration. Common stockholders will receive nothing.

Preferred stockholders will receive the entire $430,000, and they must also be paid $153,000 sometime in the future before common stockholders will receive anything.

7.

A company issues 1.09 million shares of preferred stock with a par value of $6.50 at its market price of $30.50 per share. The issuance should be recorded with a debit to Cash for:

$7.09 million and a credit to Preferred Stock for $7.09 million.

$26.16 million, a credit to Additional Paid-in Capital for $7.09 million, and a credit to Preferred Stock for $33.25 million.

$33.25 million and a credit to Preferred Stock for $33.25 million.

$33.25 million, a credit to Preferred Stock for $7.09 million, and a credit to Additional Paid-in Capital for $26.16 million.

8. Which one of the following statements about earnings per share (EPS) is correct?

EPS, in its basic form, is calculated by dividing net income by the average number of common shares issued. The EPS ratio is important because it signals the ability of the company to pay future dividends, which investors factor into the stock price. Earnings per share (EPS) is the best way to compare the performance of different companies. Earnings per share (EPS) is generally reported in the balance sheet under stockholders' equity.9.

Houghton Company began business on January 1, 2015 by issuing all of its 1,350,000 authorized shares of its $1 par value common stock for $26 per share. On June 30, Houghton declared a cash dividend of $2.50 per share to stockholders of record on July 31. Houghton paid the cash dividend on August 30. On November 1, Houghton reacquired 270,000 of its own shares of stock for $31 per share. On December 22, Houghton resold 135,000 of these shares for $37 per share.

Required:

a.

Prepare all of the necessary journal entries to record the events described above. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

b.

Prepare the stockholders' equity section of the balance sheet as of December 31, 2015 assuming that the net income for the year was $6,000,000.

Q v9.

calculate the following.

The following is total monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company: Activity Center Variable Fixed Cost Driver Account inquiry $83,232 $158,000 3,400 labor hours Correspondence $10,208 $30,000 2,900 letters Account billing $171,500 $75,000 2,450,000 lines Bill verification $11,660 $76,000 22,000 accounts In September, actual costs and activity were as follows: Activity Center Total Costs Driver Amount Account inquiry $242,374 3,480 labor hours Correspondence $40,192 2,890 letters Account billing $232,747 2,250,000 lines Bill verification $88,184 22,110 accounts Required Compute the flexible-budget variances for the following two activity cost items (round all answers to the nearest dollar and enter favorable variances as positive numbers and unfavorable variances as negative numbers): Correspondence Account billingEssayUse the accompanying solution sheet to reply to the eight situations below that relate to the audit of financial statements of nonpublic companies. Unless indicated otherwise, assume that material amounts are involved. Do not consider including an emphasis of matter paragraph in an "auditor discretionary" circumstance. Situations: 1. A company has departed from GAAP. 2. A company's inventory records were deficient and the auditor was required to satisfy herself that the inventory was properly stated using alternative procedures. She is satisfied that she has sufficient appropriate evidence. 3. In auditing a client, an auditor has determined that substantial doubt exists about an entity's ability to continue as a going concern. 4. A group auditor decides not to take responsibility for the work of the component auditor who audited a 70% owned subsidiary and issued an unmodified opinion. The total assets and revenues of the subsidiary are 5% and 8%, respectively, of the total assets and revenues of the entity being audited. 5. A company changes from FIFO to LIFO for inventory valuation and the auditor concurs with the change. The change has a material effect on the comparability of the entity's financial statements this year, but is expected to have an immaterial effect in the future. 6. Inadequate record retention policies by the client have resulted in a situation in which a CPA Is unable to obtain sufficient appropriate audit evidence with respect to a material account. 7. A CPA has decided to emphasize in the audit report that the company she audited is a component of XYZ Company, its parent. 8. A client has changed its estimate of likely doubtful accounts from 2% of credit sales to 3%. The auditor believes the change to be reasonable. Reply as to the type of opinion and other modification to the audit report as follows: Types of Opinion A Adverse Disclaimer Qualified Unmodified Other Modification FOM Add an emphasis of matter paragraph. OM Add an other matter paragraph. BFM Add a basis for modification paragraph. OTHER Make modifications other than adding an additional paragraph. NONE Make no modifications. If more than one type of opinion is appropriate list each-one with "Report 1" and one with "Report 2." If only one is appropriate, in "Report 2" place X, which indicates no second type of report is appropriate. Situation Opinion Type Other Modification Report 1 Report 2 2 Report 1 Report 2 Report 1 Report 2 4 Report 1 Report 2 5 Report I Report 2 6 Report Report 2 7 Report 1 Report 2 8 Report 1 Report 2A. Cash Disbursements Journal B. Sales Journal C. Cash Receipts Journal D. Inventory Journal 15. Items get posted from the Purchase or Sales Journal to the General Ledger and to the: A. Subsidiary Ledger B. Income Statement 20 C. Balance Sheet D. Substantive Ledger 16. The procedure of reconciling a business's cash account to the bank statement is called: A. Bank Reconciliation B. Blank Reconciliation C. Cash Internal Control Reconciliation General Ledger Reconciliation 7. One of the Internal Controls discussed include: A. Separation of duties B. Having the company's bookkeeper handle the cash deposits C. Keep the accounting records unlocked D. Allow the company's bookkeeper to skip vacations