BMGT 220Practice Exam on Chapters 10-13

May 7, 2013

Practice Question 1:

Gary’s Gas station includes an 8.50% sales tax in the amount credited to the sales account. If the sales account has a balance of $675,250, the amount of the sales tax payable to the state is:

1. $54,0202. $50,0193. $57,3964. $52,900

Practice Question 2:

On December 1, 2012, UMD Company purchased $15,000 of equipment by issuing a 120-day, 10% note payable to Bank of Maryland. Assuming the company’s accounting period ends on December 31, the journal entry recorded by UMD Company on the note maturity date will include:1. Debit to Interest Expense for $3752. Debit to Interest Payable for $3753. Debit to Interest Payable for $2504. Debit to Interest Expense for $125

Practice Question 3:Thompson Corporation issued $1,000,000 of ten-year, 10 percent bonds payable dated January 1, 2010. The market rate of interest at that time was 11 percent. Thompson Company’s journal entry to record this transaction will include

1. debit to Premium on Bonds Payable2. credit to Premium on Bonds Payable3. debit to Discount on Bonds Payable4. credit to Discount on Bonds Payable

Practice Question 4:On January 1, 2000, Terps Company issued $500,000 of 6%, 20 year bonds at a price of 95. On January 1, 2012, the unamortized discount on the bonds is $10,000, and the company retires these bonds by buying them in the open market at a price of 97.5. At retirement of these bonds, Terps Company will recognize:

1. A loss on bond retirement of $7,5002. A gain on bond retirement of $7,5003. A loss on bond retirement of $2,5004. A gain on bond retirement of $2,500

Practice Question 5:

Universe Corporation has two types of equity, described as follows:1. Preferred Stock 6%, $100 par, cumulative, 10,000 shares authorized, 3,000 shares issued and outstanding.2. Common Stock, $2 par, 500,000 shares authorized,

240,000 shares issued and outstanding.

If Universe did not pay a dividend for the last two years, but declared a dividend this year, how much total dividends will the company need to declare in order for the common stockholders to receive $.45 per share?

1. $162,000 2. $144,000 3. $108,000 4. $126,000

Practice Question 6:

The stockholders' equity section of the balance sheet for Johnstone Corporation appeared as follows before its recent stock dividend:Common stock, $5 par, 100,000 shares issued and outstanding $500,000Additional paid-in capital 100,000Retained earnings 725,000Total Stockholders’ Equity $1,325,000

Johnstone declared a 10% stock dividend when the market price per share was $8. After the stock dividends were distributed, the components of the stockholders' equity section were:

Common Stock Add'l. Paid-in Capital Retained Earnings

1. $580,000 $100,000 $645,0002. $550,000 $100,000 $675,0003. $550,000 $130,000 $645,0004. There would be no change in the components of stockholders’ equity.

Practice Question 7:

Mariam Company had 20,000 shares of $4 par-value common stock outstanding on January 1, 2010. On March 1, 2010, they purchased 2,000 of its outstanding shares for $18 per share. On May 1, 2010, it reissued 1,000 shares at $22 per share. On August 1, 2010, they reissued the other 1,000 shares at $8 per share. Given this information, the entry to record the reissuance of the stock on August 1, 2010 would include:

1. Credit Treasury Stock for $36,0002. Debit Paid-in-Capital, Treasury Stock for $4,0003. Debit Paid-In Capital, Treasury Stock for $10,0004. Debit Retained Earnings for $10,000

A. $0.16 per shareB. $0.20 per shareC. $0.35 per shareD. $0.28 per share

Practice Question 8:The following items were found in the Stockholders’ Equity section of the Balance Sheet of a company on December 31, 2012: Preferred Stock, 6%, $10 par value, 100,000 shares authorized, 20,000 shares issued, cumulative $ 200,000Contributed Capital in excess of par, Preferred Stock 300,000 Common Stock, $1 par value, 200,000 shares authorized, 100,000 shares issued 100,000 Contributed Capital in Excess of Par, Common Stock 500,000 Paid-in-Capital, Treasury Stock 5,000 Retained Earnings 250,000Treasury Stock (20,000 shares of common stock) 120,000

The company did not pay any dividends in 2010. In 2011, they paid total dividends of $12,000, and in 2012, they paid total dividends of $40,000. How much dividends will be paid to common stockholders in 2012 on a per share basis?

A. $26.58B. $26.88 C. $27.18D. $26.73

Practice Question 9:

On March 1, 2013, Apple Company purchased 3,400 shares of Microsoft Corporation for $24.78 per share, and paid brokerage fees of $510. On April 1, 2013, they sold 1,400 of the above shares and paid $210 brokerage fees. The realized gain on this transaction was $2,520. What must have been the market price of Microsoft Company’s stock per share on April 1, 2013?

A. Debit to Unrealized Loss/Gain – Equity of $60,000B. Credit to Unrealized Loss/Gain – Equity of $60,000C. Debit to Market Adjustment – AFSS for $80,000D. Credit to Market Adjustment – AFSS for $80,000

Practice Question 10:

Terps Company purchased several investments in December 2012. Costs and market values of those investments on December 31, 2012, are presented below:

Assuming all of the securities are classified as available for sale, the journal entry required on December 31, 2012, the end of Terp's fiscal year, would include a

Cost Market ValueABC stock $200,000 $180,000 DEF Stock 400,000 420,000XYZ Stock 600,000 540,000

A. The company’s balance sheet reports short term investments of $10.7 millions

B. Unrealized gains of $0.2 million are included in net incomeC. Unrealized losses of $0.7 million are included as comprehensive income in

the stockholders’ equity sectionD. The company recognized unrealized loss of $0.5 million in its balance sheet

Practice Question 11:

Buckstar Company reported the following short term investments on its balance sheet as of December 31, 2012 (all amounts in millions of dollars):

Cost Market Value

Short-term Investments – Trading Securities $3.0 $3.2Short-term investments – Available for Sale Securities $8.2 $7.5

TOTAL $11.2 $10.7

Which of the following statements is NOT true?

A. $70,000B. $200,000C. $280,000D. Cannot be determined

Practice Question 12:

On January 6, 2013, Lebron Company acquired 25% (5,000 shares) of Miami Corporation's common stock at $30 per share. On October 24, 2003, Miami Company declared and paid a cash dividend of $4 per share. On December 31, 2013, the Lebron Company reported Investment in Miami Company at $200,000. What was Miami Company’s Net Income for 2013?

A. $675,000.B. $375,000.C. $175,000.D. $50,000.

Practice Question 13:

Smiley Corp.'s transactions for the year ended December 31, 2013 included the following:

• Purchased real estate for $550,000 cash which was borrowed from a bank.

• Sold available-for-sale securities for $500,000.• Paid dividends of $600,000.• Issued 500 shares of common stock for $250,000.• Purchased machinery and equipment for $125,000 cash.• Paid $450,000 toward a bank loan.• Reduced accounts receivable by $100,000.• Increased accounts payable $200,000.• Smiley's net cash used in investing activities for 2013 was:

A. $50,000.B. $250,000.C. $450,000.D. $500,000.

Practice Question 14:

Smiley Corp.'s transactions for the year ended December 31, 2013 included the following:

• Purchased real estate for $550,000 cash which was borrowed from a bank.

• Sold available-for-sale securities for $500,000.• Paid dividends of $600,000.• Issued 500 shares of common stock for $250,000.• Purchased machinery and equipment for $125,000 cash.• Paid $450,000 toward a bank loan.• Reduced accounts receivable by $100,000.• Increased accounts payable $200,000.• Smiley's net cash used in financing activities for 2013 was:

A. $1,000. B. $2,000. C. $3,000. D. $4,000.

Practice Question 15:

Creble Company reported Net Income for 2012 in the amount of $40,000 and its Net Cash provided by Operating Activities of $38,000. The balance Sheet for the company as of December 31, 2012 showed the following:

Determine the missing Depreciation Expense for 2012.

Increase in accounts receivable $4,000

Decrease in inventory 2,000

Increase in Wages Payable 3,000

Gain on sale of equipment 5,000

A. Using Cash from Operations and borrowing to purchase investments. B. Using Cash from borrowing and selling investments to pay for purchase

of inventories and wages. C. Using cash from operations and sale of equipment to pay off debt.D. Using funds from selling common stock to pay for purchasing

inventories and other Investments.

Practice Question 16:

French CorporationStatement of Cash Flows

For the Year Ended December 31, 2013

Net cash used by operating activities (21,000) Net cash used by investing activities (63,000) Net cash provided by financing activities 38,000

From the above Statement of Cash Flows, it appears that French Company is:

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ANSWERS

Practice Question 1:

Gary’s Gas station includes an 8.50% sales tax in the amount credited to the sales account. If the sales account has a balance of $675,250, the amount of the sales tax payable to the state is:

1. $54,0202. $50,0193. $57,3964. $52,900

Practice Question 2:

On December 1, 2012, UMD Company purchased $15,000 of equipment by issuing a 120-day, 10% note payable to Bank of Maryland. Assuming the company’s accounting period ends on December 31, the journal entry recorded by UMD Company on the note maturity date will include:

1. Debit to Interest Expense for $3752. Debit to Interest Payable for $3753. Debit to Interest Payable for $2504. Debit to Interest Expense for $125

Practice Question 3:Thompson Corporation issued $1,000,000 of ten-year, 10 percent bonds payable dated January 1, 2010. The market rate of interest at that time was 11 percent. Thompson Company’s journal entry to record this transaction will include

1. debit to Premium on Bonds Payable2. credit to Premium on Bonds Payable3. debit to Discount on Bonds Payable4. credit to Discount on Bonds Payable

Practice Question 4:On January 1, 2000, Terps Company issued $500,000 of 6%, 20 year bonds at a price of 95. On January 1, 2012, the unamortized discount on the bonds is $10,000, and the company retires these bonds by buying them in the open market at a price of 97.5. At retirement of these bonds, Terps Company will recognize:

1. A loss on bond retirement of $7,5002. A gain on bond retirement of $7,5003. A loss on bond retirement of $2,5004. A gain on bond retirement of $2,500

Practice Question 5:

Universe Corporation has two types of equity, described as follows:1. Preferred Stock 6%, $100 par, cumulative, 10,000 shares authorized, 3,000 shares issued and outstanding.2. Common Stock, $2 par, 500,000 shares authorized,

240,000 shares issued and outstanding.

If Universe did not pay a dividend for the last two years, but declared a dividend this year, how much total dividends will the company need to declare in order for the common stockholders to receive $.45 per share?

1. $162,000 2. $144,000 3. $108,000 4. $126,000

Practice Question 6:

The stockholders' equity section of the balance sheet for Johnstone Corporation appeared as follows before its recent stock dividend:Common stock, $5 par, 100,000 shares issued and outstanding $500,000Additional paid-in capital 100,000Retained earnings 725,000Total Stockholders’ Equity $1,325,000

Johnstone declared a 10% stock dividend when the market price per share was $8. After the stock dividends were distributed, the components of the stockholders' equity section were:

Common Stock Add'l. Paid-in Capital Retained Earnings

1. $580,000 $100,000 $645,0002. $550,000 $100,000 $675,0003. $550,000 $130,000 $645,0004. There would be no change in the components of stockholders’ equity.

Practice Question 7:

Mariam Company had 20,000 shares of $4 par-value common stock outstanding on January 1, 2010. On March 1, 2010, they purchased 2,000 of its outstanding shares for $18 per share. On May 1, 2010, it reissued 1,000 shares at $22 per share. On August 1, 2010, they reissued the other 1,000 shares at $8 per share. Given this information, the entry to record the reissuance of the stock on August 1, 2010 would include:

1. Credit Treasury Stock for $36,0002. Debit Paid-in-Capital, Treasury Stock for $4,0003. Debit Paid-In Capital, Treasury Stock for $10,0004. Debit Retained Earnings for $10,000

A. $0.16 per shareB. $0.20 per shareC. $0.35 per shareD. $0.28 per share

Practice Question 8:The following items were found in the Stockholders’ Equity section of the Balance Sheet of a company on December 31, 2012: Preferred Stock, 6%, $10 par value, 100,000 shares authorized, 20,000 shares issued, cumulative $ 200,000Contributed Capital in excess of par, Preferred Stock 300,000 Common Stock, $1 par value, 200,000 shares authorized, 100,000 shares issued 100,000 Contributed Capital in Excess of Par, Common Stock 500,000 Paid-in-Capital, Treasury Stock 5,000 Retained Earnings 250,000Treasury Stock (20,000 shares of common stock) 120,000

The company did not pay any dividends in 2010. In 2011, they paid total dividends of $12,000, and in 2012, they paid total dividends of $40,000. How much dividends will be paid to common stockholders in 2012 on a per share basis?

A. $26.58B. $26.88 C. $27.18D. $26.73

Practice Question 9:

On March 1, 2013, Apple Company purchased 3,400 shares of Microsoft Corporation for $24.78 per share, and paid brokerage fees of $510. On April 1, 2013, they sold 1,400 of the above shares and paid $210 brokerage fees. The realized gain on this transaction was $2,520. What must have been the market price of Microsoft Company’s stock per share on April 1, 2013?

A. Debit to Unrealized Loss/Gain – Equity of $60,000B. Credit to Unrealized Loss/Gain – Equity of $60,000C. Debit to Market Adjustment – AFSS for $80,000D. Credit to Market Adjustment – AFSS for $80,000

Practice Question 10:

Terps Company purchased several investments in December 2012. Costs and market values of those investments on December 31, 2012, are presented below:

Assuming all of the securities are classified as available for sale, the journal entry required on December 31, 2012, the end of Terp's fiscal year, would include a

Cost Market ValueABC stock $200,000 $180,000 DEF Stock 400,000 420,000XYZ Stock 600,000 540,000

A. The company’s balance sheet reports short term investments of $10.7 millions

B. Unrealized gains of $0.2 million are included in net incomeC. Unrealized losses of $0.7 million are included as comprehensive income in

the stockholders’ equity section. D. The company recognized unrealized loss of $0.5 million in its balance sheet

Practice Question 11:

Buckstar Company reported the following short term investments on its balance sheet as of December 31, 2012 (all amounts in millions of dollars):

Cost Market Value

Short-term Investments – Trading Securities $3.0 $3.2Short-term investments – Available for Sale Securities $8.2 $7.5

TOTAL $11.2 $10.7

Which of the following statements is NOT true?

A. $70,000B. $200,000C. $280,000D. Cannot be determined

Practice Question 12:

On January 6, 2013, Lebron Company acquired 25% (5,000 shares) of Miami Corporation's common stock at $30 per share. On October 24, 2013, Miami Company declared and paid a cash dividend of $4 per share. On December 31, 2013, the Lebron Company reported Investment in Miami Company at $200,000. What was Miami Company’s Net Income for 2013?

A. $675,000.B. $175,000.C. $375,000.D. $50,000.

Practice Question 14:

Smiley Corp.'s transactions for the year ended December 31, 2013 included the following:

• Purchased real estate for $550,000 cash which was borrowed from a bank.

• Sold available-for-sale securities for $500,000.• Paid dividends of $600,000.• Issued 500 shares of common stock for $250,000.• Purchased machinery and equipment for $125,000 cash.• Paid $450,000 toward a bank loan.• Reduced accounts receivable by $100,000.• Increased accounts payable $200,000.• Smiley's net cash used in investing activities for 2013 was:

A. $50,000.B. $250,000.C. $450,000.D. $800,000.

Practice Question 14:

Smiley Corp.'s transactions for the year ended December 31, 2013 included the following:

• Purchased real estate for $550,000 cash which was borrowed from a bank.

• Sold available-for-sale securities for $500,000.• Paid dividends of $600,000.• Issued 500 shares of common stock for $250,000.• Purchased machinery and equipment for $125,000 cash.• Paid $450,000 toward a bank loan.• Reduced accounts receivable by $100,000.• Increased accounts payable $200,000.• Smiley's net cash used in financing activities for 2013 was:

A. $1,000. B. $2,000. C. $3,000. D. $4,000.

Practice Question 15:

Creble Company reported Net Income for 2012 in the amount of $40,000 and its Net Cash provided by Operating Activities of $38,000. The balance Sheet for the company as of December 31, 2012 showed the following:

Determine the missing Depreciation Expense for 2012.

Increase in accounts receivable $4,000

Decrease in inventory 2,000

Increase in Wages Payable 3,000

Gain on sale of equipment 5,000

A. Using Cash from Operations and borrowing to purchase investments. B. Using Cash from borrowing and selling investments to pay for purchase

of inventories and wages. C. Using cash from operations and sale of equipment to pay off debt.D. Using funds from selling common stock to pay for purchasing

inventories and other Investments.

Practice Question 16:

French CorporationStatement of Cash Flows

For the Year Ended December 31, 2013

Net cash provided by operating activities (21,000) Net cash used by investing activities (63,000) Net cash provided by financing activities 38,000

From the above Statement of Cash Flows, it appears that French Company is: