Question 1

Superscope Industries issued $100,000 of bonds on October 1,2010.Given the following partial bond amortization table for the bonds,prepare all necessary journal entries to record the issuance of the bond and the first year of the bond's life assuming Magnum has a December 31 year-end.Show how the bonds would appear on Superscope's 2010 income statement,balance sheet and statement of cash flows for Superscope Industries.

Accepted Answer

The answer of Superscope Industries issued $100,000 of bonds on...

Question 2

A 100% stock dividend and a 2 for 1 stock split are similar in that:

Accepted Answer

A) the par value of the company's stock will be cut in half 
B) the number of shares of stock outstanding will double 
C) total stockholders' equity will remain unchanged 
D) both b and c are correct

Question 3

Convertible bonds:

Accepted Answer

A) require the company to give the bondholders an amount equal to the market price of the bonds on a specific future date 
B) can be converted into stock at the bondholders' option 
C) can result in an interequity transaction 
D) both b and c are correct

Question 4

During 2010,Delenn Company issued common stock for cash.Which part of the statement of cash flows would be affected by the sale of the common stock?

Accepted Answer

A) operating activities 
B) financing activities 
C) operating and financing activities 
D) investing activities

Question 5

Stockton Enterprises signed a 4-year capital lease for a computer on June 30,2010.The lease calls for $5,000 down,and four annual payments of $14,196 beginning on June 30,2011.Stockton has a June 30 year end and uses a 10% interest rate for all calculations relative to the lease.Prepare the necessary journal entries to record the signing of the lease on June 30,2010 and the first lease payment on June 30,2011.Show how the lease would appear on the June 30,2011 balance sheet of Stockton Enterprises.

Accepted Answer

The answer of Stockton Enterprises signed a 4-year capital lease...

Question 6

The charter of the BRHC Corporation authorizes the issuance of 3,000,000 shares of no-par common stock and 1,000,000 shares of 10%,$100 par cumulative preferred stock.Events affecting the stockholders' equity section during the first year of operations (2010)are listed below.
(1.)300,000 shares of common stock were issued for $20 per share.
(2.)25,000 shares of preferred stock were sold at $102 per share.
(3.)A building with a fair market value of $820,000 was acquired for a cash payment of $300,000 and 26,000 shares of common stock.
(4.)30,000 shares of common stock were issued for $690,000 in cash.
(5.)Dividends for the preferred stock were declared and common stock dividend was declared for $1 per share.
Required:
(A.)Record the transaction described above.
(B.)Prepare the stockholders' equity section of BRHC assuming that the corporation generated $1,200,000 of income in the first year.

Accepted Answer

The answer of The charter of the BRHC Corporation authorizes...

Question 7

Carolina Corporation just issued 10,000 shares of $2 par value common stock for $7.50 per share.The journal entry to record this transaction will include all of the following except:

Accepted Answer

A) debit to cash for $75,000 
B) credit to Common Stock for $20,000 
C) Credit to Retained Earnings for $75,000 
D) credit to Paid-in-Capital in Excess of Par--Common Stock for $55,000

Question 8

A corporation may "force" its convertible-bond holders to convert.How and why would it be able to do this?

Accepted Answer

The answer of A corporation may "force" its convertible-bond holders...

Question 9

How does the declaration and distribution of a stock dividend affect a firm?

Accepted Answer

A) decreases stockholders' equity 
B) increases stockholders' equity 
C) no change in total stockholders' equity or assets 
D) decreases total stockholders' equity and total assets

Question 10

When the Retained Earnings account has a debit balance,it is referred to as a:

Accepted Answer

A) loss 
B) deficit 
C) cumulative loss 
D) donation of capital

Question 11

How does the amount of premium and discount amortized in each period change over the term of bonds? Discount Premium

Accepted Answer

A) Increase Increase 
B) Decrease Increase 
C) Increase Decrease 
D) Decrease Decrease

Question 12

In the secondary market,when the market rate of interest on bonds increases:

Accepted Answer

A) bond prices decline 
B) bond prices increase 
C) both b and d are correct 
D) the carrying value of the bonds increases

Question 13

If stock with a $2 par value was issued for $12 per share,

Accepted Answer

A) common stock would be credited for $12 per share 
B) common stock cannot be issued for more than par value 
C) paid-in capital in excess of par should be credited for $10 per share 
D) gain on sale of common stock should be credited for $10 per share

Question 14

When a company exercises a call feature and buys its outstanding bonds back prior to their maturity date:

Accepted Answer

A) the amount of cash paid depends on the market rate of interest at the time the bonds are called 
B) any related unamortized discount will be removed from the books 
C) the company will always pay less than face value for the bonds 
D) both a and b are correct

Question 15

The Discount on Notes Payable account is always used when accounting for a:

Accepted Answer

A) noninterest-bearing note 
B) interest bearing note 
C) contra payment note 
D) installment note

Question 16

A stockholder who received a 10% common stock dividend would have an increase in her/his ownership percentage equal to:

Accepted Answer

A) 10% 
B) 20% 
C) cannot be determined from the information given 
D) there would be no change in the ownership percentage

Question 17

Darvin Company purchased equipment with a fair value of $100,000 on a 6 percent,4-year installment note.What would be Darvin's annual payment on the note,assuming that payments are made at year end?

Accepted Answer

A) $25,000 
B) $27,226 
C) $28,859 
D) unable to determine from the information given

Question 18

Carolina Corporation just issued 10,000 shares of $2 par value common stock for $7.50 per share.The journal entry to record this transaction will include a:

Accepted Answer

A) debit to Donated Capital for $75,000 
B) credit to Common Stock for $75,000 
C) debit to Retained Earnings for $20,000 
D) credit to Paid-in-Capital in Excess of Par--Common Stock for $55,000

Question 19

Match between columns
                        Premises: Common Stock
Notes Payable
Stock Dividend Distributable
Dividend Payable
Discount on Notes Payable
Premium on Notes Payable
Treasury Stock
Preferred Stock
Paid-in-Capital in Excess of Par
Paid-in-Capital from Treasury Stock

Accepted Answer

The Answer of DL - Debit balance in liability classification is...

Question 20

J&C Corporation purchased for the treasury 1,000 shares of its own $1 par value common stock at $20 per share.This was the first time the company had ever purchased treasury stock.Shortly thereafter,J&C sold 400 shares of this treasury stock at $17 per share.The journal entry to record the sale of the treasury stock would include a:

Accepted Answer

A) credit to Cash for $8,000 
B) debit to Treasury Stock for $6,800 
C) debit to Retained Earnings for $1,200 
D) debit to Loss from Treasury Stock Transactions for $1,200

Exam 15: Recording and Evaluating Capital Resource Process Activities: Financing