Question 1

On October 31 Witchway Company issued 90000 shares of no-par no stated value stock for $1117100.Use the following tabular analysis to record ths receipt of cash and issuance of stock:

Accepted Answer

A) Increase Cash and increase Common Stock for $1117100. 
B) Increase Cash for $1117100 increase Common Stock for $ 90000 and increase Sales Revenue for $1027000. 
C) Increase Cash for $1117100 increase Common Stock for $ 900000 and increase Sales Revenue for $217100. 
D) Decrease Common Stock and decrease Cash for $1117100.

Question 2

Recording the issuance of bonds at a discount will include a(n)

Accepted Answer

A) increase to Cash for the face amount of the bonds. 
B) increase to Cash for the face amount of the bonds plus the amount of the discount. 
C) increase to Cash for the face amount of the bonds minus the amount of the discount. 
D) decrease to Cash for the face amount of the bonds.

Question 3

Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

Accepted Answer

A) True 
 B)False

Question 4

Mohling Company typically sells subscriptions on an annual basis and publishes eight times a year.The magazine sells 60000 subscriptions in January at $10 each.Recording the sale of the subscriptions involves a(n)

Accepted Answer

A) Increase to Subscriptions Receivable and an increase to Subscription Revenue for $600000. 
B) Increase to Cash and an increase to Unearned Subscription Revenue for $ 600000. 
C) Increase to Subscriptions Receivable and an increase to Unearned Subscription Revenue for $75000. 
D) Increase to Prepaid Subscriptions and a decrease to Cash for $600000.

Question 5

A company receives $264 of which $24 is for sales tax.Recording the sale would include a(n)

Accepted Answer

A) increase to Sales Taxes Expense for $24. 
B) increase to Sales Taxes Payable for $24. 
C) decrease to Sales Revenue for $264. 
D) increase to Cash for $240.

Question 6

Which of the following is not a right or preference associated with preferred stock?

Accepted Answer

A) The right to vote. 
B) First claim to dividends. 
C) Preference to corporate assets in case of liquidation. 
D) To receive dividends in arrears before common stockholders receive dividends.

Question 7

Selling the bonds at a premium has the effect of

Accepted Answer

A) causing the total cost of borrowing to be higher than the bond interest paid. 
B) causing the total cost of borrowing to be lower than the bond interest paid. 
C) raising the effective interest rate above the state interest rate. 
D) increasing the amount of cash paid for interest each 6 months.

Question 8

A retail store increased the Sales Revenue for the sales price and the amount of sales tax on sales.If the sales tax rate is 5% and the balance in total receipts amounted to $294000 what is the amount of the sales taxes owed to the taxing agency?

Accepted Answer

A) $280000 
B) $294000 
C) $14700 
D) $14000

Question 9

The following totals for the month of March were taken from the payroll records of Kern Company. $$\begin{array} { l r } 
\text { Salaries } & \$ 270,000 \
\text { FlCA taxes withheld } & 20,655 \
\text { Income taxes withheld } & 59,400 \
\text { Medical insurance deductions } & 3,915 \
\text { Federal unemployment taxes } & 2,160 \
\text { State unemployment taxes } & 13,500
\end{array}$$ Recording the monthly payroll on March 30 would include a(n)

Accepted Answer

A) decrease to Salaries and Wages Payable for $170370. 
B) decrease to Salaries and Wages Payable for $186030. 
C) increase to Salaries and Wages Expense for $270000. 
D) increase to Salaries and Wages Expense for $170370.

Question 10

The payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings.

Accepted Answer

A) True 
 B)False

Question 11

If a corporation issued bonds at an amount less than face value it indicates that the corporation has a weak credit rating.

Accepted Answer

A) True 
 B)False

Question 12

Norlan Company does not ring up sales taxes separately on the cash register.Total receipts for October amounted to $36750.If the sales tax rate is 5% what amount must be remitted to the state for October's sales taxes?

Accepted Answer

A) $1750 
B) $1838 
C) $88 
D) It cannot be determined.

Question 13

Treasury Stock is a(n)

Accepted Answer

A) contra asset account. 
B) retained earnings account. 
C) asset account. 
D) contra stockholders' equity account.

Question 14

A company receives $348 of which $28 is for sales tax.Recording the sale would include

Accepted Answer

A)  a increase to Sales Taxes Expense for $28. 
B) decrease to Sales Taxes Payable for $28. 
C) decrease to Sales Revenue for $348. 
D) increase to Cash for $348.

Question 15

What is the total stockholders' equity based on the following account balances? $\begin{array}{lr}
\text { Common Stock } & \$ 1,800,000 \
\text { Paid-In Capital in Excess of Par } & 100,000 \
\text { Retained Earnings } & 360,000 \
\text { Treasury Stock } & 60,000
\end{array}$

Accepted Answer

A) $1900000. 
B) $2320000. 
C) $2260000. 
D) $2200000.

Question 16

The following information pertains to Marsh Company.Assume that all balance sheet amounts represent average balance figures. $$\begin{array} { l r } 
\text { Total assets } & \$ 400,000 \
\text { Stockholders' equity-common } & 200,000 \
\text { Total stockholders' equity } & 280,000 \
\text { Sales revenue } & 120,000 \
\text { Net income } & 30,000 \
\text { Number of shares of common stock } & 8,000 \
\text { Common dividends } & 6,000 \
\text { Preferred dividends } & 4,000
\end{array}$$ What is Marsh's payout ratio?

Accepted Answer

A) 33.3%. 
B) 20.0%. 
C) 13.3%. 
D) 5.0%.

Question 17

West County Bank agrees to lend Drake Builders Company $400000 on January 1.Drake Builders Company signs a $400000 6% 6-month note.Recording the pay off of the note and interest at maturity assuming that interest has been accrued to June 30 includes a(n)

Accepted Answer

A) Decrease to Notes Payable and to Cash for $412000. 
B) Decrease to Notes Payable for $400000 decrease to Interest Payable for $12000 and a decrease to Cash for $412000. 
C) Increase to Interest Expense for $12000 decrease to Notes Payable for $400000 and a decrease to Cash for $412000. 
D) Decrease to Interest Payable for $6000 decrease to Notes Payable for $400000 increase to Interest Expense for $6000 and a decrease to Cash for $412000.

Question 18

A cash register tape shows cash sales of $8000 and sales taxes of $400.Recording this information includes a(n)

Accepted Answer

A) Increases to Cash and Sales Revenue for $8000. 
B) Increase to Cash for $8400 and increases to Sales Tax Revenue for $400 and Sales Revenue for $8000. 
C) Cash $8000 Sales Tax Expense $400 and Sales Revenue for $8400. 
D) Increase to Cash for $8400 and increases to Sales Revenue for $8000 and Sales Taxes Payable for $400.

Question 19

The statement "Bond prices vary inversely with changes in the market rate of interest" means that if the

Accepted Answer

A) market rate of interest increases the contractual interest rate will decrease. 
B) contractual interest rate increases then bond prices will go down. 
C) market rate of interest decreases then bond prices will go up. 
D) contractual interest rate increases the market rate of interest will decrease.

Question 20

Dividends may be declared and paid in cash or stock.

Accepted Answer

A) True 
 B)False

Exam 8: Financial Analysis: the Big Picture

On October 31 Witchway Company issued 90000 shares of no-par no stated value stock for $1117100.Use the following tabular analysis to record ths receipt of cash and issuance of stock:

Recording the issuance of bonds at a discount will include a(n)

Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

Mohling Company typically sells subscriptions on an annual basis and publishes eight times a year.The magazine sells 60000 subscriptions in January at $10 each.Recording the sale of the subscriptions involves a(n)

A company receives $264 of which $24 is for sales tax.Recording the sale would include a(n)

Which of the following is not a right or preference associated with preferred stock?

Selling the bonds at a premium has the effect of

A retail store increased the Sales Revenue for the sales price and the amount of sales tax on sales.If the sales tax rate is 5% and the balance in total receipts amounted to $294000 what is the amount of the sales taxes owed to the taxing agency?

The payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings.

If a corporation issued bonds at an amount less than face value it indicates that the corporation has a weak credit rating.

Norlan Company does not ring up sales taxes separately on the cash register.Total receipts for October amounted to $36750.If the sales tax rate is 5% what amount must be remitted to the state for October's sales taxes?

Treasury Stock is a(n)

A company receives $348 of which $28 is for sales tax.Recording the sale would include

What is the total stockholders' equity based on the following account balances? $\begin{array}{lr}\text { Common Stock } & \$ 1,800,000 \\\text { Paid-In Capital in Excess of Par } & 100,000 \\\text { Retained Earnings } & 360,000 \\\text { Treasury Stock } & 60,000\end{array}$

West County Bank agrees to lend Drake Builders Company $400000 on January 1.Drake Builders Company signs a $400000 6% 6-month note.Recording the pay off of the note and interest at maturity assuming that interest has been accrued to June 30 includes a(n)

A cash register tape shows cash sales of $8000 and sales taxes of $400.Recording this information includes a(n)

The statement "Bond prices vary inversely with changes in the market rate of interest" means that if the

Dividends may be declared and paid in cash or stock.