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Wesley Hospital installs a new parking lot

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Wesley Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $15,000. Which of the following statements is true with respect to these additions?
$30,000 should be debited to the Land account.

$15,000 should be debited to Land Improvements.

$45,000 should be debited to the Land account.

$45,000 should be debited to Land Improvements.

Equipment was purchased for $75,000. Freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be
$14,700.

$12,300.

$12,000.

$17,700.

On May 1, 2010, Pinkley Company sells office furniture for $90,000 cash. The office furniture originally cost $225,000 when purchased on January 1, 2003. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $22,500. What gain should be recognized on the sale?
$14,250.

$6,750.

$27,000.

$13,500.

Equipment with an invoice price of $20,000 was purchased and freight costs were $900. The cost of the equipment would be     $____________


Simon Company issued 4,000 shares of its $5 par value common stock in payment of its attorney's bill of $35,000. The bill was for services performed in helping the company incorporate. Simon should record this transaction by debiting
Organization Expense for $20,000.

Legal Expense for $35,000.

Legal Expense for $20,000.

Organization Expense for $35,000.

S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $10,000 by issuing 5,000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $1.80 per share.
Given this information, the journal entry for E. Corp. to record this transaction is:
Legal Expense
10,000
Common Stock
10,000

Legal Expense
9,000
Common Stock
9,000

Legal Expense
9,000
Common Stock
5,000
Paid-in Capital in Excess of Par – Common
4,000

Legal Expense
9,000
Common Stock
5,000
Paid-in Capital in Excess of Par – Common
5,000

Rancho Corporation sold 200 shares of treasury stock for $40 per share. The cost for the shares was $30. The entry to record the sale will include a
credit to Paid-in Capital from Treasury Stock for $2,000.

debit to Paid-in Capital in Excess of Par Value for $2,000.

credit to Treasury Stock for $8,000.

credit to Gain on Sale of Treasury Stock for $6,000.



Match the items below by entering the appropriate code letter in the space provided.
Treasury stock
Legal capital
Par value
Preemptive right
Retained earnings
Cumulative feature
Paid-in capital
Board of directors
Capital stock
Limited liability

1.
Unit of ownership in a corporation.
2.
Total amount paid-in on capital stock.
3.
Enables stockholders to maintain their same percentage ownership when new shares are issued.
4.
The amount that must be retained in the business for the protection of creditors.
5.
Creditors only have corporate assets to satisfy their claims.
6.
Responsible to stockholders for corporate activity.
7.
Corporation's own stock that has been reacquired by the corporation but not retired.
8.
Net income retained in the corporation.
9.
Preferred stockholders have a right to receive current and unpaid prior-year dividends before common stockholders receive any dividends.
10.
The amount assigned to each share of stock in the corporate charter.




The effect of the declaration of a cash dividend by the board of directors is to
Increase
Decrease
a.
Stockholders' equity
Assets
b.
Assets
Liabilities
c.
Liabilities
Stockholders' equity
d.
Liabilities
Assets

a

b

c

d

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:
Total Assets
Total Liabilities
Total Stockholders' Equity
a.
Increase
Decrease
No change
b.
No change
Increase
Decrease
c.
Decrease
Increase
Decrease
d.
Decrease
No change
Increase

a.

b.

c.

d.

Jennifer Company reports the following amounts for 2010:
Net income
$135,000
Average stockholders' equity
500,000
Preferred dividends
35,000
Par value preferred stock
100,000

The 2010 rate of return on common stockholders' equity is
33.8%.

27.0%.

25.0%.

22.5%.

Norman Corporation had 250,000 shares of common stock outstanding during the year. Norman declared and paid cash dividends of $200,000 on the common stock and $160,000 on the preferred stock. Net income for the year was $880,000. What is Norman's earnings per share?
$3.52

$2.88

$2.08

$2.72

On January 1, 2010, Grant Corporation issued $4,000,000, 10-year, 8% bonds at 102. Interest is payable semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2010 is
Cash
4,000,000
Bonds Payable
4,000,000

Cash
4,080,000
Bonds Payable
4,080,000

Cash
4,080,000
Bonds Payable
4,000,000
Premium on Bonds Payable
80,000

Premium on Bonds Payable
80,000
Cash
4,000,000
Bonds Payable
4,080,000

Four thousand bonds with a face value of $1,000 each, are sold at 103. The entry to record the issuance is
Cash
4,120,000
Discount on Bonds Payable
120,000
Bonds Payable
4,000,000

Cash
4,000,000
Premium on Bonds Payable
120,000
Bonds Payable
4,120,000

Cash
4,120,000
Bonds Payable
4,120,000

Cash
4,120,000
Premium on Bonds Payable
120,000
Bonds Payable
4,000,000

If bonds with a face value of $150,000 are converted into common stock when the carrying value of the bonds is $135,000, the entry to record the conversion will include a debit to
bonds payable for $135,000.

bonds payable for $150,000.

discount on bonds payable for $15,000.

bonds payable equal to the market price of the bonds on the date of conversion.

Match the items below by entering the appropriate code letter in the space provided.
Operating lease
Debenture bonds
Premium on bonds payable
Straight-line method of amortization
Bonds
Discount on bonds payable
Registered bonds
Debt to total assets ratio
Effective-interest method of amortization
Serial bonds
Bond indenture
Capital lease

1.
Produces a periodic interest expense that is the same amount each interest period.
2.
A legal document that sets forth the terms of a bond issue.
3.
Produces a periodic interest expense equal to a constant percentage of the carrying value of the bonds.
4.
A form of interest-bearing notes payable used by corporations.
5.
Occurs when the contractual interest rate is less than the market interest rate.
6.
Unsecured bonds issued against the general credit of the borrower.
7.
A contractual arrangement which is in effect a purchase of property.
8.
Bonds that mature in installments.
9.
A contractual arrangement that gives the lessee temporary use of property.
10.
Bonds issued in the name of the owner.
11.
A solvency measure that indicates the percentage of assets provided by creditors.
12.
Occurs when the contractual interest rate is greater than the market interest rate.

On January 1, 2010, Milton Company purchased at face value, a $1,000, 6% bond that pays interest on January 1 and July 1. Milton Company has a calendar year end.
The entry for the receipt of interest on July 1, 2010, is
Interest Receivable
30
Interest Revenue
30

Cash
60
Interest Revenue
60

Interest Receivable
60
Interest Revenue
60

Cash
30
Interest Revenue
30

Barr Company acquires 60, 10%, 5 year, $1,000 Community bonds on January 1, 2010 for $61,250. This includes a brokerage commission of $1,250.
If Barr sells all of its Community bonds for $62,500 and pays $1,500 in brokerage commissions, what gain or loss is recognized?
Gain of $2,500

Loss of $250

Gain of $250

Gain of $1,250

Decker Corporation purchased 1,000 shares of Kent common stock at $75 per share plus $3,000 brokerage fees as a short-term investment. The shares were subsequently sold at $80 per share less $3,400 brokerage fees. The cost of the securities purchased and gain or loss on the sale were
Cost
Gain or Loss

$75,000
$5,000 gain

$78,000
$1,400 loss

$78,000
$2,000 gain

$75,000
$1,400 loss

Lanier industries owns 45% of McCoy Company. For the current year, McCoy reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Lanier's equity in McCoy's net income and the receipt of dividends from McCoy?
Dec. 31
Stock Investments
112,500
Revenue from Investment in McCoy
Company
112,500
Dec. 31
Cash
27,000
Stock Investments
27,000

Dec. 31
Revenue from Investment in
McCoy Company
112,500
Stock Investments
112,500
Dec. 31
Stock Investments
27,000
Cash
27,000

Dec. 31
Stock Investments
112,500
Revenue from Investment in McCoy
Company
112,500
Dec. 31
Cash
60,000
Stock Investments
60,000

Dec. 31
Stock Investments
85,500
Revenue from Investment in McCoy
Company
85,500

Joy Elle’s Vegetable Market had the following transactions during 2010:
1. Issued $50,000 of par value common stock for cash.
2. Repaid a 6 year note payable in the amount of $22,000.
3. Acquired land by issuing common stock of par value $100,000.
4. Declared and paid a cash dividend of $2,000.
5. Sold a long-term investment (cost $63,000) for cash of $6,000.
6. Acquired an investment in IBM stock for cash of $12,000.
What is the net cash provided by financing activities?
$28,000

$18,000

$50,000

$26,000

In Rooney Company, Treasury Stock increased $30,000 from a cash purchase, and Retained Earnings increased $80,000 as a result of net income of $124,000 and cash dividends paid of $44,000. Net cash used by financing activities is:
$74,000.

$110,000.

$30,000.

$44,000.

In the Green Company, the beginning and ending balances in Land were $198,000 and $240,000 respectively. During the year, land costing $45,000 was sold for $45,000 cash, and land costing $87,000 was purchased for cash. The entries in the reconciling columns of the worksheet will include a:
credit to Land $45,000 and a debit to Sale of Land $45,000 under investing activities.

credit to Land $45,000 and a debit to Sale of Land $45,000 under financing activities.

net debit to Land $42,000 and a credit to Purchase of Land $42,000 under investing activities.

debit to Land $87,000 and a credit to Purchase of Land $87,000 under financing activities.

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.

A. Added to net income
B. Deducted from net income
C. Cash outflow—investing activity
D. Cash inflow—investing activity
E. Cash outflow—financing activity
F. Cash inflow—financing activity
G. Significant noncash investing and financing activity

1. Decrease in accounts payable during a period

2. Declaration and payment of a cash dividend.

3. Loss on sale of land.

4. Decrease in accounts receivable during a period.

5. Redemption of bonds for cash.

6. Proceeds from sale of equipment at book value.

7. Issuance of common stock for cash.

8. Purchase of a building for cash.

9. Acquisition of land in exchange for common stock.

10. Increase in merchandise inventory during a period.

The current assets of Kile Company are $150,000. The current liabilities are $100,000. The current ratio expressed as a proportion is
1.5 : 1

$150,000 ÷ $100,000.

.67 : 1

150%.

The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.
Assets
Cash and short-term investments
$45,000
Accounts receivable (net)
25,000
Inventory
20,000
Property, plant and equipment
210,000
Total Assets
$300,000
Liabilities and Stockholders' Equity
Current liabilities
$50,000
Long-term liabilities
90,000
Stockholders' equity-common
160,000
Total Liabilities and Stockholders' Equity
$300,000
Income Statement
Sales
$120,000
Cost of goods sold
66,000
Gross margin
54,000
Operating expenses
30,000
Net income
$24,000
Number of shares of common stock
6,000
Market price of common stock
$20
Dividends per share
.50

What is the current ratio for Soho?
1.30

1.80

1.40

.64

The following amounts were taken from the financial statements of Palmer Company:
2010
2009
Total assets
$800,000
$1,000,000
Net sales
720,000
650,000
Gross profit
352,000
320,000
Net income
126,000
117,000
Weighted average number of common shares outstanding
90,000
90,000
Market price of common stock
$35
$39

The profit margin ratio for 2010 is
36.0%.

17.5%.

18.4%.

18.0%.

The following financial statement information is available for Howard Corporation:
2010
2009
Stockholders' equity common
$330,000
$270,000
Net sales
784,000
697,000
Cost of goods sold
406,000
377,000
Net income
112,000
80,000
Tax expense
48,000
29,000
Interest expense
14,000
14,000
Dividends paid to preferred
stockholders
22,000
20,000
Dividends paid to common
stockholders
15,000
10,000

The return on common stockholders’ equity for 2010 is
25.0%.

30.0%.

37.3%.

27.3%.

Direct materials and direct labor of a company total $6,000,000. If manufacturing overhead is $3,000,000, what is direct labor cost?
$0

$3,000,000

Cannot be determined from the information provided

$6,000,000

Cost of goods manufactured is calculated as follows:
Direct materials used + direct labor + manufacturing overhead – ending WIP – beginning WIP.

Direct materials used + direct labor + manufacturing overhead – beginning WIP + ending WIP.

Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP.

Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending WIP.

Dolan Manufacturing Company's accounting records reflect the following inventories:
Dec. 31, 2010
Dec. 31, 2009

Raw materials inventory
$310,000
$260,000
Work in process inventory
300,000
160,000
Finished goods inventory
190,000
150,000

During 2010, $400,000 of raw materials were purchased, direct labor costs amounted to $500,000, and manufacturing overhead incurred was $480,000.
The total raw materials available for use during 2010 for Dolan Manufacturing Company is
$350,000

$710,000

$660,000

$260,000

Given the following data for Mehring Company, compute (A) total manufacturing costs and (B) cost of goods manufactured:
Direct materials used
$180,000
Beginning work in process
$30,000
Direct labor
150,000
Ending work in process
15,000
Manufacturing overhead
225,000
Beginning finished goods
38,000
Operating expenses
263,000
Ending finished goods
23,000

(A)
(B)

$555,000
$570,000

$555,000
$540,000

$570,000
$585,000

$540,000
$570,000

Barr Mfg. provided the following information from its accounting records for 2010:
Expected production
30,000 labor hours
Actual production
28,000 labor hours
Budgeted overhead
$600,000
Actual overhead
$580,000

How much is the overhead application rate if Barr bases the rate on direct labor hours?
$18.67 per hour

$20.00 per hour

$19.33 per hour

$20.71 per hour

Gulick Company developed the following data for the current year:
Beginning work in process inventory
$120,000
Direct materials used
72,000
Actual overhead
144,000
Overhead applied
108,000
Cost of goods manufactured
132,000
Total manufacturing costs
360,000


Gulick Company's direct labor cost for the year is
$36,000.

$180,000.

$108,000.

$144,000.

Greer Company developed the following data for the current year:
Beginning work in process inventory
$68,000
Direct materials used
104,000
Actual overhead
88,000
Overhead applied
92,000
Cost of goods manufactured
450,000
Total manufacturing costs
428,000

How much is Greer Company's direct labor cost for the year?
$300,000

$254,000

$164,000

$232,000

In applying the high-low method, what is the fixed cost?

Month
Miles
Total Cost
January
80,000
$ 96,000
February
50,000
80,000
March
70,000
94,000
April
90,000
130,000

$36,000

$14,000

$50,000

$17,500

Fessler, Inc. has a product with a selling price per unit of $200, the unit variable cost is $75, and the total monthly fixed costs are $300,000. How much is Fessler's contribution margin ratio?
150%

266.6%

62.5%

37.5%

A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $120,000. The number of units the company must sell to break even is
60,000 units.

240,000 units.

24,000 units.

40,000 units.

Fixed costs are $300,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?
$1,200,000

$700,000

$400,000

$900,000

Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $180,000. What is Boswell break-even point in units?
28,125.

16,364.

20,000.

25,556.

A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:
Variable
Fixed

Indirect materials
$140,000
Depreciation
$60,000
Indirect labor
200,000
Taxes
10,000
Factory supplies
20,000
Supervision
50,000
A flexible budget prepared at the 80,000 machine hours level of activity would show total manufacturing overhead costs of
$360,000.

$288,000.

$408,000.

$384,000.

A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:
Variable
Fixed

Indirect materials
$120,000
Depreciation
$50,000
Indirect labor
160,000
Taxes
10,000
Factory supplies
20,000
Supervision
40,000
A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of
$360,000.

$270,000.

$370,000.

$300,000.

A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:
Variable
Fixed

Indirect materials
$90,000
Depreciation
$37,500
Indirect labor
120,000
Taxes
7,500
Factory supplies
15,000
Supervision
30,000
A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of
$202,500.

$225,000.

$277,500.

$270,000.

Match the items below by entering the appropriate code letter in the space provided.
Direct fixed costs
Investment center
Flexible budget
Return on Investment
Budgetary control
Indirect fixed costs
Controllable costs
Profit center
Static budget
Responsibility reporting system
Responsibility accounting
Management by exception

1.
A measure of the profitability of an investment center computed by dividing controllable margin (in dollars) by average operating assets.
2.
A part of management accounting that involves accumulating and reporting revenues and costs on the basis of the individual manager who has the authority to make the day-to-day decisions about the items.
3.
A projection of budget data at one level of activity.
4.
The use of budgets to control operations.
5.
Costs which are incurred for the benefit of more than one profit center.
6.
A responsibility center that incurs costs, generates revenues, and has control over the investment funds available for use.
7.
The review of budget reports by top management directed entirely or primarily to differences between actual results and planned objectives.
8.
The preparation of reports for each level of responsibility shown in the company's organization char.
9.
Costs that relate specifically to a responsibility center and are incurred for the sole benefit of the center.
10.
Costs that a manager has the authority to incur within a given period of time.
11.
A responsibility center that incurs costs and also generates revenues.
12.
A projection of budget data for various levels of activity.


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