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Penn Foster 061692RR – CORPORATIONS
Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer.
1. Birch issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current market value of $3,000. Which of the following is not part of the journal entry for this transaction?
A. Crediting paid-in capital in excess of par common for $600
B. Crediting common stock for $3,000
C. Debiting equipment for $3,000
D. Crediting common stock for $2,400
2. Net sales at Kelly’s Bakery increased from $40,000 to $60,000, and its cost of goods sold increased from $20,000 to $40,000. Vertical analysis based on net sales would show which percentages for cost of goods sold (rounded to the nearest %)?
A. 67% and 40%
B. 40% and 20%
C. 10% and 30%
D. 50% and 67%
3. What is the rate of return on common stockholders’ equity if sales are $100,000, net income is $22,700, and average common stockholders’ equity is $86,000?
A. The rate of return can’t be determined from the information given.
4. If total assets are $6,000, what is the common-size figure of cash, assuming that cash has a balance of $2,400?
5. If you own 500 shares (2% of a corporation’s stock) and the corporation issues 15,000 new shares, how many of the new shares can you purchase under pre-emptive right?
6. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $12,000 in arrears?
A. $18,000 preferred; $22,000 common
B. $20,000 preferred; $20,000 common
C. $40,000 preferred; $0 common
D. $6,000 preferred; $34,000 common
7. If current assets were $100,000 in 2009 and $88,000 in 2010, what was the amount of increase or decrease in percentage terms from 2009 to 2010? (Round to the nearest percent.)
A. Decrease of 14%
B. Increase of 14%
C. Increase of 12%
D. Decrease of 12%
8. Accounts receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year. Income reported on the income statement for the year was $300,000. The cash flow from operating activities on the cash flow statement using the indirect method is
9. Casey Company has a $2,400 credit balance in Paid-In Capital— Treasury Stock. It sells 500 shares of treasury stock that the company reacquired at $21/share, for $18/share. After the transaction, what will the balance be in the Paid-In Capital in Excess of Par— Treasury account?
A. $900 debit
B. $3,900 credit
C. $1,500 debit
D. $900 credit
10. What is Jane’s rate of return on total assets if average total assets are $100,000; net income is $2,000; interest expense if $1,600; and income tax is $2,000?
11. Tammy Company has a beginning accounts receivable balance of $65,000 and an ending accounts receivable balance of $60,000. Net credit sales are $250,000. Tammy’s accounts receivable turnover rate is
12. To determine why net income and cash on the balance sheet don’t equal, an accountant can prepare a/an
A. balance sheet.
B. income statement.
C. statement of cash flows.
D. statement of retained earnings.
13. The records of Ashley Boutique showed a net loss of $30,000; depreciation expense of $25,000; and an increase in supplies on hand of $5,000. The amount of net cash flow from operating activities using the indirect method is
14. Cost of goods sold for the year was $850,000. Inventory was $60,000 at the beginning of the year and $90,000 at the end of the year. There were no changes in the amount in accounts payable for the year. Cash payment for merchandise to be reported under the direct method is
15. Casey Company has an accounts receivable turnover of 36 days, an inventory turnover of 77 days, and an accounts payable turnover of 40 days. Casey’s cash conversion cycle is _______ day(s).
16. Operating cash flows affect
A. current assets and current liabilities.
B. long-term asset accounts.
C. long-term liability accounts.
D. equity accounts.
17. Casey Company reported net income of $35,000; depreciation expenses of $20,000; an increase in accounts payable of $2,000; and an increase in current notes receivable of $3,000. Net cash flows from operating activities under the indirect method is
18. Tammy Corporation has 350,000 shares of $3 par common stock outstanding. It has declared a 5% stock dividend. The current market price of the common stock is $7.50/share. The amount that will be credited to common stock on the date of declaration is
19. Which activities are computed differently using the two methods of formatting a statement of cash flows?
A. Both operating activities and investing activities
B. Financing activities
C. Operating activities
D. Investing activities
20. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is noncumulative. How much will be distributed to the preferred and common stockholders on the date of payment?
A. $40,000 preferred; $0 common
B. $34,000 preferred; $6,000 common
C. $6,000 preferred; $34,000 common
D. $0 preferred; $40,000 common