Acc 111 financial accounting i – test 3 – spring 2014

Test #3
Spring 2014 NAME___________________________________

1. Journalize the following transactions using
A. the direct write-off method of accounting for uncollectible receivables
B. the allowance method of accounting for uncollectible receivables

June 10 Received $1,100 from Jim Dobbs and wrote off $4,000, the remainder owed.
Oct. 11 Reinstated the account of Jim Dobbs and received $4,000 cash in full payment.
A.
DEBIT CREDIT
B:
DEBIT CREDIT

2. Determine the amount of interest due at maturity and the maturity value on the following notes assuming the year to have 360 days:

Face Term Interest Interest Maturity
Amount of Note Rate Amount Value
(a) $6,000 60 days 9%
(b) $9,000 90 days 8%

3. Journalize the following transactions for Solley Company.
a. Received a $4,800.00, 90-day, 9% note from Alan Hibbetts in payment of his account.
b. Received the amount due from Hibbetts on his note.
DEBIT CREDIT

4. Classify each of the following costs associated with long-lived assets as one of the following:
A. Buildings
B. Machinery and Equipment
C. Land
D. Land Improvements

______19. Fees paid to architect to design new office building

_____ 20. Cost of insurance during the construction of new office building

_____ 21. Interest on money borrowed to finance construction of new office building

_____ 22. Sales Taxes paid on new factory equipment

_____ 23. Freight costs paid on purchase of new equipment

_____ 24. Repairs made to used office equipment at acquisition

_____ 25. Costs to survey a new piece of land for a new business location

_____ 26. Costs of government permits required to develop land for a new business location

_____ 27. Purchase price of land purchased for new business site

_____ 28. Landscaping at new business location

5. Determine the depreciation expense for the first year two years for equipment costing $500,000, with a life of 5 years, and residual value of $50,000, using (a) the double declining-balance method and (b) the straight-line method.
(a) Year 1

Year 2

(b) Year 1

Year 2

6. A company had outstanding stock as follows during each of its first three years of operations: 2,500 shares of 10% cumulative preferred stock, $100 par, and 50,000 shares of $10 par common stock. The amounts distributed as dividends are as follows:
Year 1 $12,000
Year 2 $28,000
Year 3 $60,000

Determine the total dividends and per share dividends for each class of stock for each year by completing the schedule.

Preferred Common
Total Per Share Total Per Share

7. On April 1, 10,000 shares of $5 par common stock were issued at $22, and on April 7, 5,000 shares of $50 par preferred stock were issued at $104. Journalize the entries for April 1 and 7.

DEBIT CREDIT
8. On February 1 of the current year, Motor, Inc. issued 500 shares of $2 par common stock to an attorney in return for preparing and filing the Articles of Incorporation. The value of the services is $8,500. Journalize this transaction.

DEBIT CREDIT
9. On April 10, a company acquired land in exchange for 1,000 shares of $20 par common stock with a current market price of $73. Journalize this transaction.

DEBIT CREDIT

10. A corporation, which had 18,000 shares of common stock outstanding, declared a 3-for-1 stock split. Answer the following:
(a) What will be the number of shares outstanding after the split? ___________________________
(b) If the common stock had a market price of $240 per share before the stock split, what would be an approximate market price per share after the split? _________________________________

11. The dates of importance in connection with a cash dividend of $65,000 on a corporation’s common stock are January 15, February 15, and March 15. Journalize the entries required on each date.

DEBIT CREDIT

MULTIPLE CHOICE – Circle the letter of the best answer.
1. Under the corporate form of business organization
a. ownership rights are easily transferred.
b. a stockholder is personally liable for the debts of the corporation.
c. stockholders’ acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.
d. stockholders wishing to sell their corporation shares must get the approval of other stockholders.
2. The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called
a. treasury stock
b. issued stock
c. outstanding stock
d. authorized stock

3. Par value
a. is the monetary value assigned per share in the corporate charter.
b. represents what a share of stock is worth.
c. represents the original selling price for a share of stock.
d. is established for a share of stock after it is issued.

4. The date on which a cash dividend becomes a binding legal obligation is on the
a. declaration date.
b. date of record.
c. payment date.
d. last day of the fiscal year end.

5. The primary purpose of a stock split is to
a. increase paid-in capital
b. reduce the market price of the stock per share
c. increase the market price of the stock per share
d. increase retained earnings

6. Which of the following statements is not true about a 2-for-1 split?
a. Par value per share is reduced to half of what it was before the split.
b. Total contributed capital increases.
c. The market price will probably decrease.
d. A stockholder with ten shares before the split owns twenty shares after the split.

7. Which of the following below is an example of a capital expenditure?
a. cleaning the carpet in the front room
b. tune-up for a company truck
c. replacing an engine in a company car
d. replacing all burned-out light bulbs in the factory 0

8. When a company throws away machinery that is fully depreciated with no residual value, this transaction would be recorded with the following entry
a. debit Accumulated Depreciation; credit Machinery
b. debit Machinery; credit Accumulated Depreciation
c. debit Cash; credit Accumulated Depreciation
d. debit Depreciation Expense; credit Accumulated Depreciation

9. Which of the following below is an example of a capital expenditure?
a. cleaning the carpet in the front room
b. tune-up for a company truck
c. replacing an engine in a company car
d. replacing all burned-out light bulbs in the factory

10. Allowance for Doubtful Accounts is classified as a(n) ______ and has a normal ______ balance.
a. equity, credit
b. contra-asset, debit
c. equity, debit
d. contra-asset, credit

11. The amount of the promissory note plus the interest earned on the due date is called the
a. realizable value
b. maturity value
c. face value
d. net realizable value

12. All of the following below are needed for the calculation of straight-line depreciation except
a. cost
b. residual value
c. estimated life
d. units produced