Account Rec. II
Partnerships
Corporations
Long-Term Liabilities
Mixed bag
100
The matching principle, as applied to bad debts, requires: A. That expenses be ignored if their effect on the financial statements is unimportant to users' business decisions. B. The use of the direct write-off method for bad debts. C. The use of the allowance method of accounting for bad debts. D. That bad debts be disclosed in the financial statements. E. That bad debts not be written off.
What is the use of the allowance method of accounting for bad debts
100
A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is a: A. Mutual agency partnership. B. Limited partnership. C. Limited liability partnership. D. General partnership. E. Limited liability company.
What is Limited partnership.
100
Par value of a stock refers to the:
What is value assigned per share by the corporate charter
100
A bond traded at 102½ means that:
What is the bond traded at 102.5% of its par value.
100
A corporation sold 14,000 shares of its $1 par value common stock at a cash price of $13 per share. The entry to record this transaction would include:
What is a credit to Common Stock for $14,000.
200
If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in: A. An increase in the expenses of the current period. B. A reduction in current assets. C. A reduction in equity. D. No effect on the expenses of the current period. E. A reduction in current liabilities.
What is No effect on the expenses of the current period.
200
Partnership accounting is the same as accounting for: A. A sole proprietorship. B. A corporation. C. A sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner. D. An S corporation. E. A corporation, except that retained earnings is used to keep track of partners' withdrawals.
What is a sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner.
200
When a corporation has only one class of stock, the stock is called
What is common stock.
200
A disadvantage of bond financing is: A. Bonds do not affect owners' control. B. Interest on bonds is tax deductible. C. Bonds can increase return on equity. D. It allows firms to trade on the equity. E. Bonds pay periodic interest and the repayment of par value at maturity.
What is bonds pay periodic interest and the repayment of par value at maturity.
200
In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance: A. Is ignored when earnings are not sufficient to pay interest. B. Can make up for unequal capital contributions. C. Is an expense of the business. D. Must be paid because the partnership contract has unlimited life. E. Legally becomes a liability of the general partner.
What is can make up for unequal capital contributions.
300
A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and the length of time past due is the:
What is Aging of accounts receivable method.
300
R. Stetson contributed $14,000 in cash plus office equipment valued at $7,000 to the SJ Partnership. The journal entry to record the transaction for the partnership is:
What is Debit Cash $14,000; debit Office Equipment $7,000; credit R Stetson, Capital $21,000.
300
The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is: A. Always equal to its par value. B. Always equal to its stated value. C. Referred to as paid-in capital. D. Referred to as retained earnings. E. Always below its stated value.
What is referred to as paid-in capital.
300
A bondholder that owns a $1,000, 10%, 10-year bond has: A. Ownership rights in the issuing company. B. The right to receive $10 per year until maturity. C. The right to receive $1,000 at maturity. D. The right to receive $10,000 at maturity. E. The right to receive dividends of $1,000 per year.
What is the right to receive $10,000 at maturity.
300
Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semi-annually. The current market rate is 8%. The amount of interest owed to the bondholders for each semiannual interest payment is:
What is $33,750.
400
On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $95,250; Allowance for Doubtful Accounts, credit balance of $921. What amount should be debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end of the current year will be uncollectible?
What is $4,794.
400
Forman and Berry are forming a partnership. Forman will invest a building that currently is being used by another business owned by Forman. The building has a market value of $80,000. Also, the partnership will assume responsibility for a $20,000 note secured by a mortgage on that building. Berry will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Forman's Capital account are:
What is Building, $80,000 and Forman, Capital, $60,000.
400
A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and paid out cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:
What is $433,750.
400
Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semi-annually. The current market rate is 8%. The amount of interest owed to the bondholders for each semiannual interest payment is:
What is $33,750.
400
A bond sells at a discount when the: A. Contract rate is above the market rate. B. Contract rate is equal to the market rate. C. Contract rate is below the market rate. D. Bond has a short-term life. E. Bond pays interest only once a year.
What is Contract rate is below the market rate.
500
A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is an $800 debit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:
What is $4,400
500
Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer's capital account?
What is $20,000. Singer's Share of Income = Partnership Income * Ratio of Capital Investments Singer's Share of Income = $75,000 * [$40,000/($60,000 + $50,000 + $40,000)] Singer's Share of Income = $75,000 * ($40,000/$150,000) = $20,000
500
Percy Corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 400 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include:
What is A debit to Organization Expenses for $4,000
500
On January 1 of 2015, Parson Freight Company issues 7%, 10-year bonds with a par value of $2,000,000. The bonds pay interest semi-annually. The market rate of interest is 8% and the bond selling price was $1,864,097. The bond issuance should be recorded as:
What is Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000.
500
Forman and Berry are forming a partnership. Forman will invest a building that currently is being used by another business owned by Forman. The building has a market value of $80,000. Also, the partnership will assume responsibility for a $20,000 note secured by a mortgage on that building. Berry will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Forman's Capital account are:
What is Building, $80,000 and Forman, Capital, $60,000.
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