College Accounting 101 Paul St John Final Study Guide
Question and Answer
Which financial statement reports over a period of time?
A)Retained earnings statement
B)Balance sheet
C)Statement of Financial Position
D)#1 & 3 above - CORRECT ANSWER-A) Retained earnings statement
Genesis Company buys a $900 machine on credit. This will affect the:
A)Income statement only
B)Balance sheet only
C)Income statement and retained earnings statement
D)Income statement, retained earnings statement, and balance sheet - CORRECT
ANSWER-B) Balance sheet only
When calculating interest expense using the effective interest rate method, the
___________ interest rate should be used.
a. market
b. discount
c. stated
d. contract - CORRECT ANSWER-A) market
A corporation issues for cash $8,000,000 of 20-year, 8% bonds, interest payable
semiannually. The amount received for the bonds will be
a. the present value of 40 semiannual interest payments of $320,000, plus the
present value of $8,000,000 to be repaid in 20 years.
b. the present value of 20 annual interest payments of $640,000.
c. the present value of $8,000,000 to be repaid in 20 years, less the present value of
40 semiannual interest payments of $320,000.
d. the present value of 20 annual interest payments of $640,000, plus the present
value of $8,000,000 to be repaid in 20 years. - CORRECT ANSWER-A) the present
value of 40 semiannual interest payments of $320,000, plus the present value of
$8,000,000 to be repaid in 20 years.
Douglas Company issued five-year bonds on January 1. The 12% bonds have a face
value of $35,000,000 and pay interest every January 1 and July 1. The bonds sold
for $37,702,483 based on the market interest rate of 10%. Douglas Company uses
the effective interest rate method to amortize bond discounts and premiums. On July
1 of the same year, Douglas Company should record interest expense (rounded to
the nearest dollar) of
a. $2,100,000.
b. $1,885,124.
c. $2,262,149.
d. $4,200,000. - CORRECT ANSWER-B) $1,885,124
When the effective interest rate method is used, the amortization of the bond
premium
,a. increases interest expense each period.
b. has no effect on the interest expense in any period.
c. decreases interest expense each period.
d. increases interest expense in some periods and decreases interest expense in
other periods. - CORRECT ANSWER-c. decreases interest expense each period
Under the corporate form of business organization,
a. stockholders' acts can bind the corporation even though the stockholders have not
been appointed as agents of the corporation.
b. stockholders wishing to sell their corporation shares need not get the approval of
other stockholders, thus making it easy to transfer ownership rights.
c. a stockholder is personally liable for the debts of the corporation.
d. stockholders wishing to sell their corporation shares must get the approval of other
stockholders. - CORRECT ANSWER-b. stockholders wishing to sell their corporation
shares need not get the approval of other stockholders, thus making it easy to
transfer ownership rights.
Which of the following statements concerning taxation is accurate?
a. Only the stockholders must pay taxes on corporate income.
b. Corporations pay federal income taxes but not state income taxes.
c. Corporations pay federal and state income taxes.
d. Corporations pay income taxes but their stockholders do not. - CORRECT
ANSWER-c. Corporations pay federal and state income taxes.
An advantage of the corporate form of business entity is
a. that corporations are subject to more governmental regulations.
b. double taxation.
c. unlimited liability for stockholders.
d. the ease of transfer of ownership. - CORRECT ANSWER-d. the ease of transfer
of ownership.
Which of the following is not characteristic of a corporation?
a. Corporations have less regulatory costs than other business forms.
b. The financial loss that a stockholder may suffer from owning stock in a public
company is limited to the amount invested.
c. Corporations are required to file federal income tax returns.
d. A corporation can own property in its name. - CORRECT ANSWER-a.
Corporations have less regulatory costs than other business forms.
A corporation issues 2,000 shares of common stock for $32,000. The stock has a
stated value of $12 per share. The journal entry to record the stock issuance would
include a credit to Common Stock for
a. $32,000.
b. $12,000.
c. $2,000.
, d. $24,000. - CORRECT ANSWER-d. $24,000.
The entry to record the issuance of common stock at a price above par includes a
credit to
a. Preferred Stock.
b. Cash.
c. Paid-In Capital in Excess of Par—Common Stock.
d. Organizational Expenses. - CORRECT ANSWER-c. Paid-In Capital in Excess of
Par—Common Stock.
The number of shares remaining in the hands of shareholders after some stock has
been reacquired is referred to as the shares
a. issued.
b. in arrears.
c. authorized.
d. outstanding. - CORRECT ANSWER-d. outstanding.
The number of shares of stock that a corporation can issue as stated in its charter is
referred to as
a. issued.
b. arrears.
c. authorized.
d. outstanding. - CORRECT ANSWER-c. authorized.
What items belong on the Balance sheet statement? (6 items) - CORRECT
ANSWER-1) accounts receivable
2) cash
3) common stock
4) land
5) supplies
6) wages payable
What items belong on the income statement? (4 items) - CORRECT ANSWER-1)
fees earned
2) supplies expense
3) utilities expense
4) wages expense
What items do not belong on the balance sheet statement? (4 items) - CORRECT
ANSWER-1) fees earned
2) supplies expense
3) utilities expense
4) wages expense
What items do not belong on the income statement? (6 items) - CORRECT
ANSWER-1) accounts receivable
2) cash
Question and Answer
Which financial statement reports over a period of time?
A)Retained earnings statement
B)Balance sheet
C)Statement of Financial Position
D)#1 & 3 above - CORRECT ANSWER-A) Retained earnings statement
Genesis Company buys a $900 machine on credit. This will affect the:
A)Income statement only
B)Balance sheet only
C)Income statement and retained earnings statement
D)Income statement, retained earnings statement, and balance sheet - CORRECT
ANSWER-B) Balance sheet only
When calculating interest expense using the effective interest rate method, the
___________ interest rate should be used.
a. market
b. discount
c. stated
d. contract - CORRECT ANSWER-A) market
A corporation issues for cash $8,000,000 of 20-year, 8% bonds, interest payable
semiannually. The amount received for the bonds will be
a. the present value of 40 semiannual interest payments of $320,000, plus the
present value of $8,000,000 to be repaid in 20 years.
b. the present value of 20 annual interest payments of $640,000.
c. the present value of $8,000,000 to be repaid in 20 years, less the present value of
40 semiannual interest payments of $320,000.
d. the present value of 20 annual interest payments of $640,000, plus the present
value of $8,000,000 to be repaid in 20 years. - CORRECT ANSWER-A) the present
value of 40 semiannual interest payments of $320,000, plus the present value of
$8,000,000 to be repaid in 20 years.
Douglas Company issued five-year bonds on January 1. The 12% bonds have a face
value of $35,000,000 and pay interest every January 1 and July 1. The bonds sold
for $37,702,483 based on the market interest rate of 10%. Douglas Company uses
the effective interest rate method to amortize bond discounts and premiums. On July
1 of the same year, Douglas Company should record interest expense (rounded to
the nearest dollar) of
a. $2,100,000.
b. $1,885,124.
c. $2,262,149.
d. $4,200,000. - CORRECT ANSWER-B) $1,885,124
When the effective interest rate method is used, the amortization of the bond
premium
,a. increases interest expense each period.
b. has no effect on the interest expense in any period.
c. decreases interest expense each period.
d. increases interest expense in some periods and decreases interest expense in
other periods. - CORRECT ANSWER-c. decreases interest expense each period
Under the corporate form of business organization,
a. stockholders' acts can bind the corporation even though the stockholders have not
been appointed as agents of the corporation.
b. stockholders wishing to sell their corporation shares need not get the approval of
other stockholders, thus making it easy to transfer ownership rights.
c. a stockholder is personally liable for the debts of the corporation.
d. stockholders wishing to sell their corporation shares must get the approval of other
stockholders. - CORRECT ANSWER-b. stockholders wishing to sell their corporation
shares need not get the approval of other stockholders, thus making it easy to
transfer ownership rights.
Which of the following statements concerning taxation is accurate?
a. Only the stockholders must pay taxes on corporate income.
b. Corporations pay federal income taxes but not state income taxes.
c. Corporations pay federal and state income taxes.
d. Corporations pay income taxes but their stockholders do not. - CORRECT
ANSWER-c. Corporations pay federal and state income taxes.
An advantage of the corporate form of business entity is
a. that corporations are subject to more governmental regulations.
b. double taxation.
c. unlimited liability for stockholders.
d. the ease of transfer of ownership. - CORRECT ANSWER-d. the ease of transfer
of ownership.
Which of the following is not characteristic of a corporation?
a. Corporations have less regulatory costs than other business forms.
b. The financial loss that a stockholder may suffer from owning stock in a public
company is limited to the amount invested.
c. Corporations are required to file federal income tax returns.
d. A corporation can own property in its name. - CORRECT ANSWER-a.
Corporations have less regulatory costs than other business forms.
A corporation issues 2,000 shares of common stock for $32,000. The stock has a
stated value of $12 per share. The journal entry to record the stock issuance would
include a credit to Common Stock for
a. $32,000.
b. $12,000.
c. $2,000.
, d. $24,000. - CORRECT ANSWER-d. $24,000.
The entry to record the issuance of common stock at a price above par includes a
credit to
a. Preferred Stock.
b. Cash.
c. Paid-In Capital in Excess of Par—Common Stock.
d. Organizational Expenses. - CORRECT ANSWER-c. Paid-In Capital in Excess of
Par—Common Stock.
The number of shares remaining in the hands of shareholders after some stock has
been reacquired is referred to as the shares
a. issued.
b. in arrears.
c. authorized.
d. outstanding. - CORRECT ANSWER-d. outstanding.
The number of shares of stock that a corporation can issue as stated in its charter is
referred to as
a. issued.
b. arrears.
c. authorized.
d. outstanding. - CORRECT ANSWER-c. authorized.
What items belong on the Balance sheet statement? (6 items) - CORRECT
ANSWER-1) accounts receivable
2) cash
3) common stock
4) land
5) supplies
6) wages payable
What items belong on the income statement? (4 items) - CORRECT ANSWER-1)
fees earned
2) supplies expense
3) utilities expense
4) wages expense
What items do not belong on the balance sheet statement? (4 items) - CORRECT
ANSWER-1) fees earned
2) supplies expense
3) utilities expense
4) wages expense
What items do not belong on the income statement? (6 items) - CORRECT
ANSWER-1) accounts receivable
2) cash
