ACCT 201A Exam #3 QUESTIONS &
ANSWERS(RATED A+)
A major disadvantage of a corporation is - ANSWERAdditional Taxes
ABC Corp. issues 1,000 shares of $10 par value common stock at $12 per share.
When the transaction is recorded, credits are made to - ANSWERCommon Stock
$10,000 and Paid-In Capital in Excess of Stated Value $2,000
Additions to plant assets are - ANSWERCapital Expenditures
Bennie Razor Company has decided to sell one of its old manufacturing machines
on June 30, 2022. The machine was purchased for $80,000 on January 1, 2018, and
was depreciated on a straight-line basis for 10 years assuming no salvage value. If
the machine was sold for $26,000, what was the amount of the gain or loss recorded
at the time of the sale? - ANSWER$18,000 loss
Cuso Company purchased equipment on January 1, 2021, at a total invoice cost of
$400,000. The equipment has an estimated salvage value of $10,000 and an
estimated useful life of 5 years. What is the amount of accumulated depreciation at
December 31, 2022, if the straight-line method of depreciation is used? -
ANSWER$156,000
Depreciation is a process of - ANSWERCost Allocation
Entries for cash dividends are required on the - ANSWERDeclaration date and the
payment date
Howard Corporation issued a 20-year mortgage note payable on January 1, 2022. At
December 31, 2022, the unpaid principal balance will be reported as - ANSWERPart
current and part long-term liability
If a company reports goodwill as an intangible asset on its books, what is the one
thing you know with certainty? - ANSWERThe company purchased another
company
If everything else is held constant, earnings per share is increased by -
ANSWERThe purchase of treasury stock
In the stockholders' equity section of the balance sheet, common stock - ANSWERIs
part of paid-in capital
In the stockholders' equity section, the cost of treasury stock is deducted from -
ANSWERTotal paid-in capital and retained earnings
, JD Company borrowed $70,000 on December 1 on a 6-month, 12% note. At
December 31 - ANSWERBoth the note payable and the interest payable are current
liabilities
Laurel Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are
issued at a premium, this indicates that - ANSWERThe contractual interest rate
exceeds the market interest rate
No Fault Insurance Company collected a premium of $18,000 for a 1-year insurance
policy on April 1. What amount should No Fault report as a current liability for
Unearned Insurance Premiums at December 31? - ANSWER$4,500
On January 1, 2022, Kelly Corp. issues $200,000, 5-year, 7% bonds at face value.
The entry to record the issuance of the bonds would include a - ANSWERCredit to
Bonds Payable for $200,000
Ottman Company borrows $88,500 on September 1, 2022, from Farley State Bank
by signing an $88,500, 12%, 1-year note. What is the accrued interest at December
31, 2022? - ANSWER$3,540
Pierce Company incurred $150,000 of research and development costs in its
laboratory to develop a new product. It spent $20,000 in legal fees for a patent
granted on January 2, 2022. On July 31, 2022, Pierce paid $15,000 for legal fees in
a successful defense of the patent. What is the total amount that should be debited
to Patents through July 31, 2022? - ANSWER$35,000
Preferred stock may have priority over common stock except in - ANSWERVoting
Prescher Corporation issued bonds that pay interest every January 1. The entry to
accrue bond interest at December 31 includes a - ANSWERCredit to Interest
Payable
The benefits to leasing include each of the following except - ANSWERHigher resale
value
The market interest rate - ANSWERIs the rate investors demand for loaning funds
The time period for classifying a liability is one year or the operating cycle, whichever
is - ANSWERLonger
To be classified as a current liability, a debt must be expected to be paid, within -
ANSWER1 year or the operating cycle, whichever is longer
U-Bet corporation has 10,000 shares of 8%, $100 par value, cumulative preferred
stock outstanding at December 31, 2022. No dividends were declared in 2020 or
2021. If U-Bet wants to pay $375,000 of dividends in 2022, common stockholders
will receive - ANSWER$135,000
What term is used for bonds that have specific assets pledged as collateral? -
ANSWERSecured bonds
ANSWERS(RATED A+)
A major disadvantage of a corporation is - ANSWERAdditional Taxes
ABC Corp. issues 1,000 shares of $10 par value common stock at $12 per share.
When the transaction is recorded, credits are made to - ANSWERCommon Stock
$10,000 and Paid-In Capital in Excess of Stated Value $2,000
Additions to plant assets are - ANSWERCapital Expenditures
Bennie Razor Company has decided to sell one of its old manufacturing machines
on June 30, 2022. The machine was purchased for $80,000 on January 1, 2018, and
was depreciated on a straight-line basis for 10 years assuming no salvage value. If
the machine was sold for $26,000, what was the amount of the gain or loss recorded
at the time of the sale? - ANSWER$18,000 loss
Cuso Company purchased equipment on January 1, 2021, at a total invoice cost of
$400,000. The equipment has an estimated salvage value of $10,000 and an
estimated useful life of 5 years. What is the amount of accumulated depreciation at
December 31, 2022, if the straight-line method of depreciation is used? -
ANSWER$156,000
Depreciation is a process of - ANSWERCost Allocation
Entries for cash dividends are required on the - ANSWERDeclaration date and the
payment date
Howard Corporation issued a 20-year mortgage note payable on January 1, 2022. At
December 31, 2022, the unpaid principal balance will be reported as - ANSWERPart
current and part long-term liability
If a company reports goodwill as an intangible asset on its books, what is the one
thing you know with certainty? - ANSWERThe company purchased another
company
If everything else is held constant, earnings per share is increased by -
ANSWERThe purchase of treasury stock
In the stockholders' equity section of the balance sheet, common stock - ANSWERIs
part of paid-in capital
In the stockholders' equity section, the cost of treasury stock is deducted from -
ANSWERTotal paid-in capital and retained earnings
, JD Company borrowed $70,000 on December 1 on a 6-month, 12% note. At
December 31 - ANSWERBoth the note payable and the interest payable are current
liabilities
Laurel Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are
issued at a premium, this indicates that - ANSWERThe contractual interest rate
exceeds the market interest rate
No Fault Insurance Company collected a premium of $18,000 for a 1-year insurance
policy on April 1. What amount should No Fault report as a current liability for
Unearned Insurance Premiums at December 31? - ANSWER$4,500
On January 1, 2022, Kelly Corp. issues $200,000, 5-year, 7% bonds at face value.
The entry to record the issuance of the bonds would include a - ANSWERCredit to
Bonds Payable for $200,000
Ottman Company borrows $88,500 on September 1, 2022, from Farley State Bank
by signing an $88,500, 12%, 1-year note. What is the accrued interest at December
31, 2022? - ANSWER$3,540
Pierce Company incurred $150,000 of research and development costs in its
laboratory to develop a new product. It spent $20,000 in legal fees for a patent
granted on January 2, 2022. On July 31, 2022, Pierce paid $15,000 for legal fees in
a successful defense of the patent. What is the total amount that should be debited
to Patents through July 31, 2022? - ANSWER$35,000
Preferred stock may have priority over common stock except in - ANSWERVoting
Prescher Corporation issued bonds that pay interest every January 1. The entry to
accrue bond interest at December 31 includes a - ANSWERCredit to Interest
Payable
The benefits to leasing include each of the following except - ANSWERHigher resale
value
The market interest rate - ANSWERIs the rate investors demand for loaning funds
The time period for classifying a liability is one year or the operating cycle, whichever
is - ANSWERLonger
To be classified as a current liability, a debt must be expected to be paid, within -
ANSWER1 year or the operating cycle, whichever is longer
U-Bet corporation has 10,000 shares of 8%, $100 par value, cumulative preferred
stock outstanding at December 31, 2022. No dividends were declared in 2020 or
2021. If U-Bet wants to pay $375,000 of dividends in 2022, common stockholders
will receive - ANSWER$135,000
What term is used for bonds that have specific assets pledged as collateral? -
ANSWERSecured bonds
