ACCT 201A Exam #3 Prep Questions All
Answered Correctly 2026-2027 Update.
A major disadvantage of a corporation is - Answer Additional 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 - Answer Common Stock $10,000 and Paid-In
Capital in Excess of Stated Value $2,000
Additions to plant assets are - Answer Capital 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 - Answer Cost Allocation
Entries for cash dividends are required on the - Answer Declaration 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 - Answer Part 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? - Answer The company purchased another company
If everything else is held constant, earnings per share is increased by - Answer The purchase of
treasury stock
, In the stockholders' equity section of the balance sheet, common stock - Answer Is part of
paid-in capital
In the stockholders' equity section, the cost of treasury stock is deducted from - Answer Total
paid-in capital and retained earnings
JD Company borrowed $70,000 on December 1 on a 6-month, 12% note. At December 31 -
Answer Both 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 - Answer The 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 - Answer Credit 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 - Answer Voting
Prescher Corporation issued bonds that pay interest every January 1. The entry to accrue bond
interest at December 31 includes a - Answer Credit to Interest Payable
The benefits to leasing include each of the following except - Answer Higher resale value
The market interest rate - Answer Is the rate investors demand for loaning funds
Answered Correctly 2026-2027 Update.
A major disadvantage of a corporation is - Answer Additional 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 - Answer Common Stock $10,000 and Paid-In
Capital in Excess of Stated Value $2,000
Additions to plant assets are - Answer Capital 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 - Answer Cost Allocation
Entries for cash dividends are required on the - Answer Declaration 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 - Answer Part 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? - Answer The company purchased another company
If everything else is held constant, earnings per share is increased by - Answer The purchase of
treasury stock
, In the stockholders' equity section of the balance sheet, common stock - Answer Is part of
paid-in capital
In the stockholders' equity section, the cost of treasury stock is deducted from - Answer Total
paid-in capital and retained earnings
JD Company borrowed $70,000 on December 1 on a 6-month, 12% note. At December 31 -
Answer Both 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 - Answer The 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 - Answer Credit 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 - Answer Voting
Prescher Corporation issued bonds that pay interest every January 1. The entry to accrue bond
interest at December 31 includes a - Answer Credit to Interest Payable
The benefits to leasing include each of the following except - Answer Higher resale value
The market interest rate - Answer Is the rate investors demand for loaning funds
