INSTRUCTIONS: Complete the Items Below
ACCT 101 – MR. FARINA
Pre-quiz #6 (Chapters 11 and 12)
INSTRUCTIONS: Complete the items below.
Name
1
FILL-IN-THE-BLANK—PRINCIPLESANDTERMINOLOGY—Chapter 11
INSTRUCTIONS: Complete each of the following statements by writing the appropriate words or amounts in the Answers column.
ForAnswers / Scoring
0.Corporations whose shares of stock are widely distributed and traded in
a public market are called ...... /
public corporations /
0. ____
1-2.A corporation purchases 20,000 shares of its own $25 par common stock for $1,250,000, recording it at cost. Will the purchase increase, decrease, or have no effect on the following?
1.Expenses ...... / 1. ____
2.Total stockholders’ equity ...... / 2. ____
3-5.The stock in Question 1-2 is resold for $1,500,000. Will the sale increase, decrease, or have no effect on the following?
3.Revenues ...... / 3. ____
4.Total stockholders’ equity ...... / 4. ____
5.Total assets ...... / 5. ____
6.If 90,000 shares of common stock are authorized, 75,000 shares are issued, and 5,000 shares are held as treasury stock, how many shares are outstanding? /
6. ____
7.Organization costs are normally classified as a(n) ...... / 7. ____
8-9.A corporation’s outstanding stock is composed of 20,000 shares of $5 preferred and 100,000 shares of common, $25 par. At the end of its first year of operations, a total of $200,000 in dividends is to be distributed. Determine the total amount of the dividends to be paid on the preferred stock and common stock.
8.Preferred ...... / $ / 8. ____
9.Common ...... / $ / 9. ____
10.The excess of issue price over par of common stock is termed a .... / 10. ____
11.A debit balance in Retained Earnings is called a(n) ...... / 11. ____
12.The effect on total stockholders’ equity of the declaration of a cash dividend is (increase, decrease, or no effect) /
12. ____
13.Three different dates related to a cash dividend declaration are (1) date of declaration, (2) date of record, and (3) date of payment. The date for recording liability is the date of /
13. ____
14.A corporation with 30,000 shares of common stock issued, of which
5,000 shares are held as treasury stock, declares a cash dividend of $4
a share. The total amount of the dividend is ...... /
$ /
14. ____
15-18.State the net effect (increase, decrease, no effect) of the authorization and issuance of stock certificates in a stock split on each of the following:
15.Paid-in capital ...... / 15. ____
16.Retained earnings ...... / 16. ____
17.Number of shares outstanding ...... / 17. ____
18.Market price per share ...... /
18. ____
For
Answers / Scoring
19-22.State the net effect (increase, decrease, no effect) of the declaration and payment of a cash dividend on the following:
19.Paid-in capital ...... / 19. ____
20.Retained earnings ...... / 20. ____
21.Total stockholders’ equity ...... / 21. ____
22.Cash ...... / 22. ____
23.The liability of the stockholders of a corporation is usually (limited, unlimited) with respect to debts owed by the corporation /
23. ____
FILL-IN-THE-BLANK—PRINCIPLESANDTERMINOLOGY—Chapter 12
INSTRUCTIONS:CompletethefollowingstatementsbywritingtheappropriatewordsoramountsintheAnswerscolumn.
ForAnswers / Scoring
0.Investment by one corporation in the controlling interest of another corporation is called a /
business combination /
0. ____
1.An item classified as a prior period adjustment should be reported in a .. / 1. ____
2-4.Income before income tax reported on the income statement for the
year is $750,000. Because of temporary differences in accounting and tax methods, the taxable income for the same year is $600,000. If the income tax rate is 40%, determine the amount of each of the following:
2.Income tax to be reported on the income statement ...... / $ / 2. ____
3.Actual income tax to be paid during the year ...... / $ / 3. ____
4.Deferred income tax liability at the end of the year if the balance was a credit of $6,000 at the beginning of the year /
$ /
4. ____
5-6.Identifythefollowingasapriorperiodadjustmentoranextraordinaryitem:
5.Material error in computing patents expense at end of preceding fiscal year / 5. ____
6.Gain from condemnation of building ...... / 6. ____
7-11.Indicatewhetherbalancesinthefollowingaccountswouldbereportedonthebalancesheet,retainedearningsstatement,orincomestatement:
7.Loss from Discontinued Operations ...... / 7. ____
8.Deferred Income Tax Payable ...... / 8. ____
9.Investment in XYZ Co. Common Stock ...... / 9. ____
10.Restructuring charge ...... / 10. ____
11.Marketable Securities ...... / 11. ____
12-15.Indicate whether each of the following accounts would be included in or excluded from the paid-in capital section of the balance sheet:
12.Paid-In Capital in Excess of Par—Common Stock ...... / 12. ____
13.Investment in XYZ Co. Common Stock ...... / 13. ____
14.Treasury Stock ...... / 14. ____
15.Preferred stock ...... / 15. ____
16.A financial ratio that represents how much the market is willing to pay
per dollar of a company’s earnings is the ...... /
16. ____
17.Under this method of accounting for long-term investments in stocks,
cash dividends are credited to the investment account ...... /
17. ____
18-21.Parent Company owns 90% of the outstanding shares of Sub Corporation.
18.Parent Company is referred to as the ...... / 18. ____
19.Sub Corporation is referred to as the ...... / 19. ____
20.The equity of the remaining 10% of Sub Corporation stock is called .... / 20. ____
For
Answers / Scoring
21.Securities held with the intention of trading for profit are called ...... /
21. ____
22.Dividends received from marketable securities are reported on the income statement as / 22. ____
23.Dividends received from equity-method securities are recorded as a ... / 23. ____
24.Differences between taxable income and income reported on the income statement that reverse in later years are called /
24. ____
25.Extraordinary items for financial reporting purposes are unusual in
nature and ...... /
25. ____
26.All changes in stockholders’ equity, except dividends and stockholders’ investments, are described by the term /
26. ____
27.Temporary investments are reported on the balance sheet at (cost or fair market value) /
27. ____
PROBLEM1—CLASSIFICATIONOFCORPORATEACCOUNTS—Chapter 11
INSTRUCTIONS: Identify each of the items listed below as an asset, liability, stockholders’ equity, revenue, or expense, and indicate the normal balance of each account.
Answers / ForItem / Balance / Scoring
0.Common Stock ...... / stockholders’
equity /
credit /
0. ____
1.Organization Costs ...... / 1. ____
2.Paid-In Capital in Excess of Par—Preferred Stock ...... / 2. ____
3.Retained Earnings ...... / 3. ____
4.Treasury Stock ...... / 4. ____
5.Preferred Stock ...... / 5. ____
6.Stock Dividends Distributable ...... / 6. ____
PROBLEM2—ANALYSISOFCORPORATETRANSACTIONS—Chapter 11
INSTRUCTIONS: Selected corporation transactions are listed below. For each transaction, indicate the account(s) to be debited and credited by inserting in the appropriate column the letter(s) that correspond to the accounts listed below. (Do not record amounts.)
ACCOUNTS
A.CashH.Paid-In Capital in Excess of Par—Preferred Stock
B.Cash DividendsI.Preferred Stock
C.Cash Dividends PayableJ.Retained Earnings
D.Common StockK.Stock Dividends
E.Organization Cost ExpenseL.Stock Dividends Distributable
F.Paid-In Capital from Sale of Treasury StockM.Treasury Stock
G.Paid-In Capital in Excess of Par—Common Stock
For / ForTRANSACTIONS / Debit / Scoring / Credit / Scoring
0.Issued 10,000 shares of $10 par common stock at $120, receiving cash / A / 0. ____ / D, G / 0. ____
1-2.Issued 300 shares of $25 par preferred stock with a fair value of $30
per share to an attorney in payment of legal fees for organizing the corporation /
1. ____ /
2. ____
3-4.Declared a stock dividend of 7,000 shares of $100 par common stock;
fair market value is $150 per share ...... /
3. ____ /
4. ____
5-6.Issued stock dividend declared in Question 3-4 ...... / 5. ____ / 6. ____
7-8.Sold all 500 shares of treasury stock that was originally purchased at
$29 for $35, receiving cash ...... /
7. ____ /
8. ____
9-10.Acquired treasury stock for $20 per share. It had originally been $10
par common stock issued at $16 per share ...... /
9. ____ /
10. ____
11-12.Declared a cash dividend on common stock ...... / 11. ____ / 12. ____
PROBLEM3—PROBLEMS—Chapter 12
INSTRUCTIONS:CompletethefollowingstatementsbywritingtheappropriatewordsoramountsintheAnswerscolumn.
ForAnswers / Scoring
0.The amount debited to the investment account when STU Co. acquires
80% of the common stock of VWY Co. for $300,000 cash is ...... /
$300,000 /
0. ____
1-4.The stockholders’ equity of a corporation is composed of preferred $5 stock, $125,000; paid-in capital in excess of par—preferred stock, $10,500; common stock, $25 par, $250,000; paid-in capital in excess of par—common stock, $200,000; retained earnings, $60,000. The net income is $75,000.
1.The paid-in capital attributable to preferred stock is ...... / $ / 1. ____
2.The paid-in capital attributable to common stock is ...... / $ / 2. ____
3.The total stockholders’ equity is ...... / $ / 3. ____
4.The earnings per share of common stock is ...... / $ / 4. ____
5.On January 2, Peach Company purchases 35% of the 20,000 outstanding shares of $25 par common stock of Sharpe Corporation at $18. The amount debited to Investment in Sharpe Corporation Stock is /
$ /
5. ____
6-8.Sharpe Corporation in Question 5 realizes net income of $75,000 and declares and pays cash dividends of $45,000 in the first year following acquisition by Peach Co.
6.Peach Co.’s share of the $75,000 of net income amounts to ...... / $ / 6. ____
7.Peach Co.’s share of the $45,000 of dividends amounts to ...... / $ / 7. ____
8.Peach Co.’s net increase in its investment in Sharpe Corporation account amounts to /
$ /
8. ____
9.At the end of the first year following acquisition by Peach Company, Sharpe Corporation reported $300,000 of sales. Peach Company reported $450,000 of sales, which included $35,000 of sales to Sharpe Corporation. The amount of sales to be eliminated in preparing a consolidated income statement for the year is /
$ /
9. ____
10.Pull Corporation purchases 100 shares of Bill Co.’s $15 par common stock at $47 a share plus a brokerage fee of $100. The amount of the journal entry to record the purchase is /
$ /
10. ____
11.Pull Corporation sells the shares of Bill Co. in Question 10 at
$45 a share with net proceeds of $4,400. The amount of the gain or
loss from the sale is ...... /
$ /
11. ____
12.Pull Corporation reported earnings per share of $5.25 in 2008. The market price of the common stock was $21 at the end of 2004. The price-earnings ratio on this stock is /
12. ____
PROBLEM 4 – SHORT ESSAY
The following note to the consolidated financial statements of Goodyear Tire & Rubber Company relates to the principles of consolidation used in preparing the financial statements:
The company’s investments in 20% to 50% owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for by the equity method. Accordingly, the Company’s share of the earnings of these companies in included in consolidated net income.
Required: Is it a requirement that Goodyear use the equity method in this situation? Explain.
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