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LSM call 4 Byler J a5 Gd g A Pee romiresin|| 1979991999999999999999199991999 95314 = Eocerere reece cece rer cee Ce Cece re reece Scanned with CamScannerAccounting For Corporations Doaa Doaa /Nour NouR Final Revision Theoretical ch.15 6 A corporation records bond transactions when: bY Issues (Sells) Bonds bonds ~ redeems (buys back) Bondholders convert bonds into common stock. 6 If bondholders sell their bond investments to other investors, the issuing firm receives no further money ,nor does the issuing corporation journalize the transaction Issuing Bonds At FaceValue At Discount At Premium v v Contractual Interest % = MKT int.% Contractual Int.% MKT int.% 6 Candlestick reports bonds payable in the long-term liabilitiés section of the balance sheet because the maturity (more than one year away). 6 The company classifies interest payable as a current liability . Take Care @ 6 The contractual interest rate is the rate applied to the face (par) value to arrive at the interest paid in a year. ~_& The market interest rate is the rate investors’ demand| market interest rates change daily. 2. Issuing Bonds at Discount 3. Issuing Bonds at Premium is Definition | Selling the bond at a value less than of its Selling the bond at a value More than of Face Value its Face Value Used Contractual Interest % < Market Int.% Contractual Interest % > Market Int.%6 cwhen _] gall eeu og shy SHE hs Gta pial The price of the.bonds will bebidup - ||... SS gh g sity He uiad patil Discount = Face value — Selling Price Premium= Selling Price — Face value of bond of bond of bond of bond Recordin | Cash 98,000 Cash 102,000 gsale of | Discount on bond Payable 2,000 Bonds Payable 100,000 bonds Bonds Payable 100,000 Premium on bond Payable 2,000 In Balance Sheet In Balance Sheet Long-term liabilities Long-term liabilities Statemen | Bond Payable 100,000 Bond Payable 100,000 t | Less: Discount on bond Payable 2,000 Add: Premium on bond Payable 2,000 Presentat ——— — Ton | Carrying (Book) Value $98,000 Carrying (Book) Value $102,000 * Discount on Bonds Payable > contra account has adebit balance - _ itis not an asset. SE ee eons Porn =a Scanned with CamScannerAccounting For Corporations Doaa /Nour 6 The issuance of bonds below face value causes The sale of bonds above face value causes the total cost of borrowing to increase . the total cost of borrowing to be less than Cost Of | § the discount is an additional cost of borrowing | _ the bond interest paid. Borrowin | recorded as as interest expense . 6 The bond premium is considered to be a reduction in the cost of borrowing 8 1. Redeeming Bonds at Maturity Book Value of Bonds = Its Face valu edeeming Bonds Before Maturity i & Acompany may decide to redeem bonds before maturity: > To reduce interest cost - _® Toremové debt from its balance sheet. & AcomparG should redeem debt early only tf it has sufficient cash resources. 6 Whes’a company redeems bonds before maturity, itis necessary to: (1) Eliminate the carrying value of the bonds at the redemption date, (2) Record the cash paid : [ay Recognize the gain or loss on redemption. The carrying value of the bondsis the face value of the bonds less any remamnngibond discount or plus any remaining bond premium at the redemption date. Kh Notice that © y The Hiscount Normally has Debit Balance Buta the redemption It wl be Credit We Premium Normally has Credit Balance But 3t the redemption It will be Debit eae tverting Bonds into Conimon Stock’ \& When the issuing company records a conversion, the Company ighiores the current market prices of the bonds and stock. Instead, the company transfers the carrying ‘value of the bonds to paid-in capital accounts & No gain or loss is recognized. Amortization (Apoendix A) Ametiting the discount Amortizing the pre:aium allocating bond discount to expense allocating bond premium to expense jas imeach period in which the bonds are outstanding Increase interest expense reported each I: ou Decrease interest expense reported each period. period. After the Amortizing the discount, After the Amortizing the premium, interest expense exceed the contractual interest expense will be Less than the amount. contractual amount. Or::.Total interest expense will exceed the | Or ::-The contractual interest will exceed the contractual interest by the amount of interest expense by the amount of premium discount over the life of the bonds. over the life of the bonds. ‘As the discount is amortized, As the premiumis amortized, discount balance & “* Carrying value of WY Premium balance & Y Carrying value of thebonds | thetzonds Scanned with CamScanner1 £ & & é ¥ Accounting For Corporations Doaa /Nour Noting That: At maturity ‘Noting That: At maturity The carrying value = The face Value The carrying value = The face Value ofthe bonds. _of the bonds. ofthe bonds. _of the bonds jortizatl The straight-line method of amortization: allocates the same amount to interest expense in each interest petiod. ‘A. Amortizing Bond Discount Bond discount Bond + Number of Interest Amortization = Discount Periods > At maturity, the carrying value of the bonds = The face value of the bonds. B. Amortizing Bond Premium Bond Premium Bond + Number of Interest Amortization = — Premium Periods Long-term liabilities: are obligations expects to pay more than one year in the future. © Bonds are a form of interest-bearing note payable issued by corporations, Types of Bonds © Secured bonds | Bonds have specific assets of the issuer pledged as collateral for the bonds. Example: Mortgage bond (A bond secured by real estate) Sinking fund bond _| A bond secured by specific assets set aside to redeem (retire) the bonds. Unsecured bonds |e Bonds are issued against the general credit of the borrower. (debenture bonds) _|+ Companies with good credit ratings use these bonds extensively. Convertible bonds |e Bonds can be converted into common stock at the bondholder’s option. ‘*__The conversion feature generally is attractive to bond buyers. é = Callable bonds | Bonds that the issuing company can redeem (buy back) at a stated dollar amount prior to maturity. © Acall feature s included in nearly all corporate bond issues. Serial bond Mature in stallment _..Termbond..._- | Mature at specificdate (lump sum - sishes eh ot OS Hate seca hee Face value is the amount of principal due at the maturity date Maturity date The date t is the amount of principal due at the maturity date that the final payment is due to the investor from the issuing company. Contractual interest | is the rate used to determine the amount of cash interest the borrower rate (Stated Rate)_| pays and the investor receives. (is stated as an annual rate.) _~ Bond indenture | A legal document that shows the terms and summarizes the rights of the bondholders and their trustees, and the obligatioris of the issuing company Trustee (usually a financial institution) keeps records of each bondholder, maintains custody of unissued bonds, and holds conditional title to pledged property. ‘other notes: (read only): © The issuing company arranges for the printing of bond certificates. © The indenture and the certificate are separate documents, provides the following information: name of the issuer, face value, contractual interest rate, and maturity date. © Aninvestment company that specializes in selling securities generally sells the bonds for the issuing company. ‘Scanned with CamScannerAccounting For Corporations Doaa /Nour 6 The current market price (present value) of a bond is the value at which it should sell in the marketplace. Current market price (present value) is 0 function of the three factors: 1. dollar amounts to be received, 2. length of time until the amounts are received, and 3. Market rate of interest. i Chapter 17 Usefulness ofthe Statement of Cash Flows & During period, The statemgnt of cash flows reports ——e eee = = cash receipts > cash payments Net change ineash resulting from Operating Investing Financing activities activities activities 6 The information in a statement of cash flows helps investors, creditors, and others assess the following. 1.The entity's ability to generate future cash flows. By examining relationships between items investors can better predict the future cash flows than they can from accrual-t Basis data. h 2,The entity's ability to pay dividends and meet obligations. -If a company does not have adequate cash, it cannot pay employees, settle debt pay dividends. it alone shows the flows of casing business. Tie reasons for the difference between net income and nef cash provided (used) by efating activities. _ isa ‘Net income provides information on the success or failure of a business, a¢crual-basis > Mapy readers of the statement of cash flows want to kndW the reasons for the difference bet\veen net income and net cash provided by operating activities > 4, The.cash investing and financing transactions during the period. : (better understand why assets and liabilities changed during the period). **Classification of Cash Flows 1. Operating activities” most important” include The cash transactions that create revenues and expenses. ( determination of net income). It shows the cash provided by company operations which is considered to be the best measure of ‘a company’s ability to generaté sufficient cash to continue as‘ going concern. 2. Investing activities include (a) acquiring and disposing of investments and property, plant, and equipment, and (b) lending money and collecting the loans. 3. Financing activities include (a) obtaining cash from issuing debt and repaying the amounts borrowed (b) obtaining cash from stockholders, repurchasing shares, and paying dividends. ‘LOWS AND. Scanned with CamScannerDoaa /Nour Accounting For Corporations Operating activities—Income statement items Cash inflows: From sale of goods or services. From interest received and d Cash outflows: suppliers for inventory. - employees for wages. government for taxes. To lenders for interest. ‘To others for expenses. Investing activities—Changes in investments and long-term assets Cash inflows: From sale of property, plant, and equipment. From sale of investments in debt or equity securities of other entities. From collection of principal on loans to other entities. Cash outflows: To purchase property, plant, and equipment. To purchase investments in debt or equity secu To make loans to other entities. lends received. ities of other entities. ies—Changes in long-term liabilities and stockholders’ equity Financing a Cash inflows: a From sale of common stocl From issuance of debt (bonds and notes). Cash outflows: To stockholders as dividends. To redeem long-term debt or reacquire capital stock (treasury stock). Note: - For example, receipts of investment revenue (interest and dividends) are classified as operating activities. So are payments of interest to lender are considered operating activities Because companies report these items in the income statement, where results of operations are shown. Significant Noncash Activities ‘Companies do not report in the body of the statement of cash flows significant financing and ie _ investing activities that donot affect cash, 1. Direct issuance of common stock to purchase assets. 2. Conversion of bonds into common stock. 3. Issuance of debt to purchase assets. 4, Exchanges of plant assets. **Companies prepare the statement of cash flows differently from the three other basic financial statements. -- * Comparative balance sheets. * Current income statement. * Additional information. . **Note @ It is not prepared from an adjusted trial balance . hree major steps in preparing the statement of cash flows Wap dal 17015 fle to da jhat SI ob Cli ai agape Scanned with CamScannerAccounting For Corporations Doaa /Nour STEP 1: Devarmine net cash provided/used by operating acuviies by converal income from an sezrual basis €o a cash basis. Ce rs “This stop Involves analyzing not on the currene years income scammer bur also comparative bslance shears and Seleceed additonal de. ity accounts and record as Roneash transactions. Pp involves analyzing comparative ‘Shoot daea and selected additional ‘effects on cash, STEP 3; Compare the net change In cash on the statement of cash flows with the change In the Ca: ‘oported of the balance sheet to make sure We have 2 Method to ie Cash Flow; Statement the indirect method > Ajuga core og as tet colo affect ash . the direct method > Shows operating cash receipts and payments. in. > Prepared by adjusting each item in the income ‘ompanies prefer for two reasor a statement from the accrual basis to the ca: {a} easier andes costly toprepare, bass 2) on the differences between >The FASB has expressed a preference for, bt inéome and net cash flow from direct method but allows the use of eithér | ppefating activities. ‘method Both/IMust convert net income from an accrual basis to a cash basis Both methods arrive at the same amount for “Net cash provided by operating activities.” ‘They Wiffer in how they arrive at the amount. Indirect Method X + Depreciation o Gin Change in Current Assets. Change in Current Lia j \ + Amortization St loss PE were [increase +Decrease + increase __)- decrease inancing Activities Analyze change in Non-Current Asset & Liability Accounts And Record them as Investing & Financing Activities or as Non cash Investing & Financing Activities. Step #2: Investing Activities 0 Purchase of Fixed Asset & securities + Selling Fixed Asset&securities Scanned with CamScannerif the land purchased directly exchanging bonds for land. The issuance of bonds payable for land has no effect on cash. It is a significant noncash investing and financing activity that merits disclosure in a separate schedule Be, asset + Acauisition (Purchased) - Depreciation ending Asset Given + ? = Given Given 100,000 + R - 10,000 150,000 «Acquisition (Purchased Asset) = $60,000 Step # 3: Financing Activities —_ + + Sell Treasury + Issue Debt 0 Sale of Common Stock Stock {Bonds/Notes) Payment - {-) Buy Treasury (-) Reedemeption of Stock Dividens Payment of the dividends (not the declaration) is a cash outflow that the company reports as a financing activity. f the Divid ment is not given: REBeg + Netincome - Dividens paid = RE Ending 200,000 + 50,000 7 = 150,000 ‘Step #4: Compare the net change in cash on the Statement of Cash Flows with the change In the cash account reported on the Balance Sheet to make sure the amounts agree, Scanned with CamScannerAccounting For Corporations DoAA/nouR ch.14 © A dividend js a corporation's distribution of cash or stock to its stockholders . © Types of Dividends: 1. Cash dividends. 3. Stock dividends. 2. Property dividends. 4. Scrip (promissory note). * Cash-dividends are not paid on treasury shares. * Foracory i ay a cash dividend, it must have the following: 1. Retained cariings Adequate cash: 13, A declaration of dividends 1 aes **Liquidating dividend: A dividend declared out of paid-in capital Such a dividend reduces or “liquidates” the amount originally paid in by stockholders. company’s board of directors must Gorefully consider both current and fut J Sefends on the company’s cash resources. La (declaration of dividends “ % Dividends do not accrue like interest on a note payable, and they oe hota j liability until dectared. Entries for Cash Dividends} Three dates are important 2. Record Date 3. Payment Date aia 2. Adequate cash: Before declaring a cash dividend +253 cL)! e235 di a 4, Declaration Date The declaration commits the | the corporation updates its stock corporation to'2 legal ownership records. Records the payment of obligation. the dividend. Make an entry “TNo. entry is required Make an entry To recognize the increase in \ Dividends Payable(Liab.) Cash Dividends andthe | The purposeis to identify the _ | 1 Cash (Asset) increase in the liability persons or entities that will no effect on Dividends Payable. receive the dividend, not to stockholders’ equity 4 Cash Dividends determine the amount of the | But reduces current assets 4 Dividends Payable (Liability) dividend liability. and current liabilities Cash Divides ~ Dividends Payable | xx Dividends Payable Cash Entries Scanned with CamScannerAccounting For Corporations Very Important Notes @ 6 Cash dividends decrease W retained earnings. 6 Dividends Payable is a current liability. . & The payment of the dividend réduces both current assets and current liabilities with no effect on stockholders’ equity. 6 The cumulative effect of the declaration and payment of a cash dividend is to” decrease both stockholders’ equity and total assets. ividend Preferences Preferred stockholders have right to receive dividends before common stockholders, 4:1) US ely ail a5 UN jeell peal Per share dividend amount is stated as a percentage of the preferred stock's par value (% of Par Value) or as a specified amount. © Ifacompany does not pay dividends to preferred stockholders, it cannot pay ~ dividends to common stockholders, 4S14:bl gi pi ye ued peat ytiadae I * Most preferred stocks also have a preference on corporate assets if the corporation fails Cumulative Dividend «Preferred stock often contains a cumulative dividend feature. This * Preferred stockholders must be paid both current-year dividends any unpald prior-year dividends called (Dividends in arrears) 5 sisi cl, Before common stockholders re dividen © Stock dividend: a pro rata (proportional to ownership) distribution of the corporation's own stock to stockholders, Whereas a company pays cash in a cash dividend, a company issues shares of stock in astock dividend, i, A stock dividend results in a decréase in retained earnings and an increase in paid-in capital. Unlike a cash dividend, a stock dividend does not decrease total stockholders’ equity or total assets. Notice that © ‘© Similar to Cash Dividends, Stock Dividends decrease retained earnings ‘* Common Stock Dividends Distributable isa stockholders’ equity account, + Itisnota liability becouse assets will not be used to pay the divi **A stock split, like a stock dividend, involves issuance of additional shares to. stockholders according to their percentage ownership. Astock split results in a reduction in the ited value are, ‘The purpose of a stock split is to increase the market ability of the stock by lowering its market price per share. © Nojournal entry recorded for the stock split. Astock split does not have any effect on total paid-in capital, retained earnings, or total stockholders’ equity. — Summarizes the differences between stock dividends and stock splits.v.irap Scanned with CamScannerAccounting For Corporations Item Stock Dividend Total paid-in capital _ \ Increase No change Total retained earnings :* ~~ Decrease No change Total par value (common stock)* - “Increase Z No change Par value per share “="No change Decrease Outstanding shares Increase Increase Total stockholders’ equity... No change No change * m Retained earnings is net income that a company retains in the business. Remember: The closing entry of Retained Earnings In case of Net Income In Case of Net loss i Expenses exceed Revenues Income Summary xx Retained Earnings x Retained Earnings wx Income Summary Restrictions result from one or more of the following causes: 1, Legal restrictions. 45 94.048 $ Many states require a corporation to restrict 4353 retained earnings for the cost of Lt 4433) treasury stock purchased. When the company sells the treasury stock, the restriction is lifted «ib 2. Contractual restrictions. 43353 / Long-termdebt contracts «4 4s Gyall aie may restrict retained e2rnings as a ondition for the loan u=5. “Na The restriction limits 24% the use of corporate assets for payment of“ | dividends cla! gis 45 p20 yyaal s53., Thus, it increases the likelihood that the \ corporation will be able to meet required loan paymenisclball > 2 ans | 3. Voluntary restrictions 4: L585 sf Le sh sith “R The’ board of directors may voluntarily create retained earnings restrictions for specific - ~~ Purposes. «psp Cee diel «Ni 5 jail CM gle 98 Dans Sa 2M ula Aiea Cea fll 581 Guagll Sy Gt Ch SW Leradall§jpZaall Ch Mc 98 Gay ‘< Perior Period Adjustments Aaa PU Net Incomes Hl CLL yikes oly AB Aye Uh ches ty yates cll a any As ya ME tyes oli} y gs ABM LS ly 4 das. coh UH 5 A corporation may close its books and issued financial sttziments then discovers that it made a material error in reporting net Income of a prior year. 1 The correction of a material error in previously issued financial statements is known as a prior period adjustment. The company makes the correction directly to Retained Earnings. Retained Earnings Statement ™ The retained earnings statement shows the changes in retained earnings during the year. ® t Scanned with CamScanner‘Accounting For Corporations ‘This T-account form) transactions that affect retained earnings. _{-) Debit Retained Net loss . Prior period adjustments for overstatement of net income . Cash dividends and stock dividends . Some disposals of treasury stock nother Form © Doaa/nouR Earnings __(4] Credit _ 1. Net income 2. Prior period adjustments for understatement of net income 6 1. Return on Common Stockholders’ Equity shows how many dollars of net incomé the company earned for each dollar invested by ‘Net Income ‘minus + Preferred Dividends *Eamings Per Share [EPS) Average Common Stockholders’ Equity the common stockholders. Return on Common Stockholders’ Equity ™ Aconvenient measure of earnings is (EPS), which indicates the net income earned by each share of outstanding common stock. ‘ToCalculate EPS: Nat income minus, Earnings Pershsre Protemod Dividends Woighted-Avorane Gammon Remember that companies report earnings per share only for common stoc ij GLOSSARY REVIEW Cath dividend A pro rata distribution of ash to steck- Retained earnings Net income that a company retains holders (p. 610). Comulative dividend A featureof prefer! stock ents Retained earnings restrictions Circumstances. that lng the stockholder to receive current year und any unpaid prior jear dividends before common stockhold ersarepaid dividends. (9.612). Declaration date The date the boar of dirctors for tally declares (nuthorizs) a dividend and announces Itto stockholders. (9.611). Deficit A debit balance in retained earings. (p. 619) Dividend A corporations distribution of eash or stock to ts stockholders on a pro rata (proportional) basis. (610) Bae Eamings per share The net Income camed by each shure of otstanding common slack. (p. 624). st Liquidsting dividend A dvidenddectared out of palin ‘capital (p. 610. St Payment date The date dividends arc transferred to stockholders. (p. 611. Prior period adjustment The contctlon of an error in ‘previous issued financial statements. (p. 620). Record date The date when ownership of oulstanding sharesIs determined for dividend purposes. (p. 611). inte busines p69). i rate a portion of retained earings curently unavail- t able for dividends. (p. 620). i _ . Retained earnings statement A financial statement. j ‘that shows the changes in retained carnings during the ‘year (p. 621). i Return on common stockholders’ equity A measure of profitability that shows how many dollars of net }; income were earned for each dollar invested by the }! ‘owners; computed as nel income minus preferred divi- cdenils divided by average common stockholders’ equity. f (62). tock dividend A pro rata distribution to stockholders ofthe corporation's eva stock (p. 615). ockholders equity statement Astterentthatshows f the changes in cach stockholders’ equity account and in foal stockhohler’ equity dating the year (a). stock split The isnance of aditional shares of stock a stoctholderssecodlng to their percentage ownership, It is accompanied by a reduction in the par or stated ‘alus per share (p. 617). ” Scanned with CamScannerwe Cairo University | Faculty of Commerce 8:30am — 10:30 am No. of Pages: g "Answer the following Two Questions: ‘or each of the following statements, if the statement is (Truc) sclect (A), and ifany part of the statement is (False) select, 1. Mortgage bonds and sinking fund bonds are both esamples of debenture bonds. 2. Gains and losses are recognized when convertible bonds are converted Into common stock. 3. Premium on bonds is an‘adi life of the bonds. nal cost of borrowing and should be recorded as inferest expense over the 4. The gain on bond redemption is the difference between the eash paid and the maturity vatuc of the bonds. 5. The carrying value of bonds at maturity should be equal to the face value of the bonds. 6 Discount/on Bonds Payable is contra account to Bonds Payable. \ 7. A prithary objective of the statement of.cash flows is to show the income or loss on investing and finanging transactions \ 8 Nondash investing and financing activities must be reported in the body of a statement of casi flows. 9. The pif medt of interest on bonds payable is classified as a cash outflow from operating act My ~ odd insect method, esined earnings are adjusted for items that affected reported et income but did n Atet cash, et aaa IL, A common stockholder has the right to vote in the election of the board of directors. 12, Each stotkholder ins corporation has a separate eapital account in the stockholders’ equity section of the balance site. 13, The par value of common stock must always be equal to its market value on the date the stock is issued. 14, Cash dividends are nota liability of the corporation nail they are declared by the bosrd of directors. 15. Net income of a eorporation should be closed to retained earnings and net losses should be closed to paid-in capital accounts, —_ % nate yee 16, A debit balance in the Retained Earnings account is identified as a deficit. 17. A detailed stockholders’ equity section in the balance sheet will ist the names of individuals who are eligible to receive dividends on the date of record. ues! n Two: Choose the Correct Answer for the Following statements 18. A corporation issued $49 000, 5%, 10 years bonds on which of the following is true? ynuary 1, 2018. Ifthe market rate of interest is 10%, Model (2) Page tof S Scanned with CamScanner 13‘8, The bonds are sold at face vatue, b. The bonds are sold at a discount. ©. The bonds are sold at a premium. d. The bonds are sold at maturity value. 19. A corporation issued $500 000, 7%, 5 years bonds at 103. Calculate the premium. a. $515 000 b.$35.000 ©.$ 15000 4.$ 175000 20. A corporation issued $1 000 000, 5%, 10 years bonds at 95, Calculate the total cost of borrowing. a. $ $0000 b.$ 500000 ©. $950 000 d.$ $0000 21. A corporation issued $5 000, 8%, 3 years bonds on January 1, 2018, The market rate of interest is 10%. The annual interest paid is: 2.$1200 b.$400 $500 4.$ 1500 22. AS1 000, 12%, 3 years bonds issued for £05 has 0 maturity value of: $1000 b.$ 1050 $120 a d.$50 23. A Corporation issued $2 000 000, 9%, 5 years bonds at face value. These bonds are redeemed at 105 after 2 years. This will result in: 8, $50,000 loss on the retirement, 'b. $100,000 gain on the retirement. ©. $100,000 loss on the retirement. 4. $50,000 gain on the retirement, 24, A Corporation issued $300 000, 10%, 5 years bonds on January 1, 2017 at 90, The carrying value of these bond on December 31, 2017 is: a. $270 000 b.$24000 © $276.000_ d.$6000 25. A Corporation issues $2 000 000, 9%, 10 years bonds at 99. The journal entry includes: “a. Adsbii to Cash of $2,000 000 b. A debit to discount on Bonds Payable of $20 000 c. Acredit to Bonds Payable of $1 980000 d. A credit to premium on Bonds Payable of $20 000 26. A $20 000 bonds with » carrying value of $18 000 is redeemed before maturity at $25 000. Which of the ~ following is true? ees os 5 cane a, A loss of $5 000 is recorded. b. A loss of $7 000 is recorded. c. Aloss of 2 000 is recorded. d. No gain or loss is recorded, 27. On January 1, 2017, a Corporation issued $200 000, 6%, 10 years, bonds at $188,000. Calculate the interest paid on January 1, 2018? a.$ 10800 b.$ 11200 ©.$13 200 $.12.000 28. On January 1, 2016, » Corporation issued $ 600 000, 8%, 5 years bonds at 105. The journal entry on December 31,2016 is: a, Interest Expense 48.000 b. Interest Expense 42.000 Interest payable 48.000 Premium on bond payable 6.000 Interest Payable 48.000 Interest Expense 42.000 Interest Expense 48.000 Interest payable 6000 Premium on bonx! payable 6900 Cash 48.000 Interest Payable 42.000 Model (2) Page2ofS29, On January 1, 2017, a corporation issued $3 000 000, 10%, 5 years bonds for $2 916 000. Using the straight line method, calculate the annual amortization. $8400 b.S.16 800 .$14000 4.87000 30. The journal entry to record the payment of interest, In ease of issuance at premium is: at Interest Expense Load b, Interest Payable sox Interest payable sox Cash wor c. _ Interest Expense wx Interest Payable xxx Premiumon bond payable xxx _____ Premium on bond payable ex Cash ee ~~Cash, Xxx 31. A corporation issued $ 300.000, 8%, 8 years bonds at 94, The journal entry (o record the redemption at maturity is: & Bonds Payable’ 300.000 be Cash 300000 Cash A 300 000 Bonds Payable 300000 ~ & Bonds Payable 300000 Cash 300 000 Discount on bond ———__18.000 Discount on bond ) 18000 wyable ia Se payable Cash SEZ 7200 Bonds Payable | 282.000 32, WoTawi ya Wa7avi Corporation sold 400 shures of treasury stock for $45 per share, The cost for tite shares was S35.The entry to record the sale will incudea el : a to ain on Sale of Treasury Stock for $14.000. _ b.credit 0 Paid-in Capital fr Treasury ‘Stock for $4000. c. debl vi Paid-in Capital in Excess of Par for $4000. ‘d. credit to Treasury Stock for $18 000.” 7 33, Tarawe7 Company originally issued 6 000 shares of $10 parvalue common stock, (erste 000 (S30 per share). Tarawe7 subsequently purchases 600 shares of treasury stock for $27 per share and reselts the 600 shares of treasury stock for $29 per share. In the entry to record the sale of the treasury stock, there will be a a. credit to Common Stock for $16 200. b, credit to Treasury Stock for $6 000. «. debit to Paid Capt in Excess of Par of $18 000, d.credit to Pauid-In Capital from Tressury Stock for $1 200. 's December 31, 2018 balance sheet showed the following: 8% preferred stock, 34, Fanous Ramadan Corporati a $20 par value, 20 stocks issued. issued. Paid-in capital in excess of par— preferred stock $ 120, Pald-in-capital in excess of par—couimon stock $ 4 000, Retained earnings are $ 15 300. Treasury stock (40 stocks) § 1 260. Fanous’s total paid-in capital was: mon stock, S10 par value, 3 900 sto a.$ 93520 b.$94.780, 0. $92 260 d. $54 120 35. From the last statement, Fanous's total legal eapital was: a.$ 39400 b.$93 520 ©.$39000 4.$38 140 36, From the last statement, Fanous's total equity eapital was: 0,$93 520 b.$ 110080 c.$ 108 820 107 560 37. From the last statement, the Treasury Stock was purchased with a price of Model (2) Page 3 ofS = 15 Scanned with CamScannera.$20 b.$10 $30 dS315 38. From the last stalement, the outstanding number of stocks of common shares at the end of the year was: 2. 3900 stocks . 3860 stocks 3920 stocks d, 3880 stocks 39. Ramadan Gana Corporation Stocks included 40 000 shares of $5 par common stock and 10 000 shares of 5%, $10 par noncumulative preferred stock. In 2016, Ramadan dectared and paid dividends of $4 000. In 2017, Ramadan declared and paid dividends of $12 000, Howr much ofthe 2017 dividend was distributed fo preferred shareholders? 2.86000 ».$7000 $5000 d. None ofthese 40. Jean’s Vegetable Market had the following transactions during 2016: Issued $50 000 of par value common stock for cash, Repaid a 6 year note payable in the amount of $22 000. Acquired land by issuing common Stock of par value $50 000. Declared and paid a cash dividend of $7 000. Sold a long-term investment (cost ‘$3.000) for eash of $6 000. Acquired an investment in IBM stock for cash of $10 000. What is the net cash provided by financing activities? $21 000 b. $67 000 $2800 aso 41. Jean's Vegetable Market had the following transactions during 2016: Issued $50 000 of par value common stock for cash. Repaid a 6 year note payable in the amount of $22 000. Acquired land by issuing common stock of par value $100 000. Declared and paid 2 eash dividend of $2 000, Sold a long-term investment (cost $3 000) for eash of $8 000. Acquired an investment in IBM stock for eash of $15,000. What is the net eash Provided (used) by investing activities? a.$ 15.000 6.33000 © * = ~¢.$(7000)- - - — 4.$8000 From No. 51 ta No. 60: XYZ Corp. Provided the following information for the year ended December 31, 2018: - +++ = Balanee Sheet - i ° Ancome Statement for 2018 Tos | 2017 2018 | 2017 ‘Machines’ 45 60 | Notes Payable 6 30 Sales Revenue 600 Equipment 105 120 | Salaries payable UV B Cost of goods sold 420 Cash 528 273. | Bonds Payable 210 ‘180 Gross Profit 180 ~| Inventory 15 45 | Common stocks 150 ” Salaries Expense 27 Retained Eamings | 357 | 210 | | Depreciation Expense 45 Treasury Stock | (21) | (30)| | Other Operating Expense | 75 Total Assets 733 | 498 | Total Lin andEg. | 753 | 498 | | Total operating expenses «any Additional Information provided by the company Includes the following: ‘Total Gains 90 © X¥Zuses the indirect method. ‘Net income before tax [13] * Machines with book value LE 15 was sold for LE 90 cash. ‘Tax Expense 6 + Equipment with book value of LE 15 was sold for LE 30 cash. Net income after tax 7 © XYZ declared and paid LE 15 cash dividends, eee Model (2) Page dots ~ "Scanned with CamScanner» XYZ issued bonds payable for LE 30 cash, © XYZ issued common stocks for LE 60 cash, © XYZ sold treasury stocks for LE 9 cash. © The retained eamings ending balance included prior period adjustment of LE 45. 42, To find the eash flows from operating activities, depreciation expense is: a a.added tonet income. _b. Ignored. ¢. subtracted from net income _d. accurnulated 43. To find the eash flows from operating activities, the change in inventory is: : a.added tonet income. b. Ignored ¢. subtracted from netincome _d. None of these. 44. Net eash flow provided by operating activities is:_ a. LES4 oe b.LES 7 45, Net cash flow provided by investing ac d. None of these 2. LE (90) b.LE90 d. None of trese 46. Net cash flotv provided by financing activities is: " aLEl —brLE 84 ©. LE99 d, None of these 47. To find fi cash Rows from financing activilies, prior period adjustment is: a “if bb. Ignored.> c.bubtracted. d. Capitalized. 48. caulk in net fish ewes daring 2018 is: d. None of these ale AS b.LE273 LE 255 Set 49. Begins h balance of 2018 is; > 4 a. LE SHR LEQ c.LE255 “ a.Nondot these ener ac ee 50, Ending exsh balance of 2018 is: ; 2. LE255 b.LE273 ©. LE526 d. None of these End of the Examination Paper Goort Luck Model (2) Page 5 of 5 Scanned with ‘CamScannerEyorn 2019 UE =\ l= False - 2falSe__sshen Bonds _dve—redeemed befne Modutly | Be ria ing Rg Sos reteset ot, 4—false___DilRevence taetuieen Gash Paid % Garryiny\ vidoe. 5 $$$ rs 6~Tue. z 4_ilse te Sona a Mieia he B——Falge_ Cosh_achuities only i -9.~ “Tare ae ELS eins lo-Folse Aimee so bdige Yaa 13 false, Ae ers on a A Hs Ta el ae, fe Fole—__wekingrn and web loss ~StoleLbe chee FRE \o— Tine z ane aa i Balge a ee ee 13, pees ave. Sdd_ak a ‘Aiud Serene cr ee een 19-c_ Cash (SeorcoaXlo34) SIS0o0 Bone Ryshle 5 p0,006- tg Peeoniusd_of\ Bote! 15,006 = 7 /6 18 * Scanned with CamScanner20-D— Assush inheresh Dotnet Se ee ee Bond dis ees oe eee ee ete ee _( \o001060__= 4507006), 50.000 otal ostof els 85 ‘01000- BB po Wend a fe x sa = p fyear 24. WA i ee ee ee) Ve eS Pavia Bow S Sens. = 6000 exc) Lata Nvedug=—274.0(000-4Go00=-2 *61000— 95.B Cash (emenagJ— 1 880.000 ——______Distouston_ Bond Py. 2.61000 a Bnd Blable —___ 2, cams ctnn 26.2 Bond Dalle. --2.9 000 sae il ggsol Cosh 251000 tice DisGunt, 2000 - “Scanned with CamScanner 1934 LD gy cterest Paid a: QemoroX hI. =812..000l$en¢ / “98-B_Beniun Amucizalia Sand Peniy 38.8 Renin Anartizak aad Rens i a = 8469 = boo . \ SAS) Feats, = : \ ies 210 ay a eri —Prewiuan on Rood pea boon et Se interes Reable —_— — CE en1a0& 87). AB.000 29D Bind Distud pnakedkae - Sond DEG -oP. Peck aoe + 2 apes aa Nog? Periods =r Blouaoo __ 5ies. : ce BADOO | ee ee ——— a = Cash aaa oe = qe ea pat Sais oo, pats Cash 36or99, = Rea Cad ee Tengen stock 40033.) 4.009) PT _tretcess of Py (erties 38-D____ Cash (Ga0x28)____ TEU os pets I A Bea a Paid in_CuP From. FS ” Scanned with CamScannera borigd Shack Pee eee a Common—Stocl, ———___29,000- al_legl_Caf-_——_» _(aa,uagy® oA ASMiapol Reid 19 CaP, ait LO Lai Geet DDS STE Ses —<- __Anvercess_of C5. 54,000 a “Teka Paid an. CPibed @a520)* faba, Relcined_eneniedh —___ Mf Be0 I resang Stocks Goa —_/ (11240) Neel sbaee ek sey sb.D_. Vee ees 3LD. 60.2402 8b, 38.3 _§_Assued Shaes—Rarclaged Gyo 40 to = 2Qoo Shae Ua Re ARAG B.C Atecodag bo Prefered = Sd.X tox loo Share. =e} 21 , Scanned with CamScanner decrease sn. Cash (-) HC Cosh flows. Frm cPerebing ns Poe elraceae Tecan Ww = cee Beech g-exP IS Lae) Ear Son oar ee OT 7 EA +—increase ia Salary yable .. B———_____ in crantie_innates Dagabl Hable ____5_ we Cosh Pmuided bY Doaka = SV Ce rae "Scanned with CamScanner“5.5 Cash Flaws From investirg_achivikies Sale of tnachine. 9. < Sale—o} 2QuiPinest 20. oe if aad Sh ee 20 aa a Rom: a cae ME ia ____ ABissiasee RP eae dee ee ae —— issue Common Stock ___66 \— Saleh “reas Stock LB cat ie fash bv) 2: Nel increase.in Cash: Si-a\2oaz 255... 9). By —Gsh 6b _beginninay 2a a Da : Cash ob end Se 528 Scanned with CamScannerQuiz 2) Cairo University Teme Aco Y f Commerce et Section One :TRUE-FALSE STATEMENTS: Determine whether ench of the following statements Is (rive or False, if true select (A), and if false 5 select (1). . A 10% stock dividend will increase the mumber of shares outstanding but the par value per share will stay the same: 13 = a Comman Stock Dividends Distributable is reported as additional paid-in capital in the stockholders’ equit - Discount on berfds is an additional cost of horrowing and should be recorded as interest expense over the life of the bonds, 4. If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date. If the market interest rate is greater than the contractual interesi rate, bonds will sell at a discount. Section Two s MULTIPLE CHOICE QUESTIONS 6. Peabody, Inc. has 5,000 shares of 7%, $100 par value, cumulative preferred stock and 50,000 shares of $] par value common stock outstanding at December 31, 2017. If the board of directors declares a $30,000 dividend, the 5 a. preferred shareholders will receive 1/10th of what the common sharcholders will receive. "b. preferred shareholders will receive the entire $30,000. ¢. $30,000 will be held as restricted retained earnings and paid out at some future date. d. preferred shareholders will receive $15,000 and the common shareholders will receive 15,000. pra Dabney, Inc., has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and “40,000 shares of $1 par value common stock outstanding at December 31, 2017.’ There were no dividends declared in 2016. The board of directors declares and pays a $60,000 dividend in 2017. What is the amount of dividends received by the common stockholders in 2017? a. SO b. $25,000 c« $10,000 @. $35,000 8:- Art, Inc., has 2,500 shares of 3%, $100 par value, cumulative preferred stock and 20,000-shares -. _ of $1 par value common stock outstanding from December 31, 2015 through Dec. 31, 2017. ‘There were no dividends declared in 2015, The board of directors declares and pays a $22,500 dividend in 2016 and in 2017. What is the amount of dividends received by the common stockholders in 2017? ®. $7,500 b. $12,500 c. $22,500 d, $0 9. On December 31, 2017, Stanford, Inc. has 1,500 shares of 6% $100 par valuc cumulative preferred stock and 90,000 shares of $10 par value common stock outstanding. On December 31, 2017, the directors declare a $30,000 cash dividend. The cntry to record the declaration of the dividend would include: a. acredit of $30,000 to Cash Dividends. b. anote in the financial statements that dividends of $3 per share are in arrears on preferred stock for 2017. c, adebit of $30,000 to Common Stock. A acredit of $30,000 to Dividends Payable. 10. On January 1, Sly Corporation had 120,000 shares of $10 par value common stock outstanding. On March 17, the company declared a 15% stock dividend to stockholders of record on March 20. Market value of the stock was $13 on March 17, The entry to record the transaction of March 17 would includea ; ;. — a, credit to Stock Dividends for $54,000. b. credit to Cash for $234,000. 2° credit ic Common Stock Dividends Distributable for $i80,000. im a , "Scanned with CamScannerjdencls Distributable for $180,000. idend. It currently bias 3,000 shares of 7%, $100 par in arrears on its preferred stock. 4, debit to Common Stock 11. Sebastian Ine, deelared a $$0,000 ea value cuntulative preferred stoch outstanding, It is one How much cash will Sebastiani distribute to the common stockholders? . & $38,000. b. SH2.000 +c, $59,000 d.° None of these.. 12. Coaney Ine. reported net income of $540,000 during 2017 and paid dividends of $52,000 on 20,000 shares of 6%, S100 par value preferred stock outstanding. ‘was $2,400,000 on Jamutry 1, 2017, and $3,200,000 on common stock. It also I Comman stockholders’ ey December 31, 2017. The company’s return on common stockholders’ equity for 2017 is: a 17% be 15.0% 13.1% d. 19.3% 413 , Mariner Corporation Issues,2.000, 10-year, 8%, $1,000 bonds dated January 1, 2017, at 98. ‘The Journal entry to record the Issuancé Gall show a ~ a. debit to Cash of $2,000,000, _ b. credit to Discount on Bonds Payable for $40,000. ¢. credit to Bonds Payable for $2,040,000 4. debit to Cash Tor $1,960,000... 14. Bond Corporation issves 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2017, at 103. The journal entry to, record the issuance will show 3 a. debit to Césh of $5,000,000. b, credit lo Premium on Bonds Payable for $150,000. . credit {6 Bonds Payable for $5,030,000.d. credit to Cash for $5,150,000. 35, The current carrying value of Lane's $800,000 face value bonds is $797,000. If the bands are retired at 103, whét would be the amount Lane would pay its bondholders? a, $787,000 —_b, $800,000_ 820,910 1s824,000 E 16. If bonds with a face value of $140,000 are converted into. éommon stock when the carrying value of the bonds is $135,000, the entiy.(o recond the conversion will include a debitjio 2. Bonds Payable for $140,000. b. Bonds Payable for $135,000. ‘iscount on Bonds Payable for $5,000, ds Payable equal to the market price of the bonds on the date of conversion, 0,bond was retired at 102 when the carrying valus‘of the bond was $622,000. The entry to reford the retirement would irichude a ee ke = a. Qin on bond redemption of $12,000. _b, Joss on bond redemption of $10,009. cc. 1o$s on bond redemption of $12,000. @ gain on bond iption of $10,000. 18. On January 1, 2017, Meeks Corporation issued $5,000,000, 10-year, 4% bonds at 98. Interest is payable annually on January 1. The journal entry to record this transaction on January 1, 2017 is; abey am ae : cee a. h Bonds Payable... 4,900,000 b. Cash 5,100,000 jonds Payable.. 5,100,000 c- Discount on Bonds Payal 100,000 Cash .. seneteee 4,900,000 Bonds Payable... 5,000,000 i - apa 5,100,000 jonds lesan 5,000,000 Premium on Bonds Payable. 100,000 19, The selling price ofa $10,000, 5-year bor ian $10,000 if the @. contractual interest rate is Jess than the market interest rate. b, contractual interest rate is greater than the market interest rate. c._ bond is convertible. d, contractual interest rate is equal to the market interest rate, 20. Robin Corporation its $800,000 face value bonds at 104 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is 3829,960, ‘The entry to record the redemption will include a a ceed 7 S080 to Loss on Bond Redemptions debit of $2,040 to Loss on Bond edemption. : ‘ ¢ credit of $32,040 to Premium on Bonds Payable, ddebit of $32,000 1o Premium on Bonds Payable. F Scanned with CamScannerQuiza sa Model C1) IE = —tThue a — false | =p —H-Wyue__Goaeaingy wolve = Face yabue +. Bevin —Sne c Hea aoe a =e Sees Or nr 25 000 — — etaew A Shacahollerl: ill _yeceine. “Whe -entive § Bor. odilenle nti Ponape =e ee —TWivileradsinorveaS —-ANacabion to Prefered 25:09 --D 5 2Si000 ee A te Beanie to Caan RBs a Scanned with CamScannerSe ee Eee ta teal i Scanned with CamScanner 4-1) __fash_ Dividends Suiacs, Dividends Rycble __Bare00. \o€ oad WY = — iiss © sae - (sixnenn ay" A lhawee. ae [FREER Soe oan By S54 woo . Ree crengs ah ogo - iv a os = met infome._ Sebi Div — ; i eer __ Oresadpe_G oe a one intone Were ete Prokered Dix bi Xoo X 20,000 = (20400 oa Ovecadye Comman Suit Teneo + 323990 2B s,600 6, -Ro = 246000 = Boeoo = BS = —36- ae (st) = 27~13-D___ Gah Cay oreo X 98) A. 9604900 ——____Discourk_om Rand Baeble —__Yo-a00__ oe Bink Ble rrr W-B_Casha.(Srocno Xia.) 5 IS oxto0. —— Bond Poyable__> Sido010 re a ee eae —— 800.000 X 103 = 82.400 a — \G AW Band Poryabble foe AMoreoo Fu &). 7 Tord _Pwlable —_Boo.ece— we Boake ——-_____ Premiun.ot Bond___2.21009-____- oes pies ecininks Cosh 12.000 pp A di —Grainon Bend.—10,600 ‘Scanned with CamScannerPrestiuer an Band 29.1.9 60- VesS_on Bond Coy Se ot ee Ge ie Face-volue—— - i spe thOL G4 eee fe DUNN GS a { 29 Scanned with CamScannerCairo University Tntermedinte Accounting ___| [Quiz (2) | Esculty 1 Year Faculty of Conmieree Year English Section Moh (2) Section One ST RUE-FALSE STATEMENTS Determine whether each of the Following statements is tre oe false, S-trme select (A, nnd if false select (Dis. teal hy divin income by ending stockholders’ 1. Return on common stockholers’ equity is ¢ Preferred dividends paid are bled hack fo vet income in esleulting eammings per share for common stockholders : 3. The contractual interest rate is always equal to the market fiterest rate on the date that bonds are issued. - 4. Af bonds are issted at m premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods peior to the bond maturity date.. 3. The loss on bond redemption is the difference between the cash paid and the carrying value of the bonds. Section Two : MULTIPLE CHOICE QUESTIONS: 6. Bumell, Inc. has 5,000 shares of 4%, $50 par value, cummative preferred stock ant! 100.000 shares of S! par value common stock outstanding at December 31, 2016, ond December 31,2015. The board of directors declared and paid a $$,000 dividend in 2016. In 2017, $30,000 of dividends are declared and paid. What are the dividends received by the preferred and common shareholders in 20177 2 Prefered Common Preferred, Common a, $18,000 $12,000 b.$15,000 $15,000 e $12,000 ‘$18,000 4.$10,000 $20,000 7. Outstanding stock of the Larson Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 5%, $10 par noncumulative preferred stock, In 2016, Larson dectared and paid dividends of $4,000. In 2017, Larson declared and paid dividends of $12,000. Now much of the 2017 dividend was distributed to preferred shareholders? a $6,000 b. $7,000. $5,000 d._Noncof these 8, Somento Forest Inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock? a, $60 per share _b°360,000 in total -_¢.$100,000 in total d, $0.60 per share 9, Dabney, Inc., has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 40,000 shares of Si ~ par value common stock outstanding at December 31, 2017. There were no dividends declared in 2016. The board of directors declares and pays a $60,000 dividend in 2017. What is the amount of dividends received by the ‘common stockholders in 2017? oa ---$0- ~-- = by $25,000... $19,000. a __§35,000 10. Sebastiani Inc. declared a $80,000 cash dividend. It currently has 3,000 shares of 7%, $100 par value ” cumulative preferred stock outstanding. Il is one year in arears on its preferred stock. How much cash will ‘Sebastiani distribute to the common stockholders? a. $38,000. $42,000. ¢. _$59,000 d,_Noneof thes. 11. On January 1, Key Corporation had 2,000,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 20% stock dividend. Market value of the stock was $15/share. AS a result of this event, ‘i a. Key's Paid-in Capital in Excess of Par account inereased $2,000,000, b. Key's total stockholders’ equity was unaffected. c. Key’s Stock Dividends account increased $6,000,000 d All of these answer choices are correct. 12. On January 1, Sly Corporation had 120,000 shares of $10 par Value common stock outstanding. On March 17, the company declared a 15% stock dividend to stockholders of record on March 20. Market value of the ‘stock was $13 on March 17, The entry to record the transaction of March 17 would include a a. credit to Stock Dividends for $54,000. b. credit to Cash for $234,000. &. credit to Common Stock Dividends Distributable for $180,000. d. debit to Common Stock Dividends Distributable for $180,000,a 13. Nola, Ine. declares a 10% common stock dividend when it has 60,000 shares of $10 par value common stock outstanding. If the market value of $24 per share is used, the amounts Ucbited to Stock Dividends and ji id-in Capital in Excess of Par nrc: id-in Capital in sg idends Excess of Par a. $60,000 $0 b S144,000 $84,000 - e. 314,000 560,000 d. $60,000 $84,000 14. Sebold Manufacturing declared a 10% stock divider! when it had 700,000 shares of $3 par valve common stock outstanding. The market price per common shnre was $12 per shure when the dividend was declared. “The entry to record this dividend declaration includes a eredit to a, Stock Dividends for $210.000.b. Paidsin Capital in Excess of Par for $630,000. 7 ©. Common Stock for $210,000, d, Common Stock Dividends Distributable for $840,000. 15. Ellis Corporation had net inccme of $500,000 and paid dividends of $100,000 to common stockholders and $20,000 to prefered stockholders in 2017. Ellis Corporation's common stockholders’ equity at the peginning and end of 2017 was $1,740,000 and $2,260,000, respectively. There are 400,000 weighted average shares of common stock outstanding, Ellis Corporation's earnings per share for 2017 was a, $620. vb. $1.20 S125, 4, $5.00 16. Eggers Ine. hag retained eaminys of $1,600,000 and total stockholders’ equity of $4,000,000. i has 400,000 ‘shares of $5 par value common stock outstanding, which is currently selling for $30 per shave. If Egyers declares'a 10% stock dividend on its common sto a, neyincome will decrease by $200,000. , Bb. rebined eamings will deerease by $200,000 and total stockholders’ equity will nerease by $200,000, ¢. rétsined exmings will_decrease by $1,200,000 and total stockholders’ equity will indrease by $1,200.60, ~~ Ne decrease by 51,200,000 a total paid-in eapital will increase by S¢,2G0}000. d. fetainzd earnings 17 A comporatios tesognizes 2 gain or loss “ \ 2. poly wien bonds are converted into comman stocksb:~__ only when bonds are redezmed before rity: 7 c. bonds are redeemed at or before maturity. e 4d. When bonds are converted into common stock and when they are redeemed before mturity 18, On Japuary 1, 2017, Mecks Corporation issued $5,000,000, 10-year, 4% bonds at 102. Interest is payable annually on January 1. The journal en to record this tran jetion on January 1, 2017 is a. Casi, 5,000,000 bas oo... 5,000,090 b 5,100,000 5,100,000 e 100,000 5,000,000 5,100,000 a 5,100,C00 5,000,000 100,000 19, IF there is aloss on bonds redeemed ceatly, the a. lossis debited directly to Retained Eamings,b. bonds’ carrying value was less than the redemption price. cc. bonds* carrying value was greater than the redemption price.d. loss is debited to. Interest Expense, as a cost of financing. 20,.. Rikki Company reccived procecds of $188,000 on 10-year, 6% bonds issued on January 1, 2017. The bonds had a face value of $200,000, pay interest annually on December 31, and have a call price of 101. Rikki uses the straight-line method of amortization. What is the amount of interest Rikki must pay the bondholéersin 20177 a. $11,200 B $12,000c. $13,200 4. $10,800 Page 2 = t aa 31 Scanned with CamScanner© Renititoy 5 Gorman 2 Reo Quz 2 a —9 Py roe. Peay ae ow Sale Ro.£ = Net inGne — Welered Ww : Y Avewe%e. Gryonan eduity, - 4 = -Folte—_added ss Subltotled . Ele an: Te Lite af Hahastty = A ae Toe a 5 e. po ae ——A_MCQ Se Le aie ating ae 6-C_DNu Declred__Be00 —owdo ———DW-in—orreoS§__ 09 ———-_ AlloGodion_to Debad aaa es $C Atlotadion, “bo Prekened = Sth. Ayonip K Loree = § Seta! geut oy Sees (QE ae hen tl oe aba Dt _oymeng fe Xo X ROOD, —_Allocodionbo Pe. 9.510 225000 ____Remoiniet, 40 Compan 35 = bp sie at REIS Scanned with CamScanner“o-f, Wideads Deckyed Baran. DW a_Oxreas N20 Tn to-Prefered 9,900. Remainieny 45 Ganon 3B ee a a 300. « 1 X1a0_= 2.1000 TS stack Div Distsbobable sat __Ca6t X ArceaoooK-1O)_—__ es a » —f.000L000 se ge eet ie | ay (ood ; SCS ety Ps Nee <7. Go.000 beni eee inexCess_of. Py ___B4 000 I4_B Stock ck Bic Cal Cnet) — Rae %-X 409 ,90X3)——____2lor000 —s_PEC_inexcess_of Py 4301000 Sanne eeaeeone” ieee 33 Scanned with CamScanner |‘5.2 E05 Ret inGme — Prefered wo Qvew%e No-of Shaves ~Sobi000 — L000 = ff ¥ Hoo000 = | 16D stock Dis lo% X Hoowco.X 30—=- {4.201000 _ a RE) tb odshadig shes PEC a Tate Sock halder’s eduity Not change. i Bony on : Bords—ayetedeemed before robustly. 1B-D___Cash_CSpeooce tz) Syleoieoo See eg lable Rein. ae si Premium gnBond ———____laawoo \9-B__Lass_ _Gorginty tae < redemPhion Paice Qo.B— jaherest_vusk Py; Le AL ST ypeke \2igoge ea eee Scanned with CamScannerCairo University [7 Intermediate Accounting Quiz (2) Faculty of Commerce: i Year [English Section ‘Model (3) Section One :TRUE-FALSE STATEMENTS Determine whether each of the following statements is truc or false, if true select (A), and if false “ select (B):. 1. Ifbonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date. 2. If the market interest rate is greater than the contractual interest rate, bonds will sell at a discount. 3. A 10% stock dividend will increase the number-of shares outstanding but the par value per share will stay the same i 4, Common Stock Dividends Distributable is reported as additional paid-in capital in the stockholders' equity section 3 » 5. Discount on bonds is an additional cost of borrowing and should be recorded as interest expense over the life of te bonds. Section Two :MULTIPLE CHOICE QUESTIONS 6. Art, Inc,, has?,500 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of SI par value common stock outstanding from December 31, 2015 through Dec. 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays 2)$22,500 dividend in 2016 snd in 2017. What is the amount of dividends received by the common stockholders in 2017? ———_ RS a. $7,500 7b. $12,500 ¢. $22,500 d. . 50 7. On Décember/41, 2017, Stanford, Inc. has 1,500 shares of 6% $100 par value sUlnulative stock and 90,000 shares of $10 par value coramon stock outstanding. Ox December the directors declare a $30,000 cash dividend..The entry to resord the declaration of nd would include: se \ it of $30,000 to Cash Dividends. + - in the financial statements that dividends of $3 per share are in-atrears on preferred "stock for 2017. metros c. adebit of $30,000 to Common Stock.’ d. A credit of $30,000 to Dividends Payable. 8. On January U, Sly Corporation had 120,000’ shares of $10 par value common stock outstanding. ‘(Oa March 17, the company. declared a 15% stock dividend to stockholders of record oni March 20. Market value of the stock was $13 on March 17. The entry to record the transaction of March 17 would include a a, credit to Stock Dividends for $54,000. b. credit to Cash for $234,000. ¢, credit to Common Stock Dividends Distributable for $180,000. d. debit to Common Stock Dividends Distributable for $180,000. 9, Sebastiani Inc. declared a $80,000 cash dividend. It currently has 3,000 shares of 7%, $100 par value cumulative preferred stock outstanding, It is one year in arrears on its preferred stock. How much cash will Sebastiani distribute to the common stockholders? a. $38,000. b. $42,000 ¢. $59,000 ad. None of these., 10, Cooney Inc. reported net income of $540,000 during 2017 and paid dividends of $52,000 on common stock. It also has 20,000 shares of 6%, $100 par value preferred stock outstanding, Common stockholders’ equity was $2,400,000 on January 1, 2017, and $3,200,000 on December 31, 2017, The company's return on common stockholders’ equity for 2017 a. 174% “b.. 15.0% + 613.1% d. 19.3% 14, Peabody, Inc. has 5,000 shares of 7%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2017. If the board of directors declares a $30,000 dividend, the 7 Scanned with CamScannerMs dos + = a. preferred shareholders will reccive 1/10th of what the common sharcholders will receive, 4. preferred shareholders will receive the entire $30,000. ‘$30,000 will be held as restricted retained earnings and paid out at some future date, . preferred sharcholders will receive $15,000 and the common sharcholders will receive $15,000. 12, Dabney, Ine., has 5,000 shares of 5%, $100 par valuc, noncumulative preferred stock and 40.000 are of SI par value common stock outstanding at December 31, 2017. There were no Y dividends declared in 2016. The board of directors declares and pays a $60,000 dividend in 2017. What is the amount of dividends received by the common stockholders in 2017? a. $0 b. $25,000 € $10,000 d.. $35,000 13 . Martinez Corporation issues 2,000, 10-year, 8%, $1,000 bonds dated January 1, 2017, at 98. The Joumal entry to record the tssuance will show a a, debit to Gash of $2,000,000. _b. credit to Discount on Bonds Payable for $40,000. ©. credit to Bonds Payable for $2,040,000 d. debil to Cash for $1,960,000... 14. Bond Corporation issues 5,000, 10-year, 8%, $1,000 bands dated January 1, 2017, at 103. The Journal entry to record the issuance willshowa ‘a. debit to Cash of $5,000,000.’ _credit to Premium an Bonds Payable for $150,000. ©. credit to Bonds Payable for $5,030,000. d. credit to Cash for $5,150,000. 425. The current carrying value of tane’s $800,000 face value bonds is $797,000. If the bonds are retired at 103, what would be the amount Lane would payits bondholders? a. $797,000 _b, $800,000 ¢.$820,910 )$824,000 16. If bonds with a face value of $140,000 are converted into coi stock when the carrying value of the bonds is $135,000, the entry to record the conversion will include a debit to &. \Bonds Payable for $140,000. _b. Bonds Payable for $135,000. %. Discount on Bonds Payable for $5,000. . Bonds Payable equal to the marteet price of the bonds on the date of conversion. an 17. A $600,000 bond was retired at 102 when the carrying value of the bond was $622,000. The entry to record the retirement would include'a wey a. gain on bond redemption of $12,000. _b. loss on bond redemption of $10,000. ett fos on bond Jredcraption of $12,000. -d. ni on bon redemption of $10,000. 18. On January 1, 2017, Meeks Corporation i 3,000,000, 10-year, 4% bonds at 98, Inter wa ois payable ennvally on January 1. The journal entry to record this transaction on January 1, 2017 is 4,900,000 b. Cash 5,100,000 ¢ Discount on Bonds Payal B 5,000,000 5,000,000 xe 100,000 Premium ssoseeenasenee 19, The selling price of a $10,000, 5-year bond, will be less than $10,000 if the ¢& contractual interest rate is Jess than the market interest rate, 'b. contractual interest rate is greater than the market interest rate, c. bond is convertible, d. contractual interest rate is equal to the market interest rate. 20. Robin Corporation retires its $800,000 face value bonds at 104 on January 1, following the payment of annual interest. The camying value of the bonds at the redemption date is $829,960. The entry to record the redemption will include a a oe sf $2,040 to Loss on Bond Redemption. idebit of $2,040 to Loss on Bond mption. : c credit of $32,040 to Premium on Bonds Payable, d. debit of $32,000 to Premium on Bonds Payable. ‘Scanned with CamScannerQuiz Q ove '5 we TE oA [epee as, Qo in_.ptodel @) ) iu 2 Model Ci). Sega (lira Sng 3(N) salad cas lcaeeae * sf a ~ Scanned with CamScannerCairo University —T Second Year [ Date: 1370172018 Faculty of Commerce ee ‘Accounting for Corporations Time: 9:00 am-1;00ae\ English Section and Final Exam “No. of pages: 6 Georgia Program Model (1) Answer the following question se the following information to answer questions 1 through Microsoft Corporation has the following stockholders’ equity accounts on December 31, 2017; Paid-in Capital; Preferred stock, 696, $11 par, 150,000 shares authorized, 20,000 shares issued and outstanding. | $ 220,000 Common stock, $3 par. $75,000 shares authorized. 400,000 shares issued and outstanding. 1,200.00 Paid-in capital in excess of par: common 1.000.000 ‘Total paid-in capital is 2,420,000 Retained earnings 90,000 Total stockholders" equity $2,610,000 1) The average issuance price per share of common stock is a) $3 -b) $5 c) $3.5 d) $5.5 2) If total dividends declared were $12,200 in 2016 and $55,000 in 2017, then the amount of dividends that will be allocated to cumulative preferred stock for years 2016 and 2017, respectively, would be; a) $13.200, $13,200 b) $12,200, zero c) $12,200, $14,200 d) $12,200, $13.200 3) If total dividends deciared were $12,200 in 2016 und $55,000 in 2017, then the amount of dividends that will be allocated to common stock for years 2016 and 2017, respectively, would be; a) zero, $40,800 b) $1,000,S41,800° —) zero, $42,800 d) None of these 4) ABC Corporation issued 125,000 shares of $5 par value capital stock at the date of incorporation for cash at a price of $8 per share. During the first year of operations, the company earned $120,000 and declared a dividend of $80,000. At the end of this first year of operations, the balance of the Capital Stock necount is a) $875,000. > by $985,000. c) $625,000. dy $660,000. 3) Apple Corporation has 100,000 shares of S1 par value common stock and 20,000 shares of 7% cumulative preferred stock, S100 par value, outstanding. The balance in Retained Earnings at the beginning of the year was $1,400,000, and there were no dividends in arrears. Prior. year depreciation expense was overstated by $50,000, Net income for the current year was $780,000. If Apple Corporation paid a dividend of S2 per share on its common stock, whut is the balance in _ _ Retuined Earnings at the end of the year? Ses ee 5 a) $2,030,000. b) $2,080,000. ©) $1,890,000. 4) $1,840,000. 6) Ifa corporation has only common stock outstanding, which of the following constitutes legal capital at a particular date? a) The amount in the common stock account. b) ‘The sum of the common stock nccount and any additional paid in capital, ©) Toial amount of stockholders’ equity. d) The sum of common stock account and retained earnings, 7) Retained carnings a) Always equal to the amount of cash that the corporation has generated from operations. b) A part of the paid-in capital of the corporation. ©) A part of the stockholders’ claims on the total assets of the corporation, d) Closed at the end of each accounting period. 8) The financial statements of a corporation that failed during the current year to pay uny dividends on its enmulative preferred stock should: 4) Include the amount of dividends in arrears among its current liabilities. b) Include a footnote disclosing the amount of the dividends in arrears. ¢) Show the amount of dividends in arrears as a deduetion from retained camings, d) List dividends in arrears ns a long-term liability. = 9) Paid-in capital from treasury stock would appear on a balance sheet under the category: a) Capital stock. b) Treasury stock. ¢) Additional paid-in capital d) Contra to owners' equity. Model (1) Page tof 6 Scanned with CamScanner10) Common stock dividends distributable is classified as az ~ a) Longsterm lability. b) Contra stockholders! equity aceount to Retained Earnings. ©) Current liability 4) Stockholders’ equity account. 11) Ifa material aceounting error was made in a prior year net income, that error: ) Should be reflected on the current year's income b) Should be reflected on the retained camings statement, statement. ¢) Should be reflected as a change in accounting d) Should be included in footnotes to the principle, financial statements. 12)A restriction of retained earnings: i. 2) Reduces the dollaramount of retained -—_-b).Appears in the statement of reiained earnings ceamings shown in the balance sheet, as a reduction of ending retained ca ©) Appears in the liability section of the balance d) Limits the dollar amount of-dividends a sheet. corporation may declare. 13)Orascom, Ine. had $00,000 shares of eamifinn stock outstariding before a stock split aveurred, and 1,250,000 shares outstanding uffer the stock split. The stock split was: a) S-for-2, UA). for-l. ©) L-fores. ) S-forel. 14) Which of the following statements reflets the transferability of ownership rights in a corporation? 2) Ifa stockholderecides to transfer ownership, he must transfer all of his shares. b) A stockholdef must not obtain permission from the issuing company before selling shares, ¢)_A stockholder must abain pennission from the board of directors before seling shares. 4) A stockolder must obtain permission from atleast three other stockholders before selling shares. 15)Moonligh Company issued 4,000 shares of its $5 par value common stock in payment of its attorney's bill of $80,000. The bill W2s for serviees performed in helping the company incorpbrate, This transaction is recorded by debitin; A a) Légat Expense for $20,000, Ny Legal Expense for $80,000. OO, zoion ExPe sanization Expense for $21 4d). Organization Expense for $80,000. that 1 be classified by ownership are Cy fneld and Privately held. = b) St -stock, qe oc Ce OS dead outside, 4) Majority znd minority. RIC 17)On thlldjvidend record date, Be reser: jvidend ‘becomes a current obligation. 'b)No entry is required. c) An Mitry may be required ifit sa stock dividend. 4) Dividends Payable is debited, is 18 through 20: Nike Corporation has jockholders' equity accounts on January 1, 2017: r --> > Coimmot Stock, $10 pair value 2 eo 1,500,000 Paid-in Capital in Excess of Par.. 200,000 Retained Eartings.. 500.000 Total Stockholders! Equity. $2,200,000 Daring 2017, the following treasury stock transactions occurred on April 1, Purchasec! 10,000 shares at $18 per share. On August 1, Sold 000 shares at S22 per share. On October 1, Solis, shares at $15 per share. 18) The journal entry to record Octobei~1, transaction would include: 2) Debit treasury stock for'$72000 b) Credit Paid-in Capital from Treasury Stock for $1200 ©) Debit Cash for $1200 ) Debit Paid-in Capital from Treasury Stock for $12000 19) The balance of Paid In Capital from Treasury Stock at December 31,2017, would be: a) $16000 b) $4000 ©) $12000 d) $2800 20) Assume net income was $110,000 for 2017. What is the amount of the total Stockholders' Equity scetion of the balance sheet for Nike Corporation at December 31, 2017? a) $2,278,000 by $2,274,000 ©) $2,314,000 &) $2,168,000 21) Bonds containing a provision for exchange into common stock of the issuing company are called — bonds a) Debenture by Redeemable ©) Convertible @) Callable Model (1) Page 2 016 « 39 Scanned with CamScannerona & ,*,*: 3 Da, y 22) Adams Corporation is considering the issuance of $100 million, 10% bonds payable. This will resu, a) Lower net income and lower income taxes expense than if it issucs capital stock. +) Higher net income and higher income taxes expense than if tissues capital stock. ©) Lowernet income and higher income taxes expense than ifit issues capital stock. 4) ligher net income and lower income taxes expense than if't issues capital stock. 23)Mr. Stocker invested in capital stock of Axle Corporation, while Mr. Bundy purchased bonds - payable issued by Axle Corporation. Which of the following correctly describes the status of Mr. Stocker and Mr. Bundy? - a) Mr. Slocker is considered an owner of Axle Corporation; Mr, Bundy is a ereditor. b) Both Mr. Stocker and Mr. Bundy have voting rights. ¢) Axle Corporation must redeem Mr. Stocker’s and Mr. Bundy’s investment at some maturity date, d)_Each year, Mr. Stocker and Mr, Bundy will receive dividends, 24) A S1,000 bond that sells for 104 has‘a selling price of: a) $1,004 b) $1,040 <) $1,400 @) $1,000 25) On September 1, 2017, Disney Corporation issued $100 million of 12% bonds payable at 100, due September 1, 2027, Interest payment dates ure September 1 and March 1. 4)1n 2017, Disney will make no interest payments tothe bondholders, but will recognize bond interest expense. 'b) In 2017, Disney will make no interest payments to the bondholders and will not recognize bond interest expense. ©) In 2017, Disney will make interest payments to the bondholders and will recognize bond interest expense. d) In 2017, Disney will make interest payments to the bondholders, but will not recognize bond interest expense. 26) Toyota Corporation has $2,000,000 bonds issued at face value. These bonds are callable at 105. If the corporation exercises the call provision on these bonds on December 31, 2017, it will result 4) $100,000 loss on the retirement of the bonds. b) $100,000 gain on the retirement of the bonds +) $50,000 loss on the retirement of the bonds. d) $50,000 gain on the retirement of the bonds. + Use the following data for answering questions 27 through 30: Lola Company issues $2,000,000, 9%, 10 years bonds on December 31, 2016, tnterest is paid semiannually each June 30 and December 31. The bonds sell ata price of 98. _ 27)The entry made by the company to record the issuance of the bonds at December 31, 2016 includes: a) A debit to Cash of $2,000,000 ) A debit to discount on Bonds Payable of $40,000 a Mp ~~ "c) A crédit to Bonds Payable of $1,960,000 d) A.credit to Bonds Interest Payable of $40,000 %, te) eS ; Lola's entry at June 30, 2017, to record the first semiannual payment of interest and amortization & of discount on the bonds includes a: wz, a) Debit to Bonds Interest Expense of $90,000 b) Credit to Cash of $92,000 ‘8 a -_¢) ‘Debit to Discount on Bonds Payable of $2,000 - d) Debit to Bonds Interést'Experisé of $92,000, ~~~ ~9/ 29)The amount of bond interest expense recognized by Lola Company in 2017 with respect to these bonds is: a) $180,000 'b) $184,000 ¢) $176,000 d) $182,000 30) The carrying value of this liability on Lola Company's December 31, 2017, balance sheet is: a) $2,000,000 'b) $1,960,000 c) $1,964,000 d) $1,956,000 © Use the following data for answering questions 31 through 34: S Apple Corporat issues $10,000,000, 12%, 10 years bonds Price of 102 on October 1, 2016. Interest payment dates are April | and October 1. 31)The total amount of cash received hy Apple t issuance of bonds on October 1, 2016 is a) $10,200,000 b) $10,500,000 c) $10,800,000 d) $10,000,000 K 32) Interest expense on these bonds recognized by Apple for 2016 is a) $300,000 by $295,000 c) $305,000 4) None of these 33) Apple's entry on April 1, 2017 to record the first semiannual interest payment and amortization of Premium since December 31, 2016 includes: 4) Debitto Bond Interest Expense of $600,000 b) Debit to Bond Interest Expense of $595,000 ¢) Debit to Bond Interest Payable of $300,000 — d) Credit to Premium on Bonds Payable of $5,000 34)The carrying value of these bonils ot: Apple's Corporation December 31, 2017, belance sheet is: a) $10,175,000 b) $10,200,000 c) $10,195,000 d) $10,225,000 ‘Model (1) Page 3 of 6 a ee ee ns Scanned with CamScanneroe ‘gg Bonds issued at a premium will: 3) Have a greater maturity value than a bond issued at a discount ) Have a lesser maturity value than a bond issued at a discount, «¢) Have the same maturity value as a bond issued at a discount. 4) Have a different maturity valve than a bond issued at a discount, depending upon the interest rate and maturity date. Webster Company issues $1,000,000 face value, 6%, 5-3 paid semiannually each June 30 and December 31. The bonds sell at 2 price of 97. 36) The entry made by Webster Company to record issuance of the bonds payable at December 31, 2011, includes: 2) A debit to Cash of $1,000,000. b) A debit to Discount on Bonds Payable of $30,000. ¢) A credit to Bonds Payable of $970,000.) A credit to Bond Interest Payable of $30,000. 37) Webster's entry at June 30, 2012, to_record—the first semiannual payment of interest and amortization of discount on the bonds includes a: = a) Debit to Bond Interest Expense of $30,000. ») Credit Cash of $33,000. ©) -Debit to Discount on Bonds Payable of $3,000 d) Debit to Bond Interest Expense of $33,000. 38) The amount of bond interest expense recognized by Webster Company in 2012 with respect to these bonds is: a) $60,000 b) $63,000 ©) $120,000 d) $66,000 39) The carrying value of this liability on Webster Company's December 31, 2012, balance sheet a) $1,000,000 b) $970,000 ¢) $976,000 d) $967,000 40) Secured bonds are bonds that a) angi in the possession of a banks — b) are registered in the narte of the owner. c) hve specific assets of the issuer pledged as collateral, d) have detachable interes: cpupons. 41)A corporation recognizes @ gain or loss a) Only ywKen bonds are convericd into common stock. b), Only‘when bonds are redeemed tcfore maiwrity. When bonds are redeemed at or before maturity... f) When bonds are cofverted into common stock and when they are redezined bifore maturity. 42) $60}h090 bond was retired at 98 when thecarrying value of thie oid was $590,000. The entry to recor .¢ retirement would include a a)\'Gain on bond redemption of $10,000. by Loss on b of $10,000. c) \Loss on bond redemption of $2,000. d) Gain on bond redemption of $2,000. 43) Lowe Co!pany has $1,500,000 of bonds outstanding. The unamortized premium is 519,600. If the _ ‘company redeemed the bonds at 101, , what would be the gain or loss on the redemption? a) $4,600 gain b) $4,600 loss ¢) $15,000 gain 4d) $15,000 loss YH) Norton Compaiy purchased a building on January 2by signing « long-term S4¥0,000 mortgage note payable with monthly payments of $4,500, The mortgage nate payable carrics an interest rate of 10 percent. The amount owed on the mortgage note payable after the first ¢-ayment will be a) $480,000 b)_ $479,500 ©) $476,000 _ d) $475,500 45) A.$600,000 bond was retired at 102.hen the carrying value of the bond was $622,000. The entry to record the retirement would include a: 3) Gain on bond redemption of $12,000, b) Loss on bond redemption of $10,000. ©) Loss.on bond redemption of $12,000. d) Gain on bond redemption of $10,000. 46) Which one of the following is a principal function of the statement of cash flows? a) To predict futwe profit growth. b) To calculate the turnover of inventory. ©) To evaluate the level of debt and leverage of acompany d) To predict the ability to puy debts and dividends. 47)The cash effects of transactions that create revenues and expenses 1 a)The investing activities. b) The financing activities. c) The operating uctivities. ) The processing activities. 48) Which one of the following is not considered a cash outflow from an investing activity? a) Purchase of long-term investments. b) Loans made to others. ©) Purchase of treasury stock. 4) Purchase of land. —_— Model (1) Page 4 of 6 41 “Scanned with CamScanner~49) Arturo Inc, purchased! equipment for $12,000 by issuing a 6-month note payable. How would this transaction be shown on the statement of cash flows? a) Inthe noncash financing and investing activities. _b)_ Inthe investing activities section. c) Inthe operating activities section, 4) Inthe financing activities section. 50) Which one of the following items is not gencrally used in preparing a statement of cash flows? a) Adjusted trial balance. b) Comparative balance sheets, c) Current year income statement, d) Additional information. 51) In Jude Company, a4and was sold for $150,000 cash, equipment were purchased for 560, 000 cash, and Bonds Payable increased by $120,000 front issuance for cash at face value. The net cash provided by: investing activities is: a) $150,000. b) $210,000, ©) $90,000, 4) $270,000. 52)The net income reported on the income statement for the current year was $220,000, Depreciation recorded on plant assets was $35,000, Accounts receivable and inventories increased by $2,000 and $8,000, respectively. Prepaid expenses and accounts payable decreased by $2,000 und 12,000 respectively. How much cash was provided by operating activities? a) $200,000. b) $235,000. ©) $220,000. d) $255,000. 53) Ifa gain of $12,000 is incurred in selling for eash office equipment having 1 book value of $110,000, the amount reported in the cash flows from investing activities section of the statement of cash flows a) $98,000. b) $122,000. _ ©) $110,000, d) $12,000. 54)In Ramon Company, Treasury Stock increased $20,000 from a cash irchase, and Retained Earnings increased $80,000 as a result of net income of $120,000 and cash di Net cash provided (used) by financing activities is: : a) ($20,000). b) $40,000. ¢) $120,000. d) ($60,000). oe 55) During 2016, Harvey Industries reported cash provided by operating activities $670,000, cash used by investing activities $1,039,000, and cash used by financing activities $145,000. In addition, cash spent for fixed assets during the period was $404,000, No dividends were paid. Based on the above information, - what was the amount of Harvey's free cash flow? a) ($369,000). 'b) $1,450,000. c) $266,000. _9) ($918,000). 56) Tomas Pest Control Products has the following information available: Net Income $25,000, Cash is? Provided by Operations $33,000, Cash Sales $65,000, Capital Expenditures $10,000, Dividends Paid $2,000, What is the amount of Tomas’ free cash flow? a) $27,000. 'b) $23,000. ¢) $21,000. d) $10,000, Use the following data for answering questions 57 through Parmesan Company uses the direct method to prey s statement of eash flows. It repons the foliowi 1g information regarding the year 2017: From the income statement: Sales Revenues 5240,000; Cost of goods sold $190,000; Operating expenses $25,000; Net income $25,000. From the balance sheet: Beginning balance Ending balance Accounts receivable $12,000 $15,000 at Inventory $22,000 $18,000 Accounts payable $7,000 $12,000 Accrued expenses payable $3,000 $1,200 nds paid of $40,000. . / s & Sr e ‘Assume that there were no sales of long-term assets, no interest revenue, and no expenses other than the expenses shown above. Assume also that accounts payable are for purchases of inventory only. 57) What is the amount of cash received from customers? a) $237,000 'b) $243,000 c) $240,000 d) $50,000 58) What is the amount of cash paid to suppliers? a) $185,000 b) $194,000 c) $181,000 d) $191,000 59) What is the amount of cash paid for operating expenses? a) $26,800 b) $23,200 s) $30,000 d) $18,600 60) What is the amount of net cash provided (used) hy operating activities? a) ($26,800) b) $29,200 c) $23,000 d) ($18,600) Model (1) Page 5 of 6 POR es 2 ae ee ' ~ ~'Scanned with CamScanner™” The cost of goods sold during the year was $183,000. Merchandise inventory decreased by $8,000 during the year and accounts payable decreased by $4,000 during the year. Compute the amount of cash paid to supplicrs using the direct method. a) $187,000. b) $179,000. c) $191,000. d) $175,000, 62) Garton Company had net income of $195,000 in 2016, Depreciation expense for the year is $50,000. During the year, Accounts Receivable increased $8,000 and Prepaid Expenses decreased $1,000, The company also sold equipment at a loss of $3,000, Caleulate net eash flows from operating activities using the indirect method. a) $241,000. by ($241,000). c) $238,000. 4) ($238,000). 63) During 2016, Blaine Company sold n building with a book value of $145,000 for proceeds of $175,000. The company also sold long-term_investments for proceeds of $32,000. The company purchased land and a nciv building for $320,000 by signing a long-term note payable. No other transactions impacted longer asset accounts during 2016, Compute net cash flows from investing activities. a) $113,000. ~~ b) ($113,000). ©) $207,000. 4) ($207,000). 64)Show Company had total operating expenses of $153,000 in 2016, which included Depreciation Expense of $30,000; Also during 2016, prepaid expenses decreased by $9,500 und accrued expenses payable increased by $8,500. Caleulate the amount of cash payments for operating expenses in 2016 using the direct method. a) $154,000. b) $135,000. ©) $124,000. ~ d) $105,000, 65)The following information is available for Redcands Company: Receipts from customers $215,000, Dividends from stock '$3,000, Proceeds from sale of equipment $18,000, Proceeds from $90,000, Payments Tor. suppliers $100,000, Payments for operstipg expenses $78,000, Interest paid $6,000, Taxes paid $1,000, Dividends paid $20,000. Based o' tf preceding i sativa, conipute the net cash provided by operating activities. a) {$70,000. b) $10,000. Se) $27,000. ) Nene of these, 66)Plexis|ompoay reported net income of S1s8,000. For 2016, deprecistion was $5,000, and the comply feported a gain on sale of investments of $12,000-Accounts receivable increased $25,000 and'a is ts payable decreased $23,000. Compute net cash provided by ove ting activities usitig” the indh-ect method. i a) $133,000. b) $145,000. ©) $88,000.-~ © Use the following information to answer the questions 67 and 68: d) $150,600, “The income statement for Jones Company showed. cost of goods sold. of $80,000 and operating expenses of $65,000. The comparative balance sheets for the year show that inventory decreased $5,000. prepaid expenses increased $7,000, accounts payable increased $3,000, and accrued expenses payable decreased $5,000. 67) What is the amoimnt of cash payments to suppliers? a) $82,000. \_ — ) $72,000. c) $88,000, J) None of these. 68) What is the amount of cash payments for operating expenses? , a) $77,000, ™b)_$63, 000. c) $67,000-~ d) $53,000. + Use the following given data to ansier-the questions 69 und 7 Jean's Vegetable Market had the following transactions during 2017 1. Issucd $50,000 of par value common stock for cash. 2. Repaid a 6 year note payable for the amount of $22,000. 43. Acquired land by issuing common stock of par value $100,000, 4, Declared and paid a cash dividend of $2,000, 5. Sold a long-term investment for cash $8,000. 6. Acquired an investment in IBM stock for cash $15,000, 69) What is the amount of net eash provided (used) by investing activities? a) ($15,000). b) $33,000. - ¢) (7,000). d) $8,000, 70) What is the amount of net cash provided (used) by financing uctivities? 1) ($21,006). b) (867,000). ©) $28,000. —— — 4} $26,000, Model (1) Page 6 of 6 ~ Scanned with CamScanner ~~