Question 1

A company has 100,000 shares of $1 par value common stock authorized, 63,000 shares issued, and 60,000 shares outstanding. How many treasury shares does the company have?

Accepted Answer

$3,000$

Question 2

On January 1, Palmer Inc. issued $1,000,000, 9% 10-year bonds for $910,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. At the end of the first year, what is the balance in the bond discount account?

Accepted Answer

$81,000 - (\$9,000)$

Question 3

A company issues $500,000 of 6%, $100 par cumulative preferred stock. The preferred dividends are in arrears for three years. The company also issued 2,000 shares of $1 par value common stock. If the company declares $30,000 in dividends this year, how much will the common stockholders receive?

Accepted Answer

$0$

Question 4

Which of the following is an example of a cash flow from a financing activity?

Accepted Answer

Receipt of cash from the issuance of treasury stock

Question 5

Warranty expense should be recorded in the period:

Accepted Answer

the product is sold and recognized as revenue.

Question 6

A company issued $1,000,000 of 10-year, 8% bonds at a market rate of 7%. Which of the following statements is true?

Accepted Answer

The annual interest paid is $80,000.

Question 7

If a bond is sold at a premium, the amount of the bond's carrying value reported on subsequent balance sheets:

Accepted Answer

Decreases each year

Question 8

Which of the following transactions would NOT create a cash flow?

Accepted Answer

The company declared a cash dividend

Question 9

A company reported net income for 2007 of $60,000 which includes depreciation expense of $13,000, and amortization expense (patent) of $5,000. Also, accounts payable increased by $3,000 and inventory decreased by $2,000. The amount of 'cash flows from operating activities' using the indirect method for 2007 was:

Accepted Answer

$74,000$

Question 10

Assume the following shares outstanding: Preferred stock, $100 par value, cumulative, 1,000 shares with 3 years dividends in arrears for 2005, 2006, and 2007. Common stock, $100 par value, 2,000 shares. Total dividends declared in 2007 were $39,000. The total amount of dividends to which common stockholders are entitled is:

Accepted Answer

$9,000$

Question 11

On July 1, 2008, Badger Corporation issued $300,000, 10-year, 8% bonds. The bonds pay interest in semiannual amounts beginning January 1, 2009. What is the selling price of the bonds if the market annual interest rate at that time was 10%?

Accepted Answer

$280,613$

Question 12

Which of the following statements about stock dividends is true?

Accepted Answer

A stock dividend increases the number of shares outstanding but does not reduce the per value per share.

Question 13

The difference between the issue price of stock and the par value of the stock is:

Accepted Answer

additional paid-in capital.

Question 14

Which of the following is NOT included in cash flows from operating activities under the indirect method?

Accepted Answer

Receipt of cash from the issuance of bonds payable.

Question 15

A company has $1,000,000 of 6% bonds outstanding, issued at face value. The bonds pay interest annually. What is the annual cash payment for interest?

Accepted Answer

$60,000$

Question 16

A company purchases $13,000 of equipment by issuing a 30-day, 5% note payable. The total cash paid for interest at maturity of the note is:

Accepted Answer

$54$

Question 17

Which of the following would increase retained earnings?

Accepted Answer

Net income for the period

Question 18

A company declared a 2-for-1 stock split on 12,000 shares of $5 par value common stock. Consequently, the par value and the number of shares after the split would be:

Accepted Answer

Par value $2.50$, Number of shares $24,000$

Question 19

Which of the following is an example of a cash flow from an investing activity?

Accepted Answer

Purchase of equipment for cash

Question 20

If a company issues bonds at a discount, which of the following is true regarding interest expense?

Accepted Answer

Reported annual interest expense is higher than the annual interest payments

Financial Accounting Final Exam Practice: Comprehensive Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards