Financial Accounting Exam 3

The date when a cash dividend becomes a legal obligation is on the:

A)declaration date

.B)payment date.

C)date of record.

D)when the stock is issued.

E)last day of the corporate year

A

When amortising a discount or premium on a bond, interest expense reported on the incomestatement is impacted by the:

A)Maturity value (par value) of the bonds

B)Stated rate of interest included in the bond certificate

C)Market rate of interest on the date the bonds were issued

D)Market rate of interest on the interest payment date

E)None of the above.

C

In order for a company to pay a cash dividend:

A)it must have enough cash to pay the dividend.

B)it must have enough retained earnings to declare the dividend.

C)it must have enough net income for the period.

D)both A and B must occur.

E)All of the above must occur

D

The total change in cash as shown near the bottom of the statement of cash flows for the year should equal which of the following?

A)Net income or net loss found on the income statement

B)The difference in retained earnings when reviewing the comparative balance sheet.

C)The ending cash balance on the current year's balance sheet

D)The difference in cash when reviewing the comparative balance sheet

E)None of the above.

D

Which of the following would NOT appear on a statement of cash flows prepared using the direct method?

A)Cash payments to suppliers

B)Cash received from sale of assets

C)Loss on sale of assets

D)Cash receipts from customers

E)All of these items would appear2

C

Rock Company uses the indirect method to prepare its statement of cash flows. Rock'sAccumulated Depreciation-Equipment account increased during the period. Rock did not purchase or sell equipment during the period. The increase in Accumulated Depreciation-Equipment is:

A)added to net income to determine net cash provided by operating activities.

B)reported in the financing activities section.

C)deducted from net income to determine net cash provided by operating activities.

D)reported in the investing activities section.

E)not reported.

A

When a company purchases treasury stock, which of the following is true?

A)Since treasury stock is held by the original issuer, it is not longer considered to be issued.

B)Dividends continue to be paid on the treasury stock because it is issued.

C)Treasury stock is considered to be an asset because cash is paid for the stock.

D)The cost of the treasury stock reduces stockholders' equity

E)None of the above are true

E

A bond is issued at a price of 104 and retired early at a price of 98. Which of the following is true?

A)A gain will be reported on the income statement when the bond is retired

B)A gain will be reported on the income statement when the bond is issued

C)A loss will be reported on the income statement when the bond is issued

D)A loss will be reported on the income statement when the bond is retired

E)There is not enough information to answer the question

A

Amortizing a discount on a bonds payable will cause Discount on Bonds Payable and interestexpense respectively to:

A)increase and decrease.

B)decrease and increase.

C)decrease and decrease.

D)increase and increase.

E)There is not enough information to answer the question.

B

A company should recognize a gain on treasury stock:
A)when treasury stock is sold for more than the par value of the stock.
B)when treasury stock is sold for more than it was purchased for.

C)when treasury stock is sold for less than the par value of the stock.

D)when treasury stock is purchased for less than the par value of the stock.

E)in none of the above situations. No gain is recognized on treasury stock transactions

E

If bonds are issued at a discount, over the life of the bonds, the carrying value will:

A) Decrease.

B) Stay the same.

C) Increase.

D) Depend on the current market interest rate.

C

Declaring a cash dividend has what effect on total stockholders’ equity?

A) No effect on total stockholders’ equity.

B) Cannot be determined from the given information.

C) A decrease in total stockholders’ equity.

D) An increase in total stockholders’ equity.

C