课程名称：初级会计学 课程性质：必修 课程范围：Ch10~Ch13 开课教师：戚务君 开课学院：商学院 开课系级：会计整开 考试日期(年月日)：98/4/21 考试时限(Mins)：13:00~16:00 试题本文： Principles of Accounting Midterm 98.4.21 Degree Name ID Number Part A TRUE-FALSE STATEMENTS 1 Section 404 of the Sarbanes-Oxley Act requires more scrutiny of internal controls of public and private companies. 2 A patent should be amortized over its expected useful life even if it is shorter than its legal life. 3 Postretirement benets should be expensed when earned by the retiree. 4 A corporation would be bound by a contract entered into by one of its stockholders. 5 The asset turnover ratio is calculated as total sales divided by ending total assets. Part B MULTIPLE CHOICE QUESTIONS 6 On 4/1, 2003, Timi Corporation issued $4,000,000, 10-year, 8% bonds, dated 1/1, 2003 at 100 plus accrued interest. Interest is payable semiannually on 1/1 and 7/1. The journal entry to record this transaction on 4/1, 2003 is a. Cash 4,000,000 Bonds Payable 4,000,000 b. Cash 4,080,000 Bonds Payable 4,080,000 c. Interest Expense 80,000 Cash 4,000,000 Bonds Payable 4,080,000 d. Cash 4,080,000 Bonds Payable 4,000,000 Bond Interest Payable 80,000 7 Which of the following is not a primary concern of internal accounting control? a. Eciency of company operations b. Accuracy of the accounting records c. Maximization of prots d. Adherence of transactions to policy e. Safeguarding of assets 8 A $500,000 bond issue with a carrying value of $503,000 is called at 102 and retired. As a result, which of the following statements is true? a. A loss of $7,000 is recorded. b. A loss of $10,000 is recorded. c. A gain of $3,000 is recorded. d. Net income will increase. 1 e. No gain or loss is recorded. 9 Which of the following assets does not decline in service potential over the course of its useful life? a. Equipment b. Furnishings c. Land d. Fixtures 10 Each of the following is used in computing revised annual depreciation for a change in estimate except a. book value. b. cost. c. depreciable cost. d. remaining useful life. 11 Which of the following factors does not aect the initial market price of a stock? a. The company's anticipated future earnings b. The par value of the stock c. The current state of the economy d. The expected dividend rate per share 12 On January 2, 2005, Riley Corporation issued 20,000 shares of 6% cumulative preferred stock at $100 par value. On December 31, 2008, Riley Corporation declared and paid its rst dividend. What dividends are the preferred stockholders entitled to receive in the current year before any distribution is made to common stockholders? a. $0 b. $120,000 c. $360,000 d. $480,000 13 In the stockholders' equity section of the balance sheet, the classication of capital stock consists of a. additional paid-in capital and common stock. b. common stock and treasury stock. c. common stock, preferred stock, and treasury stock. d. common stock and preferred stock. 14 Which of the following is an incorrect statement about a corporation? a. A corporation is an entity separate and distinct from its owners. b. Creditors ordinarily have recourse only to corporate assets in satisfaction of their claims. c. A corporation may be formed in writing, orally, or implied. d. A corporation is subject to numerous state and federal regulations. 2 15 The date a cash dividend becomes a binding legal obligation to a corporation is the a. declaration date. b. earnings date. c. payment date. d. record date. Part C BRIEF EXERCISES 16 Instructions Complete the requirements specied for each of the following independent situations. a. Milan Company purchased land and an oce building on March 1 for a combined cash price of $1,600,000. The land had a cost of $940,000 and the building had a book value of $200,000 on the seller's books. The land and building had fair market values of $1,040,000 and $560,000, respectively on March 1. Milan made the following entry at acquisition: Land 940,000 Building 1,000,000 Gain on Purchase 140,000 Accumulated Depreciation 200,000 Cash 1,600,000 Instructions Prepare the correct entry for the acquisition. b. Nolton Company bought machinery on January 1, 2006 at a cost of $300,000. The machinery had an estimated life of 10 years and salvage value of $30,000. In December 2008, Nolton estimates that the machinery will have a life of only 5 more years and a $36,000 salvage value. Nolton uses straight-line depreciation. Compute the revised annual depreciation. c. Farley Company bought equipment on July 1, 2007 at a total cost of $400,000. The equipment has an estimated useful life of 5 years and salvage value of $80,000. Farley uses the double-declining-balance method of depreciation. Compute depreciation for 2007 and 2008. 17 On March 1, 20x7, the Van Wurt Corporation issued $600,000 of 10% 5-year bonds. The semiannual interest payment dates are February 28 and August 31. Because the market rate for similar investments was 11%, the bonds had to be issued at a discount. The discount on the issuance of the bonds was $24,335. The company's scal year ends February 28. Instructions Prepare entries in journal form to record the bond issue on March 1, 20x7, the paymet of interest , and the amortization of the discount on August 31, 20x7 and on February 28, 20x8. Use eective interest method.(Round answers 0:40 = $128; 000 to the nearest dollar.) 18 Suppose you have a part-time sales position over the winter break in a small clothing store that is part of a national chain. The store's one full-time employee with whom you have become friendly, hired you. Explain what you would do in the situations described below. identify internal control problems that exist in each situation. 3 a. You arrive at the store at 6 P.M. to take over the evening shift from the full-time employee who hired you. You notice that this person takes a coat from a rack, puts it on, and leaves by the back door. You are not sure if the coat is one that was for sale or if it belonged to the employee. b. You are the only person in the store on a busy evening. At the closing time, you total the cash register and the receipts and discover that the cash register is $20 short of cash. You consider replacing the $20 out of your pocket because you think you may 1=2 = $80; 000 2008 depreciation: ( $400; 000 $80; 000) have made a mistake and are afraid you might lose you job if the company thinks you took the money. 19 In a recent year, Avaya, Inc., an East Coast telecommunications company, issued 34,300,000 shares of common stock for a total of $212,000,000. As a growing company, Avaya could have raised this signicant amount of money by issuing long-term bonds, but the company's bnd rating had recently been lowered. What are some advantages of issuing common stock as opposed to bonds? What are some disadvantages? Answer Part A TRUE-FALSE STATEMENTS(17.5%) 1 F 2 T 3 T 4 F 5 F Part B MULTIPLE CHOICE QUESTIONS :40 (35%) 6 D 7 C 8 A 9 C 10 B 11 B 12 D 13 D 14 C 15 A Part C BRIEF EXERCISES 16 (20%) a. Land 1,040,000 Building 560,000 Cash 1,600,000 b. Book value, 1/1/08 ($300,000 - $54,000) $246,000 Less: New salvage value 36,000 Depreciable cost $210,000 Remaining useful life 5 years Revised annual depreciation ( $210; 000 5 ) $42,000 c. 2007 depreciation: $400; 000 --

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