Financial Acct. Final Review part 3

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Financial Acct. Final Review part 3
2012-12-12 14:54:33
Part Final Review

Part 3 Final Review
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  1. Olivia incurs cost of $3000 to repair a refrigerator that she sold two years ago that was still under warranty.  How much warranty expense will she record when she makes these repairs?
  2. Kyle's emplyees work for a total of 250 hours this pay period. he pays them  all a flat rate of $12 per hour.  Withholdings from their pay include 5% state income tax, 10% federal income tax, 7.65% FICA taxes, and $200 for employees' portion of their health benefits.  In addition, Kyle pays 7.65% FICA taxes (emplyer portion), 2% unemployment tax and $800 for his protion of employee health benefits.  How much wages payable will Kyle record this pay period?
  3. Claire sells a $5 item to a customer. Since sales tax is 10%, claire collects a total of $5.50 from the customer.  How would she record this transaction? (Claire uses a periodic inventory system so you can ignore cost of goods sold)
    • Dr.  Cash 5.50
    •       Cr. Sales Revenue 5
    •       Cr. Sales Tax Payable 0.50
  4. Kirsten Corp. gets sued for supposedly making defective products.  If she loses the case, she will have to pay somewhere between $100,000 and $150,000. Her attorney believes that it is reasonably possible that kirsten will lose the court case.  How shoud Kirsten include information about this lawuit in her financial statements?
    Make a footnote disclosure discribing the lawsuit but do not record a liability.
  5. Olivia has the following current assets: Cash $50,000, Receivables $20,000, Inventory $30,000, Prepaid Expenses $10,000.  She has $40,000 of current liabilities.  What is Olivia's Acid-test Ratio?
  6. It is better to sell bonds at a premium than at a discount.
    True or False
  7. Trevor issues $100,000 face value of bonds.  The bonds pay interest semi-annually at a stated rate of 4% and mature in 4 years.  The market rate for bonds of similar ristiness is 5% .  How much wil Trevor receive from issuing these bonds?
  8. trevor has net incoe of 70,000, incoe tax expense of 30,000, and interest expense of 50,000. What is trevor's times interest earned ratio?
  9. KYle issues 100,000 shares of $0.10 par value common stock at a price of $20 per share.  What would the journal entry he recorded for this sale be?
    • Dr.  Cash 2,000,000
    •        Cr. Common stock 10,000
    •        Cr. Additional Paid-in-Capital 1,990,000
  10. Olivia reissues 1,000 shares of treasury stock for $30 per share.  She originally repurchased this stock for $20 per share.  How will she record this transaction?
    • Dr.  Cash 30,000
    •      Cr. Treasury Stock 20,000
    •      Cr Additional Paid in Capital 10,000
  11. What is the effect of a stock dividend on total stockholder's equity?
    Stockholder's equity does not chnage
  12. Clair declares and pays a $2,500 dividend. What journal entry would she make on the payment date?
    • Dr. Dividends Payable 2.500
    •     Cr. Cash 2500
  13. Clair declares and pays a $2500 divident. What journal entry would she make on the anouncment date?
    • Dr. Dividends 2500
    •      Cr. Dividents Payable 2500
  14. Kyle pays a 10% stock dividend on his common stock. Prior to the dividend, there are 10.000 shares outstanding.  the stock has a $1 per share par value and a $15 per shar market vlue.  After closing entries, what effect will this tock divident have on retained earnings?
    Retained earnings will decrease by $15,000
  15. Olivia Corp. reported net income of $10,000,000 this year. Shepaid $500,000 o fprefered stock dividends during the year and has 1,000,000 shares of common stock outstanding.  Finally, her stock price at the end of the year was $130. What is Olivia Corp.'s price-to-earnings ratio as of the end of the year?
  16. Retirig bonds is an example of
    a financing cash flow
  17. The sum of operating cash flow plus investinng cash flow plus financing cash flow must equal the overall change in cash for the year.
    True or False
  18. KYle Corp is planning to pay a stock dividend but is trying to decide if it should pay a 15% stoock dividend or a 25% stock dividend. Kyle Corp. is a rlatively new company and wants the impact of tehstock dividend on retained earnings (after closing entries) to be as small as possible.  The par value of Kyle Corp stock is $1, outstanding.  What should Kyle Corp do?
    Pay the 25% stock dividend
  19. Trevor is considering invetig in two stocks.  the companies ar in the same industry, are roughly the same size, and have similar growth prospects, similar return on equity, and similar management styles.  they are otherwise very similar to each other except for the following: 
    Company A has earnings per share of$44 and a stock price of $586
    Company B has earnings per share of $1.59 and a stock price of $31. Which company's stock is likely to be a better invetment and why?
    Company a A because it has a lower price-to-earnings ratio
  20. Claire wants to get a loan so she goes to the bank.  The loan officer tells her that her current ratio of 2 is too low and that she needs to get her current ratio up to at least 3 to qualify for the loan. Which of the following transactions would help her to increase her current ratio?
    Pay off some accounts payable