Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Questions
Q:
Which of the following is NOT a necessary condition for oligopoly?
A) Barriers to entry
B) Strategic dependence of firms
C) Differentiated products
D) Either a small number of firms or market dominance by a small number of firms
Q:
A simple account form widely used in accounting as a tool to understand how debits and credits affect an account balance is called a:
A.Withdrawals account.
B.Capital account.
C.Drawing account.
D.T-account.
E.Balance column sheet.
Q:
Pond Corporation uses the fair value method of accounting for its investment in Swan Company. Which one of the following events would affect the Investment in Swan Co. account?
A) Investee losses
B) Investee dividend payments
C) An increase in the investee's share price from last period
D) All of the above would affect the Investment in Swan Co. account.
Q:
A credit is used to record:
A.A decrease in an expense account.
B.A decrease in an asset account.
C.An increase in an unearned revenue account.
D.An increase in a revenue account.
E.All of these.
Q:
Which is NOT a characteristic of monopolistic competition?A) small share of market to each firm B) lack of collusion among firmsC) few firms in the industry D) independence of each firmʹs decisions
Q:
Griffon Incorporated holds a 30% ownership in Duck Corporation. Griffon should use the equity method under which of the following circumstances?
A) Griffon has surrendered significant stockholder rights by agreement between Griffon and Duck.
B) Griffon has been unable to secure a position on the Duck Corporation's Board of Directors.
C) Griffon has inadequate or untimely information to apply the equity method.
D) The ownership of Duck Corporation is diverse.
Q:
Which of the following statements is incorrect?
A.The normal balance of accounts receivable is a debit.
B.The normal balance of owner's withdrawals is a debit.
C.The normal balance of unearned revenues is a credit.
D.The normal balance of an expense account is a credit.
E.The normal balance of the owner's capital account is a credit.
Q:
PQTC$1310$15$1214$25$1119$45$1025$75$930$115$835$165Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?A) 14 B) 19 C) 25 D) 30
Q:
Pinkerton Inc. owns 10% of Sable Company. In the most recent year, Sable had net earnings of $40,000 and paid dividends of $6,000. Pinkerton's accountant mistakenly assumed Pinkerton had considerable influence over Sable and used the equity method instead of the cost method. What is the impact on the investment account and net earnings, respectively?
A) By using the equity method, the accountant has understated the investment account and overstated the net earnings.
B) By using the equity method, the accountant has overstated the investment account and understated the net earnings.
C) By using the equity method, the accountant has understated the investment account and understated the net earnings.
D) By using the equity method, the accountant has overstated the investment account and overstated the net earnings.
Q:
The right side of a T-account is a(n):
A.Debit.
B.Increase.
C.Credit.
D.Decrease.
E.Account balance.
Q:
When a perfectly competitive firm experiences positive economic profits, A) the high barriers to entry prevent further competition.B) existing firms exit the industry.C) additional firms enter the industry.D) firms have no incentive to exit or enter the industry.
Q:
Which one of the following statements is correct for an investor company?
A) The balance in the Investment in Osprey Co. account can be reduced to represent a decline in the fair market value of the investment, but will not be adjusted if the fair market value increases.
B) Under the equity method, the balance in the Investment in Osprey Co. account can be negative if the investee corporation operates at a loss.
C) Once the balance in the Investment in Osprey Co. is reduced to zero, it will not be reduced any further.
D) Under the equity method, the balance in the Investment in Osprey Co. account will increase when cash dividends are received.
Q:
A debit is:
A.An increase in an account.
B.The right-hand side of a T-account.
C.A decrease in an account.
D.The left-hand side of a T-account.
E.An increase to a liability account.
Q:
The rate of production that maximizes the positive difference between total revenues and total costs is theA) profit-maximizing rate of production.B) rate of production at which marginal revenue equals marginal product.C) rate of production at which marginal revenue equals average revenue. D) rate of production at which average revenue equals average total cost.
Q:
Which one of the following items, originally recorded in the Investment in Falcon Co. account under the equity method, would not be systematically used to reduce investment income on a periodic basis?
A) Amortization expense of goodwill
B) Depreciation expense on the excess fair value attributed to machinery
C) Amortization expense on the excess fair value attributed to lease agreements
D) Interest expense on the excess fair value attributed to long-term bonds payable
Q:
The numbering system used in a company's chart of accounts:
A.Is the same for all companies.
B.Is determined by generally accepted accounting principles.
C.Depends on the source documents used in the accounting process.
D.Typically begins with balance sheet accounts.
E.Typically begins with income statement accounts.
Q:
Total OutputTotal Costs0$101182213234245266297338389441051In the above table, the marginal cost of the fourth unit isA) $1.00. B) $2.00. C) $6.00. D) $24.00.
Q:
What method of accounting will generally be used when one company purchases between 20% to 50% of the outstanding stock of another company?
A) Only the fair value method may be used.
B) Only the equity method may be used.
C) Either the fair value method or the equity method may be used, depending upon the relationship between the companies.
D) Neither the fair value method nor the equity method may be used, regardless of the level of ownership.
Q:
A list of all accounts and the identification number assigned to each account used by a company is called a:
A.Source document.
B.Journal.
C.Trial balance.
D.Chart of accounts.
E.General Journal.
Q:
Inside information
A) applies to proprietorships only.
B) applies to proprietorships and partnerships only.
C) applies to corporations only.
D) applies to all forms of business.
Q:
What method of accounting will generally be used when one company purchases less than 20% of the outstanding stock of another company?
A) Only the fair value method may be used.
B) Only the equity method may be used.
C) Either the fair value method or the equity method may be used, depending upon the relationship between the companies.
D) Neither the fair value method nor the equity method may be used, regardless of the level of ownership.
Q:
A ledger is:
A.A record containing increases and decreases in a specific asset, liability, equity, revenue, or expense item.
B.A journal in which transactions are first recorded.
C.A collection of documents that describe transactions and events entering the accounting process.
D.A list of all accounts with their debit balances at a point in time.
E.A record containing all accounts and their balances used by a company.
Q:
All of the following are characteristics of a proprietorship EXCEPT A) the business is owned by one individual.B) one person is responsible for all the debts of the firm. C) one person gets all of the profits.D) the firm can form a corporation to protect itself against the debts.
Q:
Pony acquired Spur Corporation's assets and liabilities for $500,000 cash on December 31, 2010. Spur dissolved on the date of the acquisition. Spur's balance sheet and related fair values are shown as of that date, below.
Book Value Fair Value
Cash $20,000 $20,000
Accounts Receivable 40,000 38,000
Land 45,000 50,000
Plant and Equipment net 460,000 410,000
Franchise Agreement 0 160,000
Total Assets $565,000
Accounts Payable $70,000 $70,000
Other Liabilities 120,000 110,000
Common Stock 180,000
Additional Paid in Capital 40,000
Retained Earnings 155,000
Total Liabilities and Equity $565,000
Required: Prepare the journal entry recorded by Pony as a result of this transaction.
Q:
A collection of all accounts and their balances used by a business is called a:
A.Journal.
B.Book of original entry.
C.General Journal.
D.Balance column journal.
E.Ledger.
Q:
The change in the consumption of one good that just offsets a one -unit change in the consumption of another good is theA) marginal utility. B) marginal rate of consumption. C) marginal rate of substitution. D) marginal rate of satisfaction.
Q:
On June 30, 2011, Stampol Company ceased operations and all of their assets and liabilities were purchased by Postoli Incorporated. Postoli paid $40,000 in cash to the owner of Stampol, and signed a five-year note payable to the owners of Stampol in the amount of $200,000. Their closing balance sheets as of June 30, 2011 are shown below. In the purchase agreement, both parties noted that Inventory was undervalued on the books by $10,000, and Pistoli would also take possession of a customer list with a fair value of $18,000. Pistoli paid all legal costs of the acquisition, which amounted to $7,000.
Postoli Stampol
Cash $150,000 $17,000
Inventory 260,000 120,000
Other current assets 420,000 60,000
Land 60,000 0
Plant assets-net 590,000 190,000
Total Assets $1,480,000 $387,000
Accounts payable $440,000 $127,000
Notes payable 160,000 80,000
Capital stock, $5 par 20,000 50,000
Additional paid-in capital 60,000 0
Retained Earnings 800,000 130,000
Total Liabilities & Equities $1,480,000 $387,000
Required:
1. Prepare the journal entry Postoli would record at the date of acquisition.
2. Prepare the journal entry Stampol would record at the date of acquisition.
Q:
Typically, an individual takes only one newspaper from the bin becauseA) of the low marginal utility of additional newspapers.B) total utility will rise with consumption of more than one newspaper.C) marginal utility increases with the first consumption of newspapers. D) there are limited amounts of newspapers in the bin.
Q:
A written promise to pay a definite sum of money on a specified future date is a(n):
A.Unearned revenue.
B.Prepaid expense.
C.Credit account.
D.Note payable.
E.Account receivable.
Q:
On December 31, 2010, Peris Company acquired Shanta Company's outstanding stock by paying $400,000 cash and issuing 10,000 shares of its own $30 par value common stock, when the market price was $32 per share. Peris paid legal and accounting fees amounting to $35,000 in addition to stock issuance costs of $8,000. Shanta is dissolved on the date of the acquisition. Balance sheet information for Peris and Shanta immediately preceding the acquisition is shown below, including fair values for Shanta's assets and liabilities.
Peris Shanta Shanta
Book Value Book Value Fair Value
Cash 490,000 $140,000 $140,000
Accounts Receivable 560,000 280,000 280,000
Inventory 520,000 200,000 260,000
Land 460,000 150,000 140,000
Plant Assets Net 980,000 325,000 355,000
Construction Permits 380,000 170,000 190,000
Accounts Payable (460,000) (140,000) (140,000)
Other accrued expenses (160,000) (45,000) (45,000)
Notes Payable (800,000) (460,000) (460,000)
Common Stock ($30 par) (960,000)
Common Stock ($20 par) (200,000)
Additional P.I.C (192,000) (80,000)
Retained Earnings (818,000) (340,000)
Required: Determine the consolidated balances which Peris would present on their consolidated balance sheet for the following accounts.
Cash
Inventory
Construction Permits
Goodwill
Notes Payable
Common Stock
Additional Paid in Capital
Retained Earnings
Q:
Prepaid expenses are:
A.Payments made for products and services that do not ever expire.
B.Classified as liabilities on the balance sheet.
C.Decreases in equity.
D.Assets that represent prepayments of future expenses.
E.Promises of payments by customers.
Q:
If the cross price elasticity of demand between two goods is negative, then the two goods areA) substitutes. B) complements. C) unrelated. D) independent.
Q:
Balance sheet information for Sphinx Company at January 1, 2011, is summarized as follows:
Current assets $230,000 Liabilities $300,000
Plant assets 450,000 Capital stock $10 par 200,000
Retained earnings 180,000
$680,000 $680,000
Sphinx's assets and liabilities are fairly valued except for plant assets that are undervalued by $50,000. On January 2, 2011, Pyramid Corporation issues 20,000 shares of its $10 par value common stock for all of Sphinx's net assets and Sphinx is dissolved. Market quotations for the two stocks on this date are:
Pyramid common: $28.00
Sphinx common: $19.50
Pyramid pays the following fees and costs in connection with the combination:
Finder's fee $10,000
Legal and accounting fees 6,000
Required:
1. Calculate Pyramid's investment cost of Sphinx Corporation.
2. Calculate any goodwill from the business combination.
Q:
When price is $5 per unit, quantity demanded is 12 units. When price is $6 per unit, quantity demanded is 8 units. The value of the absolute price elasticity of demand is approximatelyA) 2.20. B) 4.00. C) 1.82. D) 0.36.
Q:
Unearned revenues are:
A.Revenues that have been earned and received in cash.
B.Revenues that have been earned but not yet collected in cash.
C.Liabilities created when a customer pays in advance for products or services before the revenue is earned.
D.Recorded as an asset in the accounting records.
E.Increases to owners' capital.
Q:
On January 2, 2010 Carolina Clothing issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Dakota Dressing Company's outstanding common shares in an acquisition. Carolina paid $15,000 for registering and issuing securities and $10,000 for other direct costs of the business combination. The fair value and book value of Dakota's identifiable assets and liabilities were the same. Assume Dakota Company is dissolved on the date of the acquisition. Summarized balance sheet information for both companies just before the acquisition on January 2, 2010 is as follows:
Carolina Dakota
Cash $150,000 $120,000
Inventories 320,000 400,000
Other current assets 500,000 500,000
Land 350,000 250,000
Plant assets-net 4,000,000 1,500,000
Total Assets $5,320,000 $2,770,00
Accounts payable $1,000,000 $300,000
Notes payable 1,300,000 660,000
Capital stock, $5 par 2,000,000 500,000
Additional paid-in capital 1,000,000 100,000
Retained Earnings 20,000 1,210,000
Total Liabilities & Equities $5,320,000 $2,770,000
Required:
Prepare a balance sheet for Carolina Clothing immediately after the business combination.
Q:
Which of the following statements is correct?
A.When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense.
B.Promises of future payment are called accounts receivable.
C.Increases and decreases in cash are always recorded in the owner's capital account.
D.An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business.
E.Accrued liabilities include accounts receivable.
Q:
Why is the optimal quantity of pollution not less than the point at which the marginal benefit equals the marginal cost?A) The point of intersection occurs at a low level of pollution. B) There are no external costs below that level.C) Below that point firms will have to reduce the quantity that they are currently producing and lower the price.D) Below that point the value that people place on less pollution is less than the cost of reducing the pollution.
Q:
Samantha's Sporting Goods had net assets consisting of the following:
Book Value Fair Value
Cash 150,000 150,000
Inventory 820,000 960,000
Building and Fixtures 330,000 310,000
Liabilities (90,000) (88,000)
Pedic Incorporated purchased Samantha's Sporting Goods, and immediately dissolved Samantha's as a separate legal entity.
Requirement 1: If Samantha's was purchased for $1,000,000 cash, prepare the entry recorded by Pedic.
Requirement 2: If Samantha's was purchased for $1,500,000 cash, prepare the entry recorded by Pedic.
Q:
The account used to record the transfers of assets from a business to its owner is:
A.A revenue account.
B.The owner's withdrawals account.
C.The owner's capital account.
D.An expense account.
E.A liability account.
Q:
Which income maintenance program was started to support the nationʹs farmers?A) Supplemental Security Income B) Food StampsC) Earned Income Tax Credit Program D) AFDC
Q:
Pali Corporation exchanges 200,000 shares of newly issued $10 par value common stock with a fair market value of $40 per share for all the outstanding $5 par value common stock of Shingle Incorporated, which continues on as a legal entity. Fair value approximated book value for all assets and liabilities of Shingle. Pali paid the following costs and expenses related to the business combination:
Registering and issuing securities 19,000
Accounting and legal fees 150,000
Salaries of Pali's employees whose
time was dedicated to the merger 86,000
Cost of closing duplicate facilities 223,000
Required: Prepare the journal entries relating to the above acquisition and payments incurred by Pali, assuming all costs were paid in cash.
Q:
An account used to record the owner's investments in the business is called a(n):
A.Withdrawals account.
B.Capital account.
C.Revenue account.
D.Expense account.
E.Liability account.
Q:
A bilateral monopoly meansA) that a monopsonistic employer bargains with two unions.B) that a monopsonistic employer bargains with both an industrial and a craft union. C) that a monopsonistic employer bargains with a monopoly.D) that an industrial union bargains with a two -firm oligopoly.
Q:
On January 2, 2011, Pilates Inc. paid $700,000 for all of the outstanding common stock of Spinning Company, and dissolved Spinning Company. The carrying values for Spinning Company's assets and liabilities are recorded below.
Cash $200,000
Accounts Receivable 220,000
Copyrights (purchased) 400,000
Goodwill 120,000
Liabilities (180,000)
Net assets $760,000
On January 2, 2011, Spinning anticipated collecting $185,000 of the recorded Accounts Receivable. Pilates entered into the acquisition because Spinning had Copyrights that Pilates wished to own, and also unrecorded patents with a fair value of $100,000.
Required:
Calculate the amount of goodwill that will be recorded on Pilate's balance sheet as of the date of acquisition. Then record the journal entry Pilates would record on their books to record the acquisition.
Q:
A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is a(n):
A.Journal.
B.Posting.
C.Trial balance.
D.Account.
E.Chart of accounts.
Q:
The president of the United States can obtain a court injunction that will stop a strike for an80-day ʺcooling-offʺperiod if the strike is expected to imperil national safety or health. This power is granted in theA) Wagner Act. B) Landrum-Griffin Act. C) National Industrial Recovery Act. D) Taft-Hartley Act.
Q:
On January 2, 2011, Pilates Inc. paid $900,000 for all of the outstanding common stock of Spinning Company, and dissolved Spinning Company. The carrying values for Spinning Company's assets and liabilities are recorded below.
Cash $200,000
Accounts Receivable 220,000
Copyrights (purchased) 400,000
Goodwill 120,000
Liabilities (180,000)
Net assets $760,000
On January 2, 2011, Spinning anticipated collecting $185,000 of the recorded Accounts Receivable. Pilates entered into the acquisition because Spinning had Copyrights that Pilates wished to own, and also unrecorded patents with a fair value of $100,000.
Required:
Calculate the amount of goodwill that will be recorded on Pilate's balance sheet as of the date of acquisition.
Q:
Various types of documents and other papers that companies use when they conduct their business:
A.Are called source documents.
B.Can include sales tickets.
C.Are the source of information for recording accounting entries.
D.Can be in electronic form.
E.All of these.
Q:
If laborers become more efficient over time, and if the Ajax Company would want to expand production, they wouldA) substitute capital for labor. B) hire more laborers.C) hire fewer laborers. D) produce less product.
Q:
The balance sheets of Palisade Company and Salisbury Corporation were as follows on December 31, 2010: Palisade
Salisbury Current Assets
$260,000
$120,000 Equipment-net
440,000
480,000 Buildings-net
600,000
200,000 Land
100,000
200,000 Total Assets
$1,400,000
$1,000,000 Current Liabilities
100,000
120,000 Common Stock, $5 par
1,000,000
400,000 Additional paid-in Capital
100,000
280,000 Retained Earnings
200,000
200,000 Total Liabilities and Stockholders' equity
$1,400,000
$1,000,000 On January 1, 2011 Palisade issued 30,000 of its shares with a market value of $40 per share in exchange for all of Salisbury's shares, and Salisbury was dissolved. Palisade paid $20,000 to register and issue the new common shares. It cost Palisade $50,000 in direct combination costs. Book values equal market values except that Salisbury's land is worth $250,000.
Required:
Prepare a Palisade balance sheet after the business combination on January 1, 2011.
Q:
Source documents:
A.Include the ledger.
B.Are the sources of accounting information.
C.Must be in electronic form.
D.Are based on accounting entries.
E.Include the chart of accounts.
Q:
When a regulator is concerned about pleasing different groups in order to keep employed, this is known as theA) share-the-gains, share-the-pains theory. B) regulatory hypothesis.C) capture hypothesis. D) creative theory.
Q:
Bigga Corporation purchased the net assets of Petit, Inc. on January 2, 2011 for $380,000 cash and also paid $15,000 in direct acquisition costs. Petit, Inc. was dissolved on the date of the acquisition. Petit's balance sheet on January 2, 2011 was as follows:
Accounts receivable-net $90,000 Current liabilities $75,000
Inventory 220,000 Long term debt 80,000
Land 30,000 Common stock ($1 par) 10,000
Building-net 20,000 Addtl. paid-in capital 215,000
Equipment-net 40,000 Retained earnings 20,000
Total assets $400,000 Total liab. & equity $400,000
Fair values agree with book values except for inventory, land, and equipment, which have fair values of $260,000, $35,000 and $35,000, respectively. Petit has patent rights with a fair value of $20,000.
Required:
Prepare Bigga's general journal entry for the cash purchase of Petit's net assets.
Q:
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) and two product formats (A and B) in an industry. The game with the dominant strategy is also calledA) the prisonersʹ dilemma. B) Tweedle Dee-Tweedle Dum. C) Pure Coordination Game. D) Tit-for-Tat.
Q:
Source documents include all of the following except:
A.Sales tickets.
B.Ledgers.
C.Checks.
D.Purchase orders.
E.Bank statements.
Q:
Saveed Corporation purchased the net assets of Penny Inc. on January 2, 2011 for $1,690,000 cash and also paid $15,000 in direct acquisition costs. Penny dissolved as of the date of the acquisition. Penny's balance sheet on January 2, 2011 was as follows:
Accounts receivable-net $190,000 Current liabilities $235,000
Inventory 480,000 Long term debt 650,000
Land 10,000 Common stock ($1 par) 25,000
Building-net 630,000 Paid-in capital 150,000
Equipment-net 240,000 Retained earnings 590,000
Total assets $1,650,000 Total liab. & equity $1,650,000
Fair values agree with book values except for inventory, land, and equipment, which have fair values of $640,000, $140,000 and $230,000, respectively. Penny has customer contracts valued at $20,000.
Required:
Prepare Saveed's general journal entry for the cash purchase of Penny's net assets.
Q:
A sales invoice:
A.Is a type of source document.
B.Is used by sellers to record the sale.
C.Is used by buyers to record purchases.
D.Gives rise to an entry in the accounting process.
E.All of these.
Q:
Which of the following is most likely to be sold in an oligopoly market?A) Pizza B) Cell phone serviceC) Electricity D) Computer software
Q:
On January 2, 2011 Palta Company issued 80,000 new shares of its $5 par value common stock valued at $12 a share for all of Sudina Corporation's outstanding common shares. Palta paid $5,000 for the direct combination costs of the accountants. Palta paid $18,000 to register and issue shares. The fair value and book value of Sudina's identifiable assets and liabilities were the same. Summarized balance sheet information for both companies just before the acquisition on January 2, 2011 is as follows:
Palta Sudina
Cash $75,000 $60,000
Inventories 160,000 200,000
Other current assets 200,000 250,000
Land 175,000 125,000
Plant assets-net 1,500,000 750,000
Total Assets $2,110,000 $1,385,00
Accounts payable $100,000 $155,000
Notes payable 700,000 330,000
Capital stock, $2 par 600,000 250,000
Additional paid-in capital 450,000 50,000
Retained Earnings 260,000 600,000
Total Liabilities & Equity $2,110,000 $1,385,000
Required:
1. Prepare Palta's general journal entry for the acquisition of Sudina assuming that Sudina survives as a separate legal entity.
2. Prepare Palta's general journal entry for the acquisition of Sudina assuming that Sudina will dissolve as a separate legal entity.
Q:
The accounting process begins with:
A.Analysis of business transactions and source documents.
B.Preparing financial statements and other reports.
C.Summarizing the recorded effect of business transactions.
D.Presentation of financial information to decision-makers.
E.Preparation of the trial balance.
Q:
Considering the relevant market structures, which is an INCORRECT statement?A) In a perfectly competitive situation, there is an extremely large number of firms. B) In pure monopoly, there is only one firm.C) In monopolistic competition, there is a large number of firms.D) In any market situation, the number of firms is not very important.
Q:
At December 31, 2011, Pandora Incorporated issued 40,000 shares of its $20 par common stock for all the outstanding shares of the Sophocles Company. In addition, Pandora agreed to pay the owners of Sophocles an additional $200,000 if a specific contract achieved the profit levels that were targeted by the owners of Sophocles in their sale agreement. The fair value of this amount, with an agreed likelihood of occurrence and discounted to present value, is $160,000. In addition, Pandora paid $10,000 in stock issue costs, $40,000 in legal fees, and $48,000 to employees who were dedicated to this acquisition for the last three months of the year. Summarized balance sheet and fair value information for Sophocles immediately prior to the acquisition follows.
Book Value Fair Value
Cash $100,000 $100,000
Accounts Receivable 280,000 250,000
Inventory 520,000 640,000
Buildings and Equipment (net) 750,000 870,000
Trademarks and Tradenames 0 500,000
Total Assets $1,650,000
Accounts Payable $200,000 $190,000
Notes Payable 900,000 900,000
Retained Earnings 550,000
Total Liabilities and Equity $1,650,000
Required:
1. Prepare Pandora's general journal entry for the acquisition of Sophocles assuming that Pandora's stock was trading at $35 at the date of acquisition and Sophocles dissolves as a separate legal entity.
2. Prepare Pandora's general journal entry for the acquisition of Sophocles assuming that Pandora's stock was trading at $35 at the date of acquisition and Sophocles continues as a separate legal entity.
3. Prepare Pandora's general journal entry for the acquisition of Sophocles assuming that Pandora's stock was trading at $25 at the date of acquisition and Sophocles dissolves as a separate legal entity.
4. Prepare Pandora's general journal entry for the acquisition of Sophocles assuming that Pandora's stock was trading at $25 at the date of acquisition and Sophocles survives as a separate legal entity.
Q:
The balance sheet reports the financial position of a company at a point in time.
Q:
A monopolist maximizes profits by findingA) the rate of output where marginal revenue equals marginal cost. B) the rate of output where price equals marginal cost.C) the price where price exceeds marginal revenue by that largest amount. D) the price where average revenue and marginal cost are equal.
Q:
On January 2, 2011 Piron Corporation issued 100,000 new shares of its $5 par value common stock valued at $19 a share for all of Seana Corporation's outstanding common shares. Piron paid $15,000 to register and issue shares. Piron also paid $20,000 for the direct combination costs of the accountants. The fair value and book value of Seana's identifiable assets and liabilities were the same. Summarized balance sheet information for both companies just before the acquisition on January 2, 2011 is as follows:
Piron Seana
Cash $150,000 $120,000
Inventories 320,000 400,000
Other current assets 500,000 500,000
Land 350,000 250,000
Plant assets-net 4,000,000 1,500,000
Total Assets $5,320,000 $2,770,000
Accounts payable $1,000,000 $300,000
Notes payable 1,300,000 660,000
Capital stock, $5 par 2,000,000 500,000
Additional paid-in capital 1,000,000 100,000
Retained Earnings 20,000 1,210,000
Total Liabilities & Equities $5,320,000 $2,770,000
Required:
1. Prepare Piron's general journal entry for the acquisition of Seana, assuming that Seana survives as a separate legal entity.
2. Prepare Piron's general journal entry for the acquisition of Seana, assuming that Seana will dissolve as a separate legal entity.
Q:
An income statement reports the revenues earned less expenses incurred by a business over a period of time.
Q:
A perfectly competitive firm will not earn an economic profit in the long run, because
A) it is a ʺprice-maker.ʺ
B) it faces a perfectly inelastic demand curve.
C) there are no barriers to entry into the industry.
D) it produces differentiated products.
Q:
Parrot Incorporated purchased the assets and liabilities of Sparrow Company at the close of business on December 31, 2011. Parrot borrowed $2,000,000 to complete this transaction, in addition to the $640,000 cash that they paid directly. The fair value and book value of Sparrow's recorded assets and liabilities as of the date of acquisition are listed below. In addition, Sparrow had a patent that had a fair value of $50,000.
Book Value Fair Value
Cash $120,000 $120,000
Inventories 220,000 250,000
Other current assets 630,000 600,000
Land 270,000 320,000
Plant assets-net 4,650,000 4,600,000
Total Assets $5,890,000
Accounts payable $1,200,000 $1,200,000
Notes payable 2,100,000 2,100,000
Capital stock, $5 par 700,000
Additional paid-in capital 1,400,000
Retained Earnings 490,000
Total Liabilities & Equities $5,890,000
Required:
1. Prepare Parrot's general journal entry for the acquisition of Sparrow, assuming that Sparrow survives as a separate legal entity.
2. Prepare Parrot's general journal entry for the acquisition of Sparrow, assuming that Sparrow will dissolve as a separate legal entity.
Q:
Revenue is properly recognized:
A.When the customer's order is received.
B.Only if the transaction creates an account receivable.
C.At the end of the accounting period.
D.Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.
E.When cash from a sale is received.
Q:
The vertical distance between the horizontal axis and any point on a perfect competitorʹs demand curve measuresA) total cost.B) total revenues.C) product price, marginal revenue, and average revenue.D) supply curve for the product.
Q:
When considering an acquisition, which of the following is NOT a method by which one company may gain control of another company?
A) Purchase of the majority of outstanding voting stock of the acquired company.
B) Purchase of all assets and liabilities of another company.
C) Purchase the assets, but not necessarily the liabilities, of another company previously in bankruptcy.
D) All of the above methods result in a company gaining control over another company.
Q:
Which of the following accounting principles would require that all goods and services purchased be recorded at cost?
A.Going-concern principle.
B.Continuing-concern principle.
C.Cost principle.
D.Business entity principle.
E.Consideration principle.
Q:
Total OutputTotal Costs0$101182213234245266297338389441051In the above table, the marginal cost of the ninth unit isA) $4.00. B) $5.00. C) $6.00. D) $7.00.
Q:
In reference to international accounting for goodwill, U.S. companies have complained that past U.S. accounting rules for goodwill placed them at a disadvantage in competing against foreign companies for merger partners. Why?
A) Previous rules required immediate write off of goodwill which resulted in a one-time expense that was not required under international rules.
B) Previous rules required amortization of goodwill which resulted in an ongoing expense that was not required under international rules.
C) Previous rules did not permit the recording of goodwill, thus resulting in a lower asset base than international counterparts would recognize.
D) All of the above are correct.
Q:
If a business is not being sold or closed, the amounts reported in the accounts for assets used in operations are based on costs. This practice is best justified by the:
A.Cost principle.
B.Going-concern principle.
C.Objectivity principle.
D.Business entity principle.
E.Both A and B.
Q:
Information that is not available to the general public about what is happening in a corporation isA) opportunity benefit. B) limited liability.C) economic rent. D) inside information.
Q:
Goodwill arising from a business combination is
A) charged to Retained Earnings after the acquisition is completed.
B) amortized over 40 years or its useful life, whichever is longer.
C) amortized over 40 years or its useful life, whichever is shorter.
D) never amortized.
Q:
According to generally accepted accounting principles, a company's balance sheet should show the company's assets at:
A.The cash equivalent value of what was given up or received.
B.The current market value of the asset received in all cases.
C.The cash paid only, even if something other than cash was given in the exchange.
D.The best estimate of a certified internal auditor.
E.The objective value to external users.
Q:
Proprietorships areA) the most common form of business organization in the country. B) responsible for most of the profits in the country.C) generally large relative to other business organizations. D) easy to form but difficult to dissolve.