Q&A Hero

Q: Zed Bennett opened an art gallery and as a dealer completed these transactions: 1) Started the gallery, Artery, by investing $40,000 cash and equipment valued at $18,000. 2) Purchased $70 of office supplies on credit. 3) Paid $1,200 cash for the receptionist's salary. 4) Sold a painting for an artist and collected a $4,500 cash commission on the sale. 5) Completed an art appraisal and billed the client $200. What was the balance of the cash account after these transactions were posted? A. $12,230. B. $12,430. C. $43,300. D. $43,430. E. $61,430.

Q: On January 1, 2010, Platt Corporation purchased a 30% interest in Sandig Company for $450,000. On this date, the fair values of Sandig's assets and liabilities are assumed to be the same as their book values. Platt will account for Sandig using the equity method. Sandig's adjusted trial balance at the date of acquisition and year end were as follows: Debits December 31 January 1 Current assets $160,000 $120,000 Noncurrent assets 420,000 460,000 Expenses 390,000 Dividends (paid June 30) 40,000 Total $1,010,000 Credits Current Liabilities $90,000 $120,000 Capital stock 250,000 250,000 Beginning Retained earnings 140,000 140,000 Sales 530,000 Total $1,010,000 Required: 1. What is Platt's investment income from Sandig for the year ending December 31, 2010? 2. Calculate Platt's investment in Sandig at year end December 31, 2010.

Q: If Tim Jones, the owner of Jones Hardware proprietorship, uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to: A.Debit Salary Expense and credit Cash. B.Debit Tim Jones, Salary and credit Cash. C.Debit Cash and credit Tim Jones, Withdrawals. D.Debit Tim Jones, Withdrawals and credit Cash. E.Debit Automobiles and credit Cash.

Q: Wader's Corporation paid $120,000 for a 25% interest in Shell Company on July 1, 2010. No information is available on the fair value of Shell's assets and liabilities. Assume the equity method. Shell's trial balances at July 1, 2010 and December 31, 2010 were as follows: Debits December 31 July 1 Current assets $100,000 $50,000 Noncurrent assets 300,000 310,000 Expenses 160,000 120,000 Dividends (paid in June) 40,000 40,000 Total $ 600,000 $ 520,000 Credits Current Liabilities $60,000 $40,000 Capital stock (no change) 200,000 200,000 Retained earnings Jan. 1 100,000 100,000 Sales 240,000 180,000 Total $600,000 $520,000 Required: 1. What is Wader's investment income from Shell for the year ending December 31, 2010? 2. Calculate Wader's investment in Shell at year end December 31, 2010.

Q: The following transactions occurred during July: 1) Received $900 cash for services provided to a customer during July. 2) Received $2,200 cash investment from Barbara Hanson, the owner of the business. 3) Received $750 from a customer in partial payment of his account receivable which arose from sales in June. 4) Provided services to a customer on credit, $375. 5) Borrowed $6,000 from the bank by signing a promissory note. 6) Received $1,250 cash from a customer for services to be rendered next year. What was the amount of revenue for July? A. $ 900. B. $ 1,275. C. $ 2,525. D. $ 3,275. E. $11,100.

Q: Pancake Corporation saw the potential for vertical integration and purchases a 15% interest in Syrup Corp. on January 1, 2010, for $150,000. At that date, Syrup's stockholders' equity included $200,000 of $10 par value common stock, $300,000 of additional paid in capital, and $500,000 retained earnings. The companies began to work together and realized improved sales by both parties. On December 31, 2011, Pancake paid $250,000 for an additional 20% interest in Syrup Corp. Both of Pancake's investments were made when Syrup's book values equaled their fair values. Syrup's net income and dividends for 2010 and 2011 were as follows: 2010 2011 Net income $220,000 $330,000 Dividends $20,000 $30,000 Required: 1. Prepare journal entries for Pancake Corporation to account for its investment in Syrup Corporation for 2010 and 2011. 2. Calculate the balance of Pancake's investment in Syrup at December 31, 2011

Q: During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the January 31 beginning cash balance? A.$700. B.$1,100. C.$2,900. D.$0. E.$4,300.

Q: Pike Corporation paid $100,000 for a 10% interest in Salmon Corp. on January 1, 2010, when Salmon's stockholders' equity consisted of $800,000 of $10 par value common stock and $200,000 retained earnings. On December 31, 2011, after receipt of the year's dividends from Salmon, Pike paid $192,000 for an additional 20% interest in Salmon Corp. Both of Pike's investments were made when Salmon's book values equaled their fair values. Salmon's net income and dividends for 2010 and 2011 were as follows: 2010 2011 Net income $60,000 $140,000 Dividends $20,000 $40,000 Required: 1. Prepare journal entries for Pike Corporation to account for its investment in Salmon Corporation for 2010 and 2011. 2. Calculate the balance of Pike's investment in Salmon at December 31, 2011

Q: On April 30, Holden Company had an Accounts Receivable balance of $18,000. During the month of May, total credits to Accounts Receivable were $52,000 from customer payments. The May 31 Accounts Receivable balance was $13,000. What was the amount of credit sales during May? A.$ 5,000. B.$47,000. C.$52,000. D.$57,000. E.$32,000.

Q: Plum Corporation paid $700,000 for a 40% interest in Satin Company on January 1, 2011 when Plum's stockholders' equity was as follows: 10% cumulative preferred stock, $100 par $ 500,000 Common stock, $10 par value 300,000 Other paid-in capital 400,000 Retained earnings 800,000 Total stockholders' equity $2,000,000 On this date, the book values of Plum's assets and liabilities equaled their fair values and there were no dividends in arrears. Required: Calculate the amount recorded in the Investment in Satin Company and the amount of implied Goodwill in this transaction.

Q: On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of September? A.A $0 balance. B.A $4,300 debit balance. C.A $4,300 credit balance. D.A $5,700 debit balance. E.A $5,700 credit balance.

Q: Firms must conduct impairment tests more frequently than annually when A) other shareholders hold more than 50% interest. B) a more-likely-than-not expectation exists that a reporting unit will be sold or disposed of. C) a specific unit does not have publicly traded stock. D) using the equity method.

Q: A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is: A.Recorded as a debit to an unearned revenue account. B.Recorded as a debit to a prepaid expense account. C.Recorded as a credit to an unearned revenue account. D.Recorded as a credit to a prepaid expense account. E.Not recorded in the accounting records until the earnings process is complete.

Q: In reference to the determination of goodwill impairment, which of the following statements is correct? A) The goodwill impairment test under FASB 142 is a three-step process. B) If the reporting unit's fair value exceeds its carrying value, goodwill is unimpaired. C) Under FASB 142, firms must first compare carrying values (book values) at the firm level. D) All of the above are correct.

Q: Robert Haddon contributed $70,000 in cash and land worth $130,000 to open a new business, RH Consulting. Which of the following general journal entries will RH Consulting make to record this transaction?A.B.C.D.E.

Q: In reference to intercompany transactions between an investor and an investee, when the investor can significantly influence the investee, which of the following statements is correct, assuming that the investor is using the equity method? A) There is the presumption of arms-length bargaining between the related parties. B) As long as the investor recognizes the effects of the transaction in its financial statements, it is not required to provide any additional disclosures. C) In reporting its share of earnings and losses of an investee, the investor must eliminate the effect of profits and losses on the intercompany transactions until they are realized. D) None of the above is correct.

Q: An asset created by prepayment of an expense is: A.Recorded as a debit to an unearned revenue account. B.Recorded as a debit to a prepaid expense account. C.Recorded as a credit to an unearned revenue account. D.Recorded as a credit to a prepaid expense account. E.Not recorded in the accounting records until the earnings process is complete.

Q: Pelican Corporation acquired a 25% interest in Seafare Incorporated at book value several years ago. Seafare declared $100,000 dividends in 2010 and reported its income for the year as follows: Income from continuing operations $600,000 Loss on discontinued division (100,000) Net income $500,000 Pelican's Investment in Seafare account for 2010 should increase by A) $ 100,000. B) $ 125,000. C) $ 150,000. D) $ 180,000.

Q: Wisconsin Rentals purchased office supplies on credit. The general journal entry made by Wisconsin Rentals will include a: A.Debit to Accounts Payable. B.Debit to Accounts Receivable. C.Credit to Cash. D.Credit to Accounts Payable. E.Credit to Wisconsin Rentals, Capital.

Q: Bart Company purchased a 30% interest in Simpson Corporation on January 1, 2008, and Bart accounted for its investment in Simpson under the equity method for the next 3 years. On January 1, 2011, Bart sold one-half of its interest in Simpson after which it could no longer exercise significant influence over Simpson. Bart should A) continue to account for its remaining investment in Simpson under the equity method for the sake of consistency. B) adjust the investment in Simpson account to one-half of its original amount and account for the remaining 15% interest using the equity method. C) account for the remaining investment under the cost method, using the investment in Simpson account balance immediately after the sale as the new cost basis. D) adjust the investment account to one-half of its original amount (one-half of the purchase price in 2008), and account for the remaining 15% investment under the cost method.

Q: Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for 6-months services in advance. Management Services' general journal entry to record this transaction will include a A.Debit to Unearned Management Fees for $60,000. B.Credit to Management Fees Earned for $60,000. C.Credit to Cash for $60,000. D.Credit to Unearned Management Fees for $60,000. E.Debit to Management Fees Earned for $60,000.

Q: The income from an equity method investee is reported on one line of the investor company's income statement except when A) the cost method is used. B) the investee has extraordinary items. C) the investor company is amortizing cost-book value differentials. D) the investor company changes from the cost to the equity method.

Q: Rocky Industries received its telephone bill in the amount of $300, and immediately paid it. Rocky's general journal entry to record this transaction will include a A.Debit to Telephone Expense for $300. B.Credit to Accounts Payable for $300. C.Debit to Cash for $300. D.Credit to Telephone Expense for $300. E.Debit to Accounts Payable for $300.

Q: Panda Corporation purchased 100,000 previously unissued shares of Skunk Company's $10 par value common stock directly from Skunk for $2,200,000. Skunk's stockholders' equity immediately before the investment by Panda consisted of $3,000,000 of common stock and $4,800,000 in retained earnings. What is Panda's book value of equity in the net assets of Skunk? A) $2,200,000 B) $2,500,000 C) $3,000,000 D) $3,333,000

Q: Double-entry accounting is an accounting system: A.That records each transaction twice. B.That records the effects of transactions and other events in at least two accounts with equal debits and credits. C.In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits. D.That may only be used if T-accounts are used. E.That insures that errors never occur.

Q: Jacana Corporation paid $200,000 for a 25% interest in Lilypad Corporation's common stock on January 1, 2010, but was not able to exercise significant influence over Lilypad. During 2011, Jacana reported income of $120,000, excluding its income from Lilypad, and paid dividends of $50,000. Lilypad reported net income of $40,000 during 2011 and paid dividends of $20,000. Jacana should report net income for 2011 in the amount ofA) $115,000.B) $120,000.C) $125,000.D) $130,000.

Q: Pyming Corporation accounts for its 40% investment in Sillabog Company using the equity method. On the date of the original investment, fair values were equal to the book values except for a patent, which cost Pyming an additional $40,000. The patent had an estimated life of 10 years. Sillabog has a steady net income of $20,000 per year and consistently pays out 40% of its net income as dividends to its shareholders. Which one of the following statements is correct?A) The net change in the investment account for each full year will be a debit of $8,000.B) The net change in the investment account for each full year will be a debit of $4,800.C) The net change in the investment account for each full year will be a debit of $800.D) The net change in the investment account for each full year will be a credit of $800.

Q: A credit entry: A.Increases asset and expense accounts, and decreases liability, owner's capital, and revenue accounts. B.Is always a decrease in an account. C.Decreases asset and expense accounts, and increases liability, owner's capital, and revenue accounts. D.Is recorded on the left side of a T-account. E.Is always an increase in an account.

Q: A debit is used to record: A.A decrease in an asset account. B.A decrease in an expense account. C.An increase in a revenue account. D.An increase in the balance of an owner's capital account. E.An increase in the balance of the owner's withdrawals account.

Q: Of the following accounts, the one that normally has a credit balance is: A.Cash. B.Office Equipment. C.Sales Salaries Payable. D.Owner, Withdrawals. E.Sales Salaries Expense.

Q: An investor uses the cost method of accounting for its investment in common stock. During the current year, the investor received $25,000 in dividends, an amount that exceeded the investor's share of the investee company's undistributed income since the investment was acquired. The investor should report dividend income of what amount? A) $25,000 B) $25,000 less the amount in excess of its share of undistributed income since the investment was acquired C) $25,000 less the amount that is not in excess of its share of undistributed income since the investment was acquired D) None of the above is correct.

Q: An account balance is: A.The total of the credit side of the account. B.The total of the debit side of the account. C.The difference between the total debits and total credits for an account including the beginning balance. D.Assets = liabilities + equity. E.Always a credit.

Q: Jabiru Corporation purchased a 20% interest in Fish Company common stock on January 1, 2008 for $300,000. This investment was accounted for using the complete equity method and the correct balance in the Investment in Fish account on December 31, 2010 was $440,000. The original excess purchase transaction included $60,000 for a patent amortized at a rate of $6,000 per year. In 2011, Fish Corporation had net income of $4,000 per month earned uniformly throughout the year and paid $20,000 of dividends in May. If Jabiru sold one-half of its investment in Fish on August 1, 2011 for $500,000, how much gain was recognized on this transaction? A) $278,950 B) $280,000 C) $280,950 D) $282,000

Q: Which of the following statements is correct? A.The left side of a T-account is the credit side. B.Debits decrease asset and expense accounts, and increase liability, equity, and revenue accounts. C.The left side of a T-account is the debit side. D.Credits increase asset and expense accounts, and decrease liability, equity, and revenue accounts. E.In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction.

Q: Sadie Corporation's stockholders' equity at December 31, 2010 included the following: 6% Preferred stock, $10 par value $1,000,000 Common stock, $1 par value 10,000,000 Other paid-in capital common 4,000,000 Retained earnings 4,000,000 $19,000,000 Pilga Corporation purchased a 30% interest in Sadie's common stock from other shareholders on January 1, 2011 for $5,800,000. What was the book value of Pilga's investment in Sadie on January 1, 2011? A) $5,400,000 B) $5,700,000 C) $7,120,000 D) $7,440,000

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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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.