Units 4-6 Latest Update -

Pre-Assessment Intermediate Accounting II Units 4-6 Latest Update - 180 Questions and 100% Verified Correct Answers Guaranteed A+

A bookkeeper is reviewing transactions for a company that acquired 12,000 shares of its $1 par value common stock at $10 per share using the cost method. The shares were originally issued at $1 over par value.

The first sale of the treasury stock was for 1,000 shares at $10, the second sale was for 5,000 shares at $2 above cost, and the third sale was for 5,000 shares at $4 below cost.The company retired the remaining 1,000 shares of treasury stock on the last day of the year.

Which transaction includes a debit to Paid-on Capital from Treasury stock for $10,000?

• First sale of 1,000 shares
• The retirement of 1,000 shares
• Second sale of 5,000 shares

D. Third sale of 5,000 shares - CORRECT ANSWER: D. Third sale of 5,000 shares

$50,000 = 5,000 x $10; $30,000 = 5,000 x ($10 - $4); $10,000 = 5,000 x ($4 - $2); $10,000 = $50,000 - $30,000 - $2,000. The journal entry for the third sale is as follows: Debit Cash for $30,000; Debit Paid-in Capital from Treasury Stock for $10,000; Debit Retained Earnings for $10,000; Credit Treasury Stock for $50,000.

A company allows all full-time employees--but no part-time employees--to participate in its employee stock purchase plan. The employees have the option to purchase common stock discounted by 25%, and the plan offers no substantive option feature.

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What is one of the three required features that causes the plan to be considered compensatory?

• There is no substantive option feature.

• The company only includes common stock as part of the plan.

• The stock is discounted by 25%.

• Part-time employees are excluded from the stock option plan. - CORRECT

ANSWER: C. The stock is discounted by 25%.

Non-compensatory plans can only be discounted for 5% or less.

A company announces a $500,000 dividend payable to common stockholders. The cash dividend announcements noted that stockholders should consider $400,000 of the dividend as income and the remainder as a return of capital.

Which journal entry should be used to record this dividend?

• Debit Retained Earnings for $500,000; Credit Paid-in Capital in Excess of Par -

Common Stock for $100,000; Credit Dividends Payable for $400,000

• Debit Retained Earnings for $400,000; Credit Dividends Payable for $400,000

• Debit Retained Earnings for $500,000; Credit Dividends Payable for $500,000

• Debit Retained Earnings for $400,000; Debit Paid-in Capital in Excess of Par -

Common Stock for $100,000; Credit Dividends Payable for $500,000 - CORRECT ANSWER: D. Debit Retained Earnings for $400,000; Debit Paid-in Capital in Excess of Par - Common Stock for $100,000; Credit Dividends Payable for $500,000 2 / 4

$100,000 = $500,000 - $400,000. This is a liquidating dividend. The difference between the return of capital should be debited to the Paid-in Capital in Excess of Par - Common Stock account.

A company believes a property contains natural resources and pays $80,000 for the property. The company spends $50,000 on a bulldozer to be used in multiple projects, $10,000 to dig the land to find the natural resources, and $3,000 on intangible development costs.How much is the depletion base for the natural resources?

A. $143,000

B. $133,000

C. $93,000

D. $80,000 - CORRECT ANSWER: $93,000

• Cost of land, exploration, and intangible development cost are all part of the

depletion base: $93,000 = $80,000+$10,000+$3,000

A company borrows $20,000 by issuing a three-year note with a stated and effective rate of 5%.How much will the company record in the Notes Payable account upon signing the note?

A. $22,000

B. $20,000

C. $21,000

D. $23,000 - CORRECT ANSWER: B. $20,000

The note will be recorded at face value.

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A company borrows $20,000 by issuing a three-year note with a stated and effective rate of 5%.How much will the company record in the Notes Payable account upon signing the note?

A. $21,000

B. $23,000

C. $20,000

D. $22,000 - CORRECT ANSWER: C. $20,000

The note will be recorded at face value.

A company collected sales tax of $2,800 on sales of $35,000. The sales tax rate is 8.5%.Which entry should be used to record the amount due to the taxing agency?

• Debit Sales Revenue for $2,800; credit Cash for $2,800
• Debit Sales Revenue for $2,800; debit Loss on sales tax collection of $175; credit

Cash of $2,975

• Debit Cash for $2,800; credit Sales Tax Revenue $2,800
• Debit Cash for $2,975; credit Sales Revenue for $2,800; credit Loss on sales tax

collections $175 - CORRECT ANSWER: B. Debit Sales Revenue for $2,800; debit Loss on sales tax collection of $175; credit Cash of $2,975

Sales tax revenue = $35,000 * .0825 = $2,975. The company undercollected sales tax by $175. Debit Sales Revenue $2,800 Debit Loss on Sales Tax Collection $175 (Credit) Cash $2,975

A company currently has stock warrants outstanding. The company needs to determine when these warrants impact its earnings per share. When should they be included in the calculation?

• When the warrants have a dilutive effect on earnings per share
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