202 AC Principles of Accounting
Park University
Name Randall Hall
Exam 1A-Chapters 13-15
Multiple Choice Questions- ( 2 points each ) Select the ONE, BEST Answer
1. Stockholders' equity consists of :
B.
Contributed capital and retained earnings.
2.
Retained earnings:
E.
All of the above.
1
3.
The price-earnings ratio is calculated by dividing:
A.
Market value per share by earnings per share.
4.
Bonds can be issued:
E.
All of the above.
5.
Amortizing a bond discount:
D.
Decreases interest expense each period.
6.
A company may retire bonds by:
E.
All of the above.
7.
At acquisition, debt securities are:
C.
Recorded at cost.
8.
Long-term investments can include:
E.
All of the above.
9.
Foreign exchange rates fluctuate due to changes in :
E.
All of the above.
10. When a credit sale is denominated in a foreign currency, the foreign exchange rate used to record the sale
is the current exchange rate:
E.
On the date of the sale.
Problem #1 ( 25 points )
3
A corporation had stockholders' equity on January 1 as follows: Common Stock, $5 par value, 1,000,000
shares authorized, 500,000 shares issued; Contributed Capital in Excess of Par Value, Common Stock,
$1,000,000; Retained Earnings, $3,000,000. Prepare journal entries to record the following transactions:
Mar. 1
Earnings (25,000 x $6) . . . . . . . . . .. . . . . . . . . . . . . . . . 150,000
Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000
Capital above Par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Mar. 20
Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .125,000
Common Stock . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000
Problem #2 ( 25 Points )
On January 1, 2007, a company issued 10-year, 10% bonds payable with a par value of $500,000, and
received $442,647 in cash proceeds. The market rate of interest at the date of issuance was 12%. The
bonds pay interest semiannually on July 1 and January 1. The issuer uses the straight-line method for
amortization. Prepare the issuer's journal entry to record the first semiannual interest payment on July 1,
2007.
Jul. 1
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 30,735.30
Discount. . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,735.30
Cash. . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Problem #3 ( 30 Points )
5
Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to record the
following transactions. Include any year-end adjustments.
Dec. 21
Inventory. . . . . . . . . .. . . . . . . . . . . . . . . . .. . . . . . . . . .45,700
Accounts Payable. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . 45,700
Dec. 31
Foreign exchange loss. . . . . . . . . .. . . . . . . . . . . . . . . . 150
Accounts Payable (500,000 * -0.0003. . . . . . . . . .. . . . . . . . . . . . . . . . 150
Jan. 20
Accounts Payable. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 45,850
Foreign exchange rate loss (500,000 * -0.0003) . . . . . 150
Cash. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 46,000