Quiz 7 - Name ACCT 2101 Quiz #7 Fall Semester, 2005...

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Unformatted text preview: Name ACCT 2101 Quiz #7 Fall Semester, 2005 DEADLINE: WEDNESDAY, 11/23/05, BY 1:00 P.M. Section (11 or 12) _ (please print clearly) Pledge: On my honor, I have neither given nor received any unauthorized help on this quiz. (signed) Instructions: 1. This is a take-home exam. You may use your textbook, course notes, class exercises, and chCT materials. 2. You may not work with another person on this quiz. You may consult with your instructor for help. 3. You must write legibly and LABEL all parts of your answers or they will not be graded. 4. There will be no partial credit on this quiz. However, you are still required to Show your work, and it must match your answer. 5. You must submit a hard copy of your completed quiz to my office (Room 443) or bring it to class by the deadline. NO electronic copies will be accepted. Point Allocation: Problem 1: 2 Problem 2: 2 Problem 3: 3 Problem 4: 2 Problem 5: _1_ Total Available Points Q ACCT210] Quiz 7 Iof6 PROBLEM 1. REQUIRED: For each of the following independent cases affecting Buiova Engineering, Inc. (BEI), j oumalize the adjusting entry needed on December 31, the end of the accounting period. a. Each Friday. BEI pays employees for the current week‘s work. The amount of the pay- roll is $2.500 for a 5-day work week. The current accounting period ends on Monday. b. BE! has received notes receivable from some clients for professional services. During the cur- rent year, BEI has earned accrued interest revenue of $2.640, which will be received next year. c. The beginning balance of Engineering Supplies was $1,800. During the year, the entity purchased supplies costing $12,530, and at December 31 the inventory of supplies on hand is $2,970. ‘ d. BB is conducting tests of the Strength of the steel to be used in a large building. and the client paid BE! $36,000 at the start of the project. BEi recorded this amount as Unearned Engineering Revenue. The tests wili take severai months to complete. BEI executives esti- mate that the company has earned three-fourths of the total tee during the current year. t. Depreciation for the current year includes Office Furniture, $5.500; Engineering Equipment. $6,360; and Building, $3,790. Make a compound entry !. Details of Prepaid insurance are shown in the amount: Prepaid Insurance Jan. 1 Bal. 600 Apr. 30 2,400 BE] pays the annual insurance premium (the payment {or insurance coverage is called a premium) on April 30 each year. ACCTZJU] Quiz 7 2 of6 PROBLEM 2. On January 1, 2005, the Hanson Company was authorized to issue 1,000,000 shares of its $2 par . value stock. It then completed the following transactions: u 1/ 1 1/05 issued 120,000 shares of common stock at $32 per share for cash. 1/ 17/05 Exchanged 200,000 share of common stock for the following assets at the indicated fair market values: Inventory $2,700,000 Land 3,100,000 Building 1,000,000 1/23/05 Issued the promoters of the corporation 45,000 shares of common stock for their services in organizing the company. The Board of Directors valued these services at $1,485,000. REQUIRED: a. Prepare journal entries to record each transaction. b. Prepare the balance sheet of the company as of February 1, 2005. ACCT 2101 Quiz 7 3 of6 PROBLEM 3. On January 1, 2005, Nuclear Corporation had these stockholders’ equity accounts: Common stock ($10 par value, 70,000 shares issued and outstanding) $700,000 Paid-in Capital in Excess of Par Value 300,000 Retained Earnings 540,000 During the year, the following transactions occurred: 1/ 15/05 Declared a $060 cash dividend per share to stockholders of record on January 31, payable to February 15. 2/15/05 Paid the dividend declared in January. 4/15/05 Declared at 10% stock dividend to stockholders of record on April 30, distributable on May 15. On April 15, the market price of the stock was $16 per share. 5/15/05 Issued the shares for the stock dividend. 12/1/05 Declared a $0.75 per share cash dividend to stockholders of record on December 15, payable January 10, 2006. 12/31/05 Determined the net income for the year was $370,000. On December 31, the market price of the stock was $15 per share. REQUIRED: a. Journalize the transactions. ’0. Calculate the following ratios as of December 31, 2005: (1) Earnings per share. (2) Payout ratio. (3) Price-earnings ratio. ACCT2101 Quiz 7 4 of6 PROBLEM 4. The Georgia Tech Company had the following transactions in its own stock. The company had not previously had any treasury stock transactions. _ l. The company reacquired 700 shares of its own $2 par value common stock previously issued at $45 per share, for $40 per share. 2. The company reissued 150 shares at $47 per share, cash. 3. The company reissued 125 shares at $17 per share, cash. 4. The company received 60 shares of its common stock as a donation fiom a stockholder. 5. The 60 shares of donated treasury stock were reissued at $23 per share. REQUIRED: Record each transaction. ACCT2101 Quiz 7 5 of6 PROBLEM 5. 3. Identify two advantages and two disadvantages of the corporate form. b. Explain the difference among the following terms: (1) Small stock dividend, (2) Large stock dividend, and (3) Stock split. - 0. Identify two reasons that companies reacquire their own stock (treasury stock). ACCTZIOI Quiz 7 6of6 Name ACCT 2101 Quiz #7 Solution Fall Semester, 2005 Section (11 or 12) (please print clearly) Pledge: On my honor, I have neither given nor received any unauthorized help on this quiz. (signed) Instructions: 1. This is a take—home exam. You may use your textbook, course notes, class exercises, and WebCT materials. 2. You may not work with another person on this quiz. You may consult with your instructor for help. 3. You must write legibly and LABEL all parts of your answers or they will not be graded. 4. There will be no partial credit on this quiz. However, you are still required to show your work, and it must match your answer. 5. You must submit a hard copy of your completed quiz to my office (Room 443) or bring it to class by the deadline. NO electronic copies will be accepted. Point Allocation: Problem 1: 2 Problem 2: 2 Problem 3: 3 Problem 4: 2 Problem 5: 1 Total Available Points 1:0 ACCT2101Qu1’z 7 1 of8 PROBLEM 1. REQUIRED: For each of the following independent cases affecting Bulova Engineering, Inc. (BEi), journalize the adjusting entry needed on December 31, the end of the accounting period. a. Salaries Expense 500 Salaries Payable 500 ($2,500 / 5 = $500 per day) 1). Interest Receivable 2,640 Interest Revenue 2,640 c. Engineering Supplies Expense 11,360 Engineering Supplies 11,360 [($1,800 + $12,530) ~ $2,970 = $11,360] (1. Uneazmed Engineering Revenue 27,000 Engineering Revenue 27,000 ($36,000 * 3A : $27,000) e. Depreciation Expense 15,650 Accumulated Depr——Office Furniture 5,500 Accumulated DepriEngineering Equipment 6,360 Accumulated DepreBuilding 3,790 f. Insurance Expense 2,200 Prepaid Insurance 2,200 {($600 + $2,400) 7 ($200/mo. * 4 mo.) = $2,200] ACCT2101Quiz7 20f8 O .33 eat-d" PROBLEM 2. On January 1, 2005, the Hanson Company was authorized to issue 1,000,000 shares of its $2 par value stock. It then completed the following transactions: 1/11/05 Issued 120,000 shares of common stock at $32 per share for cash. 1/17/05 Exchanged 200,000 share of common stock for the following assets at the indicated fair market values: Inventory $2,700,000 Land 3,100,000 Building 1,000,000 1/23/05 Issued the promoters of the corporation 45,000 shares of common stock for their services in organizing the company. The Board of Directors valued these services at $1,485,000. REQUIRED: a. Prepare journal entries to record each transaction. b. Prepare the balance sheet of the company as of February 1, 2005. Part 21. 1111/05 Cash (120,000 * $32) 3,840,000 Common Stock (120,000 * $2) 240,000 Paid in Capital in Excess of Par 3,600,000 1/17/05 Inventory 2,700,000 0 (bah Land 3,100,000 2’0." Building 1,000,000 Common Stock (200,000 * $2) 400,000 Paid in Capital in Excess of Par 6,400,000 1/23/05 Organization Costs 1,485,000 Common Stock (45,000 * $2) 90,000 Paid in Capital in Excess of Par 1,3 95,000 ACCTZIO] Quiz 7 3 0f8 Part b. Hanson Company Balance Sheet February 1, 2005 Current Assets: Cash $ 3,840,000 Inventory 2,700,000 Total Current Assets Noncurrent Assets: Land 3,100,000 Building 1,000,000 Organization Costs 1,485,000 Total Noncurrent Assets TOTAL ASSETS Common Stock (365,000 shares outstanding at $2 par) Paid in Capital in Excess of Par TOTAL LTABILITIES & STOCKHOLDERS’ EQUITY ACCTZIOI Quiz 7 $ 6,540,000 5,585,000 i 12,125,000 $ 730,000 11,395,000 § 12,125,000 40f8 PROBLEM 3. On January 1, 2005, Nuclear Corporation had these stockholders’ equity accounts: Common stock ($10 par value, 70,000 shares issued and outstanding) $700,000 Paid—in Capital in Excess of Par Value 300,000 Retained Earnings 540,000 During the year, the following transactions occurred: 1/15/05 Declared a $0.60 cash dividend per share to stockholders of record on January 31, payable to February 15. 2/15/05 Paid the dividend declared in January. 4/15/05 Declared at 10% stock dividend to stockholders of record on April 30, distributable on May 15. On April 15, the market price of the stock was $16 per share. 5/15/05 Issued the shares for the stock dividend. 12/1/05 Declared a $0.75 per share cash dividend to stockholders of record on December 15, payable January 10, 2006. 12/31/05 Determined the net income for the year was $370,000. On December 31, the market price of the stock was $15 per share. REQUIRED: a. Journalize the transactions. b. Calculate the following ratios as of December 31, 2005: (1) Earnings per share. (2) Payout ratio. (3) Price-earnings ratio. Part a. 1/15/05 Retained Earnings 42,000 Dividends Payable 42,000 (70,000 * $0.60) 2/ 1 5/ 05 Dividends Payable 42,000 Cash 42,000 ACCT2101 Quiz 7 5 of8 PROBLEM 3 continued. 4/15/05 Retained Earnings (7,000 * $15) ' - 112,000 Common Stock Distributable (7,000 * $10) 70,000 Paid in Capital in Excess of Par 42,000 5/15/05 Common Stock Distributable 70,000 7, Common Stock 70,000 0' w. 604 12/1/05 Retained Earnings 57,750 Dividends Payable 57,750 [(70,000 + 7,000) * $0.75] 12/31/05 Income Summary 370,000 : ( Retained Earnings 370,000 ‘Nfi refit“ Part 13. (1) EPS = (Income / Average Shares Outstanding) = $370,000 / [(70,000 + 77,000) / 2] = $5.03 per share 0 $3 I ‘ 1n (2) Payout Ratio : (Dividends Declared/ Income) = [($42,000 + $57,750)/ $370,000] 50"" x 27% (3) P/E Ratio = Market Price/ EPS = $15 / $5.03 3 3 times ACCT 2101 Quiz 7 6 of8 PROBLEM 4. The Georgia Tech Company had the following transactions in its own stock. The company had not previously had any treasury stock transactions. 1. The company reacquired 700 shares of its own $2 par value common stock previously issued at $45 per share, for $40 per share. 2 The company reissued 150 shares at $47 per share, cash. 3 The company reissued 125 shares at $17 per share, cash. 4. The company received 60 shares of its common stock as a donation from a stockholder. 5 The 60 shares of donated treasury stock were reissued at $23 per share. REQUIRED: Record each transaction. 1. Treasury Stock (700 * $40) 28,000 Cash 28,000 2. Cash (150 * $47) 7,050 Treasury Stock (150 * $40) 6,000 Paid in Capital — Treasury Stock Transactions 1,050 3. Cash (125 * $17) 2,125 Paid in Capital — Treasury Stock Transactions 1,050 Retained Earnings 1,825 Treasury Stock (125 * $40) 5,000 4. Memo entry: 60 shares received as a donation. 5. Cash (60 * $23) 1,380 Paid in Capital — Donations 1,380 ACCTZIO] Quiz 7 70f8 0a PROBLEM S. a. Identify two advantages and two disadvantages of the corporate form. ‘3‘ Advantages of corporate form (any two): > Easy transfer of ownership. > Limited liability. > Continuous existence. > Professional management. > Separation of owners and entity (no mutual agency). ’3' Disadvantages of the corporate form (any two): 5/ > Multiple taxation. 0 ,‘b > Government regulation. > Potential for entrenched management. > Limited ability to raise creditor capital in some cases. b. Explain the difference among the following terms: (1) Small stock dividend, (2) Large stock dividend, and (3) Stock split. (1) Small stock dividend ~ a stock dividend of less than 20—25% of outstanding shares; recorded at market value. (2) Large stock dividend 7 a stock dividend of more than 20-25% of outstanding shares; recorded at par value. (3) Stock split —— distribution of 100% or more of additional shares of the corporation’s stock; recorded as adjustment to par value. c. Identify two reasons that companies reacquire their own stock (treasury stock). '3' Reasons to acquire treasury stock (any two): > For issuance to employees. > Reissue the stock later at a higher price. > Reduce the number of shares outstanding and thereby increase EPS. > To avoid an outside takeover. on?” ACCT2IOI Quiz? 80ch’ ...
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This note was uploaded on 04/22/2011 for the course ECON 1001 taught by Professor Puller during the Spring '11 term at Georgia Institute of Technology.

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Quiz 7 - Name ACCT 2101 Quiz #7 Fall Semester, 2005...

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