UMUC ACCT 221 Quiz 1 | 3,6,7,8,9 Solved

UMUC ACCT 221 Quiz 1

1.     The date on which a cash dividend becomes a binding legal obligation is on the

a.   declaration date.

b.   date of record.

c.   payment date.

d.   last day of the fiscal year-end.

2.         Dividends are predominantly paid in

a.   earnings.

b.   property.

c.   cash.

d.   stock.

3.         Solaris, Inc. has 2,000 shares of 5%, $10 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014. What is the annual dividend on the preferred stock?

a.   $5 per share

b.   $1,000 in total

c.   $10,000 in total

d.   $.05 per share

    4.     If a corporation issued $3,000,000 in bonds which pay 5% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?

a.   $3,000,000

b.   $45,000

c.   $150,000

d.   $105,000

5.         A bond with a face value of $200,000 and a quoted price of 102⅛ has a selling price of

a.   $240,225.

b.   $204,025.

c.   $200,225.

d.   $204,250.

6.         On January 1, 2014, Meeks Corporation issued $5,000,000, 10-year, 4% bonds at 102. Interest is payable semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2014 is

a.   Cash.................................................................................................................... 5,000,000

               Bonds Payable.................................................................................                       5,000,000

b.   Cash.................................................................................................................... 5,100,000

               Bonds Payable.................................................................................                       5,100,000

c.    Premium on Bonds Payable...............................................................     100,000

      Cash.................................................................................................................... 5,000,000

               Bonds Payable.................................................................................                       5,100,000

d.   Cash.................................................................................................................... 5,100,000

               Bonds Payable.................................................................................                       5,000,000

               Premium on Bonds Payable...................................................                          100,000

    7.     Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014 for $60,000. 

The journal entry to record this investment includes a debit to

a.   Debt Investments for $64,800.

b.   Debt Investments for $60,000.

c.   Cash for $60,000.

d.   Stock Investments for $60,000.

    8.     Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014 for $60,000. 

Assume Community pays interest on January 1 and July 1, and the July 1 entry was done correctly.  The journal entry at December 31, 2014 would include a credit to

a.   Interest Receivable for $2,400.

b.   Interest Revenue for $4,800.

c.   Accrued Expense for $4,800.

d.   Interest Revenue for $2,400.

9.         Mize Company owns 30% interest in the stock of Lyte Corporation. During the year, Lyte pays $20,000 in dividends to Mize, and reports $300,000 in net income. Mize Company’s investment in Lyte will increase Mize¢s net income by

a.   $6,000.

b.   $90,000.

c.   $96,000.

d.   $10,000.

10.       In accounting for stock investments between 20% and 50%, the _______ method is used.

a.   consolidated statements

b.   controlling interest

c.   cost

d.   equity