Question

37. Which of the following statements is NOT true?
A A company may exclude a short-term obligation from current liabilities, if, at
statement of financial position date, the entity expects to refinance under an existing
agreement for at least a year, and the decision is solely at its discretion
B Cash dividends should be recorded as a liability when they are declared by the board
of directors
C Warranty costs are charged to expense as they are paid if company uses the cash basis
method
D Federal income taxes withheld from employees' payroll cheques should be recorded as
a long-term liability
38. Lace Ltd. sold five-year, 12% bonds, face value $500,000 on January 1, 2014. Interest is paid semiannually on June 30th and December 31st . The bonds were sold for $538,500 to yield 10%. What is
Lace’s interest expense for 2014 if Lace using the effective interest method to amortize bond discounts
and premiums?
A $50,000
B $53,696
C $53,850
D $60,000
39. Pike Inc. issued $500,000, 9% bonds on July 1, 2014 with a maturity date of July 1, 2024. The bonds
were issued for $469,500 to yield 10%. Pike uses the effective interest method of amortizing bond
discount. Interest is payable annually on June 30. What should the balance of the Bonds Payable
account be at June 30, 2016?[CPA adapted]
A $500,000
B $493,900
C $473,595
D $471,450
40. Which of the following statements about preferred shares is correct?
A Rank ahead of common shares; do not have a vote
B Rank ahead of common shares; do not pay dividends
C Rank behind common shares; do not pay dividends
D Rank behind common shares; do not have a vote
41. Why would a corporation want to issue preferred shares rather than debt?
A. To avoid paying dividends to the common shareholders.
B. To manage the debt-to-equity ratio, which is too high.
C. To increase the market value of the common shares.
D. To decrease the market value of the common shares.
42. The liability of shareholders is
A
B
C
D
Similar to the liability of partners in a partnership
Similar to the liability of the owner of a proprietorship
Equal to the amount required to satisfy long-term liabilities
Limited to their investment in the company
43. Which of the following transactions would NOT result in a decrease in retained earnings?
A
B
C
D
Declaration and issuance of a share dividend
Net loss incurred in the reporting period
Declaration of a cash dividend
Correction of error in depreciation; depreciation overstated in a prior year
ADMN 3321H - Intermediate Financial Accounting II
Accounting Assignment #1
Professor Wallace WI 2019 - Tuesday Jan. 22nd 7
44. Apple’s Price/Earnings Ratio (P/E ratio) was 19:1 in November 2017 and Microsft’s P/E ratio was
25.5:1. What is the most plausible explanation for this situation?
A
B
C
D
The price of an Apple share in the secondary market is $19.10 US
Apple is a riskier investment than Microsoft
Microsoft is a riskier investment than Apple
The return for every $1 invested in Apple is 19.1%
45. Which financial statement would you look at to see if a company distributed any of its profits to its
shareholders [if company follows IFRS]?
A Statement of Changes in Equity
B Statement of Assets
C Statement of Financial Position
D Statement of Liabilities
46. The indirect method was used to prepare the Operating Activities section of a Cash Flow Statement. It
included the addition of an amount for Accounts Receivable (A/R) to Net Income. What does this
adjustment for A/R tell us?
A The A/R balance decreased
B The A/R balance increased
C Sales decreased
D Sales increased
47. Which of the following is NOT an adjustment to Net Income when calculating cash flow from
operating activities using the indirect method and ASPE?
A Depreciation
B Interest expense
C Change in accounts receivable balance
D Gain or loss on sale of capital assets
48. At June 30, 2013, Sportsco Inc. had total assets of $2,400,000, current liabilities of $270,000, capital
stock of $300,000, and retained earnings of $1,000,000. What are long-term liabilities?
A $830,000
B $1,830,000
C $1,100,000
D $1,370,000
49. Thornton Ltd. had retained earnings of $186,400 on December 31, 2011. During 2012, Thornton
reported net income of $56,700 and paid dividends of $110,000. What is Thornton’s retained earning
balance at December 31, 2012?
A $76,400
B $133,100
C $243,100
D $353,100
50. On July 1, 2014, Cee Corp. issued 1,000 of its no par common shares and 2,000 of its no par preferred
shares for a lump sum of $100,000. At this date Cee's common shares were selling for $48 per share
and the preferred shares for $36 per share. If Cee uses the relative fair value method what amount of
the proceeds should be allocated to the preferred shares?
A. $50,000.
B. $55,000.
C. $60,000.
D. $72,000

Answer 1

3 Declaratim and issuance of a shave dividend 4 The setum for eveny 1 imvested ivn Apple is 19.1 % Stotem ent of fimancial Bo The AIR ealace nceased Position, 46) 6 Chamje in accounts seceivable Balamce $353,lo0