Department of Business Administration
Principle of Accounting: MID-Exam 1 (Problem)
March 18 , 2013
Student Major and Class (系級) Student Name Student Number
Problem 1 (10 points, 2 point/each)
1. Which of the following is incorrect about the statement of cash flows? a. It is a fourth basic financial statement.
b. It provides information about cash receipts and cash payments of an entity during a period. c. It reconciles the ending cash account balance to the balance per the bank statement. d. It provides information about the operating, investing, and financing activities of the business.
2. Common Stock dividends distributable
a. is a contra equity account.
b. is a current liability.
c. is reported as an addition to equity under Capital Stock–Common Stock. d. reduces total equity
3. Short-term debt investments must be readily marketable and expected to be sold within: e. 3 months from the date of purchase.
f. the next year or operating cycle, whichever is shorter. g. the next year or operating cycle, whichever is longer. h. the operating cycle.
4. Cash dividends paid to shareholders are classified on the statement of cash flows as: i. operating activities
j. investing activities.
k. a combination of (a) and (b).
l. financing activities.
5. Oxford Inc. was authorized to issue 50,000 £10 par value Common Stock. As of December 31, 2011, the company had issued 22,000 shares at an average price of £22 per share. During 2011, the company felt that the shares were undervalued so it purchased 5,000 treasury shares at £18 per share. When the share price rebounded later in the year, the company sold 2,000 of the treasury for £25. Retained earnings was £829,000 at December 31, 2011. The amount of Paid-in Capital reported on the December 31, 2011 Balance Sheet is a. £140,000.
Problem 2 (13 points)
Greeve Corporation had the following equity accounts on January 1, 2011: Capital Stock—Common Stock ($1 par) $400,000, Paid-in Capital—Common Stock $500,000, and Retained Earnings $100,000. In 2011, the company had the following treasury share transactions.
Mar. 1Purchased 5,000 shares at $7 per share.
June 1Sold 1,000 shares at $10 per share.
Sept. 1Sold 2,000 shares at $9 per share.
Dec. 1Sold 1,000 shares at $5 per share.
Greeve Corporation uses the cost method of accounting for treasury shares. In 2011, the company reported net income of $60,000.
(a) Journalize the treasury share transactions, and prepare the closing entry at December 31, 2011, for net income. (10 points) (b) Prepare the equity section for Greeve Corporation at December 31, 2011. (3 points)
Problem 3 (12 points)
Arnold Corporation has been authorized to issue 40,000 shares of $100 par value, 8%, non-cumulative preference shares and 2,000,000 no-par Common Stocks. The corporation assigned a $5 stated value to the Common Stocks. At December 31, 2011, the ledger contained the following balances pertaining to equity. Capital Stock—Preference| $ 240,000|
Paid-in Capital—Preference| 56,000|
Capital Stock—Common Stock| 2,000,000|
Paid-in Capital—Common Stock| 5,700,000|
Treasury Shares—Common Stock (1,000 shares)| 22,000|
Paid-in Capital—Treasury| 3,000|
Retained Earnings| 560,000|
The preference shares were issued for land having a fair value of $296,000. All Common Stocks issued were for cash. In November, 1,500 Common Stocks were purchased for the treasury at a per share cost of $22. In December, 500 treasury shares were sold for $28 per share. No dividends were declared in 2011. Instructions
(a) Prepare the journal entries for the: (2 points/each)
(1) Issuance of...