Final Exam Possible Questions Answers Essay

1. (TCO C) Redstone Company spent $190,000 developing a new process, $45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented. How should these costs be accounted for in the year they are incurred?

2. (TCO D) Total payroll of Watson Co. was $920,000, of which $160,000 represented amounts paid in excess of $100,000 to certain employees. The amount paid to employees in excess of $7,000 was $720,000. Income taxes withheld were $225,000. The state unemployment tax is 1.2%, the federal unemployment tax is .8%, and the F.I.C.A. tax is 7.65% on an employee’s wages to $100,000 and 1.45% in excess of $100,000. (a) Prepare the journal entry for the wages and salaries paid. (b) Prepare the entry to record the employer payroll taxes.

3. (TCO D). Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar.) The December 31, 2010 balance sheet of Wolfe Co. included the following items: 7.5% bonds payable due December 31, 2018 $1,200,000

Unamortized discount on bonds payable 48,000

The bonds were issued on December 31, 2008 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization.) On April 1, 2011, Wolfe retired $240,000 of these bonds at 101 plus accrued interest.

4. (TCO E) Parker Corporation has issued 2,000 shares of common stock and 400 shares of preferred stock for a lump sum of $72,000 cash.


(a) Give the entry for the issuance assuming the par value of the common was $5 and the market value $30, and the par value of the preferred was $40 and the market value $50. (Each valuation is on a per share basis and there are ready markets for each stock.) (b) Give the entry for the issuance assuming the same facts as (a) above except the preferred stock has no ready market value, and the common stock has a market value of $25 per share.

5. (TCO F) The stockholder’s equity section of Lemay Corp shows the following on Dec 31, 2011: Preferred stock- 6% $100 par, $4000 shares outstanding$400,000

Common Stock-$10 par, 60,000 shares outstanding$600,000

Paid-in capital in excess of par$200,000

Retained earnings$114,000

Total stockholders’ equity$1,314,000


Assuming that all of the company’s retained earnings are to be paid out in dividends on 12/31/11 and that preferred dividends were last paid on 12/31/09, show how much the preferred and common stockholders should receive if the preferred stock is cumulative and fully participating.

Read also  Operational Research

6. (TCO A) At December 31, 2010, Sager Co. had 1,200,000 shares of common stock outstanding. In addition, Sager had 450,000 shares of preferred stock which were convertible into 750,000 shares of common stock. During 2011, Sager paid $600,000 cash dividends on the common stock and $400,000 cash dividends on the preferred stock. Net income for 2011 was $3,400,000 and the income tax rate was 40%. What would be the diluted earnings per share for 2011 (rounded to the nearest penny)? Please show all computations.

7. (TCO B) On May 1, 2010, Kirmer Corp. purchased $450,000 of 12% bonds, interest payable on January 1 and July 1, for $422,800 plus accrued interest. The bonds mature on January 1, 2016. Amortization is recorded when interest is received by the straight-line method (by months and rounded to the nearest dollar). (Assume bonds are available for sale.)


(a) prepare the entry for May 1, 2010.

(b) The bonds are sold on August 1, 2011 for $425,000 plus accrued interest. Prepare all entries required to properly record the sale.

More Essays

  • Mini Case Gilbert Enterprise

    The firm's stocks are undervalued. According to the dividends, growth rate, and discount rate the share price should be $43. 36 which is $8. 11 higher than the current market price. If the repurchase of $1Million worth of shares occurs, the company's Return on Equity would increase. This would happen since...

  • Posthorn Corporation

    Posthorn Corporation acquired 20,000 of the 100,000 outstanding common shares of Stamp Company on January 1, 2010, for a cash consideration of $200,000 at a time when its shareholders' equity amounted to $1,000,000. The shares of both companies were traded on the national stock exchange. During 2010, Stamp...

  • The Dot Com Bubble

    The Dot-com Bubble or the Tech Bubble was a speculative bubble in the shares of early internet companies called "Dot-coms." Soon after the 1987 stock market crash, global stock markets resumed their previous bull market trend, led by computer and other technology-related stocks that were traded on the new...

  • Roles Played by the Asx and Asic

    1.0 Introduction On 1 April1987, six exchanges that operated in the state capital cities merged to form the ASX. It is an Australia's primary national market for equities, derivatives, and securities. In Nov.1998, the ASX became the first exchange in the world to have its shares listed on its own market....

  • Wills and Trusts

    Facts:             Tom is trustee of a trust created by Abe in 1986. The corpus consists of stocks and bonds worth $150,000, an apartment house appraised at $650,000 in a neighborhood which is becoming increasingly industrial, and a vacant lot. Yearly net income from the stocks and bonds is $12,000, and...

  • Vodafone Case Questions

    Suggested questions 1. What was the strategic and economic rational for Mannesmann's acquisition of Organge? Did Mannesmann overpay for Orange? 2. Vodafone AirTouch proposed that each Mannesmann share would receive 53.7 Vodafone AirTouch shares, so that in aggregate Mannesmann shareholders would own 47.2%...

  • Common Stocks – Long Positions

    The Parker Hannifin Corporation (PH) stock has recorded one of the longest running dividend increases among the S&P 500 for years. On May 8, it reported an amazing first quarter result that provided the much need thrust. The stock price was 38.82 on the trading day of Nov 20 from which it saw a significant...

  • Financial Analysis of Northrop Grumman

    The fiscal analysis of Northrop Grumman includes the examination of profitability, liquidity, and equity ratios, its 3 year stock price, as well as a general financial overview of the company. This case study exams their fiscal strategy as well as the debt utilization and possible effects of the fiscal...

  • Theories of Capital Structure

    1. Apple Corporation has 2.5 million shares outstanding with a market value of $2.00 each (expected return = 16%) and debt with a market value of $1, 000,000 and a return of 10% Required a. What is the return on the capital of Apple Corporation? [Show all workings and formulae) [7.5 marks] 2. Samsung...

  • Pre and Post M&a Performance in Accounting Ratio

    There are loads of tools to measure the performance of a financial performance of an entity but financial ratios is probably the best known tool which is mainly to analyze the performance of an entity by comparing the present to the past relative figures taken or composed from the financial statement . The...

Read also  Company Law Question Solution