Multiple Choice Answers

1.Brandon Company completed an aging of its accounts receivable and came up with an estimated amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectable accounts, how much will the credit be to the allowance for doubtful accounts if Brandon uses the estimate of aging receivables as its method of estimating uncollectable accounts?
A. $4,250
B. $5,525
C. $7,159
D. $5,067

2.Brandon Company completed an aging of its accounts receivable and came up with an estimated amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectible accounts, how much will the credit be to the allowance for doubtful accounts if Brandon uses the percent of credit sales as its method of estimating uncollectible accounts?
A. $5,067
B. $7,159
C. $5,525
D. $4,250

3.Which of the following would not be considered a contingent liability?
A. Mortgage payable
B. Cosigning a loan
C. Potential fines from the EPA
D. Pending legal action

4.Which section of the income statement does not report net of income taxes or net of income tax savings?
A. Extraordinary items section
B. Discontinued operations section
C. Cumulative effect of changes in accounting principles section
D. Continuing operations section

5.Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $12,000 in arrears?
A. $6,000 preferred; $34,000 common
B. $18,000 preferred; $22,000 common
C. $20,000 preferred; $20,000 common
D. $40,000 preferred; $0 common

6.Birch issued 200 shares of $12 par common stock in exchange for a piece of equipment with a current market value of $3,000. Which of the following is not part of the journal entry for this transaction?
A. Debiting Equipment for $3,000
B. Crediting Common Stock for $3,000
End of exam
C. Crediting Paid-in Capital in Excess of Par—Common for $600
D. Crediting Common Stock for $2,400

7.The Isaiah Corporation Stockholders’ Equity section includes the following information:
Preferred Stock $22,000
Paid-in Capital in Excess of Par—Preferred 2,980
Common Stock 48,000
Paid-in Capital in Excess of Par—Common 3,400
Retained Earnings 7,350
Total par value of the preferred and common stock is
A. $70,000.
B. $77,350.
C. $83,730.
D. $76,380.

8.The Amanda Corporation Stockholders’ Equity section includes the following information:
Preferred Stock $12,000
Paid-in Capital in Excess of Par— Preferred 2,700
Common Stock 15,000
Paid-in Capital in Excess of Par— Common 4,100
Retained Earnings 8,200
What was the total selling price of the preferred stock?
A. $14,700
B. $12,000
C. $16,100
D. $20,200