Accouting 2 Study Guide – Help Needed

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(1)Which of the following
represents the largest number of common shares? 

Treasury Shares

Issued shares

Outstanding shares

Authorized shares 

(2)  If Keene Company issues 4,500 shares of $5 par
value common stock for $80,000, the account 

a.  Common
Stock will be credited for $22,500.

b.  Paid-in
Capital in Excess of Par will be credited for $22,500. 

c.  Paid-in
Capital in Excess of Par will be credited for $80,000. 

d.  Cash
will be debited for $57,500. 

(3) The following data is
available for Blaine Corporation at December 31, 2013:

Common stock, par $10 (authorized
25,000 shares)  $200,000  

Treasury Stock (at cost $15 per
share)    900 

Based on the data, how many shares
of common stock are outstanding? 

a.  25,000 

b.  20,000 

c.  24,940 

d.  19,940 

(4) Treasury stock is 

a.  stock
issued by the U.S. Treasury Department. 

b.  stock
purchased by a corporation and held as an investment in its treasury. 

c.  corporate
stock issued by the treasurer of a company. 

d.  a
corporation’s own stock which has been reacquired but not retired. 


  (5 )The
date on which a cash dividend becomes a binding legal obligation is on the 

a.  declaration

b.  date
of record. 

c.  payment

d.  last
day of the fiscal year-end. 

(6) The cumulative effect of the
declaration and payment of a cash dividend on a company’s financial statements
is to 

a.  decrease
total liabilities and stockholders’ equity. 

b.  increase
total expenses and total liabilities. 

c.  increase
total assets and stockholders’ equity. 

d.  decrease
total assets and stockholders’ equity.

(7) Which of the following is not a
significant date with respect to dividends? 

a.  The
declaration date 

b.  The
incorporation date 

c.  The
record date 

d.  The
payment date 

(8) Dividends Payable is classified
as a 

a.  long-term

b.  contra
stockholders’ equity account to Retained Earnings. 

c.  current

d.  stockholders’
equity account. 

(9) Story Inc. has 5,000 shares of
6%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par
value common stock outstanding at December 31, 2013. What is the annual
dividend on the preferred stock?   

a.  $60
per share 

b.  $30,000
in total 

c.  $50,000
in total 

d.  $0.60
per share 

(10) Entries for cash dividends are
required on the: 

(a)  declaration
date and the payment date. 

(b)  record
date and the payment date. 

(c)  declaration
date, record date, and payment date. 

(d)  declaration
date and the record date. 

(11) Which of the following is not
reported under additional paid-in capital? 

(a)  Paid-in
capital in excess of par value. 

(b)  Treasury

(c)  Paid-in
capital in excess of stated value. 

(d)  Paid-in
capital from treasury stock. 

(12) Depreciation is a process of: 

(a)  valuation. 

b)  cost

(c)  cash

(d)  appraisal. 

(13) All of the following factors
in computing depreciation are estimates except 

a.  cost. 

b.  residual

c.  salvage

d.  useful

(14) The balance in the Accumulated
Depreciation account represents the 

a.  cash
fund to be used to replace plant assets. 

b.  amount
to be deducted from the cost of the plant asset to arrive at its fair market

c.  amount
charged to expense in the current period. 

d.  amount
charged to expense since the acquisition of the plant asset. 

(15) The book value of an asset is
equal to the 

a.  asset’s
fair value less its historical cost. 

b.  blue
book value relied on by secondary markets. 

c.  replacement
cost of the asset. 

d.  asset’s
cost less accumulated depreciation. 

(16) In computing depreciation,
salvage value is 

a.  the
fair value of a plant asset on the date of acquisition. 

b.  subtracted from accumulated
depreciation to determine the plant asset’s depreciable cost. 

c.  an
estimate of a plant asset’s value at the end of its useful life. 

d.  ignored
in all the depreciation methods. 

(17)A truck was purchased for
$120,000 and it was estimated to have a $24,000 salvage value at the end of its
useful life. Monthly depreciation expense of $2,000 was recorded using the
straight-line method. The annual depreciation rate is 

a.  20%. 

b.  2%. 

c.  8%. 

d.  25%. 

(18) The units-of-activity method
is generally not suitable for 

a.  airplanes. 

b.  buildings. 

c.  delivery

d.  factory

(19) Costs incurred to increase the
operating efficiency or useful life of a plant asset are referred to as 

a.  capital

b.  expense

c.  ordinary

d.  revenue

(20) A gain or loss on disposal of
a plant asset is determined by comparing the 

a.  replacement
cost of the asset with the asset’s original cost. 

b.  book
value of the asset with the asset’s original cost. 

c.  original
cost of the asset with the proceeds received from its sale. 

d.  book
value of the asset with the proceeds received from its sale. 

(21)  If disposal of a plant asset occurs during
the year, depreciation is 

a.  not
recorded for the year.

b.  recorded
for the whole year. 

c.  recorded
for the fraction of the year to the date of the disposal. 

d.  not
recorded if the asset is scrapped. 

(22) An asset which costs $29,800
and has accumulated depreciation of $8,000 is sold for $21,600. What amount of
gain of loss will be recognized when the asset is sold? 

a.  A
gain of $200. 

b.  A
loss of $200. 

c.  A
loss of $8,200. 

d.  A
gain of $8,200. 

(23) On a balance sheet, natural
resources may be described more specifically as all of the following except 

a.  land

b.  mineral

c.  oil

d.  timberlands. 

(24) Depletion is 

a.  a
decrease in market value of natural resources. 

b.  the
amount of spoilage that occurs when natural resources are extracted. 

c.  the
allocation of the cost of natural resources to expense. 

d.  the
method used to record unsuccessful patents 

(25)A coal company invests $12
million in a mine estimated to have 20 million tons of coal and no salvage
value. It is expected that the mine will be in operation for 5 years. In the
first year, 1,000,000 tons of coal are extracted and sold. What is the
depletion expense for the first year? 

a.  $600,000

b.  $240,000

c.  $60,000

d.  Cannot
be determined from the information provided. 


The Remove-U-Tattoo Clinic purchased a surgical laser for
$84,000 on January 1, 2014.  The
estimated salvage value is $4,000.  The
laser has a useful life of five years and the clinic expects to use it 10,000

It was used for 900 hours in 2014; 2,100 hours in 2015;
2,400 hours in 2016. 


Showing all of your computations, compute the book value and
the balance in the Accumulated Depreciation Account for December 31, 2015 under
each of the following three methods after the depreciation for 2015 has been

(1)  Straight-line: 

2015 accumulated depreciation

  2015 book value ____________________ 


    2015 accumulated depreciation

book value ____________________ 

(3)  Double-declining

2015 accumulated depreciation

2015 book value

On January 1, Steff Corporation had 80,000 shares of no-par
common stock issued. 5,000 shares are held as treasury stock. The stock has a
stated value of $5 per share. During the year, the following transactions

  Apr.  1  Issued
12,000 additional shares of common stock for $18 per share. 

  June  15  Declared
a cash dividend of $1 per share to stockholders of record on June 30. 

  July  10  Paid
the $1 cash dividend. 

  Dec.  1  Purchased
7,000 additional shares of common stock for $17 per share. 

  Dec.  15  Declared a
cash dividend on outstanding shares of $1.20 per share to        shareholders
of record on December 31. 

Instructions:  Prepare the entries, if any, on each of the
dividend dates. 

Dan Ville, the President and CEO of Pick ‘Em Up, Inc., a
waste management firm, was recently hospitalized, suffering from exhaustion and
a heart ailment. Immediately prior to his hospitalization, Pick‘Em Up had
experienced a sharp decline in its stock price, and trading activity became
almost nonexistent. The primary reason for this was concern expressed in the
media over a new untested pick up management system implemented by the company.
Mr. Williamson had been unwilling to submit the procedure to testing before
implementation, but he reluctantly agreed to limited tests after the system was
operational. No problems have been identified by the tests to date.

The other members of management called a meeting to
determine what they should do.JohnKing, Sales Manager, suggested that the
company purchase a large number of shares of treasury stock. In that way,
investors might notice that activity had picked up, and might decide to buy more
shares. This plan would use up most of the company’s available cash, so that
there will be no money available for a cash dividend. Planet Systems has paid
cash dividends every quarter for over ten years.


1.  Is Mr. Kings’s suggestion ethical? Explain.

  Is it ethical to discontinue the
cash dividend? Explain.

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