Reference no: EM132749372

Questions -

Q1. Fancy Fashions bought machinery at a cost of $80,000 on January 1, 2000. On January 1, 2002, they decided to switch from the straight-line to the double declining- balance method of amortization. The machinery has no salvage value and an eight- year useful life. The cumulative effect of this change in accounting principle before income taxes is

a. $10,000.

b. $20,000.

c. $35,000.

d. $15,000.

Q2. Patterson Corporation issued 3,000, no par value common shares at $2 per share in exchange for a truck. The truck had a fair market value of $20,000. The entry to record this transaction includes a credit to Common Shares for

a. $14,000.

b. $3,000.

c. $20,000.

d. $6,000.

Q3. Modine Manufacturing declared an 8% stock dividend when it had 150,000, no par value common shares, issued at $3 per share. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit to

a. Retained Earnings for $36,000.

b. Stock Dividends-Common for $144,000.

c. Common Shares for $36,000.

d. Common Stock Dividends Distributable for $144,000.

Q4. As a result of a stock dividend,

a. total shareholders' equity remains the same.

b. total shareholders' equity increases.

c. total shareholders' equity decreases.

d. retained earnings remain unchanged.

Q5. Callable preferred shares

a. are paid a fixed interest rate.

b. may be called by their issuer at a specified price.

c. are a liability.

d. may be exchanged for common shares by their owner.

Q6. Kaline Corporation issued 150 of $25 convertible preferred shares for $3,750. Each preferred share was convertible into one, par value common share, issued at $10 per share. The entry to record the conversion of sixteen convertible preferred shares into common shares includes a credit to

a. Common Shares.

b. Preferred Shares.

c. Retained Earnings.

d. Dividends Declared.

Q7. Zowkeway Industries sold exercise equipment costing $300,000 on the instalment basis for $500,000. Collections from customers were $100,000 in 2000, $250,000 in 2001, and $150,000 in 2002. The amount of gross profit that should be recognized in 2002 using the instalment method is

a. $250,000.

b. $150,000.

c. $60,000.

d. zero.