Question

4) The interest charged on a $150,000 note payable, at the rate of 5%, on a 10-month note would be *

a- $6,250

b- $2,500

c- $1,000

d- $7,500

5) Beng Company has 30,000 shares of $1 par common stock issued and outstanding. The company also has 5,000 shares of $100 par 5% noncumulative preferred stock outstanding. The company did not pay the preferred dividends in 2019. On December 1, 2020 the company’s board of directors declared that $250,000 will be paid as dividend on January 17, 2021. What amount of dividends would common stockholders earn? *

a- $225,000

b- $200,000

c- $150,000

d- $125,000

6) On June 1, 2019, Lilo Inc. announces a 3:1 stock split on its 30,000 shares of $6 par value common stock outstanding. The memo announcing the split will include information about the stock’s par value which will be: *

a- $2

b- $18

c- 10,000 shares

d- 90,000 shares

7) A company receives $1,000 including 6% sales tax. The journal entry to record the sale would include a *

a- Credit to Sales Revenue for $1,000

b- Debit to Sales Revenue for $1,000

c- Debit to Sales Revenue for $943.3

d- Credit to Sales revenue for $943.3

Answer 1

Question 4

Answer: a. $6,250

Interest charged = $150,000 x 5% x (10 months / 12 months) = $6,250

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Question 5

Answer: a. $225,000

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Preferred dividend = Total par value x Preferred dividend rate = (5,000 shares x $100 par) x 5% = $25,000

Dividend payable to common shareholders = Total dividend - Preferred dividend = $250,000 - $25,000 = $225,000

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Question 6

Answer: a. $2

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Par value per share after stock split = $6 x (1 / 3) = $2

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Question 7

Answer: a- Credit to Sales Revenue for $1,000

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Note:

Sales tax collected from the customer is not part of sales. The company has an obligation to pay the collected sales tax to the government.

So, the collected sales tax amount will be credited to the sales tax payable account.