Question

46-50 The account Allowance for Doubtful Accounts is closed out at the end of the year....

46-50

The account Allowance for Doubtful Accounts is closed out at the end of the year.

True

False

Brown Creek Co. has 40,000 shares of cumulative preferred 2% stock. $60 par and 50,000 shares of $50 par common stock. The following amounts were distributed as dividends: year 1: $30,000; year 2: $90,000; year 3: $125,000. What are the dividends per share for perferred stock for each year?

Year 1: 0; Year 2: $1.65; Year 3: $1.20

Year 1: $1.54; Year 2: $0.48; Year 3: $1.65

Year 1: $0.48; Year 2: $1.20; Year 3: 0

Year 1: $0.75; Year 2: $1.65; Year 3: $1.20

The three classifications of restrictions on retained earnings are legal, contractual, and discretionary. Restrictions only have to be reported in the statement of retained earnings.

True

False

The straight-line method of bond amortization provides for a constant rate of interest over the life of the bonds.

True

False

Assume that the Seasons Company issues an installment note to County Trust Bank on January 1, 2014. The interest rate is 6%; term of note 5 years; annual payments $5,698; and principal $24,000. What is the entry to record the payment on December 31, 2015?

Debit interest expense $1,185; debit notes payable $4,513; and credit cash $5,698.

Debit interest expense $1,140; debit notes payable $4,258; and credit cash $5,698.

Debit interest expense $914; debit notes payable $4,784; and credit cash $5,698.

Debit interest expense $627; debit notes payable $5,071; and credit cash $5,698.
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Homework Answers

Answer #1

Solution (1) False

Explanation : Allowance for doubtful Account is shown separately in balance sheet.

Solution (2) D.Year 1: $0.75; Year 2: $1.65; Year 3: $1.20

working: preferred dividend per share = $30,000 / 40,000 = $0.75

Solution (3) False

Solution (4) False

Explanation : this method doesn't affect interest rate of interest.

Solution (5) A. Debit interest expense $1,185; debit notes payable $4,513; and credit cash $5,698

Working:

Interest (2015) = (24,000 + 24,000 x 6% - 5,698) x 6%

= $1,185

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