Question 1 The accounting process involves all of the following except identifying economic transactions that are relevant to the business. analyzing and interpreting financial reports. communicating financial information to users by preparing financial reports. recording non-quantifiable economic events. Question 2 Which of the following would not be considered an internal user of accounting data? Controller of the company Production manager President of the company Internal Revenue Service Question 3 Generally Accepted Accounting Principles are theories that are based on physical laws of the universe. principles that have been proven correct by academic researchers. income tax regulations of the Internal Revenue Service. standards that indicate how to report economic events. Question 4 The three types of business entities are proprietorships, partnerships, and corporations. proprietorships, partnerships, and large businesses. financial, manufacturing, and service companies. proprietorships, small businesses, and partnerships. Question 5 Owner’s equity is equal to assets minus liabilities. assets plus liabilities. assets minus revenues. revenues minus expenses. Question 6 The left side of an account is always the credit side. is always the debit side. is always the balance side. may represent the debit side or the credit side. Question 7 Credits decrease both assets and liabilities. increase both assets and liabilities. decrease both assets and equity. increase liabilities and decrease assets. Question 8 The second step in the recording process is preparing a trial balance. posting to the general ledger. analyzing a transaction. journalizing a transaction. Question 9 The chart of accounts is a device used to prove the mathematical accuracy of the ledger. listing of the accounts and the account numbers that identify their location in the ledger. required step in the recording process. list of accounts and their balances at a given time. Question 10 A list of accounts and their balances at a given point in time is called a chart of accounts. trial balance. general journal. general ledger. Question 11 The expense recognition principle matches assets with owner’s equity. assets with liabilities assets with expenses. expenses with revenues. Question 12 If a resource has been consumed but a bill has not been received at the end of the accounting period, it is optional whether to record the expense before the bill is received. an adjusting entry should be made recognizing the expense. an expense should be recorded in the next accounting period when the bill is received. an expense should be recorded when the cash is paid out. Question 13 An adjusting entry for accrued expenses increases an expense and also increases a liability account. True False Question 14 The adjusted trial balance is prepared after th ...

1. Question 1
The accounting process involves all of the following except
identifying economic transactions that are relevant to the
business.
analyzing and interpreting financial reports.
communicating financial information to users by preparing
financial reports.
recording non-quantifiable economic events.
Question 2
Which of the following would not be considered an internal user
of accounting data?
Controller of the company
Production manager
President of the company
Internal Revenue Service

2. Question 3
Generally Accepted Accounting Principles are
theories that are based on physical laws of the universe.
principles that have been proven correct by academic
researchers.
income tax regulations of the Internal Revenue Service.
standards that indicate how to report economic events.
Question 4
The three types of business entities are
proprietorships, partnerships, and corporations.
proprietorships, partnerships, and large businesses.
financial, manufacturing, and service companies.
proprietorships, small businesses, and partnerships.
Question 5

3. Owner’s equity is equal to
assets minus liabilities.
assets plus liabilities.
assets minus revenues.
revenues minus expenses.
Question 6
The left side of an account
is always the credit side.
is always the debit side.
is always the balance side.
may represent the debit side or the credit side.
Question 7
Credits
decrease both assets and liabilities.

4. increase both assets and liabilities.
decrease both assets and equity.
increase liabilities and decrease assets.
Question 8
The second step in the recording process is
preparing a trial balance.
posting to the general ledger.
analyzing a transaction.
journalizing a transaction.
Question 9
The chart of accounts is a
device used to prove the mathematical accuracy of the ledger.
listing of the accounts and the account numbers that identify
their location in the ledger.

5. required step in the recording process.
list of accounts and their balances at a given time.
Question 10
A list of accounts and their balances at a given point in time is
called a
chart of accounts.
trial balance.
general journal.
general ledger.
Question 11
The expense recognition principle matches
assets with owner’s equity.
assets with liabilities
assets with expenses.

6. expenses with revenues.
Question 12
If a resource has been consumed but a bill has not been received
at the end of the accounting period,
it is optional whether to record the expense before the bill is
received.
an adjusting entry should be made recognizing the expense.
an expense should be recorded in the next accounting period
when the bill is received.
an expense should be recorded when the cash is paid out.
Question 13
An adjusting entry for accrued expenses increases an expense
and also increases a liability account.
True
False

7. Question 14
The adjusted trial balance is prepared
after the balance sheet is prepared.
after the adjusting entries are prepared and posted to the ledger.
to prove no errors have been made during the accounting period.
after the financial statements are prepared.
Question 15
If cash received for future services is initially recorded in
revenue accounts and the company has not yet performed all of
the required services at the end of the accounting period, then
failure to make an adjusting entry will cause
liabilities to be overstated.
revenues to be overstated.
revenues to be understated.
accounts receivable to be overstated.
Question 16

8. Closing entries are necessary for
both permanent and temporary accounts.
temporary accounts only.
permanent or real accounts only.
permanent account only.
Question 17
A post-closing trial balance will contain only
permanent accounts.
temporary accounts.
income statement accounts.
nominal accounts.

9. Question 18
Correcting entries
may involve any combination of accounts in need of correction.
affect income statement accounts only.
always affect at least one balance sheet account and one income
statement account.
affect balance sheet accounts only.
Question 19
All of the following are property, plant, and equipment except
land.
buildings.
supplies.
machinery.
Question 20
Current liabilities

10. are obligations that the company expects to pay within the
coming year or the operating cycle, whichever is longer.
should not include long-term debt that is expected to be paid
within the next year.
are listed in the balance sheet in order of their expected
maturity.
must reasonably be expected to be paid within one year or the
operating cycle, whichever is shorter.
Question 21
Under a perpetual inventory system
freight costs are debited to Freight-Out.
purchase returns are debited to Purchase Returns and
Allowances.
purchases on account are debited to Inventory.
purchases on account are debited to Purchases.
Question 22
A company that maintains a perpetual inventory system has an

11. inventory account balance of $50,000. The physical count of
goods on hand totals $49,600. Which of the following adjusting
entries is correct?
debit Inventory and credit Purchases.
debit Purchases and credit Inventory.
debit Sales Discounts and credit Inventory.
debit Cost of Goods Sold and credit Inventory.
Question 23
Which of the following accounts may be found in the
adjustment columns of a worksheet for a merchandiser but not a
service company?
Accumulated Depreciation - Equipment
Salaries and Wages Expense
Prepaid Insurance
Cost of Goods Sold

12. Question 24
When goods are purchased for resale by a company using a
periodic inventory system
freight costs are debited to Purchases.
purchases on account are debited to Inventory.
purchases on account are debited to Purchases.
purchase returns are debited to Purchase Returns and
Allowances.
Question 25
In a period of rising prices, FIFO will result in
lower income tax expense than LIFO.
lower net purchases than LIFO.

13. lower net income than LIFO.
lower cost of goods sold than LIFO.
Question 26
Rickety Company purchased 1,000 widgets and has 200 widgets
in its ending inventory at a cost of $91 each and a current
replacement cost of $80 each. The ending inventory under
lower-of-cost-or-market is
$80,000.
$18,200.
$16,000.
$91,000.

14. Question 27
The following information is available for Tye Company at
December 31: Beginning inventory $80,000; Ending inventory
$120,000; Cost of goods sold $1,200,000; and Sales Revenue
$1,600,000. Tye’s inventory turnover is
15 times.
10 times.
12 times.
16 times.
Question 28
Each of the following is a subsidiary ledger except the
accounts payable ledger.
customers' ledger.
general ledger.
accounts receivable ledger.
Question 29

15. Which one of the following accounts is a control account?
Sales.
Accounts Payable.
Owner’s Capital.
Cash.
Question 30
Which of the following is not an element of the fraud triangle?
Opportunity.
Segregation of duties.

16. Rationalization.
Financial pressure.
Question 31
An employee authorized to sign checks should not record
mail receipts.
cash disbursement transactions.
owner cash contributions.
sales transactions.
Question 32
On a bank reconciliation, deposits in transit are
added to the book balance.
deducted from the bank balance.
added to the bank balance.
deducted from the book balance.

17. Question 33
Receivables are frequently classified as
accounts receivable, notes receivable, and other receivables.
accounts receivable, notes receivable, and employee
receivables.
accounts receivable and general receivables.
accounts receivable, company receivables, and other
receivables.
Question 34
The sale of receivables by a business
is an indication that the business is owned by a factor.
can be a quick way to generate cash for operating needs.
is generally the major revenue item on its income statement.
indicates that the business is in financial difficulty.
Question 35

18. Foti Co. accepts a $1,000, 3-month, 12% promissory note in
settlement of an account with Bartelt Co. The entry to record
this transaction is as follows:
Notes Receivable
1,020
Accounts Receivable
1,020
Notes Receivable
1,000
Accounts Receivable
1,000
Notes Receivable
1,000
Sales Revenue
1,000
Notes Receivable
1,030
Accounts Receivable
1,030
Question 36
A company purchased land for $70,000 cash. Real estate

19. brokers’ commission was $5,000 and $7,000 was spent for
demolishing an old building on the land before construction of a
new building could start. Under the historical cost principle, the
cost of land would be recorded at
$82,000.
$77,000.
$70,000.
$75,000.
Question 37
The entry to record depletion expense
decreases assets and increases liabilities.
decreases owner’s equity and assets.
decreases assets and liabilities.
decreases net income and increases liabilities.
Question 38

20. Which of the following statements concerning current liabilities
is incorrect?
Current liabilities include salaries and wages payable.
Current liabilities include unearned revenue.
A company that has more current liabilities than current assets
is usually the subject of some concern.
Current liabilities include prepaid expenses.
Question 39
The entry to record the issuance of an interest-bearing note
includes a credit to Notes Payable for the note’s
market value.
cash realizable value.
face value.
maturity value.
Question 40

21. Working capital is
current assets plus current liabilities.
current assets minus current liabilities.
current assets multiplied by current liabilities.
current assets divided by current liabilities.
Question 41
The current ratio is
current assets plus current liabilities.
current assets minus current liabilities.
current assets multiplied by current liabilities.
current assets divided by current liabilities.
Question 42
Companies determine net pay by subtracting payroll deductions
from gross earnings.

22. True
False
Question 43
Which one of the following payroll taxes does not result in a
payroll tax expense for the employer?
FICA tax
Federal income tax
Federal unemployment tax
State unemployment tax
Question 44
Employer payroll taxes do not include
federal unemployment taxes.
FICA taxes.
state unemployment taxes.

23. federal income taxes.
Question 45
Partnership dissolution occurs whenever a partner withdraws or
a new partner is admitted.
True
False
Question 46
Salaries to partners and interest on partners’ capital are
expenses of the partnership.
True
False
Question 47
The balance sheet of a partnership will
report retained earnings below the partnership capital accounts.
show a separate drawing account for each partner.

24. show the amount of income that was distributed to each partner.
show a separate capital account for each partner.
Question 48
Which of the following is not a necessary action that the
partnership must take upon the death of a partner?
Prepare financial statements.
Determine net income or net loss for the year to date.
Discontinue business operations.
Close the books.
Question 49
Dividends are declared out of
capital stock.

25. treasury stock.
retained earnings.
paid-in capital in excess of par value.
Question 50
Common stockholders have the right to share in the distribution
of corporate income before preferred stockholders.
True
False
Question 51
Which of the following is not reported under Additional paid-in
capital?
Common stock.
Paid-in Capital in Excess of Par–Common Stock.
Paid-in Capital in Excess of Stated Value–Common Stock.
Paid-in Capital from Treasury stock.

26. Question 52
The following are characteristics, assumptions, principles, or
constraints that guide the FASB when it creates accounting
standards.
Relevance
Faithful representation
Comparability
Consistency
Monetary unit assumption
Economic entity assumption
Expense recognition principle
Time period assumption
Going concern assumption
Historical cost principle
Full disclosure principle
Materiality
Match each item above with a description below.
1.

27. Ability to easily evaluate one company’s results relative to
another’s.
2.
Belief that a company will continue to operate for the
foreseeable future.
3.
The judgment concerning whether an item's size is large enough
to matter to decision-makers.
4.
The reporting of all information that would make a difference to
financial statement users.
5.
The practice of preparing financial statements at regular
intervals.
6.
The quality of information that indicates the information makes
a difference in a decision.
7.

28. A belief that items should be reported on the balance sheet at
the price that was paid to acquire the item.
8.
A company’s use of the same accounting principles and methods
from year to year.
9.
Tracing accounting events to particular companies.
10.
The desire to minimize bias in financial statements.
11.
Reporting only those things that can be measured in monetary
units.
12.
Dictates that efforts (expenses) be matched with results
(revenues).

29. Question 53
The steps in the accounting cycle are listed in random order
below.
List the steps in proper sequence, assuming no worksheet is
prepared, by placing numbers 1–9.
(a)
Prepare a trial balance.
(b)
Journalize the transactions.
(c)
Journalize and post closing entries.
(d)
Prepare financial statements.
(e)

30. Journalize and post adjusting entries.
(f)
Post to ledger accounts.
(g)
Prepare a post-closing trial balance.
(h)
Prepare an adjusted trial balance.
(i)
Analyze business transactions.
Part Two
SHOW YOUR WORK! Partial credit may be available if your
work is shown (i.e., formulas used, your calculations, t-
accounts)
1. (4 points) Two items are omitted from each of the following
summaries of balance sheet and income statement data for two
proprietorships for the year 2014, Garba’s Goods and Zahra
Enterprises.

31. Determine the missing amounts. Place your answers BELOW
the table (or on a separate sheet).
Garba’s
Goods
Zahra
Enterprises
Beginning of year:
Total assets
$150,502
$176,498
Total liabilities
116,297
$
(c)
Total owner’s equity
$
(a)
109,456

32. End of year:
Total assets
218,912
246,276
Total liabilities
164,184
68,410
Total owner’s equity
54,728
177,866
Changes during year in owner’s equity:

33. Additional investment
$
(b)
34,205
Drawings
39,678
$
(d)
Total revenues
294,163
136,820
Total expenses
239,435
82,092
a.
b.
c.
d.
2. Andrew Tym is the sole owner of Deer Park, a public
camping ground near the Lake Mead National Recreation Area.

34. Andrew has compiled the following financial information as of
December 31, 2014.
Revenues during 2014—camping fees
$182,196
Fair value of equipment
$182,196
Revenues during 2014—general store
84,591
Notes payable
78,084
Accounts payable
14,315
Expenses during 2014
195,210
Cash on hand
29,932
Accounts receivable
22,775
Original cost of equipment
137,298

35. a. (1 point) Determine Andrew Tym’s net income from Deer
Park for 2014.
b. (10 points) Prepare a balance sheet for Deer Park as of
December 31, 2014. (List assets in order of liquidity.)
3. The adjusted trial balance of Galecki Company at December
31, 2014, includes the following accounts: Owner's Capital
$16,530, Owner's Drawings $7,295, Service Revenue $38,409,
Salaries and Wages Expense $16,791, Insurance Expense
$1,666, Rent Expense $3,299, Supplies Expense $1,145, and
Depreciation Expense $1,180.
(5 points) Prepare an income statement for the year.
4. The adjusted trial balance of Parsons Company at December
31, 2014, includes the following accounts: Owner’s Capital
$17,577, Owner’s Drawings $7,610, Service Revenue $38,090,
Salaries and Wages Expense $16,368, Insurance Expense
$1,388, Rent Expense $3,468, Supplies Expense $1,681, and
Depreciation Expense $1,046. The balance in Owner’s Capital is
the balance as of January 1.
(6 points) Prepare an owner’s equity statement for the year
5.(6 points) For each of the following accounts, indicate the
effects of a debit and a credit on the accounts and the normal
balance of the account.
Debit Effect (Decrease, Increase)
Credit Effect (Decrease or Increase)
Normal Balance (Debit or Credit)
For Ex: Cash
Increase
Decrease
Debit
Accounts Payable

36. Advertising Expense
Service Revenue
Accounts Receivable
Owner’s Capital
Owner’s Drawing
6.(2 points) DeWitt Advertising Company’s trial balance at
December 31 shows Supplies $7,136 and Supplies Expense $0.
On December 31, there are $3,251 of supplies on hand. Prepare
the adjusting entry at December 31.
7. Don Wyatt is unable to reconcile the bank balance at January
31. Don’s reconciliation is as follows.

37. Cash balance per bank
$3,870.20
Add: NSF check
535.00
Less: Bank service charge
30.00
Adjusted balance per bank
$4,375.20
Cash balance per books
$4,185.20
Less: Deposits in transit
685.00
Add: Outstanding checks
935.00
Adjusted balance per books
$4,435.20
(10 points) Prepare a correct bank reconciliation.
THIS PORTION IS BLANK – GO TO NEXT PAGE

38. 8. The trial balance for Pioneer Advertising Agency shows the
following.
Pioneer Advertising AgencyTrial BalanceOctober 31, 2014
Debit
Credit
Cash
$14,371
Supplies
2,162
Prepaid Insurance
499
Equipment
5,621
Notes Payable
$4,272
Accounts Payable
2,778
Unearned Service Revenue
1,131

39. Owner’s Capital
9,769
Owner’s Drawings
698
Service Revenue
10,741
Salaries and Wages Expense
4,448
Rent Expense
892
$28,691
$28,691
Assume the following adjustment data.
1.
Supplies on hand at October 31 total $625.
2.
Expired insurance for the month is $189.
3.
Depreciation for the month is $80.

40. 4.
Services related to unearned service revenue in October worth
$775 were performed.
5.
Services performed but not recorded at October 31 are $307.
6.
Interest accrued at October 31 is $92.
7.
Accrued salaries at October 31 are $1,217.
(14 points) Prepare the adjusting entries for the items above.
9. The accounting records of Old Towne Electronics show the
following data.
Beginning inventory
2,829
units at
$5
Purchases
7,970
units at
$7
Sales
9,214
units at
$11
a.(1 point) Calculate Average-cost per unit. (Round answer to 3
decimal places, e.g. 2.525.)
b.(3 points) Determine cost of goods sold during the period
under a periodic inventory system using the FIFO method, the

41. LIFO method, and the average-cost method. (Round answers to
0 decimal places, e.g. 1,250.)
10. The adjusted trial balance columns of the worksheet for
DeSousa Company are as follows.
DESOUSA COMPANY
Worksheet (partial)
For the Month Ended April 30, 2014
Adjusted Trial Balance
Account Titles
Dr.
Cr.
Cash
10,040
Accounts Receivable
8,012
Prepaid Rent
2,485
Equipment
22,996

42. Accumulated Depreciation—Equip.
5,438
Notes Payable
5,675
Accounts Payable
5,271
Owner’s Capital
27,262
Owner’s Drawings
3,542
Service Revenue
15,944
Salaries and Wages Expense
10,951
Rent Expense

43. 836
Depreciation Expense
728
Interest Expense
21
Interest Payable
21
Totals
59,611
59,611
(6 points) Journalize the closing entries at April 30.
11. This information relates to Rana Co.
1.
On April 5, purchased merchandise from Craig Company for
$20,100, terms 4/10, net/30, FOB shipping point.
2.
On April 6, paid freight costs of $840 on merchandise
purchased from Craig Company.

44. 3.
On April 7, purchased equipment on account for $28,060.
4.
On April 8, returned some of April 5 merchandise, which cost
$3,100, to Craig Company.
5.
On April 15, paid the amount due to Craig Company in full.
a. (5 points) Prepare the journal entries to record these
transactions on the books of Rana Co. using a perpetual
inventory system.
b. (3 points) Briefly describe how the entries would differ if
Rana Co. uses a periodic inventory system.
12. In its first month of operation, Franklin Company
purchased 289 units of inventory for $8, then 482 units for $9,
and finally 337 units for $10. At the end of the month, 434 units
remained.
(5 points) Compute the amount of phantom profit that would
result if the company used FIFO rather than LIFO. The company
uses the periodic method.
13. At December 31, 2014, the following information was
available for A. Kamble Company: ending inventory $38,090,
beginning inventory $58,950, cost of goods sold $262,390, and
sales revenue $378,220.
a. (2 points) Calculate inventory turnover for A. Kamble
Company. (Round answer to 1 decimal place, e.g. 1.5.)
b. (2 points) Calculate days in inventory for A. Kamble
Company. (Round answer to 1 decimal place, e.g. 1.5. Use 365
days for calculation.)
14. Kingston Co. uses the percentage-of-receivables basis to
record bad debt expense. It estimates that 2% of accounts

45. receivable will become uncollectible. Accounts receivable are
$578,000 at the end of the year, and the allowance for doubtful
accounts has a credit balance of $2,210.
a. (3 points) Prepare the adjusting journal entry to record bad
debt expense for the year.
b. (1 point) If the allowance for doubtful accounts had a debit
balance of $940 instead of a credit balance of $2,210, determine
the amount to be reported for bad debt expense.
15. In 2014, Wainwright Company has net credit sales of
$1,355,500 for the year. It had a beginning accounts receivable
(net) balance of $102,000 and an ending accounts receivable
(net) balance of $140,600.
a. (2 points) Compute Wainwright Company’s accounts
receivable turnover. (Round answer to 1 decimal place, e.g.
2.5.)
b. (2 points) Compute Wainwright Company’s average
collection period in days. (Round answer to 1 decimal place,
e.g. 2.5. Use 365 days for calculations.)
16. Kieschnick Company has a balance in its Accounts
Receivable control account of $10,975 on January 1, 2014. The
subsidiary ledger contains three accounts: Bixler Company,
balance $3,980; Cuddyer Company, balance $2,640; and Freeze
Company. During January, the following receivable-related
transactions occurred.
Credit Sales
Collections
Returns
Bixler Company
$8,629

46. $8,354
$ -0-
Cuddyer Company
6,849
2,596
2,962
Freeze Company
8,832
9,146
-0-
a. (1 point) What is the January 1 balance in the Freeze
Company subsidiary account?
b. (1 point) What is the January 31 balance in the control
account?
17.(3 points) On March 3, Kitselman Appliances sells
$759,600 of its receivables to Ervay Factors Inc. Ervay Factors
assesses a finance charge of 1% of the amount of receivables
sold. Prepare the entry on Kitselman Appliances’ books to
record the sale of the receivables.
18.(3 points) On May 10, Fillmore Company sold merchandise
for $19,000 and accepted the customer’s America Bank
MasterCard. America Bank charges a 4% service charge for
credit card sales. Prepare the entry on Fillmore Company’s
books to record the sale of merchandise.
19. (2 points) Rich Castillo Company incurs the following
expenditures in purchasing a truck: cash price $47,280, accident
insurance $3,820, sales taxes $3,270, motor vehicle license
$226, and painting and lettering $580. What is the cost of the

47. truck?
20. Rottino Company purchased a new machine on October 1,
2014, at a cost of $122,400. The company estimated that the
machine will have a salvage value of $13,700. The machine is
expected to be used for 10,700 working hours during its 4-year
life.
a. (2 points) Compute the depreciation expense under straight-
line method for 2014. (Round answer to 0 decimal places, e.g.
2,125.)
b. (2 points) Compute the depreciation expense under units-of-
activity for 2014, assuming machine usage
was 1,500 hours. (Round answer to 0 decimal places, e.g.
2,125.)
c. (4 points) Compute the depreciation expense under declining-
balance using double the straight-line rate for 2014 and 2015.
d. (2 points) Prepare the journal entry to record straight-line
depreciation for 2014.
21. Peralta Company borrows $75,000 on July 1 from the bank
by signing a $75,000, 14%, one-year note payable.
(a)
(2 points) Prepare the journal entry to record the proceeds of the
note.
(b)
(2 points) Prepare the journal entry to record accrued interest at
December 31, assuming adjusting entries are made only at the
end of the year.
(NOTE: Peralta is borrowing the money – not lending it)
22. Coghlan Auto Supply does not segregate sales and sales
taxes at the time of sale. The register total for March 16 is
$42,525. All sales are subject to a 5% sales tax.
a. (1 point) Compute sales taxes payable.
b. (2 points) Make the entry to record sales taxes payable and
sales revenue.

48. 23.Yahoo! Inc.’s recent financial statements contain the
following selected data (in thousands).
Current assets
$ 4,594,772
Current liabilities
$1,717,728
Total assets
14,936,030
Total liabilities
2,417,394
a. (1 point) Compute working capital.
b.(1 point) Compute current ratio. (Round current ratio to 2
decimal places, e.g. 1.25 : 1.)
24.(2 points) If cash is borrowed on a $84,120, 9-month, 6%
note on August 1, how much interest expense would be incurred
by December 31?
25.(5 points) In January, the payroll supervisor determines that
gross earnings for Carlyle Company are $175,000. All earnings
are subject to 7.65% FICA taxes, 4.5% state unemployment
taxes, and 0.8% federal unemployment taxes. Record the
employer’s payroll taxes.
26. (2 points) At December 31, Ortiz Corporation reports net
income of $417,300. Prepare the entry to close net income.
27. (4 points) Beauty Island Corporation began operations on
April 1 by issuing 67,800 shares of $5 par value common stock
for cash at $17 per share. On April 19, it issued 1,900 shares of
common stock to attorneys in settlement of their bill of

49. $29,200 for organization costs. Journalize both issuances,
assuming the stock is not publicly traded.
28. (3 points) The characteristics of a partnership include the
following: association of individuals, limited life, and co-
ownership of property. Explain each of these terms.
29. (2 points) Mutt and Jeff are discussing how income and
losses should be divided in a partnership they plan to form.
What factors should be considered in determining the division
of net income or net loss?
30. (1 point) M. Elston and R. Ogle have partnership capital
balances of $40,000 and $80,000, respectively. The partnership
agreement indicates that net income or net loss should be shared
equally. If net income for the partnership is $42,000, how
should the net income be divided?
31. (3 points) The following terms pertain to the forming of a
corporation: (1) charter, (2) by-laws, and (3) organization costs.
Explain the terms.
32. (3 points) What factors help determine the market price of
stock?
33. (3 points) For what reasons might a company
like IBM repurchase some of its stock (treasury stock)? (List at
least three reasons)
(b)
(d)
(c)
(a)