Managerial Accounting Quiz #1

Short-term debt generally includes:

• Credit cards and mortgages
• Loans, lines of credit, and other financial obligations due within one year.
• Investments and savings accounts
• Retirement funds and insurance policies

On December 15, 2022, Hader Company repurchased 900 shares of their outstanding stock for $12.50 per share.  The stock has a par value of $1 and was originally issued on January 1, 2018 for $15 per share. How does the transaction on December 15, 2022 affect the company’s financial statements?

• The transaction will only affect the income statement by incresing Assets by $11,250, not the balance sheet.

• The transaction will have impact only on the Cash Flow Statement by investtment income of $13,500.

• The transaction will decrease both the common stock and additional paid-in capital accounts on the balance sheet by $13,500.

• The transaction will decrease both the common stock and additional paid-in capital accounts on the balance sheet by $11,250.

North Inc. purchased equipment for $78,152 on June 1, 2023 by signing 7 year, 12.22% note payable with monthly payments of $2,747. The first payment is due October 1, 2022. How much of the November 1, 2022 payment will reported as interest expense?

• $2,344

• $1547

• $751

• $788

On March 1, 2023, Fancy Co. borrows $178,250 by signing a 10-year, 3.78% note. The note requires annual interest payments on July 1st of each year, starting July 1, 2024. The repayment of the principal plus the final year’s interest is due August 1, 2033. How are the financial statements affected on January 31, 2023?

• Increase in assets $8,989; Increase in liabilities $8,989

• Increase in equity $8,989; Increase in liabilities $8,989

• No impact on the financial statements.
• Increase in assets $178,250; Decrease in net income 3.78%

What is a bond in the context of business financing?

• A type of equity that gives stock ownership

• A certificate of debt issued to manage payroll

• A method to secure physical assets

• A form of debt financing where a business borrows money from investors and repays with interest

Capital stock is made up of treasury stock, but does not include preferred stock.

• False
• True

What is decrased by dividends issued to shareholders of a company?

• Retained earnings
• Net income
• Total assets
• Revenue

The board of directors at Salt Inc. declared a dividend to be paid to its shareholders on March 1, 2022. The dividend was paid on April 5, 2022. How does the payment of the dividend on April 5, 2022 affect the dividends payable?

• The dividends payable will increase.
• The dividends payable will decrease.
• The dividends payable will remain the same.
• The dividends payable will be paid in stocks instead of cash.

Which of the following is a correct statement about dividends payable?

• Dividends payable are only paid out if the company is profitable
• Dividends payable are recorded as revenue on the income statement
• Dividends payable represent the amount owed to shareholders for dividends that have been declared but not yet paid out.
• Dividends payable are expenses incurred by the company

South Inc. had a balance in retained earnings of $9,250 on December 31, 2022. The company declared dividends of $18,590 during 2022. The company reported $29,900 in net income for the year 2022. What was the balance in retained earnings on January 1, 2022?

• $2,060

• $-2,060

• $20,600

• $-20,600