14. Under IFRS, equity is described as each of the following except a. retained

Question

14. Under IFRS, equity is described as each of the following except
a. retained equity.
b. shareholders’ funds.
c. owners’ equity.
d. capital and reserves

19. Stockton Company uses the percentage of sales method for recording bad debt expense. For the year, cash sales are $600,000 and credit sales are $2,700,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Stockton Company make to record the bad debt expense?

a. Bad Debt Expense   33,000
  Allowance for Doubtful Accounts    33,000
b. Bad Debt Expense   27,000
  Allowance for Doubtful Accounts    27,000
c. Bad Debt Expense   27,000
  Accounts Receivable    27,000
d. Bad Debt Expense   33,000
  Accounts Receivable    33,000

21. On September 1, Joe's Painting Service borrows $150,000 from National Bank on a 4-month, $150,000, 6% note. The entry by Joe's Painting Service to record payment of the note and accrued interest on January 1 is
a. Notes Payable  153,000
  Cash   153,000
b. Notes Payable  150,000
Interest Payable  3,000
  Cash   153,000
c. Notes Payable  150,000
Interest Payable  9,000
  Cash   159,000
d. Notes Payable  150,000
Interest Expense  3,000
  Cash   153,000

12. Start Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2015. What is the annual dividend on the preferred stock?
a. $50 per share
b. $25,000 in total
c. $50,000 in total
d. $0.50 per share

Explanation / Answer

14. Under IFRS, equity is also known as:

Shareholders' funds,

Owner's equity and

Capital and reserves.

Equity is not known as retained equity. Hence, correct option is (a)

19.

Cash sales = $600,000

Credit sales = $2,700,000

Bad debt percentage expected = 1%

Hence, expected bad debt = 2,700,000 x 1%

= $27,000

Since bad debt is a result of credit sales, hence it is not calculated on cash sales.

Journal entry to record bad debt expense will be as under:

Bad debt expense $27,000

Allowance for bad debts $27,000

Hence, correct option is (b)

21.

Interest on note payable = 150,000 x 6/100 x 4/12

= $3,000

Journal entry for notes payable and accrued interest on notes payable will be as under:

Notes payable $150,000

Interest payable $3,000

Cash $153,000

Hence, correct option is (b)

12.

5,000 shares of 5% , $100 par value, cumulative preferred stock = $500,000

Hence, total preferred dividend = 500,000 x 5%

= $25,000

Hence, correct option is (b)

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