ACCT 220 QUIZ 3

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● A company buys a new parcel of land. Which of the following items is properly
debited to the land account?
● Question 1 options:
● a. paving a road to access the land
● b. demolishing an existing structure
● c. the fees on a mortgage loan on the land
● d. planting of trees and shrubs
●
● Question 2 (5 points)
● What type of asset is subject to depletion?
● Question 2 options:
● a. natural resources
● b. a literary work
● c. an intangible asset
● d. a computer
●
● Question 3 (5 points)
● Which is NOT an intangible asset?
● Question 3 options:
● a. a patent on a new invention
● b. a copyright on a musical work
● c. an estimated amount of coal in a piece of owned land that has not yet been mined
● d. a contract granting the company a right-of-way
● Question 4 (5 points)
● Which is NOT an advantage of a corporation compared with a partnership or sole
proprietorship?
● Question 4 options:
● a. The corporation's existence is unaffected by the death of an owner.
● b. Owners enjoy limited liability.
● c. It is easier to raise large amounts of capital.

2. ● d. The total tax burden is lower.
●
● Question 5 (5 points)
● If a corporation's stock is purchased by the corporation on the open market but is
held in treasury and not retired, which of the following is correct?
● Question 5 options:
● a. A credit will be recorded to the treasury stock account, which is a liability account.
● b. A debit will be recorded to the treasury stock account, which is an equity account.
● c. A debit will be recorded to the treasury stock account, which is a liability account.
● d. A credit will be recorded to the treasury stock account, which is an equity account.
●
● Short Answer
● Prepare the following journal entries. Dates and descriptions are not required.
● Question 6 (5 points)
● A company sells a fixed asset (equipment) for $30,000. The asset originally cost
$80,000 and had accumulated depreciation of $55,000 at the time of the sale.
Record the journal entry to recognize the sale.
●
●
● Question 7 (5 points)
● A company scraps a fully depreciated piece of equipment originally costing $20,000.
They did not receive any proceeds. Record the journal entry.
●
● Question 8 (5 points)
● A company sells a piece of plant equipment for $2,000. The original cost was
$10,000, and the accumulated depreciation through the date of the sale was $6,500.
Record the journal entry.
●
● Question 9 (5 points)
● A company buys a new pickup truck for $35,000 on the first day of the month. They
will assume a 5-year life with a salvage value equal to 10% of the original cost.
Record the first monthly depreciation journal entry.
●
● Question 10 (5 points)

3. ● A company sells 200,000 shares of newly issued common stock having a par value
of $1 for $8.50 per share. Record the journal entry.
●
● Question 11 (5 points)
● A company has net income of $4,580,000. There are 200,000 shares of $50 par, 6%
preferred stock outstanding and 800,000 shares of common stock. What is the net
income per common share (earnings per share)? Show your calculation.
●
● Question 12 (5 points)
● When would repair costs be capitalized?
●
● Question 13 (5 points)
● What will be the result to inventory values, cost of goods sold, and net income if the
LIFO method is used during times of inflation?
●
● Question 14 (5 points)
● What is a contra account? Give an example.
●
● Question 15 (5 points)
● A mining company pays $10,000,000 for a piece of land that they estimate has a
recoverable reserve of oil equal to 1,500,000 barrels. They estimate that they will be
able to sell the land for $500,000 after they have extracted all of the oil. In year one,
the company extracts 300,000 barrels of oil. They have made no prior entries for the
removal of this oil. Record the journal entry to recognize the removal of this oil.
●
● Question 16 (5 points)
● A company has 800,000 shares of common stock outstanding and no preferred
stock. On February 21, the board of directors declares a 25-cents-per-share
dividend, payable on March 31 to shareholders of record as of March 15. Record the
journal entry for the declaration of the dividend.
●
● Question 17 (5 points)
● A company has 800,000 shares of common stock outstanding and no preferred
stock. On February 21, the board of directors declares a 25-cents-per-share dividend

4. payable on March 31 to shareholders of record as of March 15. Record the journal
entry for the payment of the dividend.
●
● Question 18 (5 points)
● A corporation has 50,000 shares of $10 par common stock. A 10% stock dividend is
declared and the market value of the stock is $80 immediately before the declaration.
Record the journal entry made on the date the dividend is declared but not paid.
●
● Question 19 (5 points)
● What is the difference between a stock split and a stock dividend?
●
● Question 20 (5 points)
● A company has 150,000 shares of common stock outstanding and 10,000 shares of
$100 par value, 5% preferred stock outstanding. The company's net income was
$387,500.
●
● What are the earnings per common share? (Show your calculation.)
●