Matching Questions
1.Management wishes to obtain financing. For each attribute/characteristic listed in 1 through 5, determine which type of financing it describes from management’s perspective by placing a D in the space if it applies to debt financing, or E if it applies to equity financing.
1. No tax savings
2. Credit rating effects
3. Contractual restrictions
4. Contractual future payments
5. Cash flows are discretionary
2.Identify the effect of the accounting equation (athroughk) of each transaction in 1 through 9 below. You may use each letter more than once or not at all.
Accounting Effects
a.
– A and – L
b.
+ A and + SE (Contributed Capital)
c.
+ A and + SE (Retained Earnings)
d.
+ A and – A
e.
+ A and + L
f.
– A and – SE (Contributed Capital)
g.
– A and – SE (Retained Earnings)
h.
+ L and –SE (Retained Earnings)
i.
– L and + SE (Retained Earnings)
j.
+ SE (Contributed Capital) and – SE (Retained Earnings)
k.
No journal entry or effect
1. Issued debt to finance the purchase of property
2. Issued common stock to finance the purchase of property
3.Used money resulting from retained earnings to finance the purchase of property
4. Declared cash dividends to shareholders
5. Paid the previously declared dividends
6. Skipped dividends on cumulative preferred stock
7. Declared and distributed a 10% stock dividend
8. Declared a 3:1 stock split
9. The market value of common stock doubled during the year
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