1. Assuming an interest rate of 6%, which of the following payment alternatives has the highest present value? A. $150,000 immediately B. $45,000 per year for the next 4 years (payment made at the end of the year) C. $5,000 now and then $20,000 per year for the next 10 years (payment made at the end of the year) D. $5,000 now and then $5,000 per year for the next 10 years (payment made at the end of the year) plus a lump-sum payment of $200,000 at the end of the 11th year
2. A company will have to pay a $50,000 liability in four years. How much must be deposited now into a bank account earning 8% compounded semiannually to fully fund the future payment? A. $34,000 B. $35,500 C. $36,523 D. $36,550
3. A corporation’s balance sheet showed the following amounts: Current Liabilities, $20,000; Bonds Payable, $60,000; Lease Obligations, $12,000; and Deferred Income Taxes, $2,000. Total stockholders’ equity was $42,000. The debt-to-equity ratio is: A. 0.45 B. 0.58 C. 1.76 D. 2.24
4. A company declares a dividend payable of $68,000. How is this reported in the statement of cash flows? A. $68,000 outflow, Financing Activities B. $68,000 outflow, Investing Activities C. $68,000 inflow, Financing Activities D. shouldn’t be reported on the statement of cash flows
Use the following Data to answer questions 5-8 Gross payroll for June $400,000 Federal income Tax withheld $70,000 State Income Tax withheld $30,000 FICA Withheld $12,000 Charitable Contributions 1% of gross pay Union Dues 2% of gross pay The unemployment rate is 3% and applies to all but $50,000 of the gross payroll
5. What is the amount of net pay? A. $265,000 B. $276,000 C. $288,000 D. $400,000
6. What is the amount of the Unemployment Tax Payable? A. $1,500 B. $8,280 C. $10,500 D. $12,000
7. What is the amount of the employer’s share of the payroll tax expense? A. $10,500 B. $12,000 C. $22,500 D. $52,500
8. The journal entry to record the payroll would include a A. debit to Wages Expense B. debit to Wages payable C. debit to FICA Payable D. credit to Wages Expense
9. M and C are partners. At the beginning of the current year, M’s capital account is $30,000 and C’s is $50,000. M and C decided to allocate income with 10% interest on capital balances at the beginning if the period and divide the balance equally. Net income for the current year is $80,000. Each partner withdrew $15,000 for personal use during the year. Determine the amount of income that will be allocated to each partner. A. M, $30,000; C, $50,000 B. M, $32,500;C,$32,500 C. M, $35,000; C, $37,500 D. M, $39,000;C,$41,000
10. The stockholders’ equity section of Joe’s Bistro’s balance sheet on January 1, appeared as follows: Common stock, $2 par, 2000 shares issued and outstanding $4,000 Additional paid-in capital – common $1,600 Retained earnings $5,400 On March 1, Joe’s Bistro reacquired 600 common shares of common stock at $10 a share. Joe’s Bistro sold all of the Treasury shares on November 15 for $12 a share. The entry to record the sale on November 15 would include a credit to what account and for what amount? A. Gain on sale of Treasury Stock, $1,200 B. Common Stock, $7,200 C. Cash, $6,000 D. Treasury stock, $6,ooo
11. Jim Ault established Ault’s Dry cleaners, a sole proprietorship, by investing $1,000 on Jan 1. During the first year of operations , the business generated net income net income of $42,000. The ending balance of the capital account was $20,000. What was the amount of the cash Jim Ault withdrew for personal use during the year? A. $0 B. $1,000 C. $20,000 D. $23,000
Use the following information to answer questions 12 – 17: On January 2, 2008, a company issued $500,000, 10-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8%, and the market rate is 6%.
12. The interest expense on the bonds at June 30, 2008 is A. $2,764 B. $17,236 C. $20,000 D. $22,764
13. The annual cash payment (paid n semiannual payments) on the bonds is A. $40,000 B. $30,000 C. $20,000 D. $15,000
14. What is the carrying value of the bonds after the first payment is made on June 30, 2008? A. $574,540 B. $571,776 C. $568,920 D. $500,000
15. What is the carrying value of the bonds at the end of 10 years? A. $574,540 B. $525,000 C. $500,000 D. $425,460
16. At the maturity date, besides an interest payment, the company would repay the bondholders A. $574,540 B. $520,000 C. $500,000 D. only the last interest payment
17. If the company redeems the bonds at a call price of 102 at December 1, 2008, after using the effective interest method for the year, what is the amount of the gain or loss? A. Gain of $58,929 B. Loss of $58,929 C. Gain of $59,012 D. Loss of $59,012
18. On May 1, a company borrowed $33,000 on a one-year, 6% note. If the company’s fiscal year ends on June 30, an entry is needed to increase A. Interest Expense $330 B. Interest Expense $1,980 C. Interest Payable $1,980 D. Interest Payable $33,000
19. The stated value of H Corp’s common stock is $0.50. The total balance in the common stock account is $37,500. 5000 shares are currently designated as treasury stock. What is the number of shares outstanding? A. 80,000 B. 75,000 C. 72,500 D. 70,000
Answer questions 20-22 based on the following information: Story Corp was incorporated as a new business on January 1. The company is authorized to issue 20,000 shares of $5 par value common stock and 10,000 shares of 6%, $10 par value, cumulative, participating preferred stock. On January 1, the company issued 8,000 shares of common stock for $15 per share and 2,ooo shares of preferred stock for $30 per share. Net income for the year ended December 31 was $375,000.
20. What is the amount of Story’s total contributed capital at December 31? A. $60,000 B. $120,000 C. $180,000 D. $555,000
21. What is the number of Story’s unissued shares of stock at December 31? A. 10,000 shares B. 12,000 shares C. 20,000 shares D. 28,000 shares
22. What is Story’s total stockholders’ equity as reported on the balance sheet at December 31? A. $60,000 B. $120,000 C. $180,000 D. $555,000
23. Which of the following describes how a stock dividend declared but not yet distributed would be recorded? A. Recorded in a stockholders’ equity account as a normal credit balance B. Recorded in a stockholders’ equity account as a contra debit balance. C. Not recorded in a stockholders’ equity account but recorded in another balance D. Not recorded in any account.
24. A company enters into a five year capital lease agreement on Jan 1, 2008. The present value of the lease on that date was $22,250. The company depreciates assets using the straight-line method and uses a December 31 year-end. What net balance will be reported on the company’s balance sheet in the leased asset account on December 31, 2009? A. $4,450 B. $8,900 C. $13,350 D. $22,250
25. Long term assets are $800, current liabilities are $500, and long term liabilities are $600. If the current ratio is 2.5 to 1, then current assets are A. $200 B. $625 C. $1,250 D. $2,000