ACC 201 - Test Four

sold for $1,012.50

A bond issuing at 101.25 means that the bond

investing activities.

Cash flows from acquiring and disposing of long-term assets are classified as

operating activities.

Cash flows from acquiring and selling products are classified as

financing activities.

Cash flows from borrowing and paying off a 90-day bank loan are classified as

6% per 6-month period

If the stated interest rate is 12% per year, but it is compounded semiannually, then the adjusted rate used for present or future value calculations will be

$59,713.00 Present Value = Investment (PV of an Annuity, 8 Periods, 7%)= $10,000 x 5.97130 = $59,713.00

Tom liquidates an investment, and his proceeds will be received in 8 annual payments of $10,000 each with interest computed at 7%. What is the Present Value of this Annuity?

95,000 ($50,000 / $.50) = 100,000 shares of common stock issued − 5,000 shares of treasury stock = 95,000 shares

Total stockholders' equity includes $50,000 of common stock with a stated value of $0.50, and 5,000 shares of treasury stock with a total cost of $25,000. How many total shares are outstanding?

Total stockholders' equity will increase by $5,000.

Which of the following is true for a corporation that issues 1,000 shares of $2 par common stock at $5 per share?

$10,165.44 Present Value = Investment x (PV of Annuity, 10 periods, 6%) $74,818.59 = Investment x 7.36009 $74,818.59/7.36009 = $10,165.44

You just won the lottery and have elected to receive 10 annual payments instead of the lump sum of $74,818.59. Calculate the amount of your annual payment assuming a 6% interest rate.

$6,000 $150,000 × .04 = $6,000

A corporation issued $150,000 of 10-year bonds at the stated rate of 8%, with interest payable semiannually. How much cash will the bond investors receive at the end of the first interest period?

$800,000 $1,000,000 × .08 or 8% = $80,000 (Interest for one year)$80,000 × 10 years = $800,000 (Interest over the life of the bonds)

A graphics design company issued bonds in the amount of $1,000,000 with a stated interest rate of 8%. If the interest is paid semiannually and the bonds are due in 10 years, what would be the total amount of interest paid over the life of the bonds?

$41,002.00 Present Value = Investment x (PV of Annuity, 5 periods, 7%)= $10,000 x 4.10020 = $41,002.00

Eric is considering buying a car. He can either purchase the car outright or make 5 annual payments of $10,000 at the end of each year. If the interest rate is 7%, how much is the outright purchase price?

$113,000 Net Income $100,000 + Depr. exp. 11,000 + Dec. in Accts. rec. 15,000 - Inc. Inventories 3,000 - Dec. Accts. pay 10,000 Net cash inflow from operating activities $113,000

If the indirect method is used to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2020?

$39,604.50 Present Value = Cash Flow (PV of Single Amount, 4 Periods, 6%)= $50,000 × .79209 = $39,604.50

Manatee Manufacturing sells a piece of equipment to make room for new machinery. Manatee will receive the sales price of $50,000 at the end of 4 years. Assuming interest at a rate of 6% per year, the Present Value of this future cash flow is how much?

$7,404.30 Present Value = Investment x (PV of a Single Amount, 4 Periods, 5%)= $9,000 x 0.82270 = $7,404.30

Mark is planning on making an investment in a new computer system. He wants to know how much he must invest to have $9,000 in 4 years if the interest rate is 5% per year?

A debit to retained earnings is required for $11,000.

Refer to Ladder Distributors. Suppose the company reissued 1,000 shares of its treasury stock on June 1, 2020, for $39 each. Which of the following is true regarding the entry required to record this transaction?

$1,340,000 $1,540,000 total at Dec. 31, 2019 − $200,000 treasury stock = $1,340,000

Refer to Ladder Distributors. What is the total amount of stockholders' equity that will be presented on the company's March 31, 2020, balance sheet?

$1,490,000 $50,000 preferred stock + $600,000 common stock + $25,000 paid-in capital + $825,000 retained earnings − (500 × $20) treasury stock = $1,490,000

Refer to Landmark Company. If the company repurchased 500 shares of its common stock for $20 per share, what is the amount of total stockholders' equity after this transaction?

Paid-in capital in excess of par increases $145,000.

Suppose a corporation issues 5,000 shares of $1 par common stock for $30 per share. In addition to the increase in cash, what effect does this transaction have on the accounting equation?

Interest Expense Discount on Bonds Payable Cash

The Kaplan Group sold $200,000 of 10-year bonds for $190,000. The face rate on the bonds was 8% and interest is paid annually on December 31. What entry would be made on December 31 when the interest is paid? (Numbers are omitted.)

$180,000 Common: 8,000 shares × $15 =$120,000 Preferred: 2,000 shares × $30 =60,000 Total = $180,000

This company was incorporated as a new business on January 1, 2019. The company is authorized to issue 50,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par, cumulative, participating preferred stock. On January 1, 2019, the company issued 8,000 shares of the common stock for $15 per share and 2,000 share of the preferred stock for $30 per share. Net income for the year ended December 31, 2019 was $375,000.

noncash investing or financing activity

When using the indirect method to determine operating cash flows, how is the issuance of stock to retire a long-term debt shown on a statement of cash flows?