ACC EXAM 3

What is the market value of a $1,000 bond, which has an interest rate of 8% and will mature in 20 years if it is discounted at 6%? Interest is paid annually.

$1,229.39

On December 30, 2017, a company issued a note payable of $50,000, of which $10,000 will be repaid each year. What is the proper classification of this note on the December 31, 2017 balance sheet?

$10,000 current liability; $40,000 long-term liability

Schneider Trucking Inc. purchased a new semi-truck on January 1, 2017 for $200,000. Its expected useful life is 4 years and its salvage value is estimated at $25,000. What is the depreciation for 2017 using the declining-balance method at a double the straight-line rate?

$100,000

Cuso Company purchased equipment on January 1, 2016, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?

$156,000

Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2017. The machine was purchased for $80,000 on January 1, 2013, and was depreciated on a straight-line basis over a 10-year life assuming no salvage value. If the machine was sold for $26,000, how much is the gain or loss to be recorded at the time of the sale?

$18,000 loss

If you bought a new truck for $40,000 for your auto parts delivery service, and you estimated that the truck would last you 200,000 miles with a salvage value of $4,000, what would be your depreciation expense for the first year in which you used the truck for 12,500 miles?

$2,250

Buttner Company borrows $88,500 on September 1, 2017, from Harrington State Bank by signing an $88,500, 12%, one-year note. How much is accrued interest at December 31, 2017?

$3,540

Use a financial calculator to compute the present value of rental receipts assuming receipts are $5,000 at the end of each year for the next 10 years and the discount rate is 8%.

$33,550.41

A company purchased a dump truck for $25,000. In addition, freight charges were $500, and an additional payment of $800 was made to paint the company's logo on the truck. The estimated salvage value and useful life are $3,800 and 5 years, respectively. How much is annual depreciation expense under the straight-line method?

$4,500

Your biology professor is going to deposit $1,000 into the bank for each of the next five years at a 4% rate. How much will be in the bank account at the end of 5 years?

$5,416.32

Given the following account balances at year-end, how much are total intangible assets on the balance sheet of Alisha Enterprises?

$5,500,000

CAB Inc. has 1000 shares of 5%, $100 par value, cumulative preferred stock and 50000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock?

$5000 in total.

Massey Corporation purchased a piece of land for $50,000. Massey paid attorney's fees of $5,000 and brokers' commissions of $4,000 in connection with the purchase. An old building on the land was torn down at a cost of $2,000, and proceeds from the scrap were $500. How much is the total cost of the land?

$60,500

Bonds with a face value of $600000 and a quoted price of 104.25 have a selling price of

$625500.

What is the market value of a $1,000 bond, which has an interest rate of 10% and will mature in 10 years if it is discounted at 15%? Interest is paid annually.

$749.07

If Sloane Joyner invests $10514.8 now and she will receive $30000 at the end of 11 years, what annual rate of interest will she be earning on her investment?

10%

How much money would you have to invest today at 4% in order to have $200,000 fifteen years from now so that you can pay your health care costs when you retire?

111,052

If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders' equity be reduced?

12,000

Justin Beiber wants to save enough money to make a down payment on a new home. He decided to put $10,000 into a savings account at the end of each of the next ten years. If he earns 4% compound interest, how much money will he have at the end of the ten years?

120,061

Perdue Company has purchased equipment that requires annual payments of $30000 to be paid at the end of each of the next 6 years. The appropriate discount rate is 12%. What amount will be used to record the equipment?

123342

Peter Johnson invests $35516.8 now for a series of $5000 annual returns beginning one year from now. Peter will earn 10% on the initial investment. How many annual payments will Peter receive?

13

How much is the future value of $100,000 in six years which earns 10% annual interest?

177,156

Hooray! You won the lottery, but you have a choice of taking the $20,000 per year for the next 20 years or taking a lump settlement today. What would be the minimum amount you would accept today if you decide that 8% is a reasonable discount rate?

196,363

What is the payout ratio?

2.5%

A $100000, 6%, 5-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

20 interest periods, 1.5% interest

Oahu Industries' average total assets for the year are $4,000,000, its net income is $800,000, and its net sales are $10,000,000. What is the return on assets?

20%

You would like to buy a new car in five years. Presently, the car you want costs $20,000. What will that car cost in five years if the price inflates by 5% each year?

25,526

How much money would you have to invest today at 6% in order to have $100,000 in 18 years so that your child can go to college?

35,034

Tilt, Inc. a pinball machine manufacturer, has been offered an opportunity to receive the following stream of cash; Year 1, $600; Year 2, $1,200; Year 3, $2,000; and Year 4, $4,000. If Tilt must earn at least 9% on its investments, what is the most it should pay for this opportunity?

5,939

Schneider Trucking Inc. purchased a new semi-truck on January 1, 2016 for $200,000. Its useful life is expected to be 4 years and its salvage value is estimated at $25,000. What is the depreciation for 2017 using the declining-balance method at double the straight-line rate?

50,000

Your company has been bought out by another company. In the acquisition, you have been asked to leave the company and as severance pay may take either $100,000 per year for the next ten years or a lump settlement today. If 10% is a reasonable discount rate, what would be the minimum amount you would accept today?

614,457

Jose Alicia wants to save enough money to attend college in ten years. He decides to put $5,000 into a savings account at the end of each of the next ten years. If he earns 6% compound interest, how much money will he have at the end of the ten years?

65,904

Allwell, Inc. earns 8% on an investment that will return $1,500,000 10 years from now. What amount should Allwell invest now in order to earn this rate of return?

694,785

What is the market value of a $1,000 bond, which has an interest rate of 10% and will mature in 10 years if it is discounted at 15%? Interest is paid annually.

876.64

Rynadune Inc. reported net income of $186,000 during 2014 and paid dividends of $26,000 on common stock. It also paid dividends on its 10,000 shares of 6%, $100 par value, noncumulative preferred stock. Common stockholders' equity was $1,200,000 on January 1, 2014, and $1,600,000 on December 31, 2014. How much is the company's return on common stockholders' equity for 2014?

9.0%

Loom, Inc. has outstanding a $1,000 face value bond with a 5% contract interest rate. The bond has 10 years remaining until maturity. If interest is paid annually, what is the value of the bond if the required rate of return is 6%?

926.39

Alphonse Inc. is thinking about investing in an annuity contract that will return $100,000 annually at the end of each year for 15 years. What amount should Alphonse pay for this investment if it earns an 6% return?

971,225

What is depreciation?

A cost allocation method

The 13th Street Grill issued 10,000 of $1 par value common stock for $5 per share. Which of the following will be part of the journal entry to record the issuance?

A credit of $10,000 to Common Stock

Tanner, Inc. issued a 10%, 5-year, $100,000 bond when the market rate of interest was 12%. At what value will the bond sell?

A discount

Which one of the following will minimize depreciation expense in the first year of owning an asset?

A long estimated life, a high salvage value, and straight-line depreciation

Which of the following does not affect retained earnings?

Additional investment by stockholders

Which one of the following is a major disadvantage of a corporation?

Additional taxes

Which one of the following costs will not be included in the cost of equipment?

Annual insurance

How is common stock listed in the stockholders' equity section of the balance sheet?

As part of paid-in capital

Which of the following measures provides an indication of how efficient a company is in employing its assets?

Asset turnover ratio

Which of the following represents the maximum number of shares a corporation can issue?

Authorized shares

Nashville Rail Co. issued $100,000 in 10-year bonds in 2009 at 103. The final interest payment was made and recorded. What entry will Nashville record for the redemption of its bonds at maturity?

Bonds Payable 100,000 Cash 100,000

Which one of the following is not a typical current liability?

Bonds payable

RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. Which statement is true at December 31?

Both the note payable and the interest payable are current liabilities.

How is the market value of a bond issuance determined?

By adding the present value of the principal amount to the present value of the interest payments.

When a bond is sold at a premium, at what amount is it reported on the balance sheet?

Carrying value

Hanlin Enterprises issued 2,000 bonds with a face value of $1,000 each at 97. What is the entry to record the issuance?

Cash 1,940,000 Discount on Bonds Payable 60,000 Bonds Payable. 2,000,000

Dynatech issues 1,000 shares of $10 par value common stock at $12 per share. When the transaction is recorded, which accounts are credited?

Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000

What is interest that is computed on principal and on any interest earned that has not been paid or withdrawn?

Compound interest

On January 1, 2017, Slice Corp. issues $200,000 of 5-year, 7% bonds at face value. Which one of the following is one effect of the entry to record the issuance of the bonds?

Credit to Bonds Payable for $200,000

DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance?

Credit to Common Stock for $15,000

Four-Nine Corporation issued bonds at par that pay interest every July 1 and January 1. Which one of the following is one effect of the entry to accrue bond interest at December 31?

Credit to Interest Payable

Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?

Declining-balance

What is the process of determining the present value called?

Discounting

Which one of the following variables is not required to calculate the present value of a future amount?

Dollar amount to be paid today

To be classified as a current liability, how or when must a debt be expected to be paid?

Either out of existing current assets or by crediting other current liabilities

Foxtrot Dancing will invest $2,500 per year for 8 years. What table is used to determine the amount accumulated at the end of the 8 years?

Future value of an annuity

A company sold for $3,000 a plant asset that had a cost of $10,000 and accumulated depreciation of $7,500. What gain or loss did the company experience?

Gain of $500

Which of the following is a disadvantage of the corporate business form?

Government regulation

A corporation issued a $50,000, 9%, 4-month note on July 1. The corporation's year-end is September 30. Which one of the following is the adjusting entry for interest on September 30?

Interest Expense 1125 Interest Payable 1125

On September 1, Banner Co. borrowed $70,000 from the City Bank for five months at 9%. Which journal entry will Banner Co. make on December 31 before issuing its financial statements?

Interest Expense 2100 Interest Payable 2100

Which one of the following is not true concerning a retained earnings restriction?

It is reported as a loss on the income statement.

Which statement describes the market interest rate?

It is the rate investors demand for loaning funds.

Which of the following is not a depreciable asset?

Land

On September 1, 2017, Banner Co. borrowed $70,000 from the City Bank for five months at 9%. Interest was properly accrued on December 31, 2017. What entry is needed to record the payment of the note and accrued interest on the due date?

Notes Payable 70000 Interest Payable 2100 Interest Expense525 Cash 72625

Which one of the following decreases when a corporation purchases treasury stock?

Outstanding shares

Which of the following costs should not be included in the cost of a building?

Parking lot repaving

Which of the following gives the recipient the right to manufacture, sell, or otherwise control an invention for a period of 20 years?

Patent

Which of the following is not a typical current liability?

Prepaid rent

Which one of the following is not a right of preferred stockholders?

Priority voting rights

Which of the following statements is false?

Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.

What term is used for bonds that have specific assets pledged as collateral?

Secured bonds

What method is normally used to account for treasury stock?

Stated value method

Pierce Company incurred $150,000 of research and development costs in its laboratory to develop a new product. It spent $20,000 in legal fees for a patent granted on January 2, 2017. On July 31, 2017, Pierce paid $15,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2017?

The company purchased another company.

Cuso Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, what does this indicate?

The contractual interest rate exceeds the market interest rate.

Which of the following is not a stockholder's right?

The right to participate in management decisions.

For what reason might a company acquire treasury stock?

To reissue the shares to officers and employees under bonus and stock compensation plans

A corporation sold 1,000 shares of its $2.00 par value common stock for $10.00 per share and later repurchased 100 of those shares for $12.00 per share. Which of the following will be debited to record the repurchase of the 100 shares?

Treasury Stock for $1,200

The Jacksonville Jaguars sell season tickets to NFL football games. There are 10 home games during the season, which runs from August through December. During February, 65,000 season tickets were sold for $12,000,000 cash. Which account will be credited by the Jacksonville Jaguars upon receipt of the $12,000,000?

Unearned Ticket Revenue

A corporation issues $1,000,000 of 8%, 5-year bonds. The 8% rate of interest is called the __________ rate.

contractual

Molina Corporation issues 5000, 10-year, 8%, $1000 bonds dated January 1, 2017, at 103. The journal entry to record the issuance will show a

credit to Bonds Payable for $5000000.

The board of directors of Yancey Company declared a cash dividend of $1.5 per share on 42000 shares of common stock on July 15, 2017. The dividend is to be paid on August 15, 2017, to stockholders of record on July 31, 2017. The correct entry to be recorded on July 15, 2017, will include a

debit to Cash Dividends.

In the balance sheet, the account Discount on Bonds Payable is

deducted from bonds payable.

The time period for classifying a liability as current is one year or the operating cycle, whichever is

longer