ACC 201 (9, 10, 11) Exam

face value

Amount of principal due at the maturity date of the bond

capital leases

Long-term leases in which the lessor transfers substantially all risk and rewards of ownership to the lessee.

proper structure of a corporation

Stockholders select the board of directors, who select officers

common stock

Term used to describe the total amount paid in by stockholders for the shares they purchase.

Stockholders' Equity

The owners' claim to assets.

cash flows from investing activities

cash activities related to non current assets

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

investing activities

A bond issuing at 101.25 means that the bond

sold for $1,012.50

time value of money

the idea that a cash flow in the future is less valuable than a cash flow at present

discount

when a bond sells at a price below face value, due to the yield being greater than the stated rate of interest

premium

when a bond's selling price is above face value; usually -

dividends

Amount of profit paid to shareholders per share per year

Cash Flow Adequacy Ratio

Cash from operations divided by expenditures for fixed asset additions and acquisitions of new businesses

preferred stock

a class of stock that generally does not give voting rights, but grants specific guarantees and dividend preferences

indirect method

a method that computes operating cash flows by adjusting NET INCOME for items that do NOT affect cash flows

annuity

a series of equal cash flows at regular intervals

bond

a type of note that requires the issuing entity to pay the face value of the bond to the holder when it matures and periodic interest at a specific rate

factors for classifying leases as capital leases

asset will be retained by lessee at end of term, lessee's payments are about same amount as payments on a note payable to purchase asset, and the lessee will use most of the asset's estimated useful life

callable bonds

bonds that give the borrower the right to pay off the bonds prior to their due date

if 100 shares of $50 par value common stock are sold at par, then the correct entry would include a credit to ...

common stock for 5,000

free cash flow

net cash provided by operating activities after adjusting for capital expenditures and cash dividends paid

when a contract establishes a relationship between an amount borrowed and one or more future cash flows, the initial amount is known as...

present value

Treasury Stock

previously issued stock that is repurchased by the issuing corporation

deficit

the accumulated losses over the entire life of a corporation that have not been paid out in dividends

500 shares of common stock for $12 per share; then an additional 100 shares of stock for $15 per share. assuming the board has placed a stated value of $10 per share on this no-par stock... the balance in the paid-in capital woudl be

$1,500 (5*100+2*500)

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

6% per 6-month period

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

Total stockholders' equity will increase by $5,000

future value

the amount to which money will grow in the future when compound interest is applied

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?

noncash investing or financing activity

Cash flows from acquiring and selling products are classified as

operating activities

which table do you use for the following question: 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?

present value of a single amount; and the ansewr is $7,404.30

pierson co. issues $400,000 of 6% 20-year bonds at 98. Straight-line amortization was used. How much bond interest expense is recorded on the annual interest payment date?

$24,400 (400,000-392,000=8,000/20=400....)

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?

$39,604.50

a bond with a total face value of 5,000 paying interest of 5% has a current price quote of 102. This bond would sell for....

$5,100 (5,000*1.02)

premium bond on a 400,000 bond payable is 5,200... what would be the carrying value of the bonds shown on the balance sheet of that year?

405,200

a co. issues a $10,000, 8%, 10-year bond on Jan. 1 for $10,420. Interest is paid annually on jan 1. if the co. uses straight-line method of amortization of bond discounts and premiums, the present or future value calculations will be ....

6% per 6-month period

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.)

Interest Expense Discount on Bonds Payable Cash

par value

a value assigned to a share of stock and printed on the stock certificate

straight line method

an interest amortization method that amortizes equal amounts of premium or discount to interest expense each period

cash flows from financing activities

cash activities related to non current activities

present value

determinations of present amounts based on expected future cash flows

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

financing

a discount is usually...

+

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.Refer to Lanier Tech. What is the amount of the company's total capital stock at December 31, 2019?

$180,000

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?

$59,713.00

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?

$6,000

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?

$800,000

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?

$95,000

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?

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