fINAL

Magenta Corporation issued $500,000 of its 6%, 10-year bonds, dated January 1, 2016, at face value plus accrued interest on September 1, 2016. Interest is paid on June 30 and December 31. Magenta uses the most common method to record the sale of the bonds between interest payment periods.Refer to Exhibit 14-7. The amount of bond interest expense reported on the year-end 2016 income statement would be

$25,000

Reagan Company purchased 10,000 shares of Clinton's Company at $45 per share plus $15,000 of Delta Company's 12% bonds, acquired at par, as available-for-sale securities. The bonds pay interest on June 30 and December 31 each year. What amount should be recorded to the Investment in Available-for-Sale Securities account?

$465,000

Exhibit 11-1On January 1, Year 1, Hills purchased equipment for $350,000. The equipment had an estimated useful life of ten years and an estimated residual value of $50,000. Use the double-declining-balance method to answer the following question.Refer to Exhibit 11-1. How much depreciation should Hills record on the asset in year 2?

$56,000

Devon Manufacturing Company purchased a new canning machine on July 1, 2015, for $190,000. The estimated salvage value is $15,000. The company uses units-of-production depreciation and estimates the machine will produce 125,000 units during its useful life. In 2015, the company manufactured 5,000 units after acquiring the machine. Depreciation expense for 2015 will be

$7,000

Excise taxes to be paid on the purchase of factory equipment would be included in which of the following accounts?

Equipment

Which of the following statements concerning treasury stock is true?

It participates in stock splits.

________ are expensed as incurred.

Research and development costs

At the date of purchase, materials, equipment, facilities, and intangibles purchased from others that have alternative future uses in research and development should be

capitalized

An improvement made to a machine increased its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be

capitalized in the machine account.

Magenta Corporation issued $500,000 of its 6%, 10-year bonds, dated January 1, 2016, at face value plus accrued interest on September 1, 2016. Interest is paid on June 30 and December 31. Magenta uses the most common method to record the sale of the bonds between interest payment periods.Refer to Exhibit 14-7. The entry to record the sale would include a

debit to Cash for $505,000

Depletion of a natural resource is typically recorded as a

debit to an inventory account

When a long-term non-interest-bearing note is exchanged solely for cash, the difference between the cash received and the face value of the note is recorded as

discount on notes payable

If a company sells its bonds at face value, the effective interest rate is

equal to the contract rate.

For financial reporting purposes, GAAP requires organization costs to be

expensed in the period in which they are incurred.

Intangible assets are initially recorded at

fair value.

Which of the following securities are reported at their amortized cost on the balance sheet date?

held-to-maturity debt securities

In the determination of the diluted earnings per share, convertible securities are

included if they are dilutive.

Alternative terms for property, plant, and equipment include all of the following except

long-term assets.

The cash surrender value of the insurance policy on the corporation's president would be presented on the balance sheet as

long-term investment

Assume common stock is issued to employees as a result of exercising stock purchase rights issued under a noncompensatory share purchase plan. At what value does the company record that stock in its books?

market price of the stock

Assume common stock is issued to employees as a result of exercising stock purchase rights issued under a noncompensatory share purchase plan. Which of the following accurately describes the effect on the company's income, paid-in capital, and retained earnings, respectively?

no effect, increased, and no effect

Investments in debt securities include all of the following except

preferred stocks that are redeemable at the option of the issuer

Investments in equity securities include all of the following except

put and call stock options

When existing corporations issue stock, costs such as legal fees and underwriter's fees are usually accounted for as

reduction of Additional Paid-in Capital

Which of the following is not a factor in selecting a depreciation method?

salvage value

Costs for which of the following activities would not be included as part of research and development (R&D) costs?

searching for applications of new research findings or of other knowledge.

A corporation is a legal entity

separate from its owners.

The authorized shares of capital stock is the number of shares

that may be issued.

To be included in property, plant, and equipment, an asset must have all of the following except

the asset must have an expected life of a normal operating cycle.

Related to long-term liabilities, reading the notes to the financial statements is important because they contain

the characteristics of the long-term debt

The preference to dividends that preferred shareholders have is

the right to receive the appropriate dividend before common shareholders are paid any dividends when dividends are declared.

Which of the following is not a reason for a corporation to acquire treasury stock?

to be used in the acquisition of other companies

When is interest expense less than interest paid?

when bonds are sold at a premium

Which of the following is not part of the shareholders' equity section of the balance sheet?

working capital

For which of the following types of bonds is interest expense recognized each year even though no interest is paid?

zero-coupon bonds

Which of the following bonds pay no interest until maturity?

zero-coupon bonds

Which of the following terms is not a common alternative for the term "property, plant, and equipment?"

capital investments

________ are bonds that give bondholders the option to exchange the bonds for a predetermined number of common equity shares of the issuing company.

Convertible bonds

Which of the following is not a reason for the issuance of long-term liabilities?

Debt financing dilutes ownership interest.

Which one of the following statements is not true?

The residual value of an asset is the difference between the expected book value of the asset at the end of its service and the costs of disposal.