Question

1) Studley Company issued a five-year $5,000,000 bond that had a 8 percent face interest rate that is paid annually when the market interest rate was 10 percent. What are the proceeds of the bond issue?

A. $5,000,000

B. $4,376,889

C. $5,671,008

D. $4,385,543

2) River Inc. had an extraordinary gain equal to $15,000(before taxes). The net income for River Inc. equals $48,000 and the tax rate was 30%. When was the value of “income from continuing operations?”

A. $63,000

B. $58,500

C. $37,500

D. no answer can be determined

3) River Inc. had an extraordinary gain equal to $15,000(before taxes). The net income for River Inc. equals $48,000. What was the value of “income from continuing operations?”

A. $48,000

B. $36,000

C. $60,000

D. no answer can be determined

4) Which of the following is not true about a capital lease?

A. The entire amount of each lease payment is considered rent expense.

B. Is used when the assets leased is in substance purchased.

C. When a capital lease is used an asset is recorded and depreciated over its useful life.

D. When a capital lease is used interest expense is incurred on each payment.

5) Which of the following is NOT a true statement about bonds?

A. A company that issue bonds is (typically) borrowing money from the public not a specific person or institution.

B. A bond’s prices in the secondary market changes as the market interest changes over time.

C. Bonds can be turned in by their holders prior to their maturity date and receive the bond’s face value.

D. When a company issues convertible bonds it will not have to pay the face value of the bonds if the bonds are converted before the bond’s maturity date.

6) In a noninterest-bearing note, the amount borrowing is which of the following?

A. face value of the note

B. face value of the note less the discount on note payable

C. face value of the note plus a premium on the note payable

D. face value of the note less interest expense calculated at the face rate of interest

7) A manufacturing company using full-absorption costing can increase net income by which of the following.

A. Increasing production and increasing ending inventory at the end of the year

B. Decreasing the inventory

C. Writing ending inventory down to its fair value

D. All of the above

8) At December 31, 2010, Edgar Enterprises had equipment with a book value of $40,000. On December 31, 2009, the book value was $55,000. The original cost of the equipment was $75,000. Assuming straight-line depreciation and no salvage value, what is the estimated economic life of the asset?

A. 5 years

B. 4 years

C. 3 years

D. 2 years

9) Assume a company has no dilutive securities. What number will be greater?

A. basic earnings per share

B. diluted earnings per share

C. question cannot be answered

D. A & B should be the same

10) Bonds payable have a face amount of $1,000,000 and a doscount of $10,000. The face interest rate is 9 percent and the effective interest rate is 10 percent. If the annual interest payment is due today, what amount of interest expense should be recorded?

A. $100,000

B. $99,000

C. $90,000

D. $89,100

11) Which of the following is the correct entry for the sale of equipment at a loss?

A. Cash

Loss

Accumulated Depreciation

Equipment

B. Cash

Loss

Equipment

C. Cash

Accumulated Depreciation

Equipment

Loss

D. Cash

Equipment

Loss

Answer 1

Dear student, we cannot able to post solution more than four subparts of the question as per our policy.

Answer 1
Interest Paid (5000000*8%)	400,000
Principal paid	5,000,000
Year	PV factor @ 10%
1	0.90909091
2	0.82644628
3	0.75131480
4	0.68301346
5	0.62092132
6	0.56447393
7	0.51315812
8	0.46650738
9	0.42409762
10	0.38554329
Total	6.14456711
Present value of Principal payment (5000000*0.38554329)	$           1,927,716
Present value of Interest payment (400000*6.14456711)	$           2,457,827
Proceeds of the bond issue	$           4,385,543
Correct Option is D.	$           4,385,543
Answer 2
Net income	48,000
Less: Extraordinary Gain (net of tax) (15000-(15000*30%))	10500
Income from continuous operation	37,500
Correct Option is C.	$                 37,500
Answer 3
Tax rate not provided.
No answer can be determined. (because of Tax rate should not provided.)
Correct Option is D.	No answer can be determined
Answer 4
The entire amount of each lease payment is considered rent expense under the Operating lease.
The entire amount of each lease payment is considered rent expense. This statement is not true for capital lease.
Correct Option is A.	The entire amount of each lease payment is considered rent expense.