A2331 Final Exam Practice Questions 1 On December 1 2015 company signed a 300 000 5 six month note payable with the amount borrowed plus accrued interest due six months later on June 1 2016 The company records the appropriate adjusting entry for the note on December 31 2015 What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1 2016 A 300 000 B 301 250 C 306 250 D 307 500 2 If you pay for 25 00 for purchase which includes 11 sales tax How much is the sales tax A 2 48 B 2 75 C 3 00 D 2 55 3 Which of the following is not a characteristic of debenture Bonds A payment of interest to bondholders is required B they are not secured by any specific assets of the corporation C bondholders have priority over common stockholders in the liquidation of assets D bonds cannot be retired before the end of their life 4 F Corporation has authorized an issue of 15 10 year bonds At the issue date the market rate of interest for this type of bond is 13 5 On these facts it might be expected that A The company will find it difficult to sell the bonds B The bonds will be sold at a premium C The bonds will be sold at a discount D The bonds will be sold at face value E The bond contract will be rewritten because it is inconsistent USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO 2 QUESTIONS On January 1 2015 ABC Company issued 10 000 of 8 12 year bonds for 9 632 cash The bonds are dated January 1 2015 and pay interest annually each December 31 The market rate of interest on the bonds is 8 5 on the issue date 5 The bond interest expense to be reported on the income statement for the year ended December 31 2015will be somewhere between A 0 and 774 B 775 794 C 795 814 D 815 834 E 835 and 1 000 6 The cash paid for interest on December 31 2015would be A 768 B 800 C 816 D 850 The following factors from the present value tables may be of use when answering the next 2 questions Present value of 1 00 Present value of an Annuity of 1 00 5 periods 10 periods 5 periods 10 periods 4 0 8219 0 6756 4 4 4518 8 1109 5 0 7835 0 6139 5 4 3295 7 7217 6 0 7473 0 5584 6 4 2124 7 3601 7 An investor wishes to have 1 000 available in five years How much should be invested today if the current interest rate is 5 percent round to the nearest dollar A 784 B 614 C 433 D 772 8 On January 1 2015 Sawyer Company issued 100 000 of its 10 year bonds payable to generate cash for expansion The bonds will retire in 10 years and have a stated rate of 5 percent Interest will be paid annually each December 31 starting December 31 2015 The market rate is 4 what amount of cash would Sawyer receive at issue round to nearest whole dollar A 100 000 B 108 115 C 67 560 D 92 277 9 Z company retires a 70 million bond issue when the carrying value of the bonds is 65 million but the market value of the bonds is 74 million Z company will record the retirement as A A debit of 9 million to Loss due to early extinguishment B A credit of 9 million to Gain due to early extinguishment C No gain or loss on retirement D A debit to Cash for 74 million 10 Which of the following is NOT a true statement about accounting for corporations A The dividends account is closed out to retained earnings B The balance in retained earnings at any point in time is equal to the total accumulated earnings of the business net of losses less the total dividends since the inception of the corporation C Any income or loss is closed out to the common stock account D Retained earnings may have a debit balance E Two primary sources of equity capital are contributed capital and earned capital retained earnings 11 Nelson Corporation issues 50 000 shares of 0 50 par value stock The market price of the stock is 8 per share Additional paid in capital on this transaction would be A debited for 400 000 B credited for 375 000 C debited for 375 000 D credited for 25 000 12 Liabilities a Are obligations b Require a probable future sacrifice of economic benefits c Are a result of past transactions or events d All of the above 13 On December 15 19x5 FLM Corporation exchanged 2 000 shares of 10 par value common stock for land The current market price of the stock was 20 per share The value of the land was not readily determinable Which of the following entries should be made to record the issuance of the stock A Land 20 000 Common Stock 20 000 Common Stock 40 000 B Land 40 000 C Land 40 000 Common Stock 20 000 Paid in Capital in Excess of Par Value 20 000 D Cannot be determined 14 Which of the following is the best definition of retained earnings A Accumulated earnings of the corporation since the date of incorporation minus any losses and minus all dividends declared B Stockholders equity minus capital stock C Net assets minus capital stock and all dividends paid since date of incorporation D Extraordinary gains minus extraordinary losses plus income from operations since date of incorporation USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO QUESTIONS Subara Corporation purchases 1 000 shares of its own 10 par value stock for 15 per share The transaction is recorded using the cost method 15 Proper recording of this transaction will A result in a decrease in stockholders equity B result in a decrease in net income C result in an increase in investments D include a debit to an Additional Paid In Capital for 5 000 16 Assume that Subara reissued the stock for 14 per share Which of the following statements is true A Common Stock will be credited for 5 000 B Treasury Stock will be credited for 15 000 C Net income will be reduced by a loss on treasury stock of 1 000 D An Additional Paid In Capital account will be credited for 2 000 17 The beginning balance of Retained Earnings was 100 and the ending balance of Retained Earnings was 125 Dividends declared for the period were 30 What was the net income A 25 B 55 C 15 D 5 18 Which of the following occurs when accrued interest is accrued on a note payable at yearend a Interest is accrued for the number of days the note is outstanding in the subsequent period b Interest is accrued for the number of days the note is outstanding in the current period c Interest is accrued …