1. Bob's Hot Tubs Inc. (BHT) sold $200,000 worth of hot tubs in 20X6 and $300,000 in 20X7. A two-year comprehensive warranty is included in the sales price. Historically, warranty costs over the two-year period have averaged 2% of total sales. During 20X6, it cost BHT $2,000 to repair defective hot tubs. During 20X7, it cost BHT $3,000 to repair defective hot tubs. What was BHT's warranty expense for 20X6?

a) $2,000

b) $3,000

c) $4,000

d) $5,000

2. Aaron's Automotive Ltd. (AAL) sells new cars. On November 1, 20X8, AAL signed a contract to sell four new sedans to a local business for $32,000 each ($128,000 total); however, AAL did not have the cars in inventory. AAL accepted a $5,000-per-car deposit ($20,000 total) from its customer. The $27,000 remaining balance (per vehicle) was payable on delivery.

On December 29, 20X8, AAL received one car from the manufacturer and agreed to pay $29,000 for it within 30 days. AAL then delivered the car to its customer. What amount will AAL report as an unearned revenue liability on its December 31, 20X8, balance sheet?

a) $15,000

b) $20,000

c) $29,000

d) $44,000

3. ZFH Inc.'s year end is December 31. On September 1, 20X6, ZFH Inc. issued $100,000 of five-year, 5% bonds with semi-annual payments when the market rate of interest was 6%. ZFH Inc. received $95,735 from the sale of the bonds.

What amount will ZFH Inc. report as interest expense on these bonds payable for its year ending December 31, 20X6, rounded to the nearest dollar?

a) $1,596

b) $1,667

c) $1,915

d) $3,829

4. On January 1, 20X4, GFF Inc. issued (sold) $100,000 of 6% bonds that mature in five years. The bonds pay interest semi-annually on June 30 and December 31. The market rate of interest at time of issuance was 5%. How much cash did GFF Inc. receive from the sale of the bonds, rounded to the nearest dollar?

a) $ 84,557

b) $102,323

c) $104,376

d) $130,632

5. An extract from the balance sheet of Stanger's Theatrical Corp. follows.

Cumulative preferred shares, $0.05, 10,000 shares authorized, issued, and outstanding

$ 30,000

Common shares, 6,000 shares authorized, 5,000 shares issued and outstanding

50,000

Retained earnings

20,000

Total shareholders' equity

$100,000

Assume that two years' preferred dividends, including the current year, are in arrears. What is the book value per common share?

a) $ 9.80

b) $11.50

c) $13.80

d) $14.00

6. Select details of PCS Inc.'s equity as at December 31, 20X9, follow:

Preferred shares, $1.00, 10,000 shares authorized, 4,000 shares issued and outstanding

$100,000

Cumulative preferred shares, $1.50, 20,000 shares authorized, issued, and outstanding

500,000

Common shares, 100,000 shares authorized, issued, and outstanding

1,000,000

All preferred shares were issued on January 1, 20X4, and the number of shares authorized, issued, and outstanding has not changed since they were issued. PCS Inc. declared and paid a cash dividend of $200,000 on December 31, 20X9. Prior to this, dividends were last declared and paid on December 31, 20X6. What is the total amount of dividends that were paid to the common shareholders on December 31, 20X9?

a) $ 98,000

b) $100,000

c) $106,000

d) $166,000

7. Select financial information for Ecstatic is Me Corp. (EMC) follows:

December 31

20X8

20X7

Total assets

$ 340,000

$ 300,000

Total liabilities

130,000

120,000

Preferred shares

50,000

50,000

Common shares

80,000

60,000

Retained earnings

80,000

70,000

Revenue

1,215,000

1,100,000

Cost of goods sold

800,000

720,000

Other expenses

372,000

360,000

Interest expense

8,000

7,000

Net income

35,000

13,000

In both 20X7 and 20X8, EMC declared and paid cash dividends of $5,000 on the preferred shares and $20,000 on the common shares. These dividends have been recorded and included in the balances above. What was EMC's return on equity (ROE) for its year ended December 31, 20X8?

a) 6.9%

b) 15.4%

c) 20.7%

d) 24.1%

8. On January 1, 20X6, ZED Ventures Inc. (ZED) purchased $100,000 of 5% bonds that mature in eight years. The bonds pay interest semi-annually on June 30 and December 31. The market rate of interest at time of issuance was 4%. How much interest income did ZED earn from these bonds in 20X6, rounded to the nearest dollar?

a) $4,264

b) $4,269

c) $4,272

d) $5,000

9. Liberty Leasing Corp. (LLC) leased a plane to ZFLY. The contract requires ZFLY to make payments of $120,000 per month for five years and then return the plane to LLC. It is likely that LLC can sell the plane for $1,000,000 at the end of the five-year lease period. What is the present value of the lease rounded to the nearest dollar if the interest rate is 6% per annum?

a) $1,252,742

b) $1,969,686

c) $6,207,067

d) $6,948,439

10. Amounts reported in the balance sheet for Horses Forever Inc. (HFI) as at December 31, 20X7 and 20X8, and HFI's income statement for the years ended December 31, 20X7 and 20X8, are presented below in alphabetical order. All accounts have their "normal" balances; for example, accounts payable are a credit.

December 31

20X8

20X7

Accounts payable

$40,000

$35,000

Accounts receivable

60,000

55,000

Accumulated depreciation building

75,000

65,000

Bank loan

30,000

45,000

Bonds payable

100,000

100,000

Building

125,000

125,000

Cost of goods sold

200,000

170,000

Interest expense

15,000

20,000

Inventory

50,000

40,000

Land

100,000

100,000

Other expenses

130,000

120,000

Revenue

400,000

350,000

Shareholders' equity

90,000

75,000

In both 20X7 and 20X8, HFI declared and paid cash dividends of $40,000 on its common shares. What was HFI's return on assets (ROA) for its year ended December 31, 20X8?

a) 11.7%

b) 17.6%

c) 26.9%

d) 27.2%