1. Surplus Mining Company has leased a machine from Craft Machinery Company. The annual payments are $6,000 and the life of the lease is 8 years. It is estimated that the useful life of the machine is 9 years. How would Surplus Mining record the acquisition of the machine?

a. The machine would be recorded as an asset with a cost of $48,000.

b. The company would not record the machine as an asset but would record rent expense of $6,000 per year.

c. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8 years.

d. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 9 years.

2. Walton Corporation shows the following in the stockholders' equity section of its balance sheet: The stated value of its common stock is $0.50 and the total balance in the common stock account is $37,500. Also noted is that 5,000 shares are currently designated as treasury stock. The number of shares outstanding is

a. 80,000.

b. 75,000.

c. 72,500.

d. 70,000.

3. Which of the following statements is true?

a. The method of preparing the operating activities section of a statement of cash flows which adjusts net income to remove the effects of deferrals and accruals for revenues and expenses is the direct method.

b. The method of preparing the operating activities section of a statement of cash flows which reports major classes of gross cash receipts and cash payments for revenues and expenses is the indirect method.

c. The FASB prefers the indirect method of preparing the operating activities section of the statement of cash flows.

d. Most companies use the indirect method of preparing the operating activities section of the statement of cash flows.

4. Which of the following statements is false?

a. The method of preparing the operating activities section of a statement of cash flows which adjusts net income to remove the effects of deferrals and accruals for revenues and expenses is the indirect method.

b. The method of preparing the operating activities section of a statement of cash flows which reports major classes of gross cash receipts and cash payments for revenues and expenses is the direct method.

c. The FASB prefers the direct method of preparing the operating activities section of the statement of cash flows.

d. Most companies use the direct method of preparing the operating activities section of the statement of cash flows.

5. On January 2, 2016, Concrete Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. What is the carrying value of the bonds after the first interest payment is made on June 30, 2016?

a. $574,540

b. $571,776

c. $568,920

d. $500,000