1.

You owe $200,000 on a mortgage loan. You wish to repay the loan with 10 equal payments, one at the end of each year for the next 10 years, and a separate final $80,000 payment at the end of 11 years. What is the appropriate amount of each of the 10 equal annual payments? The interest rate is 8% compounded annually. Hint: The present value of the 10 equal payments for the first ten years plus the present value of the $80,000 at the end of the 11th year must equal the $200,000 amount of the mortgage loan.

$24,693

$37,413

$16,751

$19,222

$28,327

2.

On January 1 of Year 1, Cameron Company purchased a sophisticated piece of equipment costing $300,000. The equipment had a $30,000 salvage value and a 10-year estimated useful life. As of January 1 of Year 4, technology has changed, and it is feared that the value of this sophisticated piece of equipment has been impaired. On January 1 of Year 4, it is projected that the equipment has a remaining useful life of 4 years, a salvage value of zero, and that it will generate cash flows of $45,000 at the end of each year for the next 4 years. The market interest rate is 10%. How much DEPRECIATION EXPENSE will Cameron Company recognize on this piece of equipment during Year 4? Note: Impairment losses are not classified as part of depreciation expense. Cameron uses straight-line depreciation.

$35,661

$42,784

$45,826

$39,413

$71,595

3.

On January 1 of Year 1, Harry Company purchased a piece of equipment for $200,000. The estimated life of the equipment is 10 years. Harry estimates that the equipment can be sold for $60,000 at the end of its life. Harry Company uses double-declining balance depreciation. For Year 2 (the SECOND year), Harry Company's net income was $100,000. What would Harry Company's net income have been in Year 2 (the SECOND year) assuming that Harry Company had initially (on January 1, Year 1) decided NOT to use double-declining balance depreciation but had instead used straight-line depreciation? Note: Ignore income taxes.

$104,000

$86,000

$64,000

$118,000

$132,000

4.

Taraz Aina is obligated to make the following payments to a loan company:TimingAmountAn annuity with the first payment made right now10 annual payments of $7,000 eachOne lump sum at the end of three years$20,000One lump sum at the end of nine years$150,000As stated above, the annuity includes a total of 10 annual payments with the first one to be made immediately. The interest rate on the loan is 12% compounded annually, and there is no penalty for early payment. How much must Taraz Aina pay RIGHT NOW in order to completely satisfy her obligation under this loan? Note: The amount she must pay right now includes the $7,000 annuity payment that is due right now. Round all of your calculations to the nearest dollar.

$72,343

$112,626

$188,469

$87,952

$130,123

5.

On January 1 of Year 1, Lily Company issued a $10,000, 10%, 20-year bond. Interest is paid annually each December 31, so the first coupon payment was made on December 31 of Year 1. On the day the bond was issued, the market interest rate on bonds with the same degree of riskiness was 12% compounded annually. Accordingly, the bond was issued at a discount of $1,494. This bond was retired on January 1 of Year 3, just one day after the second coupon payment was made. The total amount paid to retire this bond was $9,700. Lily uses the effective-interest method on its books. Note: Round all calculations to the nearest dollar. The entry to record the retirement of this bond would include a...

DEBIT to Discount on Bonds of $1,550.

CREDIT to Discount on Bonds of $1,250.

CREDIT to Discount on Bonds of $1,650.

DEBIT to Loss on Bond Retirement of $1,150.

DEBIT to Loss on Bond Retirement of $1,450.

6.

User Company leased computer equipment from Owner Company on January 1 of Year 1. The computer equipment has an expected useful life of five years. The terms of the lease require annual payments of $5,000 for five years with the first payment being made on the lease signing date (January 1 of Year 1) -- the four subsequent lease payments are made on January 1 of each subsequent year. The interest rate used in computing the lease payments is 10% compounded annually. User Company is accounting for this lease as a capital lease. Note: Round your calculations to the nearest dollar. In the journal entry made in connection with this lease on December 31 of Year 1, there is a...

DEBIT to Interest Expense of $2,585.

DEBIT to Interest Expense of $2,500.

CREDIT to Interest Payable of $2,085.

DEBIT to Interest Expense of $2,000.

DEBIT to Interest Expense of $1,895.

CREDIT to Interest Payable of $1,585.

DEBIT to Interest Payable $3,415.

nothing; no journal entry is needed on December 31 of Year 1.

7.

• Kamili Company started business on January 1 of Year 1. For Year 1, Kamili reported net income of $100,000 and paid cash dividends of $35,000. The following occurred during Year 2:Purchased 10,000 shares of treasury stock for $20 per share
• Reissued 3,000 shares of the treasury stock for $25 per share
• Reissued 6,500 more shares of the treasury stock for $8 per share
• Discovered an error in the Year 1 books. In Year 1, Kamili Company overstated its sales revenue by $23,000.
• Discovered another error in the Year 1 books. In Year 1, Kamili Company overstated its depreciation expense by $7,500.
• Net income for Year 2 was $80,000.

Note: The Year 2 net income of $80,000 has been computed correctly except that NO consideration has been given to the impact of the treasury stock transactions on net income for Year 2.

• Cash dividends paid during Year 2 were $45,000.

The correct Retained Earnings balance at the end of Year 2 is...

positive (credit) $90,000.

positive (credit) $18,500.

positive (credit) $21,500.

positive (credit) $58,500.

positive (credit) $73,500.

8.

Lorien Company issued bonds with a coupon rate of 0% and a face amount of $100,000. These are zero-coupon bonds. The bonds mature in 20 years. The market interest rate for bonds with the same degree of riskiness is 7% compounded annually. These bonds were issued on January 1 of Year 1. Lorien uses the effective-interest method on its books. Note: Round all your calculations to the nearest dollar. In the journal entry made in connection with these bonds on December 31 of Year 1, there is a...

DEBIT to Interest Expense of $7,000.

DEBIT to Discount on Bonds of $1,809.

CREDIT to Discount on Bonds of $1,809.

CREDIT to Interest Payable of $3,708.

DEBIT to Interest Expense of $5,191.

CREDIT to Discount on Bonds of $2,584.

CREDIT to Interest Payable of $1,809.

nothing; no journal entry is needed on December 31 of Year 1.

9.

Lily Company had the following account balances for Year 1. Compute Lily Company's total stockholders' equity as of the end of Year 1. Note: All equity accounts are included in this list. However, the asset and liability accounts in the list do NOT include all of the company's asset and liability accounts. As a result, you can't use the accounting equation to compute stockholders' equity.

Common Stock, at par$10,000

Foreign Currency Translation Adjustment (debit balance, decrease)30,000

Income Taxes Payable82,000

Treasury Stock20,000

Long-Term250,000

Paid-in Capital from Treasury Stock52,000

Paid-in Capital in Excess of Par-common200,000

Prepaid Expenses77,000

Retained Earnings (end of the year)180,000

Unearned Revenue53,000

Investment Securities - Available for Sale75,000

Market Adjustment Account - Available for Sale (debit balance, increase)14,000

Unrealized Increase on Available-for-Sale Securities14,000

$459,000

$406,000

$436,000

$420,000

$392,000

$466,000

$481,000

$446,000

10.

On January 1 of Year 1, Taraz Company purchased 4,000 shares of the common stock of Company A for $240,000. At the time, Company A had a total of 10,000 common shares outstanding. Accordingly, Taraz purchased 40% of the outstanding shares of Company A. During Year 1, Company A paid cash dividends totaling $20,000. Company A also reported net income of $50,000 during Year 1. During Year 2, Company A paid no cash dividends. Company A reported a net loss of $40,000 during Year 2. On December 31 of Year 1, the market value of Company A's common stock was $45 per share. On December 31 of Year 2, the market value of Company A's common stock was $72 per share. On Taraz Company's books, what amount should be reported as "Investment in Company A" as of December 31 of Year 2?

$243,000

$257,000

$236,000

$260,000

$272,000

11.

On January 16 of Year 1, Wishbone Corporation purchased 2,000 shares of Clarke Corporation common stock at $50 per share. Wishbone classified the investment in Clarke common stock as available for sale. On March 23 of Year 1, Wishbone sold 500 shares of Clarke common stock for $78 per share. On December 31 of Year 1, each of the remaining 1,500 shares of Clarke common stock had a market value of $65. For Year 1, Wishbone Corporation reported net income of $200,000. What would Wishbone's Year 1 net income have been if the investment in Clarke Corporation stock had originally been classified as trading? Note: Assume that, before Year 1, Wishbone Corporation has never had an investment in either trading or available-for-sale securities. Also, ignore income taxes.

$228,500

$244,500

$222,500

$243,500

$183,500

12.

Boatie Company has four leases. The terms of the four leases are summarized in the table below:

Transfer of Ownership at the End of the Lease Term?Cash Price of Leased AssetEconomic Life of Leased AssetPresent Value of Lease PaymentsLength of the LeaseExistence of Bargain Purchase Option in the Lease Contract?Lease 1No$100,00020 Years$92,00013 YearsNoLease 2No$100,00020 Years$82,00016 YearsNoLease 3No$100,00020 Years$92,00016 YearsNoLease 4No$100,00020 Years$82,00013 YearsNoOf these four leases, which should Boatie Company account for as capital leases? Note: ALL of the leases are noncancellable.

Lease 1 only

Lease 2 only

Lease 3 only

Lease 4 only

Leases 1, 2, and 3 only

All of the leases should be accounted for as capital leases.

Leases 3 and 4 only

None of the leases should be accounted for as capital leases.

13.

At the beginning of Year 1, Jimbo Company purchased a portfolio of trading securities for $33. At the end of Year 1, the portfolio had a value of $28. At the end of Year 2, the portfolio had a value of $37. During Year 3, the entire portfolio is sold for $25.What is the amount of unrealized gain or loss for Year 3?

$4 unrealized gain

$8 unrealized loss

$5 unrealized gain

$4 unrealized loss

$12 unrealized gain

$12 unrealized loss

$5 unrealized loss

No unrealized gain or unrealized loss

14.

Which ONE of the following statements is TRUE?

In the United States, a company with a stock price of $15 per share is likely to do a 2-for-1 stock split.

A company that has never paid cash dividends is likely to start paying cash dividends if it expects very high sales growth every year for the next five years.

A company that expects to introduce several new products in the next year is more likely to do its IPO now rather to wait for a year.

A company that is relatively certain about its strong operating cash flow for the next few years is more likely to increase its cash dividends this year than it is to increase the amount of cash used to repurchase shares of its stock.

The FASB allows a company to wait until up to 18 months following the purchase of an investment security before deciding whether that security should be classified as trading or available for sale.

None of the statements in (a) through (e) is true.

15.

Han Company had the following data for the year:Accounts receivable, beginning of year$150,000Cash collected from credit customers830,000Accounts receivable, end of year180,000Allowance for bad debts, beginning of year30,000Allowance for bad debts, end of year53,000Credit sales for the year868,000What was Han Company's BAD DEBT EXPENSE for the year?

8,000

38,000

30,000

31,000

16.

Lorien Company is a U.S. consulting company that keeps its financial records in U.S. dollars. On November 1 of Year 1, Lorien provided consulting services to a Thai company on account. The fee for the services was 500,000 Thai baht. Lorien COLLECTED the cash, in Thai baht, on March 1 of Year 2. The exchange rate for the Thai baht (relative to the U.S. dollar) was as follows on the indicated dates:November 1, Year 1one Thai baht = $0.020December 31, Year 1one Thai baht = $0.015March 1, Year 2one Thai baht = $0.018Assume that Lorien has no other foreign currency transactions and that all necessary journal entries are recorded correctly. What amount of FOREIGN EXCHANGE gain or loss should Lorien report for Year 2?

3,500 loss

1,000 loss

1,500 gain

2,500 gain

2,500 loss

1,500 loss

3,500 gain

1,000 gain

17.

At the beginning of Year 1, the company's inventory level was stated correctly. At the end of Year 1, inventory was understated by $2,000. At the end of Year 2, inventory was overstated by $450. Reported net income was $3,000 in Year 1 and $3,000 in Year 2. The correct amount of net income in Year 1 and in Year 2 is...

$5,000 in Year 1 and $2,550 in Year 2.

$1,000 in Year 1 and $3,450 in Year 2.

$1,000 in Year 1 and $550 in Year 2.

$2,000 in Year 1 and $2,450 in Year 2.

$1,000 in Year 1 and $5,450 in Year 2.

$5,000 in Year 1 and $1,000 in Year 2.

$5,000 in Year 1 and $5,000 in Year 2.

$5,000 in Year 1 and $550 in Year 2.

18.

The following information is for Raisa Company:Original CostNet Realizable ValueNormal ProfitReplacement CostInventory Item A$3,900$3,800$400$3,300After making any necessary lower-of-cost-or-market adjustment, at what amount will Item A be reported in Raisa's books?

3,400

3,300

3,900

3,800

19.

At the end of the year, Ryanes Company had the following information:Writeoffs of verified bad debts during the year$13,000Accounts receivable, end of year135,000Credit Sales for the year150,000Allowance for bad debts (before year-end adjusting entry)4,000debitHistorically, Ryanes has sometimes used the percentage of sales method and has sometimes used the allowance method in estimating bad debt expense. The percentages that Ryanes has used are as follows:

Percentage of sales method4.0%Allowance method2.5%For this year, which ONE of the following statements is correct with respect to the comparison of bad debt expense computed using the percentage of sales method and the allowance method?

Bad debt expense using the percentage of sales method is HIGHER by $1,375.

Bad debt expense using the percentage of sales method is HIGHER by $2,625.

Bad debt expense using the percentage of sales method is HIGHER by $2,250.

Bad debt expense using the percentage of sales method is HIGHER by $5,375.

Bad debt expense using the allowance method is HIGHER by $1,375.

Bad debt expense using the allowance method is HIGHER by $1,750.

Bad debt expense using the allowance method is HIGHER by $1,975.

Bad debt expense using the allowance method is HIGHER by $3,375.