14. Byers Corporation purchased equipment by issuing a 10-year, $400,000 interest-bearing note at a stated rate of 10 percent (payable annually). Given this information and assuming that a market interest rate of 8%, the equipment would be entered in the accounting records at a. $400,000 b. $453,680 C. $422,620 d. $431,059 15. A long-term, noncancelable lease for a period that is equal to the life of the leased asset is accounted for as a(n) a. Operating lease b. Rental agreement c. Finance lease d. None of these are correct 16. On January 1, Cromwell Corp. leased a mainframe computer from Fairview Company for $42,000 per year (payable on each December 31) for 10 years. The lease is a finance lease, and the current market rate of interest is 12 percent. The market value of the computer is $237,300, which is equal to its discounted present value at 12 percent. Given this data, interest expense on the lease for the first year is a. $42,000 b. $28,476 C. $25,200 d. $13,524 17. The effective interest rate on bonds is also called a. The stated rate b. The yield rate c. The nominal rate d. None of these are correct 18. Revenues are most often recognized when a. A sale takes place or a service is performed b. Cash is collected C. Inventory is purchased for resale d. Inventory is manufactured for resale 19. Conner Company's inventory balance on December 31, 2017 was $3,100,000 before considering the following transactions: Goods were in transit from a vendor to Conner on December 31, 2017. The invoice price was $250,000, and the goods were shipped FOB shipping point on December 29, 2017. The goods were received on January 4, 2018. Goods were shipped to Conner FOB destination on December 20, 2017, from a vendor. The invoice price was $125,000. The goods were received on January 1, 2018. Given the above information, on December 31, 2017, Conner should report an inventory balance of a. $3,100,000 b. $2,850,000 c. $3,475,000 d. $3,350,000 20. To properly recognize the expense associated with compensated absences, a company should a. Expense these obligations in the period the employee is absent b. Estimate and expense these obligations when a new employee is hired C. Estimate and expense these obligations in the period that the employee earns those days d. Not recognize any expense for compensated absences 9. In March, Ravenna Corporation sold $85,000 of inventory. Ravenna offers a one year warranty on all of its inventory. Ravenna estimates that 6 percent of inventory sold is usually returned and replaced during the warranty period. Given this information, what amount of warranty expense should Ravenna Corporation recognize in March? a. $0 b. $3,480 c. $5,100 d. $7,650 10. On January 1, 2017, Bushong Company purchased equipment at a cost of $12,600. The equipment had an estimated useful life of 6 years or 30,000 hours. The equipment will have a $1,200 salvage value at the end of its life. The equipment was used 6,500 hours in 2017. The depreciation expense for the year ending December 31, 2017, using the units-of- production method would be a. $3,800 b. $2,470 C. $6,500 d. $2,730 11. A machine is purchased on January 1, 2017, for $72,000 cash. The machine has an estimated useful life of 8 years and a salvage value of $17,200. If the double-declining-balance method of depreciation is used, what will be the machine's carrying amount as of December 31, 2018? a. $54,000 b. $40,500 c. $13,500 d. $31,500 12. Tanner Company purchased a building during 2015 for $600,000. From 2015 to 2017, $240,000 of depreciation was recorded. The current net fair value is $350,000 and the value in use is $370,000. The amount of impairment that should be recognized is a. $0 b. $10,000 c. $20,000 d. $30,000 13. The present value of $1,000 to be received in 3 years when interest is 12 percent compounded quarterly is computed by discounting at a. 3 percent for 12 periods b. 12 percent for 3 periods c. 4 percent for 9 periods d. 6 percent for 6 periods 8. Eldora, Inc. paid property taxes of $16,500 on June 30, 2017, for the period July 1, 2017, to June 30, 2018, and debited prepaid property tax expense. Eldora, Inc. uses a fiscal year end of September 30 for financial purposes. What journal entry should be made to recognize property tax expense for the period October 1, 2017, to June 30, 2018? a. Prepaid property taxes $16,500 $16,500 $16,500 $16,500 Property tax expense b. Property tax expense Prepaid property taxes C. Property tax expense Prepaid property taxes d. Property tax expense Prepaid property taxes $4,125 $ 4,125 $12,375 $12,375