21 Cheery Company follows IFRS for its financial reporting. On January 1, 2015 Cheery issued 250 million of 10-year convertible notes that pay interest at 5% annually. Investors pay 250 million for the notes even though the company's credit risk at the time implies a 10% interest rate for traditional debt of similar duration. When the cash flows associatedwith the debt are discounted at 10%, the resulting value is 175 million.

How much cash will Cheery pay for interest during 2015?

Question 21 options:

25 million

12.5 million

17.5 million

8.75 million

22 Cash dividends paid by a corporation:

Question 22 options:

are an expense of the corporation that declared the dividend.

reduce the net income of the corporation that declared the dividend.

reduce the retained earnings of the corporation that declared the dividend.

reduce the retained earnings of the corporation that declared the dividend because net income is reduced by the amount of the dividend.

23 Companies with a history of net operating losses are prone to issue which one of the following to raise money?

Question 23 options:

Debenture bonds

Serial bonds

Preferred stock

Notes payable

24 Stock options are granted to the employees of Young Company on March 10, 2014. The employees must wait until March 10, 2018 to exercise the options. The four-year waiting period is the:

Question 24 options:

expected life of the options.

grant period.

vesting period.

holding period.

25 By examining the statement of shareholders' equity an investor can determine all of the following EXCEPT:

Question 25 options:

shares issued to employees for share-based compensation.

unrealized losses on available-for-sale securities.

the amount of convertible bonds issued during the year.

dividends declared on common stock.

26 On January 1, 2015, Waddle Company adopted a compensatory stock option plan and granted its managers 10,000 options to buy shares of common stock; each option can be used to acquire a share of common stock at a price of $25 a share. The fair value of each option was $7.50 on January 1, 2015. The options can be converted into common stock after July 1, 2015. The required service period is three years.

What is the balance in paid-in capital-stock options as of December 31, 2016 assuming that the fair value approach is used?

Question 26 options:

$0

$25,000

$50,000

$100,000

27 The Vernon Corporation was formed on January 2, 2014. The company sold 20,000 shares of $8.00 par value stock for $20.00 per share. On July 1, 2014, Vernon bought back 4,000 shares of stock for $24.00 per share. The treasury stock was resold on September 1, 2014 for $32.00 per share.

Which one of the following is the correct entry to record the sale of treasury stock?

DRCash 128,000

CRCommon stock 128,000

DRCash 128,000

CRTreasury stock 96,000

CRPaid in capital in excess of par 32,000

DRCash 128,000

CRTreasury stock 96,000

CRGain on sale of treasury stock 32,000

DRCash 128,000

CRTreasury stock 96,000

CRRetained earnings 32,000

28 As a result of the passage of the 1984 Revised Model Business Corporation Act, it may be fair to state that the book value of _____ an accurate picture of potentially legal distributions.

owners' equity may not give

owners' equity gives

owners' equity never gives

assets gives

29 A 3-for-1 stock split will reduce the per share par value and will:

decrease the number of shares proportionately.

decrease earnings per share.

increase owners' equity.

increase the total par value of the common stock.