1. DEF Company had the following balance sheet and income statement data on

December 31^st, 2023:

Bonds Payable, 8% ( contractual rate and market rate )

maturity date December 31^st, 2027 $1,200,000

$8 Preferred Shares ( no change during the year ) 200,000

Common Shares ( no change during the year ) 1,000,000

Profit before income tax expense for the year 320,000

Income tax expense for the year 80,000

Common share dividends paid during the year 60,000

Preferred share dividends paid during the year 16,000

Based on the above data, what is the interest coverage ratio on December 31^st, 2023 ( round to two decimal places )?

a 4.33

b 5.67

c 3.50

d 3.24

2. GHI Company, a private company, decides to lease new manufacturing equipment. The lease

qualifies as a capital lease under ASPE. The lease transaction will be recorded at:

a The fair market value of the leased equipment.

b The present value of the lease payments.

c The higher of the fair market value of the leased equipment and the present value of the lease payments.

d The lower of the fair market value of the leased equipment and the present value of the lease payments.

e None of the above.

3. JKL Corporation had the following Shareholders Equity on September 30, 2023:

Shareholders' Equity Share Capital $ 10 Preferred shares, cumulative 10,000 shares authorized, 5,000 shares issued $ 5,000,000 Common shares, 200,000 shares authorized, 10,000 shares issued 200,000 Total Share Capital $ 5,200,000 Retained Earnings 570,000 Total Shareholders Equity $ 5,770,000

On September 15, 2023, JKL Corporation declared a $ 170,000 cash dividend to be paid on

October 15 to shareholders of record on September 28. Assuming that the preferred dividends

have NOT been paid for fiscal years 2021 and 2022, the total amount of the dividends paid to

the preferredshareholders on October 15, 2023 would be:

A. $ 50,000

B. $ 150,000

C. $ 170,000

D. $ 0

E. None of the above.

4. What effect does selling bonds at a premium have?

a It raises the market interest rate above the contractual interest rate.

b It attracts investors who are willing to accept a lower rate of interest than on similar bonds.

c It causes the total cost of borrowing to be higher than the bond interest paid.

d It causes the total cost of borrowing to be lower than the bond interest paid.

e None of the above.