Following data is accessible in regard of anticipated profit, market cost and economic situation following one year.

Market conditionProbabilityMarket PriceDividend per share

''

Good0.6546456

Normal0.545665675

Bad0.45645645

The current market cost of a value share is ' 106 (F.V. ' 1), which is cum 10% reward debenture of ' 6 each, per share. M/s. g Finance Company Ltd. had offered the repurchase of debentures at face esteem.

Discover the normal return and fluctuation of profits of the value shares if buyback offer is acknowledged by the financial backer.

And furthermore encourage Whether to acknowledge repurchase offer?

2. Wright agreed to assure King's loan from Ace Bank. Which of the following events would release Wright from the obligation to pay the loan?

a.Ace seeking payment of the loan only from Wright.

b.King is granted a discharge in bankruptcy.

c.Ace is paid in full by King's spouse.

d.King is adjudicated mentally incompetent

3. Taylored Corp. factored $400,000 of accounts receivable to Rich Corp. on July 1, year 2. Control was surrendered by Taylored. Rich accepted the receivables subject to recourse for nonpayment. Rich assessed a fee of 2% and retains a holdback equal to 5% of the accounts receivable. In addition, Rich charged 15% interest computed on a weighted-average time to maturity of the receivables of forty-one days. The fair value of the recourse obligation is $12,000.

Assuming all receivables are collected, Taylored?s cost of factoring the receivables would be

a.$ 8,000

b.$34,740

c.$42,740

d.$14,740

4. Ames, claiming to be an agent of Clar Corporation, makes a contract with Trimon in the name of Clar Corporation. Later, Clar Corporation, for the first time, learns what Ames has done and notifies Trimon of the truth that Ames was not an agent of Clar Corporation. Which of the following statements is incorrect?

a.Clar Corporation may ratify this contract if it does so with the entire contract.

b.Trimon may withdraw from the contract before Clar attempts to ratify it.

c.Clar Corporation may ratify this contract by performing under the contract without stating that it is ratifying.

d.Trimon may enforce this contract even if Clar Corporation does not wish to be bound.

5. Taylored Corp. factored $400,000 of accounts receivable to Rich Corp. on July 1, year 2. Control was surrendered by Taylored. Rich accepted the receivables subject to recourse for nonpayment. Rich assessed a fee of 2% and retains a holdback equal to 5% of the accounts receivable. In addition, Rich charged 15% interest computed on a weighted-average time to maturity of the receivables of forty-one days. The fair value of the recourse obligation is $12,000.

Which of the following statements is correct?

a.Rich should record an asset of $8,000 for the recourse obligation.

b.Taylored should record a liability and corresponding loss of $12,000 related to the recourse obligation.

c.Taylored should record a liability of $12,000, but no loss, related to the recourse obligation.

d.No entry for the recourse obligation should be made by Taylored or Rich until the debtor fails to pay.

6. Which of the following is not an objective for each entity accounting for transfers of financial assets?

a.To derecognize assets when control is gained.

b.To derecognize liabilities when extinguished.

c.To recognize liabilities when incurred.

d.To derecognize assets when control is given up.

7. Which of the following events will reduce a surety's liability to the creditor?

a.The principal debtor was involuntarily petitioned into bankruptcy.

b.The creditor failed to notify the surety of a partial surrender of the principal debtor's collateral.

c.The creditor was adjudicated incompetent after the debt arose.

d.The principal debtor exerted duress to obtain the surety agreement.

8. ABC operates a catering service that specializes in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the 10th day of the month following the date of service and requires that payment be made within 30 days of the billing date. Conceptually, ABC should recognize revenue from its catering services at the date when a

a.Customer places an order.

b.Luncheon is served.

c.Billing is mailed.

d.Customer?s payment is received.

9. Which one of the following statements is most likely to be true if a seller extends credit to a purchaser for a period of time longer than the purchaser?s operating cycle? The seller

a.Will have a lower level of accounts receivable than those companies whose credit period is shorter than the purchaser?s operating cycle.

b.Is, in effect, financing more than just the purchaser?s inventory needs.

c.Can be certain that the purchaser will be able to convert the inventory into cash before payment is due.

d.Has no need for a stated discount rate or credit period.

10. When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account

a.Decreases both accounts receivable and the allowance for uncollectible accounts.

b.Decreases accounts receivable and increases the allowance for uncollectible accounts.

c.Increases the allowance for uncollectible accounts and decreases net income.

d.Decreases both accounts receivable and net income.