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On December 1, Year 1, Bradley Corporation incurs a 15-year $200,000 mortgage liability in conjunction with the acquisition of an office building. This mortgage is payable in monthly installments of $2,400, which include interest computed at the rate of 12% per year. The first monthly payment is made on December 31, Year 1.

The portion of the second monthly payment (made on January 31, Year 2) that represents repayment of principal is:

Question 21 options:

	$400.
	$404.
	$2,400.
	$1,996.

Question 22 (2 points)

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Webster Company issues $1,000,000 face value, 6%, 5-year bonds payable on December 31, Year 1. Interest is paid semiannually each June 30 and December 31. The bonds sell at a price of 97; Webster uses the straight-line method of amortizing bond discount or premium.

The amount of bond interest expense recognized by Webster Company in Year 2 with respect to these bonds is:

Question 22 options:

	$60,000.
	$63,000.
	$120,000.
	$66,000.

Question 23 (2 points)

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The current balance sheet of Apex reports total assets of $20 million, total liabilities of $2 million, and stockholders' equity of $18 million. Apex is considering several financing possibilities in order to expand operations. Each question based on this data is independent of any others.

What is the approximate maximum additional amount Apex can borrow and not exceed a debt ratio of 0.3?

Question 23 options:

	$4,000,000
	$5,500,000
	$5,000,000
	$600,000

Question 24 (2 points)

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The inclusion of the intangible asset goodwill in the financial statements of a company indicates:

Question 24 options:

	That the company has a favorable reputation with its customers.
	A monopoly position in the industry or superior management.
	An unbroken record of annual earnings and dividends.
	That the company has purchased a going business at a price in excess of the fair market value of the net identifiable assets.

Question 25 (2 points)

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Wilbur Company purchased $10,000 of equipment on December 20, Year 1 on terms 2/15, net 30. Wilbur paid for the equipment on the 15th day following purchase and took advantage of the discount. Which of the following statements is correct?

Question 25 options:

	Wilbur will record a cash outflow from investing activities of $10,000 in its Year 1 financial statements.
	Wilbur will record a cash outflow from investing activities of $9,800 in its Year 1 financial statements.
	Wilbur will record a cash outflow from investing activities of $10,000 in its Year 2 financial statements.
	Wilbur will record a cash outflow from investing activities of $9,800 in its Year 2 financial statements.

Question 26 (2 points)

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The cost of a new windshield wiper on a delivery vehicle would be classified as:

Question 26 options:

	A capital expenditure.
	A revenue expenditure.
	Part of the cost of goods sold.
	An unusual and infrequent expense.

Question 27 (2 points)

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Tomasa Company paid $450,000 to acquire a piece of real estate consisting of land and an office building with a parking lot. In this situation:

Question 27 options:

	The purchase price should be apportioned among the Land, Land Improvement, and Building accounts.
	The entire purchase price should be debited to the Land account only.
	Land, Land Improvement, and Building accounts should each be credited for the respective appraisal value of each item.
	Allocation of the entire $450,000 to Land results in an understatement of net income in the current and future accounting periods.

Question 28 (2 points)

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Responsibility for selection of the depreciation methods used in financial reporting rests with:

Question 28 options:

	Company management.
	The FASB.
	The IRS.
	The CPA firm that audits the company's financial statements.

Question 29 (2 points)

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All of the following may be considered intangible assets except:

Question 29 options:

	Accounts receivable.
	Copyrights.
	Franchises.
	Goodwill.

Question 30 (2 points)

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On March 2, Year 1, Glen Industries purchased a fleet of automobiles at a cost of $550,000. The cars are to be depreciated by the straight-line method over five years with no salvage value. Glen uses the half-year convention to compute depreciation for fractional periods. The book value of the fleet of automobiles at December 31, Year 2, will be:

Question 30 options:

	$165,000.
	$330,000.
	$495,000.
	$385,000.