Select the BEST answer for each of the following questions.

1. A company has $100,000 face value of bonds outstanding. The unamortized premium on these bonds is $2,700. If the company redeemed these bonds at 99%, the gain (loss) on the redemption is:

a.$ 1,000

b. $(1,000)

c.$(2,700)

d.$ 2,700

e.$ 3,700

2.On December 31, 20X1, Asta Corporation borrowed $65,000 by signing a 5-year, 14% installment note requiring annual payments (on December 31) of accrued interest plus fixed (equal) amounts of principal. What journal entry would record the first payment on December 31, 20X2?

a.Interest Expense ......................................................................1,820.00

Notes Payable ...........................................................................13,000.00

Cash ...................................................................................14,820.00

b.Notes Payable ...........................................................................14,820.00

Interest Payable ..............................................................1,820.00

Cash ..................................................................................13,000.00

c.Interest Expense ......................................................................9,100.00

Notes Payable ..........................................................................13,000.00

Cash ..................................................................................22,100.00

d.Notes Payable ..........................................................................13,000.00

Cash ..................................................................................13,000.00

e.Notes Payable ..........................................................................22,100.00

Cash ..................................................................................22,100.00

3.On January 1, 20X1, X Corporation issued $100,000 face value of 20-year bonds, paying 9%

(contractual rate) interest annually on December 31. At the time of their issue, buyers demanded a 10% (market rate) return on their investment, and the cash proceeds of the issue to X Corporation amounted to $91,486. If the corporation uses the effective interest method, the amount of discount amortization to be recorded on December 31, 20X1 is:

a.$9,000

b.$8,514

c.$765

d.$486

e.$149

4.On January 1, 20X1, Mira Corporation issues $100,000 of 8-year bonds, paying 5% (contractual rate) interest semiannually on June 30 and December 31. The market rate of interest on the date of sale is 3%. The entry to record the sale of the bonds on the date of issue is:

a.Cash ................................................................................................102,690

Bonds Payable ......................................................................102,690

b.Cash ................................................................................................114,131

Bonds Payable ......................................................................114,131

c.Cash ................................................................................................100,000

Bonds Payable ......................................................................100,000

d.Cash ................................................................................................111,441

Bonds Payable ......................................................................111,441

e.Cash ................................................................................................113,901

Bonds Payable ......................................................................113,901

5.If a company sells a bond at a discount:

a.The market rate of interest was lower than the contractual rate of interest.

b.Interest expense for each period is less than it would have been if the bond had been sold at face value.

c.Interest expense for each period is more than it would have been if the bond had been sold at face value.

d.The bond amortized cost (carrying amount) of the bond payable would be more than its face value.

6.On January 1, 20X1, ABC Corporation issued $100,000 of 10-year bonds that pay 8% (contractual rate) interest annually on December 31. At the time of the issue, bond investors were demanding only a 7% (market rate) return on their investment. The cash proceeds of the bond issue to ABC Corporation were $107,024. Assuming the effective-interest method, the premium amortization to be recorded on December 31, 20X1 is:

a. $7,492

b. $702

c. $ 562

d. $508

e. $492

7.Once classified as a capital lease, the lessee records the leased asset and the related lease liability at the:

a.Present value of the minimum lease payments.

b.Lesser of the fair market value of the asset and the present value of the minimum

lease payments.

c.Fair market value of the asset.

d.Greater of the fair market value of the asset and the present value of the minimum

lease payments.

e.Book value of the asset.

Questions 8 and 9 refer to the following:

Acme Corporation issued $100,000 face value, 9% (contractual rate), 10-year bonds. Bond interest is paid semiannually. The market rate of interest on the issue date was 8%, and as a result the Acme Corporation received $106,796 in cash for the bonds.

8.On the first semiannual interest payment date, the holders of these bonds would be paid:

a.$4,000

b.$4,272

c.$4,500

d.$4,806

e.Some other amount

9.On the first semiannual interest payment date, the amount of premium that Acme Corporation would amortize by the effective-interest method is:

a.$228

b.$272

c.$306

d.$500

e.Some other amount

Questions 10 - 13 refer to the David and May Partnership.

10.David and May began a partnership by investing $28,000 and $20,000 in cash, respectively, and during its first year the partnership earned a profit of $42,000. David spends twice as much time running the business as does his partner. What would be the share of each partner in the $42,000 profit if the method of sharing profit and losses is not specified in their partnership agreement?

a.David's share, $20,600; May's share, $21,400.

b.David's share, $22,200; May's share, $19,800.

c.David's share, $21,400; May's share, $20,600.

d.David's share, $24,500; May's share, $17,500.

e.David's share, $21,000; May's share, $21,000.

11.What would be the share of each partner in the $42,000 profit if the partners had agreed to a $16,400 per year salary allowance to David and an $18,000 per year salary allowance to May, 10% interest on their beginning investments, and the remainder equally?

a.David's share, $20,600; May's share, $21,400.

b.David's share, $22,200; May's share, $19,800.

c.David's share, $21,400; May's share, $20,600.

d.David's share, $24,500; May's share, $17,500.

e.David's share, $21,000; May's share, $21,000.

12.What would be the share of each partner in the $42,000 profit if the partners had agreed to share it based only on the ratio of their beginning investments?

a.David's share, $21,000; May's share, $21,000.

b.David's share, $42,000; May's share, $0.

c.David's share, $21,400; May's share, $20,600.

d.David's share, $24,500; May's share, $17,500.

e.David's share, $20,600; May's share, $21,400.

13.Assume instead that during its first year the partnership earned a $28,000 profit. What would be the share of each partner in the profit if the partners had agreed to share it by giving a $16,400 per year salary allowance to David and an $18,000 per year salary allowance to May, 10% interest on their beginning investments, and the remainder equally?

a.David's share, $13,200; May's share, $14,800.

b.David's share, $14,000; May's share, $14,000.

c.David's share, $13,349; May's share, $14,651.

d.David's share, $13,600; May's share, $14,400.

e.David's share, $14,400; May's share, $13,600.

14.Eagle and Falcon operate a partnership in which they have agreed to share profits and losses in a ratio of 5:3, respectively. They have agreed to accept Robin as a partner, offering her a 20% partnership share in exchange for an $80,000 cash investment. Prior to her investment, the combined equity of Eagle and Falcon totals $120,000. The admission of Robin as a partner will result in:

a.A bonus of $40,000 to Robin.

b.A bonus of $25,000 to Eagle and $15,000 to Falcon.

c.A bonus of $20,000 each to Eagle and Robin.

d.A bonus of $20,000 each to Eagle and Falcon.

e.No bonus for any of the partners.

15.A partner who assumes unlimited liability for the debts of the partnership and, in a limited partnership, is usually responsible for the management of the partnership is known as a:

a.General partner.

b.Limited partner.

c.Mutual partner.

d.Participating partner.

e.Mutual agent.

16.The partnership of Castle, Frank, and Hampton was liquidated and all assets were turned into cash. After the partnership creditors were paid, $30,000 of cash remained. At this point, the capital accounts of the partners had the following balances: Castle, $6,000 debit (a deficit); Frank, $12,000 credit; and Hampton, $24,000 credit. The partners share profits and losses equally. The liquidation (assuming Castle cannot pay his deficit) will result in the remaining cash of $30,000 being distributed:

a.$10,000 to each partner.

b.Nothing to Castle, $15,000 to Frank, and $15,000 to Hampton.

c.Nothing to Castle, $ 9,000 to Frank, and $21,000 to Hampton.

d.Nothing to Castle, $10,000 to Frank, and $20,000 to Hampton.

e.In some other manner.

17.If one of three partners withdraws from a partnership and takes out of the partnership cash in excess of her capital account balance, the withdrawal of the partner would be recorded:

a.With a debit to the withdrawing partner's capital account that is equal to the cash credit

b.With a credit to the remaining partners' capital accounts to compensate them for the excess cash withdrawn.

c.With a debit to the remaining partners' capital accounts just large enough to compensate for the cash credit in excess over the withdrawing partner's capital balance.

d.With a debit to the withdrawing partner's withdrawals account.

e.No recording until the withdrawing partner repays the partnership for the excess cash credit.

18.A partnership's profit or loss must be divided between partners based on:

a.The time devoted to the partnership by each partner.

b.The amount invested by each partner.

c.An equal distribution between partners after salary allowances have been deducted.

d.The terms as specified in the partnership agreement.

Questions 19 and 20 refer to the following:

Son and Don are partners who share profits and losses equally. Son and Don have capital balances of $50,000 and $40,000, respectively. Assume Ron is admitted to the partnership by investing $60,000 in cash in exchange for a one-third partnership interest.

19.If the difference between Ron's investment and his recorded partnership equity is considered a bonus to the existing partners, the following amount will be credited to Ron's capital account:

a.$50,000

b.$60,000

c.$30,000

d.None of the above is correct.

20.After admitting Ron to the partnership, Son's and Don's capital balances will be:

a.$60,000 and $40,000, respectively.

b.$55,000 and $45,000, respectively.

c.$50,000 each.

d.None of the above is correct.

21.Bowes Corporation has issued 3,000, $7 cumulative preferred shares and 10,000 common shares. Dividends have not been paid on the preferred shares for the current and one prior year. Bowes has recently prospered, and the board of directors has voted to pay out $49,000 from retained earnings in dividends. Once the $49,000 is paid out, how much would the preferred and common shareholders receive per share?

a.$14.00 per share preferred, $0.70 per share common.

b.$7.00 per share preferred, $2.80 per share common.

c.$14.00 per share preferred, $7.00 per share common.

d.$7.00 per share preferred, $0.70 per share common.

e.$14.00 per share preferred, $0 per share common.

22.Sassy Corporation has issued 3,000, $7 noncumulative preferred shares and 10,000 common shares. Dividends have not been paid on the preferred shares for the current and one prior year. Sassy has recently prospered, and the board of directors has voted to pay out $49,000 from retained earnings in dividends. Once the $49,000 is paid out, how much would the preferred and common shareholders receive per share?

a.$14.00 per share preferred, $0 per share common.

b.$0 per share preferred, $4.90 per share common.

c.$7.00 per share preferred, $2.80 per share common.

d.$14.00 per share preferred, $0.70 per share common.

e.$12.25 per share preferred, $0.23 per share common.

23.Dividends on cumulative preferred shares that were not declared in a past period and must be paid before any current period dividends on the preferred shares and before any dividends on common shares are called:

a.Special dividends.

b.Premium dividends.

c.Preemptive dividends.

d.Dividends in arrears.

e.Accrued dividends.

24.Preferred shares that give the issuing company the right (at its option) to purchase the shares from shareholders at specified future dates and prices are called:

a.Convertible preferred shares.

b.Redeemable preferred shares.

c.Premium preferred shares.

d.Cumulative preferred shares.

e.Retractable preferred shares.

25.Preferred shares that are entitled to the current year dividend, but not to any unpaid amounts from previous years are called:

a.Participating preferred shares.

b.Callable preferred shares.

c.Cumulative preferred shares.

d.Convertible preferred shares.

e.Noncumulative preferred shares.

26.The following information is available for XYZ Corporation:

Shareholders' Equity

Share Capital

Preferred Shares, unlimited number of shares authorized,

5,000, $2.50 convertible, noncumulative shares issued $ 250,000

Common Shares, unlimited number

of shares authorized, 500,000 shares issued1,000,000

Each preferred share is convertible into four common shares. During the year, 2,000 preferred shares were converted into common shares. The journal entry to record the conversion would be:

a.Preferred Shares .............................................................................. 100,000

Common Shares ......................................................................100,000

b.Preferred Shares ..............................................................................4,000

Common Shares ......................................................................4,000

c.Preferred Shares .............................................................................. 400,000

Common Shares ......................................................................400,000

d. Common Shares............................................................................... 100,000

Preferred Shares......................................................................100,000

e. Preferred Shares..............................................................................16,000

Common Shares......................................................................16,000

27.Square Deal Inc. (a public company) was organized in 2020 to manufacture car stereos. The corporation was authorized to issue an unlimited number of common shares. On March 1, 2020, the corporation issued 500 common shares to the firm's lawyers for helping to organize the corporation. The fair market value of the legal fees was $12,500. The entry to record the issue of the 500 shares, which have a market value of $20 per share, would require a:

a.Credit to Common Shares for $12,500.

b.Debit to Organization Costs for $10,000.

c.Credit to Common Shares for $10,000.

d.Debit to Common Shares for $12,500.

28. Heinfell Inc. reported sales of $850,000, cost of goods sold of $510,000, and otherexpenses of $180,000. Assuming Heinfell reported a profit of $ 100,000 for the year, which of the following entries reflects Heinfell's income tax expense for the year (assuming no other income statement items)?

a. Debit to Income Tax Payable and Credit to Income Tax Expense for $ 60,000

b. Debit to Income Tax Expense and Credit to Income Tax Payable for $ 100,000

c. Debit to Income Tax Expense and Credit to Income Tax Payable for $ 60,000

d. Debit to Income Tax Payable and Credit to Income Tax Expense for $ 100,000

29. Norton Corporation has the following shareholders' equity at year end September 30, 2020:

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 issued200,000

Total Share Capital5,200,000

Retained Earnings570,000

Total Shareholders' Equity$ 5,770,000

On September 15, 2020, Norton 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 2018 and 2019, the total amount of the dividends paid to the preferred shareholders on October 15, 2020 would be:

a) $50,000

b) $0

c) $170,000

d) $150,000

30. Tantramar Corporation has the following shareholders equity on July 31, 2020:

Shareholders' Equity

Share Capital

$ 10 Preferred Shares, cumulative

10,000 shares authorized, 5,000 shares issued$ 2,000,000

Common Shares,

600,000 shares authorized, 10,000 shares issued300,000

Total Share Capital2,300,000

Retained Earnings500,000

Total Shareholders' Equity$ 2,800,000

Assume that during the following fiscal year the company had a profit of $ 65,000 and declared and paid cash dividends of $15,000. The ending balance of retained earnings on July 31, 2021 would be:

a) $500,000

b) $565,000

c) $550,000

d) cannot be determined from the information provided.