The following information relates to questions 1 through 4:

On January 1, 2014, Tonika Corporation issued a four-year, $10,000, 7% bond. The interest is payable annually each December 31. The issue price was $9,668 based on an 8% effective interest rate.

Question 1

Assuming effective-interest amortization is used, the interest expense on the income statement for the year ended December 31, 2014 is closest to:

$677.

$883.

$773.

$700.

Question 2

Assuming effective-interest amortization is used, the book value of the bonds as of December 31, 2014 is closest to:

$8,968.

$9,945.

$9,641.

$9,741.

Question 3

Assuming effective-interest amortization is used, the 2015 interest expense is closest to:

$779.

$796.

$677.

$700.

Question 4

Assuming effective-interest amortization is used, the December 31, 2015 book value after the December 31, 2015 interest payment was made is closest to:

$9,662.

$9,820.

$9,668.

$9,723.

Question 5

On January 1, 2014, Broker Corp. issued $3,000,000 par value 12%, 10 year bonds which pay interest each December 31. If the market rate of interest was 14%, the issue price of the bonds is closest to which of the following?

$3,339,084.

$2,843,172.

$3,000,000.

$2,686,896.

Question 6

On January 1, 2013, Jason Company issued $5 million of 10-year bonds at a 10% stated interest rate to be paid annually.

If the market rate of interest was 8%, the issue price of the bonds is closest to which of the following?

$5,000,000.

$5,670,000.

$5,387,500.

$5,712,500.

Question 7

On March 31, 2014, Bundy Corporation retired $10,000,000 of bonds, which have an unamortized premium of $500,000, by paying bondholders $9,850,000. How much was the gain or loss on the retirement of the bonds?

$150,000 loss.

$150,000 gain.

$650,000 gain.

$350,000 loss.

Question 8

Kirova Company has provided the following information:

• Number of issued common shares, 900,000
• Net income, $1,000,000
• Number of authorized common shares, 1,000,000
• Number of outstanding common shares, 800,000
• Number of treasury shares, 100,000

What is Kirova's earnings per share?

$1.43

$1.25

$1.11

$1.00

The following information relates to questions 9 through 11:

RKJ Company has provided the following:

• 100,000 shares of $5 par value common stock are authorized
• 70,000 shares have been issued
• 65,000 shares are outstanding

Question 9

Which of the following statements is correct?

RKJ has 35,000 shares of treasury stock.

RKJ has 30,000 shares of treasury stock.

RKJ can reissue an additional 35,000 shares of common stock.

RKJ can issue an additional 30,000 shares of common

Question 10

Which of the following statements is correct?

RKJ has 35,000 shares of treasury stock.

RKJ has 30,000 shares of treasury stock.

RKJ can resell 5,000 shares of common stock.

RKJ can issue an additional 35,000 shares of common stock.

Question 11

Which of the following statements is correct based only on the above facts?

Common stock is reported at $630,000 on the balance sheet.

Additional-paid in capital is reported at $260,000 on the balance sheet.

Common stock is reported at $350,000 on the balance sheet.

Treasury stock is reported at $45,000 on the balance sheet.

Question 12

A company purchased treasury stock for $19,000. The treasury stock was initially issued for $12,000 and had a $5,000 par value. Which of the following statements correctly describes the effects of the treasury stock purchase?

Net income increases by $7,000.

Net income decreases by $7,000.

Stockholders' equity increases $12,000.

Stockholders' equity decreases $19,000.

Question 13

CBA Company reported total stockholders' equity of $85,000 on its balance sheet dated December 31, 2014. During the year ended December 31, 2015, CBA reported net income of $10,000, declared and paid a cash dividend of $2,000, and issued additional common stock for $20,000. What is total stockholders' equity as of December 31, 2015?

$117,000.

$113,000.

$109,000.

$115,000.

Question 14

A company reported the following asset and liability balances for 2013 and 2014:

	2013	2014
Total assets	$6,800,000	$7,600,000
Total liabilities	3,200,000	3,600,000

During 2014, cash dividends of $90,000 were declared and paid, and common stock was issued for $110,000. How much was the 2014 net income?

$400,000.

$380,000.

$350,000.

$300,000.

Question 15

On January 1, 2014, Entertainment Company acquired 15% of the outstanding voting stock of Rocker Company as a long-term investment in available-for-sale securities. During 2014, Rocker Company reported net income of $1,500,000 and dividends declared and paid of $250,000. How much income will be reported during 2014 from the Rocker investment?

$225,000.

$37,500.

$187,500.

$250,000.

Question 16

Libby Company purchased equity securities for $100,000 and classified them as available-for-sale securities on September 15, 2014. At December 31, 2014, the current fair value of the securities was $105,000. How should the investment be reported in the 2014 financial statements?

The investment in available-for-sale securities would be reported on the balance sheet at its $100,000 cost.

The $5,000 unrealized gain is reported within the income statement.

The $5,000 realized gain is reported within the income statement.

The investment in available-for-sale securities would be reported in the balance sheet at its $105,000 fair value and an unrealized holding gain on available-for-sale securities would be reported in the stockholders' equity section of the balance sheet.

Question 17

On July 1, 2014, Surf Company purchased long-term investments in available-for-sale securities as follows:

• Blue Corporation common stock (par $5) 2,000 shares at $16 per share.
• Black Company preferred stock (par $20) 1,500 shares at $30 per share.

The quoted market prices per share on December 31, 2014 were as follows:

• Blue Corporation stock, $15 per share
• Black Company stock, $30 per share

Each of the long-term investments represents 10% of the total shares outstanding. The combined carrying value of the long-term investments reported in the balance sheet at December 31, 2014 would be which of the following?

$77,000.

$73,500.

$71,500.

$75,000.

The following information relates to questions 18 and 19.

Gilman Company purchased 100,000 of the 250,000 shares of common stock of Burke Corporation on January 1, 2014, at $40 per share as a long-term investment. The records of Burke Corporation showed the following on December 31, 2014:

2014 net income	$575,000
Dividends declared and paid during December, 2014	$30,000
Market price per share	$42

Question 18

How much should Gilman Company report as investment income from the Burke investment during 2014?

$230,000.

$218,000.

$12,000.

$30,000.

Question 19

At what amount should Gilman Company report the Burke investment on the December 31, 2014 balance sheet?

$4,218,000.

$4,000,000.

$4,124,000.

$3,800,000.

Question 20

On January 1, 2014, Sheldon Company paid $750,000 cash for 100% of the outstanding common stock of Mullen Company; Mullen's book value of assets minus liabilities on the date of acquisition was $550,000. The current fair value of Mullen's net assets was $70,000 in excess of their book value. What was the amount of goodwill acquired by Sheldon Company?

$200,000.

$130,000.

$480,000.

$270,000