(Solved by Humans)-1.) If 100,000 is borrowed for 9 months at an annual rate of 8%

Question

Hi!

So I attached a doc to this and its about 22 multiple choice questions. ?Now a few of the answers are online but they don't have a description on why it is done. ?i will tip nicely if it is all explained. ?There are also a few of the online answers that are WRONG (hence why I need the corrected answers)

Thanks!!!

1.) If 100,000 is borrowed for 9 months at an annual rate of 8% interest all due at maturity
then the full amount of cash including principle and interest to be paid at maturity amounts
to.
A. 6,000
B. 8,000
C. 106,000
D. 108,000
E. None of these
2.) On Jan 20X4 a company purchased a building for 250,000 borrowing 200,000 from the
bank to used with their own existing cash for the purchase. The 200,000 bank to be used
with their own existing cash for the purchase. The 200,000 bank mortgage has a 10 year
term and bears an annual interest rate of 8% compounded monthly. Payments of principle
and interest amounting to 2,426.55 are to be made at the end of each month beginning
1/31/X4. Determine the balance of the mortgage payable at 3/1/X4 assuming the monthly
payment was properly paid and recorded at the end of January and February. (round to the
nearest cent)
A. 195,146.90
B. 197,342.23
C. 197,806.28
D. 198,906.78
E. 200,000
3.) The issuance of a bond by corporation is
A. An example of debt financing
B. An example of equity financing
C. None of these
4.) Preferred stock issued by a corporation is classified for financial statement purposes as
A. Debt financing
B. Equity financing
C. None of these
5.) The issuance of 200 shares of $1 par value common stock for $10 per share would be
recorded with the following journal entry
A. (debit)Cash 2,000, (credit) common stock 2,000
B. (debit) Cash 2,000, (credit) common stock 200 AND (credit) retained earnings 1,800
C. (debit) cash 2,000, (credit) common stock 200 AND (credit) gain on sale 1,800
D. (debit) cash 2,000, (credit) common stock 200, AND (credit) paid in capital in access
1800
For 6,7 use the following information. A company has the following outstanding stock at the end
of both 20X7 and 20X8; preferred stock (6%, $100 par value, 1,000 shares issued and
outstanding) Common stock ($1 par value, 200,000 shares issued and outstanding) No dividens
were declared or paid 20X7
6.) If a company?s preferred stock is non-cumulative and the 20X8 dividend declared amounts
to a total of 20,000 how much will go to preferred stock holders?

A. 6,000
B. 8,000
C. 12,000
D. 14,000
E. 20,000
7.) If the company preferred stock is cumulative and 20X7 dividens are the only dividens in
arrears what portion of a 20X8 dividend declaration of 20,000 will go to the common
stockholders?
A. 6,000
B. 8,000
C. 12,000
D. 14,000
E. 20,000
9.) In the purchase of a used truck for 15,000 additional cost incurred in its acquisition including
$250 delivery costs, $900 of sales tax and $300 for an engine overhaul that was deemed
necessary prior to its intial use. It is expected that annual recurring engine maintenance cost will
run approximately $250 per year beginning one year following date of acquisition. The total
capital expenditures for the truck that should be included in the asset account?
A.) 16,700
B.) 16,450
C.) 16,100
D.) 15,250
E.) 15,000
10.) On July 1 20X5 a company purchased equipment for 25,000. The equipment has a 10 year
estimated usedful life, at the end of which time its salvage value vis estimated to be 5,000.
Assuming the company uses straight line method depreciation, the company?s journal entry for
equipment?s depreciation for the year ended 12/31/X6 would include a credit to
A. Depreciation Expense 2,000
B. Equipment 2,000
C. Accumulated depreciation 3,000
D. Accumulated depreciation 2,000
E. None of these
FOR 11 AND 12! At 12/31/X8 the following information for a building purchased 10 years
previously is available. Orginal cost upon acquisition is $650,000. Current appraised value at
12/31/X8 is $750,000. Estimated salvage value at the end of 40 years estimated useful life
250,000. Accumulated depreciation at 12/31/X8: 100,000
11.) Calculate the building book value at 12/31/X8
A. 400,000
B. 550,000
C. 650,000

D. 750,000
E. None of the above
12.) If the building is sold on 12/31/X8 at a price of 725,000 the accompany journal entry to
record the sale will include a debt debit to
A. Accumulated Depreciation 100,000
B. Gain on sale 75,000
C. Building for 650,000
D. Gain on sale of building 175,000
E. None of the above
F.
13.) Portland company sold equipment with a book value of $600 for $850 cash. Total
depreciation expense for the entire company for the year was $500. The beginning and ending
balances in accumulated depreciation account are 1,000 and 700 respectively. The beginning and
ending balances for equipment account are 3,500 and 3,700 respectively. In the journal entry to
record the sale of equipment for $850 cash, which ONE of the following items would appear?
(no other equipment was sold during this period)
A. Credit to equipment 1,400
B. Debit to accumulated depreciation 500
C. Debit to accumulated depreciation 300
D. Debit to loss on sale of equipment 250
E. Debit to equipment 200
14.) You owe 200,000 on a mortgage loan. You wish to repay the loan with 10 equal payments
one at the end of each year for the next 10 years, and a separate final 80,000 payment at the end
of 11 years. What is the appropriate amount of cash of the 10 eual annual payments? The
interest rate is 8% compounded annually. (The present value of the 10 equal payments for the
first 10 years plus the present value of 80,000 at the end of the 11 year MUST equal 200,000)
A. 37,413
B. 28,327
C. 24,693
D. 16,751
E. 19,222

15.) On Jan 1 of Year 1, Cameron Company purchased a sophisticated piece of equipment
costing $300,000. The equipment had a 30,000 salvage value and a 10 year estimated useful
life. As on Jan 1 of Year 4, technology has changed and it is feared that the value has been
impaired. On January 1 of Year 4 it is projected that the equipment has a remaining useful life of
4 years, a salvage of zero, and that it will generate cahs flows of 45,000 at the end of each year
for the next 4 years. The market interest rate is 10%. How much depreciation expense will
Cameron Company recognize on this piece of equipment during Year 4? Using straight line
depreciation.

A. 39,413
B. 42,784
C. 71,595
D. 35,661
E. 45,826
16.) On January 1 of Year 1, Harry Company purchased a piece of equipment for $200,000. The
estimated life is 10 years. Harry estimates that the equipment can be sold for $60,000 at the end
of its life. (Double declining balance depreciation). For year 2, Harry Company?s net income is
100,000. What would have been Harry?s Company?s net income been in Year 2 assuming that
Harry had initially decided not to use double declining balance depreciation, but had used
straight line depreciation. (ignore income tax)
A.
B.
C.
D.
E.

132,000
188,000
86,000
64,000
104,000

17.) Taraz Aina is obligated to make the following payments to a loan company
Timing
Payment Amount
An annuity with the first payment right now
10 annual payments of 7,000
One lump sum at the end of 3 years
20,000
One lump sum at the end of 9 years
150,000
The annuity included a total of 10 annual payment with the first one to be made immediately.
The interest rate on the loan is 12% compounded annually and there is no penalty for early
payment. How much must Taraz Aina pay right now in order to completely satisfy her obligation
to the loan? (the amount she must pay right now included the 7,000 annuity payment that is due
right now. Round to the nearest dollar).
A. 87,952
B. 112,626
C. 72,343
D. 188,469
E. 130,123
18.) On January 1 Year 1, Lily Company issued 10,000, 10%, 20-year bond. Interst paid
annually each December 31, so the first coupon payment was made on December 31 of Year
1. On the day the bond was issued, the market interst rate on bonds with the same degree of
riskiness was 12% compounded annually. Accordingly, the bond was issued at a discound of
$1,494. This bond was retired on January 1 Year 3, just one day after the second coupon
payment was made. The total amount paid to retire this bond was 9,700, Lily used the
effective-interest method on its books. The entry to record the retirement of this bond would
include a?.
A. Debit to Loss on Bond Retirement of 1,450

B.
C.
D.
E.

Debit to Loss on Bond Retirement of 1,550
Debit to Discount of Bonds 1,550
Credit to Discount of Bonds 1,650
Credit to Discount of Bonds 1,250

19.) User Company leased a Computer equipment from Owner Company on January 1 Yeaer 1.
The computer equipment has an expected useful life of five years. The terms of the lease require
annual payments of 5,000 for five years with the first payments being made on the lease signing
date (January 1 Year1)-then four subsequent lease payments are made on January 1 of each
subsequent year compounded annually. User Company is accounting for this lease as a capital
lease. (round to the nearest dollar.) In the journal entry made in connection with this lease on
December 31 there is a?
A.
B.
C.
D.
E.
F.
G.
H.

Debit to interest expense 2,585
Debit to interest expense 2,500
Credit to interest payable 2,085
Debit to Interest Expense 2,000
Debit to Interest Expense 1,895
Credit to Interest payable 1,585
Debit to Interest Payable 3,415
Nothing-no journal entry is needed

20.) Kamili Company started a business January 1 Year 1, Kamili reported net income of
100,000 and paid cash dividens of 35,000. The following occurred year 2: -purchased 10,000
shares of treasury stock for $20 per share ?reissued 3,000 shares of the treasury stock for $25
-reissued 6,500 more shares of treasury stock for $8 per share. -Discovered an error in year 1
books. In year 1 Kamili Company overstated its depreciation expense by $7,500. Net income
for Year 2 was $80,000. (Year 2 net income is correct). Cash dividens paid in year 2 were
$45,000. The correct retained earnings for year 2 is?..
A.
B.
C.
D.
E.

73,500
18,500
90,000
21,500
58,500

21.) Lorien Company issued bonds with a coupon rate of 0% and a face amount of 100,000.
These are zero-coupon bonds. The bonds mature in 20 years. The market interst rate for bonds
with the same degree of riskiness is 7% compounded annually. These bonds were issued January
1 Year 1. Lorien used the effective-interest method on its books. (round to the nearest dollar).
In the journal entry made in connection with these bonds on Dec 31 of Year 1 there is a?
A.
B.
C.
D.

Debit to interest expense 7,000
Debit to Discount of Bonds 1,809
Credit to Discount of Bonds 1,809
Credit to Interest Payable 3,708

E.
F.
G.
H.

Debit to Interest Expense 5,191
Credit to Discount on Bonds 2,584
Credit to Interest Payable 1,809
Nothing- no journal entry needed

22.) On January 1 year 1 Taraz Company purchased 4,000 shares of the common stock of
Company A for 240,000. At the time, Company A had a total of 10,000 common shares
outstanding. Accordingly Taraz purchased 40% of the outstanding shares of Company a. During
Year 1 Company A paid cash dividends totaling 20,000. Company A also reported net income of
50,000 during year 1. During Year 2 Company A paid no cash dividends. Company A reported a
net loss of 40,000 during Year 2. On December 31, Year 1, the market value of Company A?s
common stock was 72 per share. On Taraz Company?s books what amount should be reported as
?Investment in Company A? as December 31 of Year 2?
A.
B.
C.
D.
E.

243,000
236,000
260,000
257,000
272,000

23.) On January 16 Year 1, Wishbone Corporation purchased 2,000 shares of Clarke Corpp
common stock as available for sale. On March 23 of Year 1, Wishbone sold 500 shares of Clarke
common stock for 78 per share. On December 21 of Year 1 each of the remaining 1500 shares
of Clarke?s common stock had a market value of 65 per share. For Year 1, Wishbone
Corporation net income of 200,000. What would Wishbone?s Year 1 ntet icome have been if the
investment in Clarke Company stock had originally been classified as trading. (Before year 1,
Wishbone Corporation has never had incestment in either trading or available for sale secruities
and ignore income taxes)
A.
B.
C.
D.
E.

244,5000
183,500
243,500
228,500
22,500

25.) At the beginning of Year 1, Jimbo Company purchased a portfolio of trading secruities for
$33. At the end of year 1, the portfolio had a value of $28. At the end of Year 2 the portfolio
had a value of 37. During Year 3 the entire portfolio is sold for 25. What is the amount of
unrealized gain or loss for year 3?
A.
B.
C.
D.
E.
F.

4 unrealized gain
8 unrealized loss
5 unrealized gain
4 unrealized loss
12 unrealized gain
12 unrealized loss

G. 5 unrealized loss
H. No gain or loss