If a corporation issued $8,000,000 in bonds which pay 5% annual interest, what is the
annual net cash cost of this borrowing if the income tax rate is 30%?
a.$4,000,000
b.$120,000
c.$400,000
d.$280,000
The cash records of Landis Company show the following four situations.
There were no bank debit or credit memoranda. No errors were made by either the bank
or Landis Company.
Instructions
Answer the following questions.
The following information pertains to Benedict Company. Assume that all balance sheet
amounts represent average balance figures.
What is the return on common stockholders’ equity ratio for Benedict?
a.16.7%
b.14.0%
c.12.7%
d.10.5%
Rama Company reported the following on its income statement:
An analysis of the income statement revealed that interest expense was $60,000. Rama
Company’s times interest earned was
a.6.8 times.
b.9.3 times.
c.8.3 times.
d.5.8 times.
Wittebury Corporation retires its 3,000,000 face value bonds at 105 on January 1,
following the payment of annual interest. The carrying value of the bonds at the
redemption date is $3,112,350. The entry to record the redemption will include
a.a credit of 37,650 to Gain on Bond Redemption.
b.a debit of 37,650 to Loss on Bond Redemption.
c.a credit of 15,000 to Bonds Payable.
d.a credit of 37,650 to Bonds Payable.
What is the total stockholders’ equity based on the following account balances?
a.$2,190,000.
b.$2,430,000.
c.$2,550,000.
d.$1,680,000.
Brenda Draper borrowed $120,000 on June 1, 2013. This amount plus accrued interest
at 8% compounded annually is to be repaid on June 1, 20 Brenda has obtained the
following values related to the time value of money to help her with her financing
process and compounded interest decisions.
To the closest dollar, how much will Brenda have to repay on June 1, 2026?
a.$44,124
b.$948,454
c.$261,554
d.$326,354
On January 1, Hamblin Corporation had 90,000 shares of $10 par value common stock
outstanding. On March 17 the company declared a 10% stock dividend to stockholders
of record on March 20. Market value of the stock was $13 on March 17. The entry to
record the transaction of March 17 would include a
a.credit to Stock Dividends for $27,000.
b.credit to Cash for $117,000.
c.credit to Common Stock Dividends Distributable for $90,000.
d.debit to Common Stock Dividends Distributable for $90,000.
R. Stone Corporation has income before taxes of $780,000 and an extraordinary gain of
$200,000. If the income tax rate is 25% on all items, the income statement should show
income before irregular items and extraordinary items, respectively, of
a.$635,000 and $200,000.
b.$635,000 and $150,000.
c.$585,000 and $200,000.
d.$585,000 and $150,000.
Respondo Company has a $145,000 balance in Accounts Receivable and a $420 debit
balance in Allowance for Doubtful Accounts at yearend just prior to recording adjusting
entries. Credit sales for the period totaled $960,000. How much is the amount of the
bad debt adjusting entry if Respondo estimates that 1.5% of its receivables will be
uncollectible?
a.$2,595
b.$2,175
c.$14,400
d.$1,755
At the beginning of the year, Uptown Athletic had an inventory of $400,000. During the
year, the company purchased goods costing $1,500,000. If Uptown Athletic reported
ending inventory of $500,000 and sales of $2,000,000, their cost of goods sold and
gross profit rate would be
a.$1,000,000 and 70%.
b.$1,400,000 and 30%.
c.$1,000,000 and 30%.
d.$1,400,000 and 70%.
Amos Real Estate signed a four-month note payable in the amount of $16,000 on
September 1. The note requires interest at an annual rate of 9%. The amount of interest
to be accrued at the end of September is:
a.$480.
b.$120.
c.$1,440.
d.$160.
Here is the income statement for Ginsberg, Inc.
Additional information:
1)Common stock outstanding January 1, 2014, was 30,000 shares, and 40,000 shares
were outstanding at December 31, 2014.
2)The market price of Gillman, Inc., stock was $15.86 in 2014.
3)Cash dividends of $16,000 were paid, $4,500 of which were to preferred
stockholders.
Instructions
Compute the following measures for 2014.
(a)Earnings per share.
(b)Price-earnings ratio.
(c)Payout ratio.
(d)Times interest earned.
The expense recognition principle relates to credit losses by stating that bad debt
expense should be recorded
a.in the same period as allowed for tax purposes.
b.in the period of the sale.
c.for an exact amount.
d.in the period of the loss.
Using the following information, prepare a bank reconciliation for Hammond Company
for June 30, 2014.
a.The bank statement balance is $7,650.
b.The cash account balance is $6,422
c.Outstanding checks totaled $1,650.
d.Deposits in transit are $900.
e.The bank service charge is $22.
f.Collection of note by bank, $500.
Morgan Company does not ring up sales taxes separately on the cash register. Total
receipts for February amounted to $25,440. If the sales tax rate is 6%, what amount
must be remitted to the state for February’s sales taxes?
a.$1,527
b.$1,440
c.$1,435
d.It cannot be determined.
Keller Company issued a five-year interest-bearing note payable for $200,000 on
January 1, 2013. Each January the company is required to pay $40,000 on the note.
How will this note be reported on the December 31, 2014, balance sheet?
a.Long-term debt, $200,000
b.Long-term debt, $160,000
c.Long-term debt, $120,000; Long-term Debt due within one year, $40,000
d.Long-term debt of $160,000; Long-term Debt due within one year, $40,000