1) on january 2, 2012, indian river groves began construction of a new citrus processing
plant. the automated plant was finished and ready for use on september 30, 2013.
expenditures for the construction were as follows:
indian river groves borrowed $1,650,000 on a construction loan at 12% interest on
january 2, 2012. this loan was outstanding during the construction period. the company
also had $6,000,000 in 9% bonds outstanding in 2012 and 2013.
the interest capitalized for 2012 was:
a.$270,000
b.$72,000
c.$228,000
d.$90,000
2) the payout ratio can be calculated by dividing
a.dividends per share by earnings per share
b.cash dividends by net income less preferred dividends
c.cash dividends by market price per share
d.dividends per share by earnings per share and dividing cash dividends by net income
less preferred dividends
3) when $5,000,000 in convertible bonds are issued at par with $800,000 in value of the
equity option embedded in the bond, the ifrs journal entry will include a debit of
a.$800,000 to paid-in capital convertible bonds and a credit to bonds payable
b.$800,000 to premium on bonds payable and a credit to paid-in capital convertible
bonds
c.$800,000 to bonds payable and a credit to paid-in capital convertible bonds
d.$4,200,000 to cash along with a debit of $800,000 to discount on bonds payable and a
credit to bonds payable and a credit to paid-in capital convertible bonds
4) neer co. has a probable loss that can only be reasonably estimated within a range of
outcomes. no single amount within the range is a better estimate than any other amount.
the loss accrual should be
a.zero
b.the maximum of the range
c.the mean of the range
d.the minimum of the range
5) given below are the present value factors for $1.00 discounted at 10% for one to five
periods. each of the items 69 to 72 is based on 10% interest compounded annually.
what amount should be deposited in a bank today to grow to $3,000 three years from
today?
a.$3,000 0.751
b.$3,000 0.909 3
c.($3,000 0.909) + ($3,000 0.826) + ($3,000 0.751)
d.$3,000 0.751
6) why is the liability section of the balance sheet of primary importance to bankers?
a.to evaluate the entity’s credit quality
b.to assist in understanding the entity’s liquidity
c.to better understand sources of repayment
d.to evaluate operating efficiency
7) what is the purpose of a fasb staff position?
a.provide interpretation of existing standards
b.provide a consensus on how to account for new and unusual financial transactions
c.provide interpretive guidance
d.provide timely guidance on select issues
8) when the cash proceeds from a bond issued with detachable stock warrants exceed
the sum of the par value of the bonds and the fair market value of the warrants, the
excess should be credited to
a.additional paid-in capital from stock warrants
b.retained earnings
c.a liability account
d.premium on bonds payable
9) betty wants to know how much she should begin saving each month to fund her
retirement. what kind of problem is this?
a.present value of one
b.future value of an ordinary annuity
c.present value of an ordinary
d.future value of one
10) mann, inc., which owes doran co. $1,000,000 in notes payable with accrued interest
of $90,000, is in financial difficulty. to settle the debt, doran agrees to accept from
mann equipment with a fair value of $950,000, an original cost of $1,400,000, and
accumulated depreciation of $325,000.
instructions
(a)compute the gain or loss to mann on the settlement of the debt.
(b)compute the gain or loss to mann on the transfer of the equipment.
(c)prepare the journal entry on mann ‘s books to record the settlement of this debt.
(d)prepare the journal entry on doran’s books to record the settlement of the receivable.
11) glavine company issues 6,000 shares of its $5 par value common stock having a fair
value of $25 per share and 9,000 shares of its $15 par value preferred stock having a
fair value of $20 per share for a lump sum of $312,000. the proceeds allocated to the
common stock is
a.$32,500
b.$141,818
c.$162,500
d.$170,182
12) wynne inc. charges an initial franchise fee of $1,380,000, with $300,000 paid when
the agreement is signed and the balance in five annual payments. the present value of
the future payments, discounted at 10%, is $818,808. the franchisee has the option to
purchase $180,000 of equipment for $144,000. wynne has substantially provided all
initial services required and collectibility of the payments is reasonably assured. the
amount of revenue from franchise fees is
a.$ 300,000
b.$1,082,808
c.$1,118,808
d.$1,380,000
13) which of the following items is a current liability?
a.bonds (for which there is an adequate sinking fund properly classified as a long-term
investment) due in three months
b.bonds due in three years
c.bonds (for which there is an adequate appropriation of retained earnings) due in
eleven months
d.bonds to be refunded when due in eight months, there being no doubt about the
marketability of the refunding issue
14) financial statements for hilton company are presented below:
hilton company
balance sheet
december 31, 2012
hilton company
statement of cash flows
for the year ended december 31, 2012
at the beginning of 2012, accounts payable amounted to $12,000 and bonds payable
was $20,000.
instructions
calculate the following for hilton company:
a.current cash debt coverage ratio
b.cash debt coverage ratio
c.free cash flow