1) _________________________ has special rights that give it priority or senior status
over common stock in one or more areas such as receiving dividends or for the
distribution of assets if the corporation is liquidated.
2) A company issued 9.2%, 10-year bonds with a par value of $100,000. Interest is paid
semiannually. The market interest rate on the issue date was 10%, and the issuer
received $95,016 cash for the bonds. On the first semiannual interest date, what amount
of cash should be paid to the holders of these bonds for interest?
3) Daley Co. lends $524,210 to Davis Corporation. The terms of the loan require that
Davis make six semiannual period-end payments of $100,000 each. What semiannual
interest rate is Davis paying on the loan?
4) Calculate the amount of interest that would be owed on a $9,000, 60-day, 9% note
receivable at maturity.
5) Chrono Co. held bonds of Ayrford Co. with a cost of $125,000 and a year-end fair
value of $123,700. Chrono also held 1,500 shares of Avian common stock with a cost of
$25,000 and a year-end fair value of $26,100. These are classified as long-term
available-for-sale securities. Prepare the journal entry to record the market value of the
investments as of its December 31 year-end.
6) A company made the following merchandise purchases and sales during the month of
May:
There was no beginning inventory. If the company uses the FIFO periodic inventory
method, what would be the cost of the ending inventory?
7) A company reported net income of $112,000, operating cash flows of $57,000, total
cash flows of $97,000, and average total assets of $962,000. Calculate its cash flow on
total assets ratio.
8) Naples operates a retail store and has two service departments and two operating
departments, Shoes and Clothing. During the current year, the departments had the
following direct expenses and occupied the flowing amount of floor space.
The advertising department developed and aired 150 spots. Of these spots, 60 spots
were for Shoes and 90 spots were for Clothing. The store sold $1,500,000 of
merchandise during the year; $675,000 in Shoes and $825,000 in Clothing. Indirect
expenses include rent, utilities, and insurance expense. Total indirect expenses of
$220,000 are allocated to all departments. Prepare a departmental expense allocation
spreadsheet for Naples. The spreadsheet should assign (1) direct expenses to each of the
four departments, (2) allocate the indirect expenses to each department on the basis of
floor space occupied, (3) the advertising department’s expenses to the two operating
departments on the basis of ad spots placed promoting each department’s products, (4)
the administrative department’s expenses based on the amount of sales. Complete the
departmental expense allocation spreadsheet below. Provide supporting computations
for the expense allocations below the spreadsheet.
9) A company purchased two new delivery vans for a total of $250,000 on January 1,
Year 1. The company paid $40,000 cash and signed a $210,000, 3-year, 8% note for the
remaining balance. The note is to be paid in three annual end-of-year payments of
$81,487 each, with the first payment on December 31, Year 1. Each payment includes
interest on the unpaid balance plus principal.
(1) Prepare a note amortization table using the format below:
(2) Prepare the journal entries to record the purchase of the vans on January 1, Year 1
and the second annual installment payment on December 31, Year 2.