Q1. On November 30, 2008, Crown Food purchased two trucks for a total of $70,000 issuing a one-year, 8% note payable, all due at maturity. The interest on this loan is stated separately. The liability for this loan as of December 31, 2008:
a.Is classified as a long-term liability if Crown Food has the intent and ability to refinance by taking out a new loan not due for several years.
b.Is equal to its maturity value.
c.Is classified as a long-term liability, since it was used to acquire noncurrent assets
d.Is equal to the book value of the two trucks that were acquired in exchange.
Q2. Which of the following items is reported in neither the income statement nor the statement of cash flows?
a.Sale of marketable securities at a loss
b.Sale of marketable securities at a gain.
c.Investment of excess cash in marketable securities.
d.Adjustment of available-for-sale marketable securities owned to current market value at balance sheet date.
Q3. On January 1, 2006, Blair Company sold $800,000 of 10% ten-year bonds. Interest is payable semiannually on June 30 and December 31. The bonds were sold for $708,000, priced to yield 12%. Blair records interest at the effective rate. Blair should report bond interest expense for the six months ended June 30, 2006 in the amount of:
a.$48,000
b.$35,400
c.$42,480
d.$40,000
Q4. On November 30, 2008, Crown Food purchased two trucks for a total of $70,000, issuing a one-year, 8% note payable, all due at maturity. The interest on this loan is stated separately. How much must Crown Food pay the lender upon maturity of this note?
a.$70,000.
b.$70,467.
c.$75,600
d.$75,133
Q5. Property Inc., owns 4.5 million shares of stock of ABC Inc., classified as available-for-sale. During 2008, the fair value of those shares increased by $7 million. What effect did this increase have on Property's 2008 financial statements?
a.Net income increased.
b.Shareholders' equity decreased.
c.Total assets decreased.
d.Net assets increased.
Q6. The price of a corporate bond is the present value of its face amount at the market or effective rate of interest:
a.Plus the present value of all future interest payments at the market or effective rate of interest.
b.Plus the present value of all future interest payments at the stated rate of interest.
c.Reduced by the present value of all future interest payments at the stated rate of interest.
d.Reduced by the present value of all future interest payments at the market or effective rate of interest.
Q7. When ten-year bonds are sold with a 6% contract rate of interest, with interest payments made semi-annually, the present value factor that is used to determine the present value of the bonds would be for 20 time periods and one-half the market rate of interest on the date of the bond issue.
a.True
b.False
Q8. Which of the following material items would not be reported as an extraordinary item?
a.A loss caused by an unusual and infrequent volcano.
b.All of the above would be reported as extraordinary items.
c.A loss caused by an unusual and infrequent hurricane.
d.A loss caused by obsolescence of inventory.
Q9. Taxes that are assessed on both employers and employees under the Federal Insurance Contributions Act (FICA) are used to fund Unemployment Benefits for those who lose their jobs.
a.True
b.False
Q10. The accrued interest on December 31, 2008 for a $40,000, 9%, 120-day note payable dated November 1, 2008 totals $400. The interest expense recorded on February 29, 2009, when the note is paid in full, will total $400.
a.True
b.False
Q11. Ana Corporation purchased a long-term investment in equity securities and can exercise significant influence over the investee. Ana owns 30% of the voting stock of the investee company, which reported earnings of $75,000. Which of the following would be included in the journal entry to record the reported earnings to Ana Corporation?
a.Earnings Receivable, debit, $22,500
b.Dividend Income, credit, $22,500
c.Earnings from Long-Term Investment, $22,500
d.Earnings from Long-Term Investment, $75,000
e.Long-Term Investment, debit, $75,000
Q12. A discount on bonds should be reported on the balance sheet:
a.At the present value of the future addition to bond interest expense due to the discount.
b.As a reduction in bond issue costs.
c.As a deferred credit.
d.As a reduction of the face amount of the bond.
Q13. Both held-to-maturity debt securities and available-for-sale debt securities must be reported at their fair market value at year-end.
a.True
b.False