Circumstances of a capital lease

Question

Question 1. The issue price of bonds is equal to

• the present value of the principal
• the present value of the interest
• the present value of the principal minus the present value of the interest
• the present value of the principal plus the present value of the interest

Question 2. Striker Gold Mine issued bonds that will all be outstanding for a period of five years and then will mature on a series of specified dates over the next ten years. Which term below best describes the bonds issued by Striker Gold Mine?

• secured
• registered
• callable
• serial

Question 3. A 10% bond is sold at a price that will result in a 9% effective yield. Therefore, we can conclude that the price at which the bond was sold was

• greater than face value
• less than face value
• equal to face value
• not determinable from above information

Question 4. Which of the following situations is NOT consistent with the circumstances of a capital lease?

• a company is using a resource for most of its useful life
• a company controls the resource as if it had been purchased
• a company records a liability equal to the present value of the lease payments
• a company records a rental expense every time a lease payment is made

Question 5. The direct investment made by stockholders in a corporation is known as

• retained earnings
• donated capital
• contributed capital
• charter capital

Question 6. Which of the following is the number of shares actually in the hands of stockholders?

• authorized shares
• delivered shares
• outstanding shares
• issued shares

Question 7. A company sold $100,000 of common stock at par value. This transaction should be entered into the accounting system as

Equity Assets

Yes Yes
Yes No
No Yes
No No

Question 8. Soft Rock, Inc. sold 4,000 shares of its treasury stock to a new investor. Which of the following increased?

Authorized Stock Issued Stock

Yes Yes
Yes No
No Yes
No No

Question 9. Upbeat Music Stores issued $500,000 face value of zero coupon bonds having a life of 10 years. (Zero coupon bonds pay zero percent interest.) If the market rate of interest is 8 percent, at what price did these bonds sell?

• $135,761
• $157,600
• $158,610
• $231,595

Question 10. General Toys, Inc. sold five year bonds having a face value of $100,000 and a coupon rate of 7% when the market rate was 9%. The present value of $1 at 9% for five periods is $0.6499. The present value of a $1 annuity for 5 periods at 9% is $3.8897. At what price did these bonds sell?

• $92,218
• $93,690
• $99,248
• $100,000

Question 11. Which of the following sometimes involves an adjustment to the par value of the stock involved?

• stock dividend
• cash dividend
• stock split
• purchase of stock as an investment

Question 12. When a company declares and distributes a 40% stock dividend, which of the following usually occur?

Retained Earnings Contributed Capital
Increases Decreases

Yes Yes
Yes No
No Yes
No No

Question 13. The issuance of a common stock dividend

• reduces a company's retained earnings balance
• brings new owners into a corporation
• decreases the number of shares of outstanding stock
• increases a company's retained earnings balance

Question 14. The term "cumulative" is used to describe a feature of which of the following?

• common stock
• preferred stock
• stock splits
• stock dividends

Question 15. Frostbite Cold Storage Company was incorporated early in 2007 Since then, the following stock has been outstanding:

Preferred stock, 5%, $25 par    8,000 shares
Common stock,        $20 par    10,000 shares

On December 31, 2009, the company declared and paid a total of $50,000 in dividends. This was the first dividend declared by the business. That is, until this date no dividends had been declared or paid during the first two years of operations.

If the preferred stock is cumulative, what is the most that will be available out of the $50,000 dividend for payment to the COMMON shareholders?

• $50,000
• $42,500
• $30,000
• $20,000

Question 16. Which of the following is a FALSE statement?

• common stock can be issued at a price greater than its par value
• treasury stock can be sold at a price less than its cost
• the claims of owners are honored before those of creditors
• retained earnings is profit reinvested in a corporation

Question 17. The issue price of bonds is equal to the present value of the principal plus the present value of the interest.

• True
• False

Question 18. The direct investment made by stockholders in a corporation is known as

• retained earnings
• donated capital
• contributed capital
• charter capital

Question 19. The term "contributed capital" includes

• amounts received in excess of par value
• retained earnings
• amounts borrowed from banks
• authorized but unissued shares

Question 20. Stock splits and stock dividends will result in a reduction of total stockholders' equity.

• True
• False