Problem 1. Which of the following is not a characteristic of a corporation?
A. Continuous life
B. Ease of capital accumulation
C. Separate legal entity
D. Unlimited liability of stockholders
Problem 2: On Thursday, May 3, Skelton Electrical Supply issues 4,000 shares of $6 par value common stock at $9 per share. Which of the following items would be part of the journal entry to record this stock issuance?
A. $12,000 credit to Cash
B. $24,000 debit to Common Stock, $6 Par Value
C. $36,000 credit to Cash
D. $12,000 credit to Paid in Capital in Excess of Par Value, Common Stock
Problem 3: When dealing with the concepts of dividends there are typically three important dates to be mindful of. Which of the three dates does not require a journal entry on the books of the issuing company?
A. Date of declaration
B. Date of record
C. None of the other answers
D. Date of payment
Problem 4: Charter Home Supply recently sold 8,000 five year bonds with a face value totalling $8,000,000 and paying $50 each in interest seminannually while the market rate on similar debt instruments is 12%. With this in mind we know that the bonds sold at _________.
A. a premium.
B. a discount.
C. the par value.
D. an inflated rate.
Problem 5: Eagle Company issues bonds with a par value of $55,000 on their stated issue date. The bonds mature in 10 years and pay 8% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 10%.
What would be the price of the bonds as of their issue date?
A. $48,146
B. $99,000
C. $4,400
D. $55,000
Problem 6: On April 1, 2012 Wilson borrows $16,000 cash by signing a three-year 8% installment note. The note requires three equal payments of accrued interest and principle on March 31 of each year from 2013 through 2015. Compute the amount of the three equal total payments.
A. $6,208.53
B. 373.33
C. 5,333.33
D. 1,120.00
Problem 7: True or False:
The 20% ownership test for consideration of significant influence over an investee can not be overruled, even in the face of other evidence that would be more pusuasive.