(Multiple Choice)
1. Reed Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $75,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on the amount of Reed Company's working capital?
Question 34 options:
a) No effect
b) $75,000 increase
c) $150,000 Increase
d) $75,000 decrease
2. On April 1, 2002, Grant Corporation issued $4,000,000, 10-year, 8% bonds, dated January 1, 2002 at 100 plus accrued interest. Interest is payable semiannually on January 1 and July 1. The journal entry to record this transaction on April 1, 2002 is
Question 18 options:
a) dr. Cash 4,000,000 and cr. Bonds Payable 4,000,000
b) dr. Cash 4,080,000 and cr. Bonds Payable 4,080,000
c) dr. Interest Expense 80,000, dr. cash 4,000,000 and Cr Bonds Payable 4,080,000
d) dr. Cash 4,080,000 cr. Bonds Payable 4,000,000 and Bond Interest Payable 80,000
3. A corporation issues $300,000, 10%, 5-year bonds on January 1, 2002 for $287,400. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight- line method of amortization of bond discount, the amount of bond interest expense to be recognized on July 1, 2002 is
a) $31,260.
b) $15,000.
c) $16,260.
d) $13,740.
4. West, Inc. has a net income of $800,000 for 2002, and there are 200,000 weighted average shares of common stock outstanding. Dividends declared and paid during the year amounted to $160,000 on the preferred stock and $240,000 on the common stock. The earnings per share for 2002 is
a) $4.00.
b) $1.20.
c) $3.20.
d) $2.00