Q1. The following information relates to XYZ Corporation for the year ended February 28, 2015.
General Ledger Account Balance Bank Overdraft$101,000Mortgage Payable (long term portion)$537,000Income taxes payable$29,000Bonuses payable (to be paid March 15, 2015)$36,500Insurance premiums payable$11,000
What is XYZ Corporation's total long-term liabilities for the year ended February 28, 2015?
$141,000
$112,000
$714,500
$130,000
$101,000
Q2. On October 1, Year 1, Howell Stores, Inc. issues twenty-year, first mortgage bonds with a face value of $1,000,000. The proceeds of the issue are $1,060,000. The bonds bear interest at the rate of 10 percent per year, payable semiannually at April 1 and October 1. Howell Stores Inc. closes its books annually at December 31. Round amounts to the nearest dollar.
Assume that Howell Stores, Inc. uses the straight-line method to recognize interest expense. The amount of interest payable at Dec 31st of the first year is:
$50,000
None of the other alternatives are correct
$24,250
$25,000
$24,645
Q3. XYZ Corporation announces an offer to issue bonds with a $100,000 par value, an 6% annual contract rate with interest payable semi-annually, and with a six year life at a time when the market rate of interest is 6%
The bonds will be unsellable at these terms
The bonds will sell for less than par
The bonds will sell for more than par
The bonds will sell for par
None of the above
Q4. If the contract rate on the bond is 13% and the market interest rate at the time of sale is 12.2%, then the bond will sell at:
Discount
Par
Unable to answer with the data provided
Premium
Cannot be sold in the market
Q5. Which method is easier to compute?
straight-line method of accounting for interest expense on bonds
effective interest method of accounting for interest expense on bonds
None of the other alternatives are correct
All the three statements about bonds are correct
declining balance method of accounting for interest expense on bonds
Q6. If Ace Company and Deuce Company trade machines, Ace should set up the new machine
None of the above are correct statements
At zero since there was no cash paid
At fair market value unless the machines are deemed similar and there is no culmination of the earnings process
At the net book value of the machine given up
At the net book value of the machine given up