AC Exam 2 Version A

AC Exam 2 Version A - AC 210 Fall 2007 Exam #2 Version A...

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AC 210 Fall 2007 Exam #2 Version A Score _____/100 NAME_______________________ Student Number_________________________ 1. Mondo Cano Enterprises, borrowed $100,000 from a bank at 12% annual interest and arranged to repay it over two years with monthly payments. How much is the payment? a. $4,707 b. $4,167 c. $4,541 d. $4,889 2. The Ski Supplies Depot borrowed $106,000 via 3-year, 8% note payable. The note is to be repaid in three equal year-end installments. How much interest expense will the firm incur for the first year of the note? a. $8,480 b. $9,340 c. $6,982 d. $5,798 3. The difference between the future and present value of an amount is a. cash b. cash plus interest c. interest d. cash less interest 4. On January 1, 2003, Alpha Beta Company issued 5-year bonds having a face value of $100,000. The bonds pay 7% interest annually and were sold for $94,706 to yield 8.34% interest (market/effective rate). Alpha Beta’s 2003 income statement should report what amount for interest expense on these bonds? a. $8,340 b. $7,000 c. $6,630 d. $7,898 5. When the market (effective) rate for a bond is higher than the stated (or coupon) rate, the bond a. will sell at par b. will sell at a discount c. will sell at a premium d. cannot be sold until the market and stated rates are equal
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capital lease? a. a company records a liability equal to the present value of the lease payments b. a company controls the resource as if it had been purchased c. a company records a rental expense every time a lease payment is made d. a company is using a resource for most of its useful life 7. Under what conditions must a contingency be reported as a liability? a. it possibly will result in a loss and the amount of the loss can be reasonably estimated b. it probably will result in a loss and the amount of the loss can be reasonably estimated c. it is remotely possible it will result in a loss and the amount of the loss can be reasonably estimated d. it probably will result in a loss, whether or not the amount of the loss can be reasonably estimated 8. If a company has 500,000 shares of common stock authorized, 300,000 shares issued, and 50,000 shares held as treasury stock, how many shares are outstanding? a. 300,000 b. 350,000 c. 250,000 d. 500,000 9. Preferred stock is preferred because a. it has a higher claim on dividends and assets than common stock b. it has a higher claim on assets in liquidation than creditors do c. preferred stockholders have more voting rights than common shareholders d. it is preferred by stockholders as a potentially better investment 10. Blue Waters Fisheries had a retained earnings account balance on January 1, 2004 of $12,000. During 2004 the firm had net income of $7,200 and paid a $3,600 cash dividend. What is the December 31, 2004 retained earnings balance? a. $19,600
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AC Exam 2 Version A - AC 210 Fall 2007 Exam #2 Version A...

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