Use the following to answer question 56: Diamond Company borrowed $500,000 from BankTwo on January 1, 2006 in order

to expand its mining capabilities. The five-year note required annual payments of $130,218 and carried an annual interest rate of 9.5%. 56 What is the amount of expense Diamond must recognize on its 2007 income statement? A) $47,500 B) $39,642 C) $35,129 D) $31,037 Use the following to answer questions 57-60: Silcon Company issued $800,000 of 6%, 10-year bonds on one of its interest dates for $690,960 to yield an effective annual rate of 8%. The effective-interest method of amortization is to be used. 57 What amount of discount (to the nearest dollar) should be amortized for the first interest period? A) $22,542 B) $10,904 C) $14,554 D) $7,277 58 The journal entry on the first interest payment date, to record the payment of interest and amortization of discount will include a A) debit to Bond Interest Expense for $48,000. B) credit to Cash for $55,277. C) credit to Discount on Bonds Payable for $7,277. D) debit to Bond Interest Expense for $64,000. 59 How much bond interest expense (to the nearest dollar) should be reported on the income statement for the end of the first year? A) $55,422 B) $55,277 C) $55,131 D) $48,000 60 The journal entry to be recorded at the end of the second year for the payment of interest and the amortization of discount will include a A) debit to Bond Interest Expense for $48,000. B) credit to Cash for $55,859. C) credit to Discount on Bonds Payable for $7,277. D) credit to Discount on Bonds Payable for $7,859. 61 A company receives $132, of which $12 is for sales tax. The journal entry to record the sale would include a A) debit to Sales Tax Expense for $12. B) credit to Sales Tax Payable for $12. C) debit to Sales for $132. D) debit to Cash for $120.

62 Jensen Company issued ten-year, 9%, bonds payable in 2007 at a premium. During 2007, the company's accountant failed to amortize any of the bond premium. The omission of the premium amortization will A) not affect net income for 2007. B) cause retained earning at the end of 2007 to be overstated. C) cause net income for 2007 to be overstated. D) cause net income for 2007 to be understated. Use the following to answer question 63: Porter Company received proceeds of $211,500 on 10-year, 8% bonds issued on January 1, 2006. The bonds had a face value of $200,000, pay interest annually on December 31st, and have a call price of 102. Porter uses the straight-line method of amortization. 63 What is the amount of interest expense Porter will show with relation to these bonds for the year ended December 31, 2007? A) $16,000 B) $16,920 C) $14,850 D) $12,550 64 Failure to record a liability will probably A) result in an overstated net income. B) result in overstated total liabilities and owner's equity. C) have no effect on net income. D) result in understated total assets. 65 The Muffin Company issued a five-year interest-bearing note payable for $75,000 on January 1, 2006. Each January the company is required to pay $15,000 on the note. How will this note be reported on the December 31, 2007, balance sheet? A) Long-term Debt, $75,000 B) Long-term Debt, $60,000 C) Long-term Debt, $45,000; Long-term Debt due within one year, $15,000 D) Long-term Debt of $60,000; Long-term Debt due within one year, $15,000 66 The adjusted trial balance for Lifesaver Corp. at the end of the current year, 2007, contained the following accounts. 5-year Bonds Payable 8% $1,000,000 Bond Interest Payable 50,000 Premium on Bonds Payable 100,000 Notes Payable (3 mo.) 40,000 Notes Payable (5 yr.) 165,000 Mortgage Payable ($15,000 due currently) 200,000 Salaries Payable 18,000 Taxes Payable (due 3/15 of next yr) 25,000 The total long-term liabilities reported on the balance sheet are A) $1,365,000 B) $1,350,000

C) $1,465,000 D) $1,450,000 67 The sale of bonds above face value A) is a rare occurrence. B) will cause the total cost of borrowing to be less than the bond interest paid. C) will cause the total cost of borrowing to be more than the bond interest paid. D) will have no net effect on Interest Expense by the time the bonds mature. 68 Lahey Corporation retires its $500,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $518,725. The entry to record the redemption will include a A) credit of $18,725 to Loss on Bond Redemption. B) debit of $18,725 to Premium on Bonds Payable. C) credit of $6,275 to Gain on Bond Redemption. D) debit of $25,000 to Premium on Bonds Payable. 69 A measure of a company's solvency is the A) acid-test ratio. B) current ratio. C) times interest earned ratio. D) asset turnover ratio. 70 In a recent year Dillon Corporation had net income of $130,000, interest expense of $20,000, and tax expense of $30,000. What was Dillon Corporation's times interest earned ratio for the year? A) 6.5 B) 7.5 C) 8 D) 9 71 The Paid-in Capital in Excess of Par Value is increased in the accounting records when A) the number of shares issued exceeds par value. B) the stated value of capital stock is greater than the par value. C) the market value of the stock rises above par value. D) capital stock is issued at an amount greater than par value. Use the following to answer questions 72-73: The Ice Corporation issues 30,000 shares of $50 par value preferred stock for cash at $60 per share. 72 The entry to record the transaction will consist of a debit to Cash for $1,800,000 and a credit or credits to A) Preferred Stock for $1,800,000. B) Preferred Stock for $1,500,000 and Paid-in Capital in Excess of Par Value-Preferred Stock for $300,000. C) Preferred Stock for $1,500,000 and Retained Earnings for $300,000. D) Paid-in Capital from Preferred Stock for $1,800,000. 73 In the stockholders' equity section, the effects of the transaction above will be reported

A) entirely within the capital stock section. B) entirely within the additional paid-in capital section. C) under both the capital stock and additional paid-in capital sections. D) entirely under the retained earnings section. 74 What is the total stockholders' equity based on the following account balances? Common Stock $550,000 Paid-In Capital in Excess of Par 50,000 Retained Earnings 180,000 Treasury Stock 30,000 A) $600,000 B) $810,000 C) $780,000 D) $750,000 75 Sun Inc. has 5,000 shares of 6%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2007. What is the annual dividend on the preferred stock? A) $60 per share B) $30,000 in total C) $3,000 in total D) $0.60 per share 76 If common stock is issued for an amount greater than par value, the excess should be credited to A) Cash. B) Retained Earnings. C) Paid-in Capital in Excess of Par Value. D) Legal Capital. 77 Treasury shares plus outstanding shares equal A) authorized stock. B) issued stock. C) unissued stock. D) distributable stock. 78 Which of the following represents the largest number of common shares? A) Treasury shares B) Issued shares C) Outstanding shares D) Authorized shares 79 A corporation purchases 20,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity? A) Increase by $700,000 B) Decrease by $400,000 C) Decrease by $700,000

D) Decrease by $400,000 80 Treasury stock should be reported in the financial statements of a corporation as a(n) A) investment. B) liability. C) deduction from total paid-in capital. D) deduction from total paid-in capital and retained earnings. Use the following to answer question 81: Carter Corporation had net income of $250,000 and paid dividends of $50,000 to common stockholders and $20,000 to preferred stockholders in 2007. Carter Corporation's common stockholders' equity at the beginning and end of 2007 was $870,000 and $1,130,000, respectively. 81 Carter Corporation's payout ratio for 2007 was A) $5 per share. B) 25%. C) 20%. D) 12.5%. 82 Those most responsible for the major policy decisions of a corporation are the A) stockholders. B) board of directors. C) management. D) employees. 83 On January 1, Garrison Corporation had 1,000,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event, A) Garrison's Paid-in Capital in Excess of Par Value account increased $500,000. B) Garrison's total stockholders' equity was unaffected. C) Garrison's Retained Earnings account decreased $1,500,000. D) All of the above. 84 The date on which a cash dividend becomes a binding legal obligation is on the A) declaration date. B) date of record. C) payment date. D) last day of the fiscal year end. 85 The board of directors of Weston Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2007. The dividend is to be paid on August 15, 2007, to stockholders of record on July 31, 2007. The correct entry to be recorded on July 15, 2007, will include a A) debit to Dividends Payable B) debit to Retained Earnings. C) credit to Cash.

D) credit to Retained Earnings. 86 Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is A) $240,000.00 B) $250,000.00 C) $310,000.00 D) $230,000.00 87 The cost of goods sold during the year was $165,000. Merchandise inventory decreased by $6,000 during the year and accounts payable decreased by $3,000 during the year. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total A) $168,000.00 B) $162,000.00 C) $156,000.00 D) $174,000.00 88 Bent Company reports a $20,000 increase in inventory and a $5,000 decrease in accounts payable during the year. Cost of Goods Sold for the year was $150,000. Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were A) $150,000.00 B) $165,000.00 C) $175,000.00 D) $135,000.00 89 Simon Company had credit sales of $1,050,000. The beginning accounts receivable balance was $60,000 and the ending accounts receivable balance was $210,000. Using the direct method of reporting cash flows from operating activities, what were the cash collections from customers during the period? A) $1,200,000 B) $1,050,000 C) $900,000 D) $1,110,000 90 A company had net income of $242,000. Depreciation expense is $26,000. During the year, accounts receivable and inventory increased $15,000 and $40,000, respectively. Prepaid expenses and accounts payable decreased $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much cash was provided by operating activities? A) $214,000.00 B) $207,000.00 C) $274,000.00

D) $295,000.00 91 Which of the following would be added to net income using the indirect method? A) An increase in accounts receivable B) An increase in prepaid expenses C) Depreciation expense D) A decrease in accounts payable 92 Which one of the following affects cash during a period? A) Recording depreciation expense B) Declaration of a cash dividend C) Write-off of an uncollectible account receivable D) Payment of an accounts payable 93 Using the indirect method, patent amortization expense for the period A) is deducted from net income. B) causes cash to increase. C) causes cash to decrease. D) is added to net income. 94 Cline Company issued common stock for proceeds of $186,000 during 2007. The company paid dividends of $33,000 and issued a long-term note payable for $45,000 in exchange for equipment during the year. The company also purchased treasury stock that had a cost of $7,000. The financing section of the statement of cash flows will report net cash inflows of A) $146,000.00 B) $202,000.00 C) $153,000.00 D) $179,000.00 95 The cost of goods sold during the year was $220,000. Merchandise inventory increased by $8,000 during the year and accounts payable decreased by $4,000 during the year. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total A) $224,000.00 B) $216,000.00 C) $208,000.00 D) $232,000.00 Use the following to answer questions 96-98: Joy Elle's Vegetable Market had the following transactions during 2007: 1. Issued $25,000 of par value common stock for cash. 2. Recorded and paid wages expense of $10,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $1,000. 5. Sold a long-term investment (cost $3,000) for cash of $3,000. 6. Recorded cash sales of $20,000. 7. Bought inventory for cash of $2,000. 8. Acquired an investment in IBM stock for cash of $6,000.

9. Converted bonds payable to common stock in the amount of $10,000. 10. Repaid a 6 year note payable in the amount of $11,000. 96 What is the net cash provided by operating activities? A) $20,000.00 B) $18,000.00 C) $10,000.00 D) $8,000.00 97 What is the net cash provided by investing activities? A) $6,000.00 B) $16,000 C) ($3,000). D) $3,000.00 98 What is the net cash provided by financing activities? A) $13,000.00 B) $25,000.00 C) $14,000.00 D) $9,000.00 99 To determine the net cash provided (used) by operating activities, it is necessary to analyze A) the current year's income statement. B) a comparative balance sheet. C) additional information. D) all of the above. 100 Cash receipts from customers are greater than sales revenues when there is a(n) A) increase in accounts receivable. B) decrease in accounts receivable. C) increase in cost of goods sold. D) decrease in cost of goods sold.

56 B 57 C 58 A 59 D 60 A 61 B 62 D 63 C 64 A 65 D 66 B