7._______ When calculating the present value of a bond, which table do you use?

Question

7._______             When calculating the present value of a bond, which table do you use?   A. the PV of $1    b. the PV of an annuity of $1   c. both tables   d. none of these

8._______             Johnson Corporation issued bonds at a discount because the interest rate offered on the bond was less than the market rate. The discount represents a. extra income for Johnson   b. extra future interest expense for Johnson    c. less future interest expense for Johnson d. none of these

9._______             The major source of new accounting principles in the United States is from the   a. SEC    b. FASB   c. IRS     d. SCCC Accounting Dept.

10._______         For Ivy Corporation, Income Summary would be closed to: a. Ivy Capital   b. Ivy Common Stock    c. Retained Earnings   d. None of these

11._______         Which of the following payroll items is paid solely by the employer?     A. FICA   B. FUTA and SUTA   C. Employee’s income taxes   d. all of these are paid solely by the employer

12._______         Barney invests $1,000 today. What is the future value of this investment at the end of 5 years if the money is invested at 8%?   A. $1,000               b. $1,080     c. $1,469     d. $12,500   e. none of these

13.______         Wilson purchases a $100,000 building, with estimated salvage value of $10,000 and useful life of 5 years. The accumulated depreciation account balance after two years of straight line depreciation will be: a. $40,000   b. $20,000   c. $36,000   d. None of these

14.______         Ward company made $100,000 of net income this year. Ward had 50,000 shares of common stock outstanding and no preferred stock. Ward’s stock is currently trading at $20 per share. What is the Earnings Per Share?    a. $20 per share   b. $.50 per share    c. $2.00 per share    d. $100,000 per share

Explanation / Answer

         7 For calculation PV of a bond we use PV Of $1 table for the PV of Maturity and PV of annuity of 1$ for the PV of interest payments. So both tables used. Ans is c.          8 The discount on Johnson Cop's bond issued at discount is later debited as addotional interest expense in   addition to interest payable. So , the discount   represents b. extra future interest expense for Johnson          9 The major source of new accounting principles in the USA is from b. FASB        10 Income summary net result is Retained earning for the year. So for Ivy Corporation, Income summary would be close to c. retained earnings        11 FUTA & SUTA are paid solely by employers Answer B.        12 Future value of $1000 invetsed today by barney @8% after 5 years =1000*1.08^5=   $                       1,469 Answer c. $1469        13 Purchase cost of building =                       100,000 Salvage value                         10,000 Depreciable value                         90,000 Useful life in years                                    5 Depreciation per year in SL method                         18,000 Accumulated depreciation after 2 years $                     36,000 Answer c, $36,000        14 Net Income of Ward co                       100,000 Outstanding Common stock                         50,000 Earning per share =100000/50000 $                         2.00 Ans is c. $2 per share

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