Dissertation: Expert Support for Accounting Research Papers
44. Which of
the following statements is true?
a. Present
value of an annuity is always greater than the present value of equivalent
annuity due for a given interest rate
B. The future value of an annuity due is always greater than
the future value of an equivalent ordinary annuity at the same interest rate
b. Both A
and B are true
c. Both A
and B are false
45. You would
like to have enough money saved to receive a growing perpetuity, growing at a
rate of 5% per year, the first payment being $50,000 after retirement, so that
you and your family can lead a good life. How much would you need to save in
your retirement fund to achieve this goal? (assume that the growing perpetuity
payments start one year from the date of your retirement. The interest rate is
10%)?
A. $1,000,000
b. $10,000,000
c. $2,000,000
d. None of
the above
46. You would
like to have enough money saved to receive a growing perpetuity, growing at a rate
of 4% per year, the first payment being $60,000 after retirement, so that you
and your family can lead a good life. How much would you need to save in your
retirement fund to achieve this goal? (assume that the growing perpetuity
payments start one year from the date of your retirement. The interest rate is
10%)?
a. $1,500,000
B. $1,000,000
c. $600,000
d. None of
the above
47. You would
like to have enough money saved to receive a growing annuity for 20 years,
growing at a rate of 5% per year, the first payment being $50,000 after
retirement. That way, you hope that you and your family can lead a good life
after retirement. How much would you need to save in your retirement fund to
achieve this goal.(assume that the growing annuity payments start one year from
the date of your retirement. The interest rate is 10%)?
a. $1,000,000
b. $425,678.19
C. $605,604.20
d. None of the above
14
Junjie Liu – Econ 282 Practice
Multiple Choice
48. You would
like to have enough money saved to receive a growing annuity for 25 years,
growing at a rate of 4% per year, the first payment being $60,000 after
retirement, so that you and your family can lead a good life. How much would
you need to save in your retirement fund to achieve this goal? (assume that the
growing perpetuity payments start one year from the date of your retirement.
The interest rate is 12%)?
a. $1,500,000
B. $632,390
c. $452,165
d. None of
the above
49. In the
growing annuity and growing perpetuity formulas; the most important assumption
that is needed for the formulas to work correctly is:
a. r < g="" b.="" r="g" c.="" r=""> g
d. No
assumption is needed
50. Which of
the following statements regarding simple interest and compound interest are
true?
a. Problems
in finance generally use the simple interest concept
B. Problems in finance generally use the compound interest
concept
c. It does
not really matter whether you use simple interest or compound interest for
solving problems in finance
d. None of
the above
51. If you
invest $100 at 12% APR for three years, how much would you have at the end of 3
years using simple interest?
A. $136
b. $140.49
c. $240.18
d. None of
the above
52. If you
invest $100 at 12% APR for three years, how much would you have at the end of 3
years using compound interest?
a. $136
B. $140.49
c. $240.18
d. None of
the above
53. Which of
the following statements is true?
A. The process of discounting is the inverse of the process
of compounding
b. Ending
balances using simple interest is always greater than the ending balance using
compound interest at positive interest rates
c. Present
value of an annuity due is always less than the present value of an equivalent
annuity at positive interest rates
d. All of
the above are true
15
Junjie Liu – Econ 282 Practice
Multiple Choice
54. The
concept of compound interest is most appropriately described as:
a. Interest
earned on an investment
b. The total
amount of interest earned over the life of an investment C. Interest earned on
interest
d. None of
the above
55. Ms.
Colonial has just taken out a $150,000 mortgage at an interest rate of 6% per
year. If the mortgage calls for equal monthly payments for twenty years, what
is the amount of each payment? (Assume monthly compounding or discounting.)
A. $1254.70
b. $1625.00
c. $1263.06
d. None of
the above are true
56. An
investment at 10.47% effective rate compounded monthly is equal to a nominal
(annual) rate of:
a. 10.99%
b. 9.57%
C. 10%
d. None of
the above
57. An
investment at 12% nominal rate compounded monthly is equal to an annual rate
of: A. 12.68%
b. 12.36%
c. 12%
d. None of
the above
58. Mr.
William expects to retire in 30 years and would like to accumulate $1 million
in the pension fund. If the annual interest rate is 12% per year, how much
should Mr. Williams put into the pension fund each month in order to achieve
his goal? Assume that Mr. Williams will deposit the same amount each month into
his pension fund and also use monthly compounding.
A. $286.13
b. $771.60
c. $345.30
d. None of
the above
59. An
investment at 10% nominal rate compounded continuously is equal to an
equivalent annual rate of:
a. 10.250%
B. 10.517%
c. 10.381%
d. None of
the above
16
60. The present value of a $100 per year perpetuity at 10%
per year interest rate is $1000. What would be the present value if the
payments were compounded continuously?
a. $1000.00 B. $1049.21
c. $1024.40
d. None of
the above
40. Assume that an investor buys 100 shares of stock at $35 per share, putting up a 75% margin. a....
Assume that an investor buys 100 shares of stock at $35 per share, putting up a 75% margin.
a. What is the debit balance in this transaction?
b. How much equity funds must the investor provide to make this margin transaction?
c. If the stock rises to $55 per share, what is the investor’s new margin position?
(Comprehensive Receivables Problem) Braddock Inc. had the following long-term receivable account balances at December 31, 2013.
Transactions during 2014 and other information relating to Braddock’s long-term receivables were as follows.
1. The $1,500,000 note receivable is dated May 1, 2013, bears interest at 9%, and represents the balance of the consideration received from the sale of Braddock’s electronics division to New York Company. Principal payments of $500,000 plus appropriate interest are due on May 1, 2014, 2015, and 2016. The first principal and interest payment was made on May 1, 2014. Collection of the note installments is reasonably assured.
2. The $400,000 note receivable is dated December 31, 2013, bears interest at 8%, and is due on December 31, 2016. The note is due from Sean May, president of Braddock Inc. and is collateralized by 10,000 shares of Braddock’s common stock. Interest is payable annually on December 31, and all interest payments were paid on their due dates through December 31, 2014. The quoted market price of Braddock’s common stock was $45 per share on December 31, 2014.
3. On April 1, 2014, Braddock sold a patent to Pennsylvania Company in exchange for a $100,000 zerointerest-bearing note due on April 1, 2016. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2014, was 12%. The present value of $1 for two periods at 12% is 0.797 (use this factor). The patent had a carrying value of $40,000 at January 1, 2014, and the amortization for the year ended December 31, 2014, would have been $8,000. The collection of the note receivable from Pennsylvania is reasonably assured.
4. On July 1, 2014, Braddock sold a parcel of land to Splinter Company for $200,000 under an installment sale contract. Splinter made a $60,000 cash down payment on July 1, 2014, and signed a 4-year 11% note for the $140,000 balance. The equal annual payments of principal and interest on the note will be $45,125 payable on July 1, 2015, through July 1, 2018. The land could have been sold at an established cash price of $200,000. The cost of the land to Braddock was $150,000. Circumstances are such that the collection of the installments on the note is reasonably assured.
Instructions
(a) Prepare the long-term receivables section of Braddock’s balance sheet at December 31, 2014.
(b) Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Braddock’s balance sheet at December 31, 2014.
(c) Prepare a schedule showing interest revenue from the long-term receivables that would appear on Braddock’s income statement for the year ended December 31, 2014.
42. E 3-18 (Cash to Accrual Basis) Corinne Dunbar, M.D., maintains the accounting records of Dunbar...
E 3-18 (Cash to Accrual Basis) Corinne Dunbar, M.D., maintains the accounting records of Dunbar Clinic on a cash basis. During 2012, Dr. Dunbar collected $142,600 from her patients and paid $60,470 in expenses. At January 1, 2012, and December 31, 2012, she had accounts receivable, unearned service revenue, accrued expenses, and prepaid expenses as follows. (All long-lived assets are rented.) January 1, 2012 December 31, 2012 Accounts receivable $11,250 $15,927 Unearned service revenue 2,840 4,111 Accrued expenses 3,435 2,108 Prepaid expenses 1,917 3,232 Instructions Prepare a schedule that converts Dr. Dunbar’s “excess of cash collected over cash disbursed” for the year 2012 to net income on an accrual basis for the year 2012.
43. Exercise 21-3 Assume that on January 1, 2017, Kimberly-Clark Corp. signs a 10-year noncancelable ...
Exercise 21-3
Assume that on January 1, 2017, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement.
1. | The agreement requires equal rental payments of $77,400 beginning on January 1, 2017. | |
2. | The fair value of the building on January 1, 2017 is $453,000. | |
3. | The building has an estimated economic life of 12 years, with an unguaranteed residual value of $10,200. Kimberly-Clark depreciates similar buildings on the straight-line method. | |
4. | The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. | |
5. | Kimberly-Clark’s incremental borrowing rate is 12% per year. The lessor’s implicit rate is not known by Kimberly-Clark. | |
6. | The yearly rental payment includes $5,816 of executory costs related to taxes on the property. |
Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2017 and 2018. Kimberly-Clark’s corporate year-end is December 31. (Hint: Do the table for ten periods based on present value of minimum lease payments.)
Date | Account Title | Debit | Credit |
1/1/17 | |||
(To record the lease.) | |||
12/31/17 | |||
(To record depreciation.) | |||
(To record interest.) | |||
1/1/18 | |||
(To record second payament.) | |||
12/31/18 | |||
(To record depreciation.) | |||
(To record interest.) | |||
44. Business Solutions sells upscale modular desk units and office chairs in the ratio of 3:2 (desk...
Business Solutions sells upscale modular desk units and office chairs in the ratio of 3:2 (desk unit:chair). The selling prices are $1,250 per desk unit and $500 per chair. The variable costs are $750 per desk unit and $250 per chair. Fixed costs are $120,000.
Required
1. Compute the selling price per composite unit.
2. Compute the variable costs per composite unit.
3. Compute the break-even point in composite units.
4. Compute the number of units of each product that would be sold at the break-even point.
45. Problem 6.32 FIFO Method, Physical Flow, Equivalent Units, Unit Costs, Cost Question Swasey Fab...
Problem 6.32 FIFO Method, Physical Flow, Equivalent Units, Unit Costs, Cost Assignment Swasey Fabrication, Inc., manufactures frames for bicycles. Each frame passes through three processes: Cutting, Welding, and Painting. In September, the Cutting Department of the Tulsa, Oklahoma, plant reported the following data: a. In Cutting, all direct materials are added at the beginning of the process. b. Beginning work in process consisted of 40,500 units, 20 percent complete with respect to direct labor and overhead. Costs in beginning inventory included direct materials $1,215,000; direct labor, $222,600; and applied overhead, $150,000. C. Costs added to production during the month were direct materials, $2,565,000; direct labor, $3,471,150. overhead was assigned using the following information: Activity Rate Actual Driver Usage $150 per inspection hour Inspection 4,000 inspection hours $750 per maintenance hour Maintenance 1.600 maintenance hours $300 per order 2,000 receiving orders Receiving d. At the end of the month, 1 21,500 units were transferred out to Welding, leaving 13,500 units in ending work in process, or 25 percent complete. Assume that the FIFO method is used.
1. Which of thee following statements concerning the comparison among actual costing, normal costing and standard costing is correct? a. Actual costing system values manufactured products with the actual material costs, actual direct labor costs, and actual manufacturing overhead costs. b. Normal costing systems values manufactured products with the actual material cost, actual direct labor costs and manufacturing overhead based on a predetermined manufacturing overhead rate with possible over/under applied application of factory overhead to be closed to costs of goods sold only if insignificant or to be closed prorated to cost of goods sold, work in process and finished goods inventory if significant. c. Standard costing system values manufactured goods with predetermined material cost, predetermined labor cost, and a predetermined manufacturing overhead costs with the possible over/under applied of factory overhead to be closed to costs of goods sold only if insignificant or to be closed prorated to cost of goods sold, work in process and finished goods inventory if significant. d. All of the above 2. When shall the job order costing be used instead of process costing? a. When the production process performs standardized or uniform procedures b. When the company performs a very long production runs c. When the company intends to use it for billing customers d. When the company produces low-value and homogeneous products 3. When shall the process costing to be used instead of job order costing? a. When the production process performs standardized or uniform procedures b. When the company performs a very short production runs that is based on customer specifications c. When the company intends to us it for billing customers d. When the company produces high – value and heterogenous products 4. Which of the following statements concerning in a job – order costing is correct? a. If the scrap is significant, the realizable value of the scrap is recognized as revenue at the time it is sold b. If the scrap is insignificant but traceable to the job that yielded the scrap, the net realizable value of the scrap shall be recorded as a deduction from cost of that specific job c. If the scrap is insignificant but common to all jobs, the net realizable of scrap shall be credited to manufacturing overhead control d. If the scrap is significant the net realizable value shall be capitalized as inventory of scrap with credit going to specific job if traceable to a particular job or manufacturing control if common to all jobs e. All of the above 5. Which of the following statements concerning rework costs in a job – order costing is correct? a. If the normal rework cost is attributable to a specific job, it shall be capitalized to that particular job b. If the normal rework cost is common to all jobs, it shall be debited to manufacturing overhead control c. If the rework is abnormal, it shall be recorded as period cost or expense d. All of the above
47. Tamar Co. manufactures a single product in one department. All direct materials are added at the ...
Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Conversion costs are added evenly throughout the process. During May, the company completed and transferred 25,700 units of product to finished goods inventory. Its 3,700 units of beginning work in process consisted of $20,500 of direct materials and $253,440 of conversion cost It has process at month-end. During the month, $520,050 of direct material costs and $2,424,960 of conversion Costs were charged to production.
On January 1 of this year, Nowell Company issued bonds with a face value of $290,000 and a coupon rate of 7.5 percent. The bonds mature in five years and pay interest semiannually every June 30 and December 31. When the bonds were sold, the annual market rate of interest was 7.5 percent.
1)What was the issue price on January 1 of this year?
2)What amount of interest expense should be recorded on June 30 and December 31 of this year?
3)What amount of cash is owed to investors on June 30 and December 31 of this year?
4)What is the book value of the bonds on December 31 of this year? December 31 of next year?
49. Part C Activity-Based Costing (30 marks) Siegel Company manufactures a product that is available ...
Part C Activity-Based Costing (30 marks) Siegel Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company's profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system. Sales of the deluxe model have been increasing rapidly Manufacturing overhead is assigned to products on the basis of direct labor-hours. For the current year, the company has estimated that it will incur $900,000 in manufacturing overhead cost and produce 5,000 units of the deluxe model and 40,000 units of the regular model. The deluxe model requires two hours of direct labor time per unit, and the regular model requires one hour. Material and labor costs per unit are as follow Model Deluxe Regular Direct materials $40 $25 Direct Labor S14. $7 Required 1. Using direct labor-hours as the base for assigning overhead cost to products, compute the pre- determined overhead rate. Using this rate and other data from the problem, determine the unit product cost of each model 2. Management is considering using activity-based costing to apply manufacturing overhead cost to products for external financial reports. The activity-based costing system would have the following four activity cost pools: Activity Cost Pool Activity Measure Estimated Overhead Cost Purchasing Purchase orders issued $204,000 Processing Machine-hours $182,000 Scrap/rework Scrap/rework orders issued $379,000 Shipping Number of shipments 35,000 Expected Activity Activity Measure Deluxe Regular Tota. Purchase orders issued 200 400 600 Machine-hours......... 20,000 15,000 35,000 Scrap/rework orders issued 1,000 1,000 2,000 Number of shipments 250 650 900
50. Part C Activity-Based Costing (30 marks) Siegel Company manufactures a product that is available ...
Part C Activity-Based Costing (30 marks) Siegel Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company's profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system. Sales of the deluxe model have been increasing rapidly Manufacturing overhead is assigned to products on the basis of direct labor-hours. For the current year, the company has estimated that it will incur $900,000 in manufacturing overhead cost and produce 5,000 units of the deluxe model and 40,000 units of the regular model. The deluxe model requires two hours of direct labor time per unit, and the regular model requires one hour. Material and labor costs per unit are as follow Model Deluxe Regular Direct materials $40 $25 Direct Labor S14. $7 Required 1. Using direct labor-hours as the base for assigning overhead cost to products, compute the pre- determined overhead rate. Using this rate and other data from the problem, determine the unit product cost of each model 2. Management is considering using activity-based costing to apply manufacturing overhead cost to products for external financial reports. The activity-based costing system would have the following four activity cost pools: Activity Cost Pool Activity Measure Estimated Overhead Cost Purchasing Purchase orders issued $204,000 Processing Machine-hours $182,000 Scrap/rework Scrap/rework orders issued $379,000 Shipping Number of shipments 35,000 Expected Activity Activity Measure Deluxe Regular Tota. Purchase orders issued 200 400 600 Machine-hours......... 20,000 15,000 35,000 Scrap/rework orders issued 1,000 1,000 2,000 Number of shipments 250 650 900