Reference no: EM132716165

Questions -

Q1. The records of Coppell Sports showed the following information about a copy machine purchased for $40,000:

Accumulated depreciation at December 31, Year 3 $13,000

Depreciation for the first six months of Year 4 $2,000

On July 1, Year 4, the machine was sold for $20,000. How much is the gain or loss on disposal?

A. $5,000 loss

B. $10,000 loss

C. $5,000 gain

D. $15,000 gain

Q2. B&B Cars of Dallas, acquired an 80% interest in Grapevine Auto on December 31 for $485,000. B&B has the ability to exercise significant influence on management decisions. During the year, Grapevine Auto reported net income of $80,000 and paid cash dividends of $20,000.

How should B&B account for its investment in Grapevine Auto?

A. Apply the equity method and perform a full consolidation.

B. Apply the equity method and report the investment at market value at year end.

C. Apply mark-to-market accounting and consolidate the statements at year end.

D. Account for the investment as a special purpose entity.

Q3. Which one of the following is the least likely reason a manufacturer may acquire an ownership interest in another competitor's facility?

A. To exercise an active role in the business' activities

B. To take advantage of operating and/or cost synergies

C. To benefit from an overvaluing of assets in the investee company

D. To take over an inefficient management team

Q4. B&B Group reported three debt obligations:

$180,000, 3.5% notes payable

$1,450,000, 5% bonds issued at par

$3,680,000, 6% mortgage notes

If the market rate of interest averaged 4.5% during the year, what is B&B's weighted-average cost of debt?

A. 4.50%

B. 4.83%

C. 4.67%

D. 5.64%

E. None of the Above