Reference no: EM132505127
Question 1: A $1,000, two-year bond is issued on January 1, 2020 with a coupon rate of 8%. The market demands a yield rate of 10% for investments of similar risk. Interest will be paid on June 30th and December 31st each year. On January 1, 2020, the selling price of the bond will be
A)$1,000.
B)less than $1,000.
C)greater than $1,000.
D)cannot be determined from the information.
Question 2: Darwin Company purchased machinery on January 1, 2018 for $15,000. The machinery is estimated to have a three-year useful life with residual value of $2,400. The machine will be used in the three years 2018, 2019, and 2020 to produce 3,000, 2,000, and 1,000 units respectively. If the company uses the units-of-activity method, what will be the accumulated depreciation for the machinery on December 31, 2019?
A)$4,200
B)$6,300
C)$10,500
D)$12,600
Question 3: Which of the following costs associated with the purchase of an asset is/are not capitalized as part of the asset's cost?
A)Provincial sales tax that is non-refundable
B)Legal costs of purchase
C)Transportation costs
D)All of the above costs are capitalized
Question 4: The premium on a bonds payable account is initially
A)added to the carrying value of the bonds payable.
B)deducted from the carrying value of the bonds payable.
C)added to the face value of the bonds payable.
D)deducted from the face value of the bonds payable.
Question 5: Which of the following is not an example of a situation creating unearned revenue?
A)A store sells a $50 gift card.
B)A customer uses a $50 gift card in the store.
C)A passenger pays for an airline ticket for a flight next month.
D)A magazine receives payment for a 2-year subscription.
Question 6: Andrews Company purchased machinery on January 1, 2019 for $150,000. The machinery is estimated to have an eight-year useful life with residual value of $6,000. If the company uses a 25% declining balance depreciation method, what will be the depreciation expense for Andrews Company in 2020 (the second year of ownership)?
A)$18,000
B)$27,000
C)$28,125
D)None of the above
Question 7: Delta Company has an employee who is hired at an annual salary of $48,000. Income tax of $16,200 is deducted from the employee's pay cheques over the year. In addition, the company withholds CPP of 5% and EI of 2% from each pay cheque, as the employee's contribution for these payroll taxes. The company is also responsible for paying an additional 5% for CPP and 2.8% for EI to the government, as the employer's contribution for payroll taxes. What is the company's total annual cost of hiring this employee?
A)48,000
B)$51,744
C)$55,104
D)$67,560
Question 8: A company issues a 5% bond when the market yield rate for an investment of similar risk is 6%. This is an example of a bond issued at
A)the discount rate.
B)a premium.
C)a discount.
D)cannot tell from the information provided.
Question 9: If a company uses the units-of-activity method for calculating depreciation on an asset rather than the straight-line method, in the first year of the asset's use the depreciation expense will be
A)higher.
B)lower.
C)the same.
D)cannot tell from the information provided.
Question 10: Gordon Company purchased an asset on January 1, 2016 for $25,000. At that time, Gordon Company estimated the residual value would be $1,000 at the end of the asset's projected ten-year life. It is now January 1, 2020; Gordon Company now estimates the asset will have a residual value of $1,500, and has a remaining useful life of four years (will last until the end of 2023). Assuming Gordon Company uses the straight-line method, what will be the depreciation expense recorded for 2020?
A)$3,475
B)$2,937.50
C)$2,400
D)none of the above
Question 11: Which of the following should not be included as part of the capitalized cost of a piece of equipment?
A)Transportation costs to bring the equipment to the factory.
B)Salary costs of workers to install the equipment.
C)Legal costs to review the purchase contract for the equipment.
D)Costs of annual maintenance of the equipment.