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Questions
Q:
A long-term investment is recorded at cost when purchased.
Q:
Unrealized gains and losses on trading securities are reported as part of net income.
Q:
Trading securities are securities that are purchased by trading other securities rather than by paying cash.
Q:
A company should report its portfolio of trading securities at its market value.
Q:
Net profit margin reflects the percent of net income in each dollar of net sales.
Q:
Profit margin is calculated by sales divided by net income.
Q:
Return on total assets can be separated into the profit margin ratio and total asset turnover.
Q:
If the exchange rate for Canadian and U.S. dollars is 0.7382 to 1, this implies that 2 Canadian dollars will buy 1.48 worth of U.S. dollars.
Q:
The price of one currency stated in terms of another currency is called a foreign exchange rate.
Q:
Foreign exchange rates fluctuate due to many factors including changing political and economic conditions.
Q:
Trading securities, held-to-maturity debt securities, and equity securities giving an investor significant influence over an investee are always considered short-term investments.
Q:
Consolidated statements are prepared as if a company is organized as one entity, with the amounts allocated for subsidiaries reported in the investment accounts.
Q:
Consolidated financial statements show the financial position, results of operations, and cash flows of all entities under the parent's control.
Q:
Comprehensive income refers to all changes in equity during a period except those due to investments and distributions to income.
Q:
Investments in trading securities are accounted for using the equity method with consolidation.
Q:
IFRS requires uniform accounting policies to be used throughout the group
of consolidated subsidiaries.
Q:
The equity method with consolidation is used in accounting for long-term investments in equity securities with controlling influence.
Q:
A long-term investment classified as equity securities with controlling influence implies that the investor can exert a controlling influence over the investee.
Q:
A controlling investor is referred to as the parent and the investee company is referred to as the subsidiary.
Q:
A company holds $40,000 of 7% bonds as a held-to-maturity security. The bondholder's journal entry to record receipt of the semiannual interest payment includes a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800.
Q:
An investor purchased $50,000 of bonds that were held to maturity. The investor's journal entry at maturity of the bonds should include a debit to Cash for $50,000 and a credit to Long-Term Investments for $50,000.
Q:
A company received dividends of $0.35 per share on 300 shares of stock. The journal entry to record this transaction would be to debit Cash for $105 and credit Dividend Revenue for $105.
Q:
When an equity security is sold, the sale proceeds are compared with the cost and if the cost is greater than the proceeds, a gain on the sale of the security is recorded.
Q:
Any cash dividends received from equity securities are recorded as Dividend Expense.
Q:
Debt securities are recorded at cost when purchased and interest revenue from investments in debt securities is recorded when earned.
Q:
Management's intent and the marketability of a security determine whether or not a security is classified as a long-term or short-term investment.
Q:
Management's intent determines whether an available-for-sale security is classified as long term or short term.
Q:
Long-term investments include investments in land or other assets not used in a company's operations.
Q:
Short-term investments are readily convertible to cash and are intended to be converted into cash within one year or the operating cycle, whichever is longer.
Q:
Cash equivalents are investments that are readily converted to known amounts of cash that mature within three months.
Q:
Equity securities reflect a creditor relationship such as investments in notes, bonds, and certificates of deposit.
Q:
Long-term investments can include funds set aside for special purposes such as bond sinking funds.
Q:
Long-term investments are usually held as an investment of cash for the use of current operations.
Q:
The future value of an ________________ annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.
Q:
An _____________ is a series of equal payments occurring at equal intervals.
Q:
To calculate present value of an amount, two factors are required: __________________ and ___________________.
Q:
_____________ is a borrower's payment to the owner of an asset for its use.
Q:
A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in seven years. The fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts for seven years. What amount must the company deposit annually?
Q:
You hope to retire in 10 years. Regrettably you are only just now beginning to save money for this purpose. You expect to save $6,000 a year at an annual rate of 8%. How much will you have accumulated when you retire?
Q:
A company is beginning a savings plan. It will save $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 10% interest?
Q:
Daley Co. lends $524,210 to Davis Corporation. The terms of the loan require that Davis repay the loan with six semiannual period-end payments of $100,000 each. What semiannual interest rate is Davis paying on the loan?
Q:
Big League Sports borrowed $883,212 and must make annual year-end payments of $120,000 each. If the applicable interest rate is 6%, how many years will it take Big League Sports to pay off the loan?
Q:
When you reach retirement age, you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702. The fund will earn 6% per year. For how many years will you be able to draw an even amount of $14,702?
Q:
A company borrows money from the bank by promising to make eight semiannual payments of $9,000 each. How much is the company able to borrow if the interest rate is 10% compounded semiannually?
Q:
A company borrows money from the bank by promising to make six annual year-end payments of $25,000 each. How much is the company able to borrow if the interest rate is 9%?
Q:
Madera Iron Sculpting is planning to save the money needed to replace one of its robotic welders in five years by making a one-time deposit of $20,000 today and four yearly contributions of $5,000 beginning at the end of year 1. The deposits will earn 10% interest. How much money will Sierra have accumulated at the end of five years to replace the welder?
Q:
Troy has $105,000 now. He has a loan of $175,000 that he must pay at the end of five years. He can invest his $105,000 at 10% interest compounded semiannually. Will Troy have enough to pay his loan at the end of the five years?
Q:
A company has $50,000 today to invest in a fund that will earn 7%. How much will the fund contain at the end of eight years?
Q:
A company is setting aside $21,354 today and wishes to have $30,000 at the end of three years for a down payment on a piece of property. What interest rate must the company earn?
Q:
A company is creating a fund by depositing $65,763 today. The fund will grow to $90,000 after eight years. What annual interest rate is the company earning on the fund?
Q:
Thompson Company has acquired a machine from a dealer which requires a payment of $45,000 at the end of five years. This transaction includes interest at 8%, compounded semiannually. What is the value of the machine today?
Q:
Annette has a loan that requires a $25,000 payment at the end of three years. The interest rate on the loan is 5%, compounded annually. How much did Annette borrow today?
Q:
A company needs to have $200,000 in four years, and will create a fund to ensure that the $200,000 will be available. If they can earn a 7% return, how much must the company invest in the fund today to equal the $200,000 at the end of four years?
Q:
What is interest?
Q:
Chad is setting up a retirement fund, and he plans on depositing $5,000 per year in an investment that will pay 7% annual interest. How long will it take him to reach his retirement goal of $69,080?
A. 13.816 years
B. 0.072 years
C. 10 years
D. 20 years
E. 5 years
Q:
An individual is planning to set-up an education fund for her children. She plans to invest $10,000 annually at the end of each year. She expects to withdraw money from the fund at the end of 10 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 10 years?
A. $ 46,320
B. $ 67,107
C. $100,000
D. $144,870
E. $215,890
Q:
What amount can you borrow if you make six quarterly payments of $4,000 at a 12 % annual rate of interest?
A. $24,838.00
B. $21,668.80
C. $31,049.00
D. $40,000.00
E. $44,800,00
Q:
A company is considering an investment that will return $20,000 at the end of each semiannual period for four years. If the company requires an annual return of 10%, what is the maximum amount it is willing to pay for this investment?
A. Not more than $63,398
B. Not more than $126,796
C. Not more than $80,000
D. Not more than $129,264
E. Not more than $160,000
Q:
Jon Shear expects an investment of $25,000 to return $6,595 annually. His investment is earning 10% per year. How many annual payments will he receive?
A. Five payments
B. Six payments
C. Four payments
D. Three payments
E. More than six payments
Q:
Crowe Company has acquired a building with a loan that requires payments of $20,000 every six months for five years. The annual interest rate on the loan is 12%. What is the present value of the building?
A. $72,096
B. $113,004
C. $147,202
D. $86,590
E. $200,000
Q:
What interest rate is required to accumulate $6,802.50 in four years from an investment of $5,000?
A. 5%
B. 8%
C. 10%
D. 12%
E. 15%
Q:
How long will it take an investment of $25,000 at 6% compounded annually to accumulate to a total of $35,462.50?
A) 4 years
B) 5 years
C) 6 years
D) 2 years
E) 10 years
Q:
Keisha has $3,500 now and plans on investing it in a fund that will pay her 12% interest compounded quarterly. How much will Keisha have accumulated after two years?
A. $4,433.80
B. $4,340.00
C. $4,390.40
D. $3,920.00
E. $3,500.00
Q:
A company expects to invest $5,000 today at 12% annual interest and plans to receive $15,529 at the end of the investment period. How many years will elapse before the company accumulates the $15,529?
A. 0.322 years
B. 3.1058 years
C. 5 years
D. 8 years
E. 10 years
Q:
Sam has a loan that requires a single payment of $4,000 at the end of three years. The loan's interest rate is 6%, compounded semiannually. How much did Sam borrow?
A. $3,358.40
B. $4,000.00
C. $3,660.40
D. $4,776.40
E. $3,350.00
Q:
A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return?
A. $ 55,606
B. $137,681
C. $222,425
D. $265,764
E. $350,000
Q:
Which interest rate column would you use to determine the factor from a present value table or a future value table for 8% compounded quarterly?
A. 12%
B. 6%
C. 3%
D. 2%
E. 1%
Q:
Interest is:
A. Time.
B. A borrower's payment to the owner of an asset for its use.
C. The same as a savings account.
D. Always a liability.
E. Always an asset.
Q:
The future value of an ordinary annuity is the accumulated value of each annuity payment with interest one period after the date of the final payment.
Q:
With deposits of $5,000 at the end of each year, you will have accumulated $38,578 at the end of the sixth year if the annual rate of interest is 10%.
Q:
The present value of $5,000 per year for three years at 12% compounded annually is $12,009.
Q:
An ordinary annuity refers to a series of equal payments made or received at the end of equal intervals.
Q:
An annuity is a series of equal payments occurring at equal intervals.
Q:
At an annual interest rate of 8% compounded annually, $5,300 will accumulate to a total of $7,210.65 in five years.
Q:
The future value of $100 compounded semiannually for three years at 12% equals $140.49.
Q:
The number of periods in a future value calculation can only be expressed in years.
Q:
Future value can be found if the interest rate (i), the number of periods (n), and the present value (p) are known.
Q:
Sandra has a savings account that is now $50,000. She started with $28,225 and earned interest at 10% compounded annually. It took five years to accumulate the $50,000.
Q:
In a present value or future value table, the length of one time period may be one year, one month, or any other length of time depending on the situation.
Q:
The present value of 1 formula is often useful when a borrowed asset must be repaid in full at a later date and the borrower wants to know its worth at the future date.