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Finance
Q:
The currency in which a company presents its financial statements is known as the:
A.Multinational currency.
B.Price-level-adjusted currency.
C.Specific currency.
D.Reporting currency.
E.Historical cost currency.
Q:
Foreign exchange rates fluctuate due to changes in all but which of the following:
A.Political conditions.
B.Economic conditions.
C.Supply and demand for currencies.
D.Expectations of future events.
E.Whether the companies prepare financial statements under U.S. GAAP or IFRS.
Q:
All of the following statements relating to accounting for international operations are true except:
A.Foreign exchange gains or losses can occur when accounting for international sales transactions.
B.Gains and losses from foreign exchange transactions are accumulated in the Fair Value Adjustment Account and are reported on the balance sheet.
C.Gains and losses from foreign exchange transactions are accumulated in the Foreign Exchange Gain (or Loss) account.
D.The balance in the Foreign Exchange Gain (or Loss) account is reported on the income statement.
E.Foreign exchange gains or losses can occur when accounting for international purchases transactions.
Q:
The price of one currency stated in terms of another currency is called a(n):
A.Foreign exchange rate.
B.Currency transaction.
C.Historical exchange rate.
D.International conversion rate.
E.Currency rate.
Q:
Long-term investments in held-to-maturity debt securities are accounted for using the:
A.Fair value method with fair value adjustment to income.
B.Fair value method with fair value adjustment to equity.
C.Cost method without amortization.
D.Cost method with amortization.
E.Equity method.
Q:
Short-term investments in held-to-maturity debt securities are accounted for using the:
A.Fair value method with fair value adjustment to income.
B.Fair value method with fair value adjustment to equity.
C.Cost method with amortization.
D.Cost method without amortization.
E.Equity method.
Q:
Comprehensive income includes all except:
A.Revenues and expenses reported in the income statement.
B. Dividends paid to shareholders
C.Unrealized gains and losses on long-term available-for-sale securities.
D.All changes in equity for a period except those due to investments and distributions to owners.
E.Gains and losses reported in the income statement.
Q:
Consolidated financial statements:
A.Show the results of operations, cash flows, and the financial position of all entities under a parent's control, including all subsidiaries.
B.Show the results of operations, cash flows, and the financial position of the parent only.
C.Show the results of operations, cash flows, and the financial position of the subsidiary only.
D.Include the investments in the subsidiaries on the balance sheet.
E.Do not include a balance sheet.
Q:
Long-term investments can not include:
A.Held-to-maturity debt securities.
B.Securities with maturity dates within one operating cycle.
C.Available-for-sale equity securities.
D.Equity securities giving an investor significant influence over an investee.
E.Available-for-sale debt securities.
Q:
A controlling influence over the investee is based on the investor owning voting stock exceeding:
A.10%.
B.20%.
C.30%.
D.40%.
E.50%.
Q:
The investee company in a long term investment with controlling interest is called the:
A.Owner.
B.Subsidiary.
C.Parent.
D.Creditor.
E.Senior entity.
Q:
The controlling investor is called the:
A.Owner.
B.Subsidiary.
C.Parent.
D.Investee.
E.Senior entity.
Q:
Accounting for long-term investments in equity securities with controlling influence uses the:
A.Controlling method.
B.Equity method with consolidation.
C.Investor method.
D.Investment method.
E.Consolidated method.
Q:
Barnes Company holds $50,000 of 8% bonds that mature in six years as a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the semiannual interest payment?
A.debit Cash, $4,000; credit Long-Term InvestmentsHTM, $4,000.
B.debt Cash, $2,000; credit Long-Term InvestmentsHTM, $2000.
C.debit Cash, $2,000; credit Interest Revenue, $2,000.
D.debit Unrealized Gain-Equity, $2,000; credit Cash, $2,000.
E.debit Cash, $4,000; credit Unrealized Gain-Equity, $4,000.
Q:
Kendall Corp. purchased at par value $160,000 of Barker Company's 7% bonds that mature in 10 months. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the bonds until they mature. The journal entry to record Kendall's purchase of the bonds is:
A.debit Short-Term InvestmentsHTM $160,000; credit Cash, $160,000.
B.debit Cash, $169,333; credit, Short-Term InvestmentsHTM $169,333.
C.debit Cash, $160,000; credit Short-Term InvestmentsHTM $160,000.
D.debit Long-Term Investments-HTM $160,000; credit Cash $160,000.
E.debit Cash, $160,000; credit Long-Term Investments-HTM $160,000.
Q:
Kendall Corp. purchased at par value $75,000 of Shrem Company's 8% bonds that mature in three-years. The bonds pay interest semiannually on June 1 and December 1. Kendall plans to hold the bonds until they mature. When the bonds mature, Kendall should prepare the following journal entry:
A.debit Long-Term InvestmentsHTM, $75,000; credit Cash, $75,000.
B.debit Cash, $6,000; credit, Unrealized Gain-Equity, $6,000.
C.debit Cash, $75,000; credit Long-Term InvestmentsHTM, $75,000.
D.debit Unrealized Gain-Equity, $6,000; credit Cash, $6,000.
E.debit Cash, $75,000; credit Long-Term InvestmentsTrading, $75,000.
Q:
A company paid $37,800 plus a broker's fee of $525 to acquire 8% bonds with a $40,000 maturity value as a long-term investment. The company intends to hold the bonds to maturity. The correct entry to record the purchase of the bond investment is:
A. Debit Long-Term InvestmentsHTM $37,800; credit Cash $37,800.
B. Debit Long-Term InvestmentsHTM $38,325; credit Cash $38,325.
C. Debit Cash $40,000; credit Long-Term InvestmentsHTM $40,000.
D. Debit Long-Term InvestmentsHTM $37,800; debit Investment Expense $525; credit Cash $38,325
E. Debit Long-Term InvestmentsHTM $37,800; debit Loss on Investment $525; credit Cash $38,325.
Q:
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Q:
To calculate present value of an amount, two factors are required: The __________________ and the___________________.
Q:
The interest rate is also called the __________________ rate.
Q:
_____________ is a borrower's payment to the owner of an asset for its use.
Q:
654 is the interest factor on the Future Value of an Annuity table; n = 7; i = 7%
Fill-in-the-Blank Questions
Q:
A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years. The fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts for 7 years. What is the amount of the annual deposits that the company must make?
Q:
You are little late planning your retirement, but are looking forward to retiring in 10 years. 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 to purchase a new building. It will be saving $43,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 9% interest?
Q:
A company is beginning a savings plan. It will be saving $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:
2421 is the interest factor on the Present Value of an Annuity table; n = 6; i = 4%
Craig is paying a 4% semi-annual rate or an 8% annual rate of interest
Q:
Giuliani Co. lends $524,210 to Craig Corporation. The terms of the loan require that Craig make six semiannual period-end payments of $100,000 each. What semiannual interest rate is Craig paying on the loan?
Q:
3601 is the interest factor on the Present Value of an Annuity table; i = 6%; n =10
Q:
City Peewee League borrowed $883,212, and must make annual year-end payments of $120,000 each. If City's interest rate is 6%, how many years will it take to pay off the loan?
Q:
8017 is the PV factor on the Present Value of an Annuity table; i = 6%; n = 9
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:
4632 is the PV factor on the Present Value of an Annuity table; n = 8; i = 10%/2 = 5%
Q:
A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each. How much is the company able to borrow if the interest rate is 10% compounded semiannually?
Q:
4859 is the PV factor on the Present Value of an Annuity table; n = 6; i = 9%
Q:
A company borrows money from the bank by promising to make 6 annual year-end payments of $27,000 each. How much is the company able to borrow if the interest rate is 9%?
Q:
6410 is the FV factor on the Future Value of an Annuity table; n = 4; i = 10%
Accumulated Funds = $32,210 + $23,205 = $55,415
Q:
6105 is the FV factor on the Future Value table; n = 5; i = 10%
Future Value of an Annuity = Annuity * FV Factor
Future Value of an Annuity = $5,000 * 4.6410 = $23,205
Q:
Garcia Brass Fixtures is planning on replacing one of its machines 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 Garcia have accumulated at the end of five years to replace the machine?
Q:
6289 is the interest factor on the Future Value table; n =5 * 2 = 10; i = 10/2 = 5%
Goal of $175,000 " Future Value of $171,034.50 = Shortage of $3,965.50
Q:
Trey has $105,000 now. He has a loan of $175,000 that he must pay at the end of 5 years. He can invest his $105,000 at 10% interest compounded semiannually. Will Trey have enough to pay his loan at the end of the 5 years?
Q:
A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years?
Q:
7182 is the FV factor on the Future Value table; n = 8; i = 7%
Q:
3605 is the FV factor on the Future Value table; n = 3; i = 12%
Q:
7118 is the PV factor on the Present Value table; n = 3; i = 12%
Or, Alternative Solution: Future Value = Present Value * FV Factor
$30,000 = $21,354 * FV Factor; FV Factor = 1.4049
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:
3686 is the FV factor on the Future Value table; n = 8; i = 4%
Q:
7307 is the PV factor on the Present Value table; n = 8; i = 4%
Or, Alternative Solution: Future Value = Present Value * FV Factor
$90,000 = $65,763 * FV Factor; FV Factor = 1.3686
Q:
A company is creating a fund today by depositing $65,763. The fund will grow to $90,000 after 8 years. What annual interest rate is the company earning on the fund?
Q:
Protocol Company has acquired equipment from a dealer that requires equal payments of $12,000 at the end of the next five years. This transaction includes interest at 9%, compounded annually. What is the value of the machine today?
Q:
Mason Company has acquired a machine from a dealer that 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:
Jackson has a loan that requires a $17,000 lump sum payment at the end of four years. The interest rate on the loan is 5%, compounded annually. How much did Jackson borrow today?
Q:
Kelsey has a loan that requires a $25,000 lump sum payment at the end of three years. The interest rate on the loan is 5%, compounded annually. How much did Kelsey borrow today?
Q:
A company needs to have $150,000 in 5 years, and will create a fund to insure that the $150,000 will be available. If it can earn a 6% return compounded annually, how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?
Q:
Explain the concept of the future value of an annuity.
Q:
Explain the concept of the present value of an annuity.
Q:
Explain the concept of the future value of a single amount.
Q:
Explain the concept of the present value of a single amount.
Q:
Define interest.
Q:
The Masterson family is setting up a vacation fund, and they plan on depositing $1,000 per quarter in an investment that will pay 12% annual interest. What amount will they have available for their vacation at the end of 2 years?
A. $8,000.00
B. $8,960.00
C. $8,892.30
D. $8,240.00
E. $8,487.20
Q:
816 is the interest factor on the Future Value of an Annuity table; i= 7%; n = 10
Q:
Clara is setting up a retirement fund, and she plans on depositing $5,000 per year in an investment that will pay 7% annual interest. How long will it take her to reach her 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 his grandchildren. He plans to invest $10,000 annually at the end of each year. He 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 seven semiannual payments of $4,000 at an 8% annual rate of interest?
A. $28,000.00
B. $25,760.00
C. $31,049.00
D. $24,008.40
E. $35,691.20
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 $22,000 semiannually at the end of each semiannual period for 4 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 $69,738
B. Not more than $139,476
C. Not more than $ 88,000
D. Not more than $142,190
E. Not more than $176,000
Q:
7908 is the PV factor on the Present Value of an Annuity table; i = 10%; n = 5
Q:
Marc Lewis 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:
Russell Company has acquired a building with a loan that requires payments of $20,000 every six months for 5 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:
3605 is the FV factor on the Future Value table; n = 4; i = 8%
Q:
7350 is the PV factor on the Present Value table; n = 4; i = 8%
Or, Alternative Solution: Future Value = Present Value * FV Factor
$6,802.50 = $5,000 * FV Factor; Interest Factor = 1.3605
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:
4185 is the interest factor on the Future Value table; i = 6%; n = 6
Q:
7050 is the interest factor on the Present Value table; i = 6%; n = 6
Alternative Solution: Future Value = Present Value * FV Factor
$35,462.50 = $25,000 * FV Factor; FV Factor = 1.4185
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 2 years?
A. $4,433.80
B. $4,340.00
C. $4,390.40
D. $3,920.00
E. $3,500.00
Q:
1058 is the FV factor on the Future Value table; i = 12%; n = 10
Q:
3220 is the PV factor on the Present Value table; i = 12%; n = 10
Or, Alternative Solution:
Future Value = Present Value * FV Factor
$15,529 = $5,000 * FV Factor
Interest Factor = 3.1058;
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:
Jessica received a gift of $7,500 at the time of her high school graduation. She invests it in an account that yields 10% compounded semi-annually. What will the value of Jessica's investment be at the end of 5 years?
A. $8,250.00
B. $11,250.00
C. $12,216.75
D. $9,375.00
E. $10,500.00