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Chapters 1-4 The Accounting Cycle
Chapters 5-8 Current Assets
Chapters 9-11 Long-Term Assets
Chapters 12-14 Liabilities/Equities
Chapters 15-16 Using Information
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20 Managerial/Cost
Chapters 21-24 Budgeting/Decisions

Chapter 13 - Multiple Choice

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Chapter 13 – Multiple Choice

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Question 1 of 8

1. Question
The present value factor at 8% for one period is 0.92593, for two periods is 0.85734, for three periods is 0.79383, for four periods is 0.73503, and for five periods is 0.68058. Given these factors, what amount should be deposited in a bank today to grow to $100 three years from now?
- $100/0.79383
- $100/(0.92593/3)
- ($100/0.92593 + $100/0.85734 + $100/0.79383)
- $100 X 0.79383
Correct

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Question 2 of 8

2. Question
You are thinking of borrowing $250,000 to buy a new house. If you are going to finance this purchase at 12% interest per annum, and make 360 level monthly payments to pay off the loan, how much will your payments be?
- $250,000/360
- $250,000/present value factor for lump sum at 360 months and 1% per period
- $250,000/present value factor for annuity of 360 months at 1% per period
- $250,000 X present value factor for annuity of 360 months at 1% per period
Correct

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Question 3 of 8

3. Question
Assume that Kamchatny Vladimir borrowed $100,000 on January 1 of Year 1, at 5% interest per annum. On December 31, of Year 1, an $8,000 payment is made. On December 31, of year 2, another $8,000 payment is made. Using normal assumptions about interest and principal reduction, how much is the unpaid balance of Vladimir’s loan after the second payment?
- $100,000
- $94,000
- $93,850
- $84,000
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Question 4 of 8

4. Question
Bonds payable should be disclosed on the balance sheet.
- At their face value minus any unamortized premiums.
- At their face value plus any unamortized premiums.
- At their maturity value.
- At their face value.
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Question 5 of 8

5. Question
When the contract interest rate for a bond exceeds the effective interest rate of the bond, then:
- The price of the bond will be equal to the future cash flow associated with the bond.
- The bond will be issued at a premium.
- The bond will be issued at a discount.
- The face value of the bond will fluctuate over its life.
Correct

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Question 6 of 8

6. Question
On April 1, 20X1, German Corporation issued $100,000 of 7%, 5-year bonds dated April 1, 20X1, at 101. Interest is paid on March 31 and September 30. The proper entries to record bond interest expense for the (entire) year ended 20X1 would include a decrease in interest expense for premium amortization in the amount of (round to the nearest dollar and assume straight-line amortization):
- $0
- $117
- $150
- $200
Correct

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Question 7 of 8

7. Question
Jeske Company issued $1,000,000 of 8% bonds at a time when the market rate of interest was 10%. If the bonds were issued at a $50,000 discount and interest was paid annually, how much was interest expense for the first full year of the bond issue (utilize the effective-interest amortization technique)?
- $76,000
- $80,000
- $95,000
- $100,000
Correct

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Question 8 of 8

8. Question
Billings Corporation retired $1,000,000 face of bonds payable. At the time of the retirement, the bonds had unamortized discount of $20,000, and all interest accruals and payments were current. Under the outstanding covenants, Billings was required to pay the bond holders 103.
- The transaction caused Billings to recognize a loss of $50,000.
- The transaction caused Billings to recognize a gain of $50,000.
- The transaction caused Billings to recognize a loss of $30,000.
- The transaction caused Billings to recognize a gain of $20,000.
Correct

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Typical financial statement accounts with debit/credit rules and disclosure conventions

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Time Value of Money

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Chapters 1-4
Chapters 5-8
Chapters 9-11
Chapters 12-14
Chapters 15-16
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20
Chapters 21-24
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