Quiz 5 Mini Calculation Drill
1
A company signs a $30,000, 8% note payable
on October 1.
How much interest expense should be recorded at December 31?
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A company signs a $30,000, 8% note payable on October 1.
How much interest expense should be recorded at December 31?
Interest = Principal × Rate × Time
$30,000 × 8% × 3/12
= $600
2
A company has $500,000 face value of bonds
with a 6% stated annual interest rate.
Interest is paid semiannually. How much cash interest is paid every six months?
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A company has $500,000 face value of bonds with a 6% stated annual interest rate.
Interest is paid semiannually. How much cash interest is paid every six months?
Annual cash interest:
$500,000 × 6% = $30,000
Semiannual payment:
$30,000 ÷ 2 = $15,000
3
Bonds have a face value of $400,000.
The remaining unamortized discount is $12,000.
What is the carrying value of the bonds?
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Bonds have a face value of $400,000. The remaining unamortized discount is $12,000.
What is the carrying value of the bonds?
Carrying Value = Face Value − Unamortized Discount
$400,000 − $12,000
= $388,000
4
A company retires bonds with a carrying value of
$246,000 by paying
$240,000.
Does the company record a gain or a loss, and for how much?
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A company retires bonds with a carrying value of $246,000 by paying $240,000.
Does the company record a gain or a loss, and for how much?
Carrying Value = $246,000
Cash Paid = $240,000
$246,000 − $240,000 = $6,000 gain
5
A corporation issues 10,000 shares
of $2 par value common stock
for $18 per share.
How much is recorded in Common Stock and Additional Paid-in Capital?
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A corporation issues 10,000 shares of $2 par value common stock for $18 per share.
How much is recorded in Common Stock and Additional Paid-in Capital?
Cash received: 10,000 × $18 = $180,000
Common Stock: 10,000 × $2 = $20,000
Additional Paid-in Capital:
$180,000 − $20,000 = $160,000
6
A corporation has 120,000 issued shares
and 15,000 treasury shares.
How many shares are outstanding?
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A corporation has 120,000 issued shares and 15,000 treasury shares.
How many shares are outstanding?
Outstanding Shares = Issued Shares − Treasury Shares
120,000 − 15,000
= 105,000 shares
7
A company has 80,000 shares outstanding.
The board declares a cash dividend of
$0.75 per share.
What total dividend is declared?
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A company has 80,000 shares outstanding. The board declares a cash dividend of $0.75 per share.
What total dividend is declared?
80,000 × $0.75
= $60,000
The declaration creates a $60,000 dividend liability.
8
Net income is $540,000.
Preferred dividends are $40,000.
Weighted-average common shares outstanding are
100,000.
What is earnings per share?
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Net income is $540,000. Preferred dividends are $40,000. Weighted-average common shares outstanding are 100,000.
What is earnings per share?
Income available to common stockholders:
$540,000 − $40,000 = $500,000
EPS:
$500,000 ÷ 100,000 = $5.00 per share