Multiple choice

1. On September 1, 2010, Donna Equipment signed a one-year, 10% interest-bearing note payable for $52,000. Assuming that Donna Equipment maintains its books on a calendar year basis, how much interest expense that should be reported in the 2011 income statement? (Do not round intermediate calculations.)

$1,733

$3,467

$5,200

$3,900

2. Short Company purchased land by paying $29,000 cash on the purchase date and agreeing to pay $29,000 for each of the next eight years beginning one-year from the purchase date. Short's incremental borrowing rate is 9%. At what amount would the land be reported at on the balance sheet? (Use Table 2) (Round "PV Factor" to 4 decimal places.)

$232,000

$116,433

$261,000

$189,509

3. Rudy Corporation is looking to purchase a building costing $460,000 by paying $80,000 cash on the purchase date, and agreeing to make annual payments for the next eight years; the first payment is due one year after the purchase date. Rudy's incremental borrowing rate is 8%. How much will each of the annual payments be? (Use Table 2) (Round "PV Factor" to 4 decimal places and final answer to nearest dollar amount.)

rev: 06-16-2011 

$80,047

$47,500

$56,126

$66,126

4. What is the correct entry for the sale of 2,900 shares of $25 par value preferred stock for $188,500 cash?

A Cash 188,500 

Preferred stock 188,500 

B Cash 72,500 

Preferred stock 72,500 

C Cash 188,500 

Gain on sale of preferred stock 116,000 

Preferred stock 72,500 

D Cash 188,500 

Preferred stock 72,500 

Capital in excess of par, preferred stock 116,000 

Option A

Option C

Option B

Option D