302 Exam 2 Sample CH 17 21 24
Sample of Previous Exams Questions & Problems
Kieso: Ch 17, 21, 24—Investments, Leases, and Full Disclosure
Multiple-choice
1.
The lessor capitalizes and amortizes initial direct costs for all types of leases except:
a. direct-financing leases. b. operating leases. c. there are no exceptions. d. sales-type leases.
2.
Johnson, Inc., leased an asset to Raymond Corporation. The cost of the asset to Johnson was $8,000.
Terms of the lease specify four-year life for the lease, an annual interest rate of 15 percent, and four year-end rental payments. The lease qualifies as a capital lease and is classified as a direct-financing lease. The asset reverts to Johnson after the fourth year, when its residual value is estimated to be $1,000. The amount of each rental payment is
a. $2,335. b. $2,000. c. $2,602 d. $2,501.
3. Nichols Enterprises has an investment in 25,000 shares of Elliott Electronics that Nichols accounts for as a security available for sale. Elliott shares are publicly traded on the New York Stock Exchange, and the Wall
Street Journal quotes a price for those shares of $10/share, but Nichols believes the market has not appreciated the full value of the Elliott shares and that a more accurate price is $12/share. Nichols should carry the Elliott investment on their balance sheet at:
A. $250,000.
B. $275,000, the midpoint of Nichols's range of reasonably likely valuations of Elliott.
C. $300,000.
D. either $250,000 or $300,000, as either are defensible valuations.
4. Hawk Corporation purchased ten thousand shares of Diamond Corporation stock in 2006 for $50 per share and classified the investment as securities available for sale. Diamond's market value was $60 per share on
December 31, 2007 and $65 on December 31, 2008. During 2009, Hawk sold all of its Diamond stock at $70 per share. In its 2009 income statement, Hawk would report:
A. A gain of $200,000.
B. A gain of $150,000.
C. A gain of $300,000.
D. A gain of $ 50,000.
5. In considering interim financial
Kieso: Ch 17, 21, 24—Investments, Leases, and Full Disclosure
Multiple-choice
1.
The lessor capitalizes and amortizes initial direct costs for all types of leases except:
a. direct-financing leases. b. operating leases. c. there are no exceptions. d. sales-type leases.
2.
Johnson, Inc., leased an asset to Raymond Corporation. The cost of the asset to Johnson was $8,000.
Terms of the lease specify four-year life for the lease, an annual interest rate of 15 percent, and four year-end rental payments. The lease qualifies as a capital lease and is classified as a direct-financing lease. The asset reverts to Johnson after the fourth year, when its residual value is estimated to be $1,000. The amount of each rental payment is
a. $2,335. b. $2,000. c. $2,602 d. $2,501.
3. Nichols Enterprises has an investment in 25,000 shares of Elliott Electronics that Nichols accounts for as a security available for sale. Elliott shares are publicly traded on the New York Stock Exchange, and the Wall
Street Journal quotes a price for those shares of $10/share, but Nichols believes the market has not appreciated the full value of the Elliott shares and that a more accurate price is $12/share. Nichols should carry the Elliott investment on their balance sheet at:
A. $250,000.
B. $275,000, the midpoint of Nichols's range of reasonably likely valuations of Elliott.
C. $300,000.
D. either $250,000 or $300,000, as either are defensible valuations.
4. Hawk Corporation purchased ten thousand shares of Diamond Corporation stock in 2006 for $50 per share and classified the investment as securities available for sale. Diamond's market value was $60 per share on
December 31, 2007 and $65 on December 31, 2008. During 2009, Hawk sold all of its Diamond stock at $70 per share. In its 2009 income statement, Hawk would report:
A. A gain of $200,000.
B. A gain of $150,000.
C. A gain of $300,000.
D. A gain of $ 50,000.
5. In considering interim financial