1) The Coleman Company purchased land for $90,000 cash. Real estate brokers' commission was $5,000; attorney fees were $1,000; and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Coleman also built a chain-link fence around the property for $6,000. Under the cost principle, the cost of land would be recorded at what amount?

2) Which one of the following items is not considered a part of the cost of a truck purchased for business use? a. Sales tax
b. Truck license plate
c. Freight charges
d. Cost of lettering on side of truck

3) Presto Company purchased equipment and these costs were incurred:

Cash price $45,000
Sales taxes 3,500
Insurance during transit 640
Installation and testing 860
Total costs $50,000

Presto will record the acquisition cost of the equipment as a. $45,000.
b. $48,500.
c. $49,140.
d. $50,000.

4) Which depreciation method is most frequently used in businesses today?
a. Straight-line
b. Declining-balance
c. Units-of-activity
d. Double-declining-balance

5) Sargent Corporation bought equipment on January 1, 2016. The equipment cost $130,000 and had an expected salvage value of $10,000. The life of the equipment was estimated to be 6 years. What is the total depreciable cost of the equipment? a. $120,000.
b. $130,000.
c. $140,000.
d. $10,000.

6) Sargent Corporation bought equipment on January 1, 2016. The equipment cost $130,000 and had an expected salvage value of $10,000. The life of the equipment was estimated to be 6 years. What is the depreciation expense for the first year (2016) using the straight-line method of depreciation? a. $10,000.
b. $20,000.
c. $21,667.
d. $23,333.

7) Equipment that cost $200,000 and on which $100,000 of accumulated depreciation has been recorded was disposed of for $90,000 cash. The entry to record this event would include a. a loss of $10,000.
b. a gain of $10,000.
c. a credit to the Equipment account for $90,000.
d. a credit to Accumulated Depreciation for $90,000.

8) The method most commonly used to compute depletion is the
a. straight-line method.
b. double-declining-balance method.
c. units-of-activity method.
d. effective interest method.

9) Equipment purchased at the beginning of the fiscal year for $350,000 is expected to have a useful life of 5 years, or 16,000 operating hours, and a residual (salvage) value of $30,000. Compute the depreciation for the first year of use by each of the following methods:
(a) straight-line
(b) units-of-production (1,200 hours first year)
(c) double-declining-balance

10) Ann Ellis's regular rate of pay is $15 per hour with one and one-half times her regular rate for any hours which exceed 40 hours per week. She worked 48 hours last week. Therefore, her gross wages were
a. $720.
b. $600.
c. $780.
d. $1,080.

11) A 90-day note dated April 24 has a maturity date of
a. July 24.
b. July 23.
c. July 22.
d. July 21.

12) List two advantages and two disadvantages of becoming a corporation.

13) Match the following stockholders equity concepts to the appropriate answer.
a. articles of incorporation e. publicly held corporation
b. limited liability f. board of directors
c. Bylaws g. privately held corporation
d. Corporation h. Dividends
1. a legal entity, separate from the people who create and operate it
2. a company whose shares can be bought and sold on a stock exchange
3. rules and procedures for corporate conduct of its affairs
4. company whose shares are not bought or sold on a stock exchange
5. formally creates a corporation
6. creditors cannot pursue stockholder’s personal assets to satisfy claims
7. responsible for establishing corporate policies
8. earnings of a company distributed to stockholders

14) On April 1, the Prakash Corporation issued 10,000 shares of $1 par value common stock at $26 per share. Please write the journal entry:

15) What is the total stockholders' equity based on the following account balances?
Common Stock $580,000
Paid-In Capital in Excess of Par 90,000
Retained Earnings 180,000
Treasury Stock 10,000

16) On June 30, 2017, Arlington Company issued $1,500,000 of 10-year, 8% bonds (face value $1,000 per bond) at face value. Please write the journal entry to record the issuance of the bonds.

17) List two similarities and/or differences between equity securities (stocks) and debt securities (bonds).

18) All of the following are reported as current liabilities except
a. bonds payable.
b. notes payable.
c. accounts payable.
d. income taxes payable.

19) The national insurance commission for a developing country received a loan from the World Bank to cover the cost of: a) a 2-week trip to the U.S. for 8 top officials of the commission, to observe and learn about insurance regulation in the U.S., and b) a follow-up training program to be held in the developing country for 25 mid-level managers in the insurance industry.

Of the World Bank grant, some $30,000 was reserved to cover the cost of the in-country training, with the remaining funds to be used to cover travel costs for the U.S. trip. The World Bank issued a letter to the commission that specifically directed that the 8 travelers purchase economyclass-fare airline tickets for their trip to the U.S.

However, the 8 travelers felt that they were “big men” in their country and therefore should not travel in economy class, so they purchased 8 business-class airline tickets. Because the cost difference between economy-class and business-class was $3,750 per ticket, the entire $30,000 that was aside for the in-country training was used towards purchasing 8 business-class tickets.
As a result, the desperately-needed in-country training was never conducted. Please note that the country still is obligated to pay back the loan in full to the World Bank.

a) Yes, this is fraud! What internal control might have prevented this situation from occurring?

20) The 8-person delegation arrived in the US and spent two weeks visiting a university in Connecticut. One visitor announced that he actually was no longer a top official of the commission as he had retired two years earlier. He stated that he would not attending the group sessions and that instead he would fly to Kansas for 12 days to visit his adult son, and would return to Connecticut in time to fly back to Africa with the other 7 members of the delegation.

a) Please comment on the ethics of this retired official’s action.
b) Normally, the university would present each delegation member with an official certificate. Should the university award such a certificate to the retired official?

1) The Coleman Company purchased land for $90,000 cash. Real estat...