These questions are so confusing. So I was wondering what are each of the formulas to solve each question or what steps I need to take to complete them? I've been trying and I can't find the correct answer.
____ 11. The Dayton Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance.
a. $29,000
b. $35,000
c. $39,000
d. $45,000
____ 13. A corporation has 50,000 shares of $28 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately
a. $7
b. $112
c. $37.50
d. $600
____ 14. The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)
a. $37,736
b. $42,400
c. $40,000
d. $2,400
____ 15. The present value of $30,000 to be received in two years, at 12% compounded annually, is (rounded to nearest dollar)
a. $23,916
b. $37,632
c. $23,700
d. $30,000
____ 18. Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?
a. $1,200 loss
b. $1,200 gain
c. $17,000 loss
d. $17,000 gain
____ 19. A $300,000 bond was redeemed at 103 when the carrying value of the bond was $315,000. The entry to record the redemption would include a
a. loss on bond redemption of $6,000.
b. gain on bond redemption of $6,000.
c. gain on bond redemption of $9,000.
d. loss on bond redemption of $9,000.
____ 20. On January 1, 2010, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, 2010. The December 31, 2012 carrying amount in the amortization table for this installment note will be equal to:
a. $0
b. $13,000
c. $14,252
d. $16,603
what number 19?
To solve each of these questions, you will need to use the relevant formulas or steps. Here's how you can approach each question:
11. To compute the year-end retained earnings balance, you need to start with the beginning retained earnings balance and consider the net income, dividends, and any adjustments. The formula to calculate the year-end retained earnings balance is:
Year-end Retained Earnings = Beginning Retained Earnings + Net Income - Dividends +/- Adjustments
In this case, the beginning retained earnings balance is given as $25,000, net income is $12,000, and dividends are $5,000. Since there is an adjustment for the prior year's depreciation expense, you need to add that to the formula.
Year-end Retained Earnings = $25,000 + $12,000 - $5,000 + $3,000
Calculating the sum, the year-end retained earnings balance is $35,000 (Option b).
13. To determine the market value of the stock after a stock split, you need to divide the current market value by the stock split ratio. The formula to calculate the post-split market value is:
Post-Split Market Value = Current Market Value / Stock Split Ratio
Here, the stock split ratio is 4-for-1. So, you divide the current market value of $150 by 4.
Post-Split Market Value = $150 / 4
Calculating the division, the post-split market value is $37.50 (Option c).
14. To calculate the present value of a future amount, you need to use the present value formula. The formula to calculate the present value is:
Present Value = Future Value / (1 + Interest Rate)^n
Here, the future value is $40,000, the interest rate is 6% (or 0.06 as a decimal), and it is compounded annually for 1 year (n = 1).
Present Value = $40,000 / (1 + 0.06)^1
Calculating the expression within the brackets, the present value is approximately $37,736 (Option a).
15. Similar to the previous question, to calculate the present value of a future amount, you use the present value formula. The formula is:
Present Value = Future Value / (1 + Interest Rate)^n
Here, the future value is $30,000, the interest rate is 12% (or 0.12 as a decimal), and it is compounded annually for 2 years (n = 2).
Present Value = $30,000 / (1 + 0.12)^2
Calculating the expression within the brackets, the present value is approximately $23,916 (Option a).
18. To calculate the gain or loss on redemption of bonds, you need to consider the bond's carrying value, the redemption price, and whether it is redeemed at a premium or discount. The formula to calculate the gain or loss on redemption is:
Gain or Loss on Redemption = Redemption Price - Carrying Value
Here, the Redemption Price is 103% of the Bonds Payable balance, and the Carrying Value is given as $900,000 with a Premium of $10,000.
Redemption Price = 103% of $900,000
Gain or Loss on Redemption = Redemption Price - Carrying Value
Calculating the values:
Redemption Price = 1.03 * $900,000
Gain or Loss on Redemption = Redemption Price - Carrying Value
The result is a $17,000 gain (Option d).
19. To determine the gain or loss on redemption of a specific bond, you need to consider the carrying value and the redemption price. The formula to calculate the gain or loss is:
Gain or Loss on Redemption = Redemption Price - Carrying Value
Here, the Redemption Price is given as 103% of $300,000, and the carrying value is $315,000.
Carrying Value = $315,000
Redemption Price = 103% of $300,000
Gain or Loss on Redemption = Redemption Price - Carrying Value
Calculating the values:
Redemption Price = 1.03 * $300,000
Gain or Loss on Redemption = Redemption Price - Carrying Value
The result is a $9,000 loss (Option d).
20. To determine the carrying amount of an installment note, you need to calculate the outstanding balance after a certain number of payments. The formula to calculate the carrying amount is:
Carrying Amount = Loan Amount - (Annual Payment * Remaining Years)
Here, the loan amount is $52,000, and the annual payment is $15,179. We need to calculate the remaining years to reach the December 31, 2012 carrying amount.
Remaining Years = Total Years - Years Passed
The total years for the loan is 4, and the years passed can be calculated by subtracting the current year (2012) from the year of the loan (2010).
Years Passed = 2012 - 2010
Then, calculate the carrying amount using the Carrying Amount formula:
Carrying Amount = $52,000 - ($15,179 * Remaining Years)
Calculating the values:
Years Passed = 2012 - 2010
Remaining Years = 4 - Years Passed
Carrying Amount = $52,000 - ($15,179 * Remaining Years)
The result is $13,000 (Option b).
By following these formulas and steps, you should be able to find the correct answers to each question.