On July 1, 2011, Ace Electronics issued 10 million dollars of 8, 20-year bonds at 102. The bonds pay interest SEMIANNUALLY on December 31 and June 30. How much cash will Ace pay on December 31, 2011, the first interest payment date?
A) 800,000
B) 408,000
C) 400,000
D) 816,000
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Q. 2) This IT function's key control concern is that organization and IT strategic objectives are misaligned:
a. CIO
b. quality assurance
c. IT steering committee
d. systems development manager
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Q. 3) Financial leverage ________.
A) is always good for companies
B) refers to using borrowed money to increase earnings
C) is risk free
D) is the degree of negotiating ability
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Q. 4) By January 31 each year, employers must furnish each employee with a Wage and Tax Statement.
a. True
b. False
Indicate whether the statement is true or false
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Q. 5) Gnu Company began business January 1, 2011. The company has a liberal credit policy and has been experiencing a high rate of uncollectible accounts.
Due to the significance of this amount, the company uses the allowance method for accounting for bad debts. During 2011, credit sales were 400,000. The year-end accounts receivable balance was 170,000.
Part A: Assume that the company uses the sales method and estimates that 5 of credit sales will become bad debts. Select the column which represents the financial statement where the item will appear, and fill in the correct dollar amount:
Income Statement Balance Sheet
1. Bad debts expense
2. Net accounts receivable
3. Sales
4. Accounts receivable
5. Allowance for uncollectible accounts
Part B: Now assume that the company uses the accounts receivable method and estimates that 10 of accounts receivable will be uncollectible. Select the column which represents the financial statement where the item will appear, and fill in the correct dollar amount:
Income Statement Balance Sheet
1. Bad debts expense
2. Net accounts receivable
3. Sales
4. Accounts receivable
5. Allowance for uncollectible accounts
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Q. 6) On July 1, 2011, Ace Electronics issued 10 million dollars of 8, 20-year bonds at 102. The bonds pay interest SEMIANNUALLY on December 31 and June 30. The bonds sold at 102 because ________.
A) the market rate of interest was higher than 8
B) the market rate of interest was exactly 8
C) the market rate of interest was lower than 8
D) The answer cannot be determined from the information given.
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