Blog

You win a lottery that offers two payout options:Option A: $50,000 lump sum today.Option B: $12,000 at the end of each year for 5 years.Assume a 6% annual discount rate.Choosing the option with the higher present value demonstrates the principle of:

Company sold 100 units during the year. The following data applies:Beginning inventory: 60 units @ $10 eachPurchases: 40 units @ $12 eachEnding inventory: 20 unitsUsing FIFO, what is the cost of goods sold?

You win a lottery that offers two payout options:Option A: $50,000 lump sum today.Option B: $12,000 at the end of each year for 5 years.Assume a 6% annual discount rate.Which option has the higher present value?

7. When a company pays a previously declared dividend, the effect on financial statements is:

5. Which of the following statements about cash dividends is true?

5. You’re evaluating whether to accept $10,000 in three years or a smaller amount today. What is the present value of $10,000 to be received in 3 years if the discount rate is 4% compounded annually?

4. When treasury stock is purchased, how does it affect the accounting equation?

9. Which of the following is a likely reason a company might choose not to pay dividends?

8. XYZ Corp. issues 2,000 shares of $5 par value preferred stock at $25 per share. What is the total paid-in capital in excess of par from this transaction?

Normal Balances & Account Classification (10 pts)Below is a list of accounts. For each account, indicate (a) its normal balance (Debit or Credit) and (b) whether it belongs to Assets (A), Liabilities (L), or Equity (E).AccountNormal Balance (Dr/Cr)Classification (A/L/E)a. Accounts Receivable____________________________________________b. Unearned Revenue____________________________________________c. Common Stock____________________________________________d. Accumulated Depreciation____________________________________________e. Notes Payable____________________________________________f. Dividends____________________________________________g. Supplies____________________________________________h. Interest Payable____________________________________________i. Retained Earnings____________________________________________j. Equipment____________________________________________k. Wages Payable____________________________________________l. Prepaid Insurance____________________________________________m. Service Revenue____________________________________________n. Land____________________________________________o. Salaries Expense____________________________________________