Question : 51. Max’s Tire Center Selected data from the financial statements of : 1224955

51. Max’s Tire Center
Selected data from the financial statements of Max’s Tire Center are provided below.

2012

2011

Total liabilities

$  150,000

$  138,000

Current liabilities

45,000

42,000

Total liabilities & equity

500,000

490,000

Cash flow from operations

160,000

90,000

Net sales

370,000

360,000

Capital expenditures

80,000

30,000

Refer to the selected data provided for Max’s Tire Center. Which of the following would result from a horizontal analysis of Max’s balance sheet? 
A. Total liabilities increased 8.7% during 2012.
B. Total liabilities increased 7.8% during 2012.
C. Total liabilities is 30% of total assets in 2012.
D. The total of liabilities & equity is $500,000 in 2012.

52. Refer to the selected data provided for Max’s Tire Center. Which of the following would result from a vertical analysis of Max’s balance sheet in 2012? 
A. Total liabilities increased 8.7% during 2012.
B. The total of liabilities & equity is $500,000 in 2012.
C. Total liabilities is 27.6% of total assets in 2012.
D. Total liabilities is 30% of total liabilities & equity in 2012.

53. Time Value of Money Tables
Use the information provided in the time value of money tables in the text to answer the question(s) that follow.

Refer to the Time Value of Money Tables. Homestead Company issued $1,000,000, 7-year, 8%, bonds with interest payable semiannually. The market rate was 6%. The issuance price of the bonds is: 
A. $1,111,560.
B. $1,000,000.
C. $1,151,480.
D. $1,112,944.

54. Banister Company wishes to issue $600,000 of 10-year, 7% bonds, with interest paid annually at the end of the year. The market rate of interest is currently 5%. What information is needed in order to determine the issue price of the bond? 
A. The market rate of interest, the stated rate of interest, the bond rating, and the bond life.
B. The face value of the bonds, the stated rate of interest, the market rate of interest, and the bond life.
C. The life of the bonds, the market rate of interest, the bond rating, and the face value of the bonds.
D. The face value of the bonds, the market rate of interest, the purpose of the issue, and the bond life.

55. The bond issue price is determined by calculating the: 
A. present value of the stream of interest payments and the future value of the maturity amount.
B. future value of the stream of interest payments and the future value of the maturity amount.
C. future value of the stream of interest payments and the present value of the maturity amount.
D. present value of the stream of interest payments and the present value of the maturity amount.

56. Under the effective interest method, the cash paid on each interest payment date will: 
A. decrease if bonds are issued at a premium.
B. increase if bonds are issued at a premium.
C. remain constant regardless of the issuance price.
D. increase if bonds are issued at a discount.

57. Which of the following statements about bond accounting under the effective interest method is correct? 
A. The cash interest paid is calculated as the bond face value ´ the market rate.
B. The interest expense is calculated as the carrying value ´ the market rate.
C. The difference between the cash interest paid and the interest expense is added to the carrying value of bonds sold at a premium.
D. The difference between the interest expense and the interest paid is deducted from the carrying value of bonds sold at a discount.

58. If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will: 
A. decrease as the bonds approach their maturity date.
B. increase as the bonds approach their maturity date.
C. remain constant throughout the bonds’ life.
D. fluctuate throughout the bonds’ life.

59. Tyson Construction Inc.
Use the information provided for Tyson Construction Inc. to answer the following question(s) using the effective interest method.

On January 2, 2012, Tyson Construction Inc. issued $1,000,000, 10-year bonds for $1,135,915. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%.

Refer to the information provided for Tyson Construction Inc. The interest expense on the bonds at June 30, 2012 is: 
A. $50,000.00.
B. $45,436.60.
C. $57,135.75.
D. $90,873.20.

60. Tyson Construction Inc.
Use the information provided for Tyson Construction Inc. to answer the following question(s) using the effective interest method.

On January 2, 2012, Tyson Construction Inc. issued $1,000,000, 10-year bonds for $1,135,915. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%.

Refer to the information provided for Tyson Construction Inc. Determine the cash interest to be paid on June 30, 2012. 
A. $50,000
B. $40,000
C. $42,400
D. $46,000