The annual interest rate on the mortgage is:
a. 8%
b. 9%
c. 10%
d. 11%
1. Present value concepts are known by all the following terms except
a. time value of money.
b. moving money through time.
c. discounting cash flows.
d. determining return on equity
2. The internal rate of return is
a. where the net present value of a project is equal to zero.
b. determined by the point where cash inflows exceed cash outflows.
c. equal to the required rate of return on long-term investments.
d. the interest rate used by a company to compute dividends on common stock.
3. Present value techniques are helpful in evaluating all but which of the following?
a. Mortgages.
b. Leases.
c. Common Stock.
d. Bonds.
4. A positive net present value means the
a. the internal rate of return is 0.
b. required rate of return is greater than the internal rate of return.
c. internal rate of return is greater than the required rate of return.
d. present value of the cash outflows exceeds the present value of the cash inflows.
5. The Grant Company prepared the following mortgage amortization table:
The annual interest rate on the mortgage is:
a. 8%
b. 9%
c. 10%
d. 11%
6. The Grant Company prepared the following mortgage amortization table:
Interest expense for 1999 and interest payable at 12/31/99 would be:
a. interest expense would be $663.77 and interest payable would be $663.77
b. interest expense would be $165.21 and interest payable would be $165.21
c. interest expense would be $663.77 and interest payable would be $0
d. interest expense would be $165.21 and interest payable would be $0
7. The Grant Company prepared the following mortgage amortization table:
The mortgage payable at December 31, 1999 should be shown on the balance sheet at what amount?
a. $25,000.00
b. $24,781.81
c. $24,633.92
d. $24,708.11
8. Which of the following statements is not true about a capital lease?
a. fixed assets obtained under a capital lease agreement are depreciated by the lessee.
b. capital leases are cancellable at the option of the lessor
c. the leased asset is recorded on the worksheet of the lessee at its fair market value on the date of the lease.
d. each interest payment contains an interest component and a principal component to reduce the lease obligation
9. The Geer Company had the following lease. Note that only the first 5 years of the lease are shown.
The annual interest rate on the lease is:
a. 8%
b. 9%
c. 10%
d. 11%
10. The Geer Company had the following lease. Note that only the first 5 years of the lease are shown.
Interest expense for the year 2000 and interest payable at 12/31/2000 would be:
a. interest expense would be $15,000 and interest payable would be $15,000
b. interest expense would be $15,000 and interest payable would be $0
c. interest expense would be $20,000 and interest payable would be $20,000
d. interest expense would be $20,000 and interest payable would be $0
11. The Geer Company had the following lease. Note that only the first 5 years of the lease are shown.
The principal amount of the lease obligation liability at 12/31/2000 should be:
a. $193,705
b. $200,000
c. $150,000
d. $145,279
12. The Keeler Company had the following mortgage with a 9 percent annual interest rate. Payments are made monthly.
The interest, principal, and principal balance for 2/29/2000 should be:
a. interest should be $295.71, principal should be $110.00 and the principal balance should be $39,353.48
b. interest should be $295.82, principal should be $109.89 and the principal balance should be $39,353.59
c. interest should be $296.22, principal should be $109.49 and the principal balance should be $39,353.99
d. interest should be $295.98, principal should be $109.73 and the principal balance should be $39,353.75