# CVJI 83.doc

5. Jones Distributing Corp. can sell common stock for \$27 per share and its investors require a 17% return. However, the administrative or flotation costs associated with selling the stock amount to \$2.70 per share. What is the cost of capital for Jones Distributing if the corporation raises money by selling common stock? (Points : 1)
27.00%
18.89%
18.33%
17.00%
Quattro Corporation signed a lease from Cinco Leasing Company on July 1, Year 1, for equipment having a five-year useful life. The lease does not include any option to purchase the equipment at the end of the four-year lease term, nor does it include a provision for ownership transfer. Five equal payments of \$10,000 per year are required by the terms of the lease, with the first payment due upon signing. Quattro’s incremental borrowing rate is 8 percent, but its implicit interest rate is unknown.
Present value of an annuity at 8% for 5 years = 3.993
Present value of an annuity at 8% for 4 years = 3.312
On its December 31, Year 1, financial statements, Quattro would display the following amounts in the indicated accounts under U.S. GAAP:
Accumulated Lease
Equipment Depreciation Payable

\$0 \$0 \$0
\$43,120 \$5,390 \$33,120
\$43,120 \$4,312 \$33,120
\$49,930 \$6,241 \$39,930

22. Data pertaining to a company’s joint production for the current period follows:
A B
Quantities produced 200lbs 100lbs
Processing cost after \$1100 \$400
Products are separated
Market value at point of \$8/lb \$16/lb
separation
Compute the cost to be allocated to Product A for this period’s \$660 of joint costs if the value basis is used.
a. \$330.00.
b. \$440.00.
c. \$220.00.
d. \$194.12.
e. \$484.00.
23. Job order production is also known as:
a. Mass production.
b. Process production.
c. Unit production.
d. Customized production.
e. Standard costing.
24.. Medina Corp. uses the weighted average method for inventory costs and had the following information available for the year. Equivalent units of production for the year are:
Beginning inventory of goods in process (40% complete,\$1100)=200 units
Ending inventory of goods in process (80% complete)=400 units
Total units started during the year=3200 units
a. 3,200 units.
b. 3,320 units.
c. 3,240 units.
d. 3,520 units.
e. 3,800 units.

25. Abbe Company reported the following financial numbers for one of its divisions for the year; average total assets of \$4,100,000; sales of \$4,525,000; cost of goods sold of \$2,550,000; and operating expenses of \$1,372,000. Compute the division’s return on assets:
a. 30.3%.
b. 23.6%.
c. 13.3%.
d. 10.4%.
e. 14.7%.
Clothier, Inc. has a target capital structure of 40% debt and 60% common equity, and has a 40% marginal tax rate. If Clothier’s yield to maturity on bonds is 7.5% and investors require a 15% return on Clothier’s common stock, what is the firm’s weighted average cost of capital?
7.20%
10.80%
12.00%
12.25%

On December 31, Year 1, an entity revalued its buildings to their fair value of \$2,700,000 and recorded a revaluation gain of \$200,000. On December 31, Year 4, the buildings had a carrying value of \$2,295,000 and a recoverable amount of \$2,000,000. What amount of impairment loss will the entity report on its December 31, Year 4 income statement?
a 0
b 95,000
c 200,000
d 295,000
1. The LFM Company makes and sells a single product, Product T. Each unit of Produt T requires 1.3 hours of direct labor at a rate of \$9.10 per direct-labor hour. LFM Company needs to prepare a direct-labor budget for the second quarter of next year. The budgeted direct-labor cost per unit of Product T would be
A. \$11.83
B. \$10.40
C. \$7.00
D. \$9.10
The Danville Company is considering a \$50 million expansion (capital expenditure) program next year. The company wants to determine approximately how much additional financing will be needed if the expansion program is undertaken. Next year the company expects to earn \$25 million after interest and taxes. The company also plans to increase its dividends from \$5 million to \$7 million. If the expansion program is accepted, the company expects working capital requirements to increase by approximately \$8 million next year. Long-term debt retirement obligations total \$3 million next year and depreciation is expected to be \$13 million. No fixed assets are expected to be sold next year.
a. \$30 million
b. \$43 million
c. \$32 million
d. \$22 million
Calculate the amount of money you will have in an account at the end of the five years with an initial deposit of \$5,000 and a 10% interest rate if interest is compounded
a. Annually
b. Semi-Annually
c. Quarterly

A method is invoked by a:
A. return statement.