1.During the current year, Jacob, Alicia and Shawn, who are partners in the JAS Company, had average capital balances of $57,000, $49,000 and $64,000, respectively. The partners share profits and losses by allowing a 12% return on average capital, with any remaining income or loss divided in a ratio of 5:3:2. If the company's income for the current year was $73,800, Shawn's capital account would increase by:
a. $14,760
b. $18,360
c. $22,440
d. $27,784
2.Kidron Corporation has $5,000,000 in debt and $15,000,000 in total assets. If the debt carries an interest rate of 12% and the stockholders are require an 18% rate of return, Kidron's cost of capital is:
a. 13.5%
b. 14.8%
c. 16.0%
d. 18.0%
e. 18.5%
3.The balance sheet for The Pie Company reveals net liabilities growing slowly over four years but the company claims that they have not obtained any new debt. The Pie Company likely:
a. Has off balance sheet financing
b. Owes on lump sum notes signed in prior years
c. Issued bonds in prior years at a premium
d. Has issued preferred stock in the past four years
e. Is falsifying their financial statements
4.Jeffrey Morow made $64,000 on an investment which yielded a 7% return after 1 year. How much did Jeffrey invest?
a. $581,888
b. $640,000
c. $800,000
d. $914,286
5.Enderby Industries purchased a piece of equipment for $75,000, FOB shipping point. The company paid freight of $2,250, annual insurance of $1,000 and installation costs of $4,850. During the first six months of operation, the equipment was damaged requiring $6,505 in repair costs. The total cost assigned to the equipment should be:
a. $75,000
b. $77,250
c. $82,100
d. $88,605
e. $90,205
6. The Dunbar Company acquired a tract of land on 12/31/2005. The total cost of the land was $1,500,000. Carlton estimated that the land would be used for 20 years and then sold. Assuming the company uses straight-line depreciation, the total depreciation taken on the land for the year ended December 31, 2008 should be:
a. Amount cannot be determined without additional information
b. $75,000
c. $150,000
d. $70,000
e. $0