[reo]

Added numbers to each MCQ so it’s easy for me to know which question you’re replying to. All help is appreciated, cheers!

1.

On December 31, 2014, Rainbow Inc. borrowed $400,000 at 5% payable annually to finance the construction of a new building. In 2015, the company made the following expenditures related to this building: January 1, $200,000; June 1, $720,000; November 1, $240,000; December 31, $50,000. Included in January 1, 2015 expenditure was land costs of $80,000. The building was completed in February 2016. During 2015, two other debts are outstanding: 10-year, 8% bond of $400,000 and 6-year, 12% note of $100,000. Rainbow’s interest expense reported in 2015 income statement was:

A $21,120

B $23,460

C $25,380

D $21,000

2.

D&D Company purchased a minicomputer on January 1, 2013, at a cost of $120,000. The computer was depreciated using the sum-of-the-years’-digits method over an estimated six-year life with an estimated residual value of $15,000. On January 1, 2015, the estimate of useful life was changed to a total of nine years, and the estimate of residual value was changed to $3,400. What is the amount of depreciation expense for year 2015?

A $15,400

B $13,600

C $11,200

D $10,400

3.

Presented below is information related to equipment owned by Miller Company at December 31, 2015: Cost $800,000; Accumulated depreciation to date $150,000; Fair value $630,000. Assume that Miller intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $30,000. As of December 31, 2015, the equipment has a remaining useful life of 5 years. Assume the asset was not sold by December 31, 2016. The fair value of the equipment on that date is $660,000. It is expected that the cost of disposal is still $30,000. The amount of recovery of loss recognized on December 31, 2016 would be:

A $20,000

B $30,000

C $40,000

D $50,000

4.

Tim Andrew died, leaving to his wife Mary an insurance policy contract that provides that the beneficiary (Mary) can choose any one of the following four options. Money is worth 2.5% per quarter, compounded quarterly. One option is to allow Mary to receive $2,000 every 3 months for 4 years and $1,600 each quarter for the following 26 quarters, all payments payable at the beginning of each quarter. The present value of this option would be

A $47,698

B $48,070

C $49,279

D $50,070

Reo