On January 1, 2018, Reagan Inc. signed an agreement with Silver Leasing Co. to lease some equipment.  The lease payments are made by Reagan annually, beginning at the signing date and then every December 31st thereafter.  The equipment has an estimated 7-year useful life, title does not transfer to the lessee, and the equipment will be returned to the lessor on December 31, 2024. Reagan’s lease amortization schedule is shown below: Date Payments Interest Decrease in Balance Outstanding Balance 1/1/2018       576,615 1/1/2018 85,000   85,000 491,615 12/31/2018 85,000 24,581 60,419 431,196 12/31/2019 85,000 21,560 63,440 367,756 12/31/2020 85,000 18,388 66,612 301,143 12/31/2021 85,000 15,057 69,943 231,200 12/31/2022 85,000 11,560 73,440 157,761 12/31/2023 85,000 7,888 77,112 80,649 12/31/2024 84,681 4,032 80,649 0 What is the effective interest rate in the lease? (Round to the nearest 1%)

Which of the following would be a cash flow from investing activities?

RST Incorporated purchased 15,000 shares of its $2 par value common stock on September 23, 2018, for $24 per share.  They plan to hold these shares in treasury.  RST sold 10,000 of these shares on January 10, 2019, for $22 per share.  Which of the following is true regarding the sale on January 10, 2019?

ABC Ltd. uses the periodic inventory system and provided the following data: Date Units Cost Per Unit 1/2 Beginning Inventory 120 $80 4/3 Purchase 150 $85 5/9 Sale 175 9/18 Purchase 140 $86 10/17 Sale 180 11/5 Purchase 120 $88 What is Cost of Goods Sold using the FIFO cost flow assumption?

Alden Trucking Company purchased some trucks from Kenworthy Co. by issuing an installment note for $37,908,000 on January 1, 2018. The note agreement requires Alden to pay $10 million annually, starting on December 31, 2018 and continuing for a total of four more years (final payment December 31, 2022). Kenworthy charges the market interest rate of 10%. After the first payment was made on December 31, 2018, what was the installment note liability for the trucks on Alden’s books? (Round to the nearest dollar).

XYZ Unlimited purchased a machine for $63,000 on July 1, year 1. The machine had an estimated life of 6 years; estimated residual value of $3,000. XYZ sold the machine on December 31, year 4 for a sales price of $25,000. What was the gain or loss on the sale of the machine? XYZ uses the calendar year as its fiscal year and straight-line depreciation.

Evergreen Corp. failed to record rent expense for the last 6 months of the year that was prepaid at the beginning of the same year.  Which of the following is true regarding the effects of this error?

The Standard Company’s analysis of its inventory revealed that the net realizable value is $340,000 whereas the current amount in the Inventory account shows $365,000. What is the effect of the required writedown of inventory on the year-end financial statements? 

What is the definition of Goodwill?

Graystone Advertising’s accountant noted the following items in the review of December’s activity. What is the proper amount of expenses that should be recorded in the calendar year-end financial statements? The $700 electric bill for December was received by the end of the month and will be paid in January. The $3,000 rent for January was paid on December 31. Sales employees earned $2,000 in commissions based on December sales, however the commissions will not be paid until January. At the beginning of November, Graystone paid $2,100 for insurance coverage for November through January.