Question

4/ On November 1, 2018, Tim's Toys borrows $32,400,000 at 11% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What is the balance of interest payable for the loan as of December 31, 2018?

Multiple Choice

• $297,000.

• $148,500.

• $1,782,000.

• $594,000.

• 5/ On June 1, Royal Corp. began operating a service company with an initial cash investment by shareholders of $3,927,000. The company provided $6,600,000 of services in June and received full payment in July. Royal also incurred expenses of $3,032,000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of $578,000. What was the company's income before income taxes for the two months ended July 31 under the following methods of accounting?

  	Cash Basis			Accrual Basis
  a.	$	3,568,000		$	3,568,000
  b.	$	7,495,000		$	2,990,000
  c.	$	6,600,000		$	3,568,000
  d.	$	6,600,000		$	2,990,000

  Multiple Choice

• Option a.

• Option b.

• Option c.

• Option d.

Answer 1

4/ the answer will be D- 594000

(32400000*11*2)/(12*100)

5/ The answer would be part C: 660000 & 3568000

Cash basis : revenue from services is only received in July

Accrual basis : 660000-3032000

Here , as dividend payment is not treated as an expense while calculating the income , there will be no impact of it .