Section A (12 marks) Multiple Choice Questions Answer ALL questions. Choose the best answer. 1. Star Corporation purchased a piece of land, paying $2,000,000 cash and financing $9,000,000 of the purchase price with a 10-year, 10% installment note. The note calls for equal monthly payments that will result in the debt being completely repaid by the end of the tenth year. In this situation: A. the aggregate amount of the monthly payments is $9,000,000 B. each monthly payment is lower than the amount of interest accruing each month. c. the portion of each payment representing interest expense will decrease over the 10- year period, since principal is being paid off, yet the payment amount does not decrease D. the portion of each monthly payment representing repayment of principal remains the same throughout the 10-year period. 2. A company has 3,000 ordinary shares outstanding, with share capital of $30,000 and share premium of $150,000. A 3-for-1 share split will: A. decrease the number of ordinary shares outstanding to 1,000 only. B. increase the share premium to $90,000. C. not affect the number ordinary shares outstanding. D. decrease par value per ordinary share to $3.33. 3. Which of the following adjusting entries is/are correct? 1. Accumulated Depreciation Depreciation Expense II. Prepaid Rent Rent Expense III. Rent Revenge Uncamned Rent Revenue IV. Income Tax Expense Income Tax Payable A. IV only B. II and IV c. I, II and IV D. I, III and IV 4. ABC Service Company sold a truck for cash with a loss of $10,000 recognized. The truck has a cost of $220,000 and accumulated depreciation of $140,000. The cash received in this sale must have been: A. $70,000 B. $60,000 C. $80,000 D. $90,000 Page 3 of 9