CPA FAR Practice Exam 2 Welcome to your CPA FAR Practice Exam 2 This test is designed to prepare you mentally for the actual CPA FAR Exam with the same number of (66 questions) and the same time allowed (82 minutes) as the actual exam. The CPA FAR Exam is breakdown into four (4) Parts. Here are the Four (4) Domains of the CPA FAR Exam with the weightage and number of questions in this practice exam: 1. Conceptual Framework, Standard-Setting, and Financial Reporting [20 Questions] - 25-35% 2. Select Financial Statement Accounts [23 Questions] - 30-40% 3. Select Transactions [16 Questions] - 20-30% 4. State and Local Governments [07 Questions] - 5-15% Please click NEXT to start your Free CPA FAR Practice Exam right away. Best of Luck! 1. Under GAAP, each of the following criteria is required for an item to be recognized in a company's financial statements, except The item is measurable in monetary terms. The item reflects the expectations of investors. The item meets the definition of an element. The item can make a difference in the decisions of financial statement users. None 2. Barr Co. has total debt of $420,000 and stockholders' equity of $700,000. Barr is seeking capital to fund an expansion. Barr is planning to issue an additional $300,000 in common stock and is negotiating with a bank to borrow additional funds. The bank is requiring a debt-to-equity ratio of 0.75. What is the maximum additional amount Barr will be able to borrow? $225,000 $330,000 $525,000 $750,000 None 3. "At the end of Year 1, a defined benefit pension plan reported net assets available for benefits of $650,000. During Year 2, the following items were recorded: Investment income $ 300,000 Contributions 1,350,000 Administrative expenses 150,000 Benefits paid directly to participants 900,000 What amount should the plan report as year-end net assets available for benefits in the Year 2 statement of changes in net assets available for benefits?" $600,000 $1,250,000 $1,650,000 $2,300,000 None 4. Roaster Co. paid $800,000 for a loan with $1,000,000 face value that has experienced credit deterioration since its initial issuance. At the time of purchase the estimated expected credit loss on the unpaid principal was $65,000. What amount should Roaster report as the amortized cost for the investment on the date of acquisition? $800,000 $865,000 $935,000 $1,000,000 None 5. On September 25, Year 1, Colson Corp. sold 200,000 widgets to Cavanaugh Corp. at $5 per unit. Half of the units were delivered on November 15, Year 1, and the remaining 100,000 units were delivered on January 20, Year 2. At the time of sale, Cavanaugh paid 40% of the contract price and agreed to pay the rest in equal installments on the two delivery dates. What amount of accrual-basis revenue should Colson recognize from this sale in Year 1? $0 $500,000 $700,000 $1,000,000 None 6. During the first quarter of Year 3, Tech Co. had income before taxes of $200,000, and its effective income tax rate was 15%. Tech's Year 2 effective annual income tax rate was 30%, but Tech expects its Year 3 effective annual income tax rate to be 25%. In its first quarter interim income statement, what amount of income tax expense should Tech report? $0 $30,000 $50,000 $60,000 None 7. Which of the following items is not subject to the application of intra-period income tax allocation? Discontinued operations. Income from continuing operations. Other comprehensive income. Operating income. None 8. Yellow Co. received a large workers' compensation claim of $90,000 in the third quarter for an injury occurring in the third quarter. How should Yellow account for the transaction in its interim financial report? Recognize $30,000 for each of the first three quarters. Recognize $90,000 in the third quarter. Recognize $22,500 ratably over the four quarters of the year. Disclose the $90,000 in the third quarter and recognize it at year end. None 9. Alejo Co., a calendar-year corporation, reported income before income tax expense of $40,000 for the first quarter of Year 5. The statutory tax rate for Year 5 is 20%. Alejo's effective annual income tax rate for Year 4 was 18%. As of the first quarter of Year 5, Alejo calculated its first quarter effective tax rate to be 15% and estimates its Year 5 ETR will be 12%. What amount should Alejo report as income tax expense in its interim income statement for the first quarter of Year 5? $4,800 $6,000 $7,200 $8,000 None 10. Which of the following is the annual report that is filed with the United States Securities and Exchange Commission? Form 8-K. Form 10-K. Form S-1. Form 10-Q. None 11. A government entity is required to include a statement of cash flows in which of the following financial statements? Governmental fund financial statements. Government-wide financial statements. Proprietary fund financial statements. Fiduciary fund financial statements. None 12. A state had general obligation bonds outstanding that required semiannual interest payments. State law allowed for the general fund to make debt payments without the use of a fiscal agent. Which of the following accounts would have decreased when the state paid the interest due? Interest expenditures. Interest payable. Interest expense. Fund balance. None 13. A government's police department reports appropriations of $10,000, encumbrances of $2,000, and expenditures of $5,000. What is the amount of available appropriations for the police department? $3,000 $5,000 $7,000 $8,000 None 14. Harland County received a $2,000,000 capital grant to be equally distributed among its five municipalities. The grant is to finance the construction of capital assets. Harland had no administrative or direct financial involvement in the construction. In which fund should Harland record the receipt of cash? Custodial fund. General fund. Special revenue fund. Private purpose trust fund. None 15. Which of the following funds of a local government would report transfers to other funds as an other financing use? Enterprise. Internal service. Pension trust. General. None 16. On January 2, City of Walton issued $500,000, 10-year, 7% general obligation bonds. Interest is payable annually, beginning January 2 of the following year. What amount of bond interest is Walton required to report in the statement of revenue, expenditures, and changes in fund balance of its governmental funds at the close of this fiscal year, September 30? $0 $17,500 $26,250 $35,000 None 17. What is a primary purpose and focus of the statement of activities for a nongovernmental, not-for-profit organization? To demonstrate the ability of the organization to meet donor-imposed restrictions on resources. To demonstrate how the organization's resources are used in providing various programs and services. To provide relevant information about the cash receipts and cash payments of the organization during a period. To provide a cost-benefit analysis of the use of the organization's resources. None 18. How should a nongovernmental, not-for-profit organization report investments in its financial statements? Historical cost with gains and losses reported in the statement of activities. Amortized cost with gains and losses reported in the statement of financial position. Fair value with gains and losses reported in the statement of activities. Present value with gains and losses reported in the statement of financial position. None 19. Arkin Corp. is a nongovernmental not-for-profit organization involved in research. Arkin's statement of functional expenses should classify which of the following as support services? Salaries of staff researchers involved in research. Salaries of fundraisers for funds used in research. Costs of equipment involved in research. Costs of laboratory supplies used in research. None 20. A statement of financial position for a nongovernmental not-for-profit organization reports amounts for which of the following classes of net assets? Current. Long-term. Common stock. Without donor restrictions. None 21. A $100,000 gift was received by Group Home Projects, a nongovernmental not-for-profit organization. Group's board of directors stipulated that this gift must be invested for a period of four years, with the income to be used for general operations. How should the gift be reported in Group Home's statement of activities? Contribution revenue with donor restrictions. Contribution revenue without donor restrictions. Contribution revenue without donor restrictions of $25,000 and contribution revenue with donor restrictions of $75,000. Deferred revenue. None 22. Ciro Inc. entered a binding agreement with Sol Corp. to provide landscaping services. Sol will pay Ciro $1,000 at the beginning of each month for the next 24 months of service. Sol has poor credit, and Ciro is unsure whether Sol will default on the contract. If Sol defaults, Ciro will stop performing the monthly service. Does the agreement meet the collectability criterion to be considered a contract for revenue recognition purposes? No, because Sol has poor credit and is likely to default on the contract. No, because Ciro will stop performing the monthly service if Sol defaults. Yes, because the contract is legally binding and entitles Ciro to payment. Yes, because Sol's payments are made in advance of receiving services None 23. Clement Corp., a pharmaceutical manufacturer, licensed a drug patent to Global Corp. for royalties of 5% of drug sales. In previous years, Global's sales of the drug were $300,000, but in Year 5, Clement estimated that Global's sales would most likely be $360,000. What amount of royalty revenue should be recognized for Year 5? $0 $15,000 $16,500 $18,000 None 24. Bareb Co. sells 20 televisions to a new customer for $20,000. The customer is opening a sports bar, and Bareb is aware the sports bar will be subject to intense competition. Upon delivery, a $5,000 nonrefundable down payment is collected and the remaining $15,000 is due evenly over the next two years. If the customer defaults, Bareb's only recourse is to repossess the televisions. Bareb is uncertain as to the collectability of the remaining payments. What amount of revenue, if any, should Bareb recognize upon transfer of the televisions? $0 $5,000 $15,000 $20,000 None 25. On January 10, Year 2, Box, Inc. purchased marketable debt securities of Knox, Inc. and Scot, Inc. Box classified both debt securities as noncurrent assets but does not intend to hold them to maturity. At December 31, Year 2, the cost of each investment was greater than its fair value. The loss on the Knox investment was considered noncredit-related, and Box intends to sell the investment. The loss on Scot was considered temporary and noncredit-related. How should Box report the loss related to these investments in its Year 2 financial statements? There is an unrealized holding loss for both investments recognized in other comprehensive income. There is a realized loss for both investments recognized in net income. There is an unrealized holding loss for Scot recognized in other comprehensive income and a realized loss for the Knox investment recognized in net income. There is an unrealized holding loss for Knox recognized in other comprehensive income and a realized loss for the Scot investment in net income. None 26. At the beginning of Year 2, a company invested $40,000 in a marketable debt security. At that time, the security was appropriately classified as an available-for-sale security. At the end of Year 2, the company recorded the following related to the security: a $1,000 increase in the allowance for credit losses and an $10,500 increase in the valuation account for unrealized losses. Management does not intend to sell the security. What amount will the company report as the carrying value for the security? $28,500 $29,500 $30,500 $39,000 None 27. A marketable debt security is transferred from trading securities to the available-for-sale debt securities category. At the transfer date, the security's cost exceeds its fair value. What value is used to record the transfer? Market value, regardless of whether the decline in market value below cost is considered permanent or temporary. Market value, only if the decline in market value below cost is considered permanent. Cost, if the decline in market value below cost is considered temporary. Cost, regardless of whether the decline in market value below cost is considered permanent or temporary. None 28. During a reporting period, a computer manufacturing company used raw materials of $50,000, had direct labor costs of $75,000, and had factory overhead of $30,000. Other expenses were for advertising of $5,000, staff salaries of $10,000, and credit losses of $3,000. The company had no beginning inventory. The ending inventory was $20,000. What amount was the company's cost of goods sold during the reporting period? $135,000 $140,000 $155,000 $175,000 None 29. Main Co. began its manufacturing business last year. Main uses the dollar-value LIFO method to determine the value of its inventory. Main's inventory was valued at $100,000 at the end of last year, and, using current costs, $132,000 at the end of the current year. The prices for Main's inventory during the current year were 20% higher than last year's prices. What amount should Main report as inventory on its balance sheet at the end of the current year? $110,000 $112,000 $122,000 $132,000 None 30. A firm's ending inventory balance was overstated by $1,000. Which of the following statements is correct according to a periodic inventory system? The retained earnings were overstated by $1,000. The cost of goods sold was overstated by $1,000. The cost of goods available for sale was overstated by $1,000. The gross margin was understated by $1,000 None 31. In January Year 4, Vorst Co. purchased a mineral mine for $2,640,000 with removable ore estimated at 1,200,000 tons. After it has extracted all the ore, Vorst will be required by law to restore the land to its original condition at an estimated cost of $180,000. Vorst believes it will be able to sell the property afterwards for $300,000. During Year 4, Vorst incurred $360,000 of development costs preparing the mine for production and removed and sold 60,000 tons of ore. In its Year 4 income statement, what amount should Vorst report as depletion? $135,000 $144,000 $150,000 $159,000 None 32. Fargo, Inc. purchased an oil field for $26,000,000. It cost $2,000,000 to prepare the field for drilling. It was estimated that 800,000 barrels of oil would be extracted over the field's useful life. Fargo plans to sell the land for $1,000,000 at the end of its useful life. During the current year, 40,000 barrels of oil were extracted and sold. What is Fargo's depletion expense for the current year? $1,250,000 $1,300,000 $1,350,000 $1,400,000 None 33. Amble, Inc. exchanged a truck with a carrying amount of $12,000 and a fair value of $20,000 for a truck and $5,000 cash in a transaction that lacked commercial substance. The fair value of the truck received was $15,000. At what amount should Amble record the truck received in the exchange? $7,000 $9,000 $12,000 $15,000 None 34. On January 2, Year 1, Gant Co. purchased a franchise with a useful life of five years for $60,000 and an annual fee of 1% of franchise revenues. Franchise revenues were $20,000 during Year 1. Gant projects future revenues of $40,000 in Year 2 and $60,000 per year for the following three years. What amount should Gant capitalize related to the franchise on January 2, Year 1? $48,000 $60,000 $62,400 $300,000 None 35. On January 1, Year 1, a company capitalized $100,000 of costs for software that is to be sold. The company amortizes the software costs on a straight-line basis over five years. The carrying value of the software costs on January 1, Year 3, was $60,000. As of December 31, Year 3, the estimated future gross revenue to be generated from the sale of the software is $23,000, and the estimated future cost of disposing of the software is $8,000. What amount should the company expense related to the software costs for the year ended December 31, Year 3? $15,000 $35,000 $37,000 $45,000 None 36. On January 1, year 1, Alpha Co. signed an annual maintenance agreement with a software provider for $15,000 and the maintenance period begins on March 1, year 1. Alpha also incurred $5,000 of costs on January 1, year 1, related to software modification requests that will increase the functionality of the software. Alpha depreciates and amortizes its computer and software assets over five years using the straight-line method. What amount is the total expense that Alpha should recognize related to the maintenance agreement and the software modifications for the year ended December 31, year 1? $5,000 $13,500 $16,000 $20,000 None 37. In January of Year 4, a former employee of Dane Co. began a suit against Dane for wrongful termination in November of Year 3. After considering all of the facts, Dane's legal counsel believes that the former employee will prevail and will probably receive damages of between $1,000,000 and $1,500,000, with $1,300,000 being the most likely amount. Dane's financial statements for the year ended December 31, Year 3, will not be issued until February of Year 4. In its December 31, Year 3, balance sheet, what amount should Dane report as a liability with respect to the suit? $0 $1,000,000 $1,300,000 $1,500,000 None 38. On March 21, Year 2, a company with a calendar year end issued its Year 1 financial statements. On February 28, Year 2, the company's only manufacturing plant was severely damaged by a storm and had to be shut down. Total property losses were $10 million and determined to be material. The amount of business disruption losses is unknown. How should the impact of the storm be reflected in the company's Year 1 financial statements? Provide no information related to the storm losses in the financial statements until losses and expenses become fully known. Accrue and disclose the property loss with no accrual or disclosure of the business disruption loss. Do not accrue the property loss or the business disruption loss, but disclose them in the notes to the financial statements. Accrue and disclose the property loss and additional business disruption losses in the financial statements. None 39. On September 30, World Co. borrowed $1,000,000 on a 9% note payable. World paid the first of four quarterly payments of $264,200 when due on December 30. In its December 31 balance sheet, what amount should World report as note payable? $735,800 $750,000 $758,300 $825,800 None 40. Under current generally accepted accounting principles, which approach is used to determine income tax expense? Asset and liability approach. "With and without" approach. Net of tax approach. Deferred method approach. None 41. Ajax Corp. has an effective tax rate of 30%. On January 1, Year 1, Ajax purchased equipment for $100,000. The equipment has a useful life of 10 years. What amount of current tax benefit will Ajax realize during Year 1 by using the 150% declining balance method of depreciation for tax purposes instead of the straight-line method? $1,500 $3,000 $4,500 $5,000 None 42. Which of the following would create a deferred tax asset? Receiving interest from a municipal bond. Selling equipment on an installment note. Requiring prepayment for service contracts. Using the modified accelerated cost recovery system of depreciation. None 43. How should a gain from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method? In investment activities as a reduction of the cash inflow from the sale. In investment activities as a cash outflow. In operating activities as a deduction from income. In operating activities as an addition to income. None 44. On September 1, Year 2, Canary Co. sold used equipment for a cash amount equaling its carrying amount for both book and tax purposes. On September 15, Year 2, Canary replaced the equipment by paying cash and signing a note payable for new equipment. The cash paid for the new equipment exceeded the cash received for the old equipment. How should these equipment transactions be reported in Canary's Year 2 statement of cash flows? Cash outflow equal to the cash paid less the cash received. Cash outflow equal to the cash paid and the note payable less the cash received. Cash inflow equal to the cash received and a cash outflow equal to the cash paid and the note payable. Cash inflow equal to the cash received and a cash outflow equal to the cash paid. None 45. Which of the following statements is correct regarding deferred revenues recorded by a company that provides services to customers? Deferred revenue is a liability until the service has been performed. Deferred revenues represent revenues earned but not yet received in cash. Deferred revenues result from services that have been performed but have not been billed. A deferred revenue on the books of one company is an accrued expense on the books of another company. None 46. A company issued 100,000 shares of its $1 par common stock at a price of $8 per share. Upon issuing the stock, the company's Debt-to-equity ratio decreased. Earnings per share increased. Asset turnover increased. Financial ratios were unaffected None 47. On December 1 of the current year, Bann Co. entered into an option contract to purchase 2,000 shares of Norta Co. stock for $40 per share (the same as the current market price) by the end of the next two months. The time value of the option contract is $600. At the end of December, Norta's stock was selling for $43, and the time value of the option is now $400. If Bann does not exercise its option until January of the subsequent year, which of the following changes would reflect the proper accounting treatment for this transaction on Bann's December 31, year-end financial statements? The option value will be disclosed in the footnotes only. Other comprehensive income will increase by $6,000. Net income will increase by $5,800. Current assets will decrease by $200 None 48. Which of the following common characteristics of derivative financial instruments distinguishes them from other types of financial instruments? They impose a contractual obligation by one entity to deliver cash to a second entity to convey a contractual right. They are financial investments in stocks, bonds, or other securities that are marketable. They have a notional amount or payment provision that is based on the changes in one or more underlying variables. Most financial instruments are valued on the balance sheet at fair value, but derivatives are valued on the balance sheet at cost. None 49. On September 1, Year 1, Cano & Co., a U.S. corporation, sold merchandise to a foreign firm for 250,000 Botswana pula. Terms of the sale require payment in pula on February 1, Year 2. On September 1, Year 1, the spot exchange rate was $0.20 per pula. On December 31, Year 1, Cano's year end, the spot rate was $0.19, but the rate increased to $0.22 by February 1, Year 2, when payment was received. How much should Cano report as foreign exchange transaction gain or loss as part of Year 2 income? $0 $2,500 loss. $5,000 gain. $7,500 gain. None 50. On November 1 of the current year, Dover Corp. decides to buy a machine from a European supplier for 200,000 euros in six months. At the time of the decision, the six-month forward exchange rate is 1.30, resulting in a budget of $260,000 for the purchase. Dover enters a forward contract to purchase 200,000 euros at 1.30 as a cash flow hedge to protect against changes in the exchange rate. When Dover prepares its year-end financial statements, the unrealized gains and losses in the fair value of the forward contract will be recognized In current earnings. In other comprehensive income. As an adjustment to the payable. As an adjustment to the equipment asset. None 51. Northstar Co. acquired a registered trademark for $600,000. The trademark has a remaining legal life of five years, but can be renewed every 10 years for a nominal fee. Northstar expects to renew the trademark indefinitely. What amount of amortization expense should Northstar record for the trademark in the current year? $0 $15,000 $60,000 $120,000 None 52. Which of the following should a company classify as a research and development expense? Periodic design changes to existing products. Routine design of tools, jigs, molds, and dies. Redesign of a product prerelease. Legal work on patent applications. None 53. Jay Co.'s lease payments are made at the end of each period. Jay's liability for a finance lease would be reduced periodically by the Minimum lease payment less the portion of the minimum lease payment allocable to interest. Minimum lease payment plus the amortization of the right-of-use asset. Minimum lease payment less the amortization of the right-of-use asset. Minimum lease payment. None 54. Spring Corp. entered into a five-year lease agreement with Fall Corp. Spring, the lessee, paid an additional $5,000 nonrefundable lease bonus to Fall upon signing the operating lease agreement. When would Fall recognize, in income, the nonrefundable lease bonus paid by Spring? When received. Over the life of the lease. At the expiration of the lease. At the inception of the lease. None 55. Hebrides Corp. has an employee benefit plan for compensated absences that gives employees 10 paid vacation days. Vacation days can be carried forward indefinitely. Employees can elect to receive payment in lieu of vacation days. At December 31, Year 4, Hebrides's unadjusted balance of liability for compensated absences was $10,000. Hebrides estimated that there were 250 vacation days available at December 31, Year 4. Hebrides's employees earn an average of $100 per day. In its December 31, Year 4, balance sheet, what (if any) amount of liability for compensated absences is Hebrides required to report? $0 $15,000 $25,000 $35,000 None 56. On September 30, World Co. borrowed $1,000,000 on a 9% note payable. World paid the first of four quarterly payments of $264,200 when due on December 30. In its income statement for the year, what amount should World report as interest expense? $0 $14,200 $22,500 $30,000 None 57. During Year 3, Company A increased its investment in Company B from 10% interest, purchased in Year 2, to 30% and acquired a seat on Company B's board of directors. As a result of its increased investment, Company A changed its method of accounting for the investment from the cost adjusted for fair value method to the equity method. Company A did not elect to use the fair value method to report its 30% investment in Company B. How should Company A classify and treat the above transaction on its financial statements? Company A should classify the transaction as a change in accounting estimate and restate its financial statements retroactively. Company A should classify the transaction as neither an accounting change nor an accounting error and restate its financial statements retroactively. Company A should classify the transaction as neither an accounting change nor an accounting error and make no retroactive adjustments. Company A should classify the transaction as a change in accounting estimate and make no retroactive adjustments None 58. Holt Co. discovered that in the prior year, it failed to report $40,000 of depreciation related to a newly constructed building. The depreciation was computed correctly for tax purposes. The tax rate for the current year was 20%. How should Holt report the correction of error in the current year? As an increase in accumulated depreciation of $32,000. As an increase in accumulated depreciation of $40,000. As an increase in depreciation expense of $32,000. As an increase of depreciation expense of $40,000. None 59. Rowe, Inc. owns 80% of Cowan Co.'s outstanding capital stock. On November 1, Rowe advanced $100,000 in cash to Cowan. What amount should be reported related to the advance in Rowe's consolidated balance sheet as of December 31? $0 $20,000 $80,000 $100,000 None 60. PDX Corp. acquired 100% of the outstanding common stock of Sea Corp. in a business combination accounted for using the acquisition method. The fair value of the acquisition consideration exceeded the fair value of the identifiable assets and assumed liabilities. The general guidelines for assigning amounts to the inventories acquired provide for Raw materials to be valued at original cost. Work in process to be valued at the estimated selling prices of finished goods, less both costs to complete and costs of disposal. Finished goods to be valued at replacement cost. Finished goods to be valued at estimated selling prices, less both costs of disposal and a reasonable profit allowance. None 61. Which of the following items is recognized for governmental activities in the government-wide statement of activities and not the statement of revenues, expenditures, and changes in fund balance for governmental funds? Transfers between governmental funds. Property tax revenue for an amount deferred because it was not available. A state grant awarded and received for road repairs that were completed this fiscal year. Salaries payable at the end of the current year. None 62. Roy City received a gift, the principal of which is to be invested in perpetuity with the income to be used to support the local library. In which fund should this gift be recorded? Permanent fund. Investment trusts fund. Private-purpose trusts fund. Special revenue fund. None 63. According to GASB 34, Basic Financial Statements-and Management’s Discussion and Analysis-for State and Local Governments, certain budgetary schedules are required supplementary information. What is the minimum budgetary information required to be reported in those schedules? A schedule of unfavorable variances at the functional level. A schedule showing the final appropriations budget and actual expenditures on a budgetary basis. A schedule showing the original budget, the final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis. A schedule showing the proposed budget, the approved budget, the final amended budget, actual inflows and outflows on a budgetary basis, and variances between budget and actual. None 64. At the beginning of the year, Stam Co. had 200,000 shares of common stock issued and outstanding. On March 31, the company issued 40,000 additional shares. On July 1, it declared and distributed a 50% stock dividend and on September 30 repurchased 10,000 shares as treasury stock. What amount of shares should Stam use to calculate basic earnings per share? 287,500 342,500 345,000 360,000 None 65. Baker Co. issued 100,000 shares of common stock in the current year. On October 1, Baker repurchased 20,000 shares of its common stock on the open market for $50 per share. At that date, the stock's par value was $1, and the average issue price was $40 per share. Baker uses the cost method for treasury stock transactions. On December 1, Baker reissued the stock for $60 per share. What amount should Baker report as treasury stock gain at December 31? $0 $200,000 $400,000 $980,000 None 66. On July 28, Vent Corp. sold $500,000 of 4%, eight-year subordinated debentures for $450,000. The purchasers were issued 2,000 detachable warrants, each of which was for one share of $5 par common stock at $12 per share. Shortly after issuance, the warrants sold at a market price of $10 each. What amount of discount on the debentures should Vent record at issuance? $50,000 $60,000 $70,000 $74,000 None 1 out of 66 Time is Up! Time's upTime is Up!
