Exam 10: Reporting and Analyzing Liabilities

On January 1, 2012, Aye Corp issues $100,000, 10%, 5-year bonds for $108,111. The market interest rate is 8%. Interest is paid semi-annually on January 1 and July 1. To the nearest dollar, the amount of premium amortized on July 1, 2012 is

Last year, Catrina's Café Inc's income statement reported the following: profit, $67,500; interest expense, $15,000; and income tax expense, $22,500. The company's times interest earned ratio is

The classification of a liability as current or non-current is important because it may affect the evaluation of a company's liquidity.

A current liability must be paid out of current profit.

A contingent liability is recorded in the accounting records

A bond with a face value of $100,000 and a quoted price of 102.25 would have a selling price of

Sales tax collected by a retail store when making sales is

Very often, failure to record a liability means failure to record a(n)

Bonds are a form of interest-bearing notes payable.

Phinn's Pharmacy has collected $75 in provincial sales taxes (PST) during March. If the PST must be remitted to the provincial government monthly, the entry the company will make to record the remittance for March is

The higher the sales tax rate, the higher the profit a retailer can achieve.

Which of the following would most likely be classified as a current liability?

If bonds are issued at a discount, it means that the

The carrying amount of a bond is its face value less any unamortized premium or plus any unamortized discount.

On January 1, 2012, $1,000,000, 5-year, 10% bonds, are issued for $926,400. The market interest rate is 12%. Interest is paid semi-annually on January 1 and July 1. The discount amortized on July 1, 2012 is

If $100,000 bonds with a carrying amount of $93,500 are redeemed at 98, a loss on redemption will be recorded.

Liquidity ratios measure a company's

Layton Inc. had an operating line of credit of $100,000 and overdrew its bank balance to result in a negative cash balance of $15,000 at year-end. This would be reported in the statement of financial position as

If a bond has a face value of $10,000 and a 6% coupon interest rate, then the semi-annual interest payment will be $600.

The present value of a bond is the amount at which it sells in the marketplace.