Question 1

A $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at maturity.

Accepted Answer

A) True 
 B)False

Question 2

Sparks Company received proceeds of $634,500 on 10-year, 8% bonds issued on January 1, 2019.The bonds had a face value of $600,000, pay interest annually on December 31, and have a call price of 102.Sparks uses the straight-line method of amortization.What is the amount of interest Sparks must pay the bondholders in 2019?

Accepted Answer

A) $50,760 
B) $48,000 
C) $48,960 
D) $5,076 
A) $50,760 
B) $48,000 
C) $48,960 
D) $5,076

Question 3

West County Bank agrees to lend Drake Builders Company $400,000 on January 1.Drake Builders Company signs a $400,000, 6%, 6-month note.What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30?

Accepted Answer

The answer of West County Bank agrees to lend Drake...

Question 4

Interest expense on a note payable is only recorded at maturity.

Accepted Answer

A) True 
 B)False

Question 5

Material losses on bond redemption are reported as operating expenses on the income statement.

Accepted Answer

A) True 
 B)False

Question 6

Over the term of the bonds, the balance in the Discount on Bonds Payable account will

Accepted Answer

A) fluctuate up and down if the market is volatile. 
B) decrease. 
C) increase. 
D) be unaffected until the bonds mature. 
A) fluctuate up and down if the market is volatile. 
B) decrease. 
C) increase. 
D) be unaffected until the bonds mature.

Question 7

Corporations are granted the power to issue bonds through

Accepted Answer

A) tax laws. 
B) state laws. 
C) federal security laws. 
D) bond debentures. 
A) tax laws. 
B) state laws. 
C) federal security laws. 
D) bond debentures.

Question 8

If a corporation issued bonds at an amount less than face value, it indicates that the corporation has a weak credit rating.

Accepted Answer

A) True 
 B)False

Question 9

When bonds are issued at a premium, the total interest cost of the bonds over the life of the bonds is equal to the amount of

Accepted Answer

A) interest paid over the life of the bond. 
B) interest paid over the life of the bond plus the amount of premium at sale point. 
C) interest paid over the life of the bond minus the amount of premium at sale point. 
D) premium at the sale point. 
A) interest paid over the life of the bond. 
B) interest paid over the life of the bond plus the amount of premium at sale point. 
C) interest paid over the life of the bond minus the amount of premium at sale point. 
D) premium at the sale point.

Question 10

A retailer that collects sales taxes is acting as an agent for the

Accepted Answer

A) wholesaler. 
B) customer. 
C) taxing authority. 
D) chamber of commerce. 
A) wholesaler. 
B) customer. 
C) taxing authority. 
D) chamber of commerce.

Question 11

Most companies pay current liabilities

Accepted Answer

A) out of current assets. 
B) by issuing interest-bearing notes payable. 
C) by issuing stock. 
D) by creating long-term liabilities. 
A) out of current assets. 
B) by issuing interest-bearing notes payable. 
C) by issuing stock. 
D) by creating long-term liabilities.

Question 12

Collins Company borrowed $1,250,000 from BankTwo on January 1, 2019, in order to expand its mining capabilities.The five-year note required annual payments of $325,545 and carried an annual interest rate of 9.5%.What is the balance in the notes payable account at December 31, 2020, after the annual payment?

Accepted Answer

A) $1,250,000 
B) $816,764 
C) $1,043,205 
D) $1,012,500 
A) $1,250,000 
B) $816,764 
C) $1,043,205 
D) $1,012,500

Question 13

Yanik Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2020, at 97.The journal entry to record the issuance will show a

Accepted Answer

A) debit to Cash of $5,000,000. 
B) debit to Discount on Bonds Payable for $150,000. 
C) credit to Bonds Payable for $4,850,000. 
D) credit to Cash for $4,850,000. 
A) debit to Cash of $5,000,000. 
B) debit to Discount on Bonds Payable for $150,000. 
C) credit to Bonds Payable for $4,850,000. 
D) credit to Cash for $4,850,000.

Question 14

Neufeld Company issued $2,000,000 of 6%, 5-year bonds at 98, which pay interest annually.Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Accepted Answer

A) $1,960,000 
B) $1,964,000 
C) $1,968,000 
D) $1,976,000 
A) $1,960,000 
B) $1,964,000 
C) $1,968,000 
D) $1,976,000

Question 15

Liquidity ratios measure a company's

Accepted Answer

A) operating cycle. 
B) revenue-producing ability. 
C) short-term debt paying ability. 
D) long-range solvency. 
A) operating cycle. 
B) revenue-producing ability. 
C) short-term debt paying ability. 
D) long-range solvency.

Question 16

Bonds are a form of interest-bearing notes payable.

Accepted Answer

A) True 
 B)False

Question 17

A company receives $264, of which $24 is for sales tax.The journal entry to record the sale would include a

Accepted Answer

A) debit to Sales Taxes Expense for $24. 
B) credit to Sales Taxes Payable for $24. 
C) debit to Sales Revenue for $264. 
D) debit to Cash for $240. 
A) debit to Sales Taxes Expense for $24. 
B) credit to Sales Taxes Payable for $24. 
C) debit to Sales Revenue for $264. 
D) debit to Cash for $240.

Question 18

If a retailer sells goods for a total price of $200, which includes a 5% sales tax, the amount of the sales tax is $9.52.

Accepted Answer

A) True 
 B)False

Question 19

The carrying value of bonds will equal the market price

Accepted Answer

A) at the close of every trading day. 
B) at the end of the fiscal period. 
C) on the date of issuance. 
D) every six months on the date interest is paid. 
A) at the close of every trading day. 
B) at the end of the fiscal period. 
C) on the date of issuance. 
D) every six months on the date interest is paid.

Question 20

On October 1, Sam's Painting Service borrows $150,000 from National Bank on a 3-month, $150,000, 4% note.What entry must Sam's Painting Service make on December 31 before financial statements are prepared?

Accepted Answer

The answer of On October 1, Sam's Painting Service borrows...

A $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at maturity.

West County Bank agrees to lend Drake Builders Company $400,000 on January 1.Drake Builders Company signs a $400,000, 6%, 6-month note.What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30?

Interest expense on a note payable is only recorded at maturity.

Material losses on bond redemption are reported as operating expenses on the income statement.

Over the term of the bonds, the balance in the Discount on Bonds Payable account will

Corporations are granted the power to issue bonds through

If a corporation issued bonds at an amount less than face value, it indicates that the corporation has a weak credit rating.

When bonds are issued at a premium, the total interest cost of the bonds over the life of the bonds is equal to the amount of

A retailer that collects sales taxes is acting as an agent for the

Most companies pay current liabilities

Yanik Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2020, at 97.The journal entry to record the issuance will show a

Neufeld Company issued $2,000,000 of 6%, 5-year bonds at 98, which pay interest annually.Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Liquidity ratios measure a company's

Bonds are a form of interest-bearing notes payable.

A company receives $264, of which $24 is for sales tax.The journal entry to record the sale would include a

If a retailer sells goods for a total price of $200, which includes a 5% sales tax, the amount of the sales tax is $9.52.

The carrying value of bonds will equal the market price

On October 1, Sam's Painting Service borrows $150,000 from National Bank on a 3-month, $150,000, 4% note.What entry must Sam's Painting Service make on December 31 before financial statements are prepared?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

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Exam 10: Reporting and Analyzing Liabilities

A $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at maturity.

West County Bank agrees to lend Drake Builders Company $400,000 on January 1.Drake Builders Company signs a $400,000, 6%, 6-month note.What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30?

Interest expense on a note payable is only recorded at maturity.

Material losses on bond redemption are reported as operating expenses on the income statement.

Over the term of the bonds, the balance in the Discount on Bonds Payable account will

Corporations are granted the power to issue bonds through

If a corporation issued bonds at an amount less than face value, it indicates that the corporation has a weak credit rating.

When bonds are issued at a premium, the total interest cost of the bonds over the life of the bonds is equal to the amount of

A retailer that collects sales taxes is acting as an agent for the

Most companies pay current liabilities

Yanik Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2020, at 97.The journal entry to record the issuance will show a

Neufeld Company issued $2,000,000 of 6%, 5-year bonds at 98, which pay interest annually.Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Liquidity ratios measure a company's

Bonds are a form of interest-bearing notes payable.

A company receives $264, of which $24 is for sales tax.The journal entry to record the sale would include a

If a retailer sells goods for a total price of $200, which includes a 5% sales tax, the amount of the sales tax is $9.52.

The carrying value of bonds will equal the market price

On October 1, Sam's Painting Service borrows $150,000 from National Bank on a 3-month, $150,000, 4% note.What entry must Sam's Painting Service make on December 31 before financial statements are prepared?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

Filters