Question 1

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Accepted Answer

A)  The proportion of interest expense to payment of principal remains the same. 
B)  Interest expense increases and payment of principal decreases. 
C)  Payment of principal increases and interest expense decreases. 
D)  Both payment of principal and interest expense decrease. 
A)  The proportion of interest expense to payment of principal remains the same. 
B)  Interest expense increases and payment of principal decreases. 
C)  Payment of principal increases and interest expense decreases. 
D)  Both payment of principal and interest expense decrease.

Question 2

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

Accepted Answer

A)  Dividends payable 
B)  Bonds payable in 5 years 
C)  Three-year notes payable 
D)  Mortgage payable as a single payment in 10 years 
A)  Dividends payable 
B)  Bonds payable in 5 years 
C)  Three-year notes payable 
D)  Mortgage payable as a single payment in 10 years

Question 3

The times interest earned is computed by dividing

Accepted Answer

A)  net income by interest expense. 
B)  income before income taxes by interest expense. 
C)  income before interest expense by interest expense. 
D)  income before interest expense and income taxes by interest expense. 
A)  net income by interest expense. 
B)  income before income taxes by interest expense. 
C)  income before interest expense by interest expense. 
D)  income before interest expense and income taxes by interest expense.

Question 4

Moon Company issued $500,000, 10%, 5-year bonds on January 1, 2014, at 106. Interest is payable annually on January 1. Moon uses the effective-interest method of amortization and has a calendar year end and the bonds were issued for an effective interest rate of 8%.
Instructions
Prepare all journal entries made in 2014 related to the bond issue.

Accepted Answer

The answer of Moon Company issued $500,000, 10%, 5-year bonds...

Question 5

Bonds that may be exchanged for common stock at the option of the bondholders are called

Accepted Answer

A)  options. 
B)  stock bonds. 
C)  convertible bonds. 
D)  callable bonds. 
A)  options. 
B)  stock bonds. 
C)  convertible bonds. 
D)  callable bonds.

Question 6

Bonds with a face value of $300,000 and a quoted price of 102¼ have a selling price of

Accepted Answer

A)  $360,675. 
B)  $306,075. 
C)  $300,675. 
D)  $306,750. 
A)  $360,675. 
B)  $306,075. 
C)  $300,675. 
D)  $306,750.

Question 7

Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

Accepted Answer

A) True 
 B)False

Question 8

A $900,000 bond was retired at 98 when the carrying value of the bond was $888,000. The entry to record the retirement would include a

Accepted Answer

A)  gain on bond redemption of $12,000. 
B)  loss on bond redemption of $6,000. 
C)  loss on bond redemption of $12,000. 
D)  gain on bond redemption of $6,000. 
A)  gain on bond redemption of $12,000. 
B)  loss on bond redemption of $6,000. 
C)  loss on bond redemption of $12,000. 
D)  gain on bond redemption of $6,000.

Question 9

In the balance sheet, the account Premium on Bonds Payable is

Accepted Answer

A)  added to bonds payable. 
B)  deducted from bonds payable. 
C)  classified as a stockholders' equity account. 
D)  classified as a revenue account. 
A)  added to bonds payable. 
B)  deducted from bonds payable. 
C)  classified as a stockholders' equity account. 
D)  classified as a revenue account.

Question 10

On January 1, Sewell Corporation issues $2,000,000, 5-year, 12% bonds at 96 with interest payable on January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

Accepted Answer

A)  debit to Interest Expense, $120,000. 
B)  debit to Interest Expense, $240,000. 
C)  credit to Discount on Bonds Payable, $16,000. 
D)  credit to Discount on Bonds Payable, $8,000. 
A)  debit to Interest Expense, $120,000. 
B)  debit to Interest Expense, $240,000. 
C)  credit to Discount on Bonds Payable, $16,000. 
D)  credit to Discount on Bonds Payable, $8,000.

Question 11

Molina Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 103. The journal entry to record the issuance will show a

Accepted Answer

A)  debit to Cash of $4,000,000. 
B)  debit to Premium on Bonds Payable for $120,000. 
C)  credit to Bonds Payable for $4,000,000. 
D)  credit to Cash for $4,120,000. 
A)  debit to Cash of $4,000,000. 
B)  debit to Premium on Bonds Payable for $120,000. 
C)  credit to Bonds Payable for $4,000,000. 
D)  credit to Cash for $4,120,000.

Question 12

Shannon Company issued $1,000,000, 8%, 10-year bonds on December 31, 2013, for $960,000. Interest is payable annually on December 31. Shannon uses the straight-line method to amortize bond premium or discount.
Instructions
Prepare the journal entries to record the following events.
(a) The issuance of the bonds.
(b) The payment of interest and the discount amortization on December 31, 2014.
(c) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Accepted Answer

The answer of Shannon Company issued $1,000,000, 8%, 10-year bonds...

Question 13

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at

Accepted Answer

A)  a premium. 
B)  a discount. 
C)  par. 
D)  either a discount or premium. 
A)  a premium. 
B)  a discount. 
C)  par. 
D)  either a discount or premium.

Question 14

The following totals for the month of April were taken from the payroll records of Metz Company. Salaries $30,000
FICA taxes withheld 2,295
Income taxes withheld 6,600
Medical insurance deductions 1,200
Federal unemployment taxes 240
State unemployment taxes 1,500
The entry to record the payment of net payroll would include a

Accepted Answer

A)  debit to Salaries and Wages Payable for $18,165. 
B)  debit to Salaries and Wages Payable for $19,905. 
C)  debit to Salaries and Wages Payable for $18,405. 
D)  credit to Cash for $18,405. 
A)  debit to Salaries and Wages Payable for $18,165. 
B)  debit to Salaries and Wages Payable for $19,905. 
C)  debit to Salaries and Wages Payable for $18,405. 
D)  credit to Cash for $18,405.

Question 15

The following totals for the month of April were taken from the payroll records of Metz Company. Salaries $30,000
FICA taxes withheld 2,295
Income taxes withheld 6,600
Medical insurance deductions 1,200
Federal unemployment taxes 240
State unemployment taxes 1,500
The entry to record accrual of employer's payroll taxes would include a

Accepted Answer

A)  debit to Payroll Tax Expense for $4,035. 
B)  credit to Payroll Tax Expense for $4,035. 
C)  credit to FICA Taxes Payable for $1,740. 
D)  credit to Payroll Tax Expense for $1,740. 
A)  debit to Payroll Tax Expense for $4,035. 
B)  credit to Payroll Tax Expense for $4,035. 
C)  credit to FICA Taxes Payable for $1,740. 
D)  credit to Payroll Tax Expense for $1,740.

Question 16

The market price of bonds is obtained by computing the present value of the ________________ paid at maturity, and all ________________ payments to be made over the term of the bond.

Accepted Answer

The answer of The market price of bonds is obtained...

Question 17

Parker Company issued ten-year, 9%, bonds payable in 2014 at a premium. During 2014, the company's accountant failed to amortize any of the bond premium. The omission of the premium amortization will

Accepted Answer

A)  not affect net income for 2014. 
B)  cause retained earnings at the end of 2014 to be overstated. 
C)  cause net income for 2014 to be overstated. 
D)  cause net income for 2014 to be understated. 
A)  not affect net income for 2014. 
B)  cause retained earnings at the end of 2014 to be overstated. 
C)  cause net income for 2014 to be overstated. 
D)  cause net income for 2014 to be understated.

Question 18

Which of the following is not a current liability on December 31, 2014?

Accepted Answer

A)  A Note Payable due December 31, 2015 
B)  An Accounts Payable due January 31, 2015 
C)  A lawsuit judgment to be decided on January 10, 2015 
D)  Accrued salaries payable from 2014 
A)  A Note Payable due December 31, 2015 
B)  An Accounts Payable due January 31, 2015 
C)  A lawsuit judgment to be decided on January 10, 2015 
D)  Accrued salaries payable from 2014

Question 19

In the balance sheet, the account Discount on Bonds Payable is

Accepted Answer

A)  added to bonds payable. 
B)  deducted from bonds payable. 
C)  classified as a stockholders' equity account. 
D)  classified as a revenue account. 
A)  added to bonds payable. 
B)  deducted from bonds payable. 
C)  classified as a stockholders' equity account. 
D)  classified as a revenue account.

Question 20

On October 1, Sam's Painting Service borrows $100,000 from National Bank on a 3-month, $100,000, 4% note. What entry must Sam's Painting Service make on December 31 before financial statements are prepared?

Accepted Answer

A)  Interest Payable 1,000 Interest Expense 1,000 
B)  Interest Expense 4,000 Interest Payable 4,000 
C)  Interest Expense 1,000 Interest Payable 1,000 
D)  Interest Expense 1,000 Notes Payable 1,000 
A)  Interest Payable 1,000 Interest Expense 1,000 
B)  Interest Expense 4,000 Interest Payable 4,000 
C)  Interest Expense 1,000 Interest Payable 1,000 
D)  Interest Expense 1,000 Notes Payable 1,000

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

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

The times interest earned is computed by dividing

Bonds that may be exchanged for common stock at the option of the bondholders are called

Bonds with a face value of $300,000 and a quoted price of 102¼ have a selling price of

Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

A $900,000 bond was retired at 98 when the carrying value of the bond was $888,000. The entry to record the retirement would include a

In the balance sheet, the account Premium on Bonds Payable is

On January 1, Sewell Corporation issues $2,000,000, 5-year, 12% bonds at 96 with interest payable on January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

Molina Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 103. The journal entry to record the issuance will show a

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at

The market price of bonds is obtained by computing the present value of the paid at maturity, and all payments to be made over the term of the bond.

Parker Company issued ten-year, 9%, bonds payable in 2014 at a premium. During 2014, the company's accountant failed to amortize any of the bond premium. The omission of the premium amortization will

Which of the following is not a current liability on December 31, 2014?

In the balance sheet, the account Discount on Bonds Payable is

On October 1, Sam's Painting Service borrows $100,000 from National Bank on a 3-month, $100,000, 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 and Acquisitions in Accounting

Filters

Exam 10: Reporting and Analyzing Liabilities

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

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

The times interest earned is computed by dividing

Bonds that may be exchanged for common stock at the option of the bondholders are called

Bonds with a face value of $300,000 and a quoted price of 102¼ have a selling price of

Current maturities of long-term debt refers to the amount of interest on a note payable that must be paid in the current year.

A $900,000 bond was retired at 98 when the carrying value of the bond was $888,000. The entry to record the retirement would include a

In the balance sheet, the account Premium on Bonds Payable is

On January 1, Sewell Corporation issues $2,000,000, 5-year, 12% bonds at 96 with interest payable on January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

Molina Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 103. The journal entry to record the issuance will show a

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at

The market price of bonds is obtained by computing the present value of the ________________ paid at maturity, and all ________________ payments to be made over the term of the bond.

Parker Company issued ten-year, 9%, bonds payable in 2014 at a premium. During 2014, the company's accountant failed to amortize any of the bond premium. The omission of the premium amortization will

Which of the following is not a current liability on December 31, 2014?

In the balance sheet, the account Discount on Bonds Payable is

On October 1, Sam's Painting Service borrows $100,000 from National Bank on a 3-month, $100,000, 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 and Acquisitions in Accounting

Filters

The market price of bonds is obtained by computing the present value of the paid at maturity, and all payments to be made over the term of the bond.