Question 1

When a supplier makes a downward adjustment in the amount owed by a creditor, the creditor will:

Accepted Answer

A)  reduce the amount of the account payable to the supplier, and decrease an asset such as inventory. 
B)  increase the amount of the account payable to the supplier, and decrease an asset such as inventory. 
C)  reduce the amount of the account payable to the supplier, and increase cash. 
D)  reduce the amount of the account payable to the supplier, and decrease cash. 
A)  reduce the amount of the account payable to the supplier, and decrease an asset such as inventory. 
B)  increase the amount of the account payable to the supplier, and decrease an asset such as inventory. 
C)  reduce the amount of the account payable to the supplier, and increase cash. 
D)  reduce the amount of the account payable to the supplier, and decrease cash.

Question 2

On September 30, 2014, David's Co.'s treasurer signed a note promising to pay $520,000 on December 31, 2014. Proceeds of the note were $501,800.
(a.) Calculate the discount rate used by the lender.
(b.) Calculate the effective interest rate on the loan.
(c.) Write the journal entry to show the effect of recording interest expense for the month of October.

Accepted Answer

(a.) Discount = Principal (maturity valu

Question 3

The current liability for Wages Payable (or Accrued Payroll) represents the:

Accepted Answer

A)  gross pay earned by employees for which they have not yet been paid. 
B)  net pay earned by employees for which they have not yet been paid. 
C)  employer's federal and state payroll tax obligation. 
D)  employer's liability for various withholdings that taken out of the gross pay earned by employees. 
A)  gross pay earned by employees for which they have not yet been paid. 
B)  net pay earned by employees for which they have not yet been paid. 
C)  employer's federal and state payroll tax obligation. 
D)  employer's liability for various withholdings that taken out of the gross pay earned by employees.

Question 4

A transaction that is likely to cause an increase in a current liability is:

Accepted Answer

A)  payment of accrued wages. 
B)  accrual of interest expense. 
C)  depreciation of equipment. 
D)  accrual of bad debts expense. 
A)  payment of accrued wages. 
B)  accrual of interest expense. 
C)  depreciation of equipment. 
D)  accrual of bad debts expense.

Question 5

Many airlines have frequent flyer programs that permit travelers to accumulate credits that can be applied to the cost of tickets for future flights. Most airlines recognize the cost of their frequent flyer programs when the credits are used to purchase tickets. This practice, which seems to ignore the matching concept, results in:

Accepted Answer

A)  stating liabilities and expenses at appropriate amounts. 
B)  overstating liabilities and expenses. 
C)  understating liabilities and expenses. 
D)  understating liabilities and overstating expenses. 
A)  stating liabilities and expenses at appropriate amounts. 
B)  overstating liabilities and expenses. 
C)  understating liabilities and expenses. 
D)  understating liabilities and overstating expenses.

Question 6

Many current liabilities are affected by accrual accounting entries. This happens because:

Accepted Answer

A)  liabilities are usually paid when they are incurred. 
B)  accrual accounting involves recognizing liabilities before they are paid. 
C)  the only way to reduce a liability account balance is with an adjusting entry. 
D)  accrual accounting frequently involves recognizing liabilities before they are incurred. 
A)  liabilities are usually paid when they are incurred. 
B)  accrual accounting involves recognizing liabilities before they are paid. 
C)  the only way to reduce a liability account balance is with an adjusting entry. 
D)  accrual accounting frequently involves recognizing liabilities before they are incurred.

Question 7

The largest item of the Deferred Tax Liability for most companies is caused by:

Accepted Answer

A)  providing the allowance for doubtful accounts for book purposes. 
B)  differences in inventory cost flow assumptions (FIFO vs. LIFO) for tax versus financial accounting purposes. 
C)  differences in depreciation methods (accelerated vs. straight-line) for tax versus financial accounting purposes. 
D)  amortizing bond premium or discount for tax purposes. 
A)  providing the allowance for doubtful accounts for book purposes. 
B)  differences in inventory cost flow assumptions (FIFO vs. LIFO) for tax versus financial accounting purposes. 
C)  differences in depreciation methods (accelerated vs. straight-line) for tax versus financial accounting purposes. 
D)  amortizing bond premium or discount for tax purposes.

Question 8

A working capital loan will generally:

Accepted Answer

A)  not have an interest rate. 
B)  require that interest (if any) be paid monthly. 
C)  not affect working capital. 
D)  be classified as a noncurrent liability. 
A)  not have an interest rate. 
B)  require that interest (if any) be paid monthly. 
C)  not affect working capital. 
D)  be classified as a noncurrent liability.

Question 9

The Defiance College sells season tickets for four home football games at a price of $30. For the 2014 season, 5,000 season tickets were sold.
(a.) Write the journal entry or use the horizontal model to show the effect of the sale of the season tickets.
(b.) Write the journal entry or use the horizontal model to show the effect of hosting a home football game.
(c.) Where on the balance sheet would the account balance representing funds Received for games not yet played be classified? Assume that The Defiance College follows the same accounting and financial reporting procedures that are used in business.

Accepted Answer

The answer of The Defiance College sells season tickets for...

Question 10

Which of the following is not sometimes associated with bonds?

Accepted Answer

A)  Debenture. 
B)  Callable. 
C)  Cumulative. 
D)  Convertible. 
A)  Debenture. 
B)  Callable. 
C)  Cumulative. 
D)  Convertible.

Question 11

Interest on a Note Payable is most appropriately accrued:

Accepted Answer

A)  when the note is signed. 
B)  as of the end of each accounting period during which the note is a liability. 
C)  when principal payments on the note are made. 
D)  when the interest is paid. 
A)  when the note is signed. 
B)  as of the end of each accounting period during which the note is a liability. 
C)  when principal payments on the note are made. 
D)  when the interest is paid.

Question 12

The amortization of bond discount:

Accepted Answer

A)  increases the cash paid to bondholders for interest. 
B)  results in bond interest expense being greater than the interest paid to bondholders. 
C)  results in bond interest expense being less than the interest paid to bondholders. 
D)  reduces the carrying value of bonds payable on the balance sheet. 
A)  increases the cash paid to bondholders for interest. 
B)  results in bond interest expense being greater than the interest paid to bondholders. 
C)  results in bond interest expense being less than the interest paid to bondholders. 
D)  reduces the carrying value of bonds payable on the balance sheet.

Question 13

Assume that Wallywill, Inc. offered its customers, which are primarily retail stores who sell its products, an advertising allowance equal to 8% of the amount of purchases from Wallywill during December, if the retail store would spend the money for advertising in January. Wallywill Inc.'s sales in December totaled $5,000,000, and it was expected that 70% of those sales were made to retailers who would take advantage of the advertising allowance offer. Write the journal entry or use the horizontal model to show the effect of the accrual that should be made as of December 31 with respect to the advertising allowance offer.

Accepted Answer

Advertising expense = $5,000,0

Question 14

The liability for product warranty claims is an example of a liability that:

Accepted Answer

A)  has been calculated using estimates. 
B)  has been recorded in the process of matching revenue and expense. 
C)  also resulted in a reduction of net income. 
D)  all of these. 
A)  has been calculated using estimates. 
B)  has been recorded in the process of matching revenue and expense. 
C)  also resulted in a reduction of net income. 
D)  all of these.

Question 15

An Accounts Payable normally results from which of the following transactions?

Accepted Answer

A)  Purchasing accounts for cash. 
B)  Purchasing property, plant and equipment on credit. 
C)  Purchasing goods and services from suppliers on credit. 
D)  All of these. 
A)  Purchasing accounts for cash. 
B)  Purchasing property, plant and equipment on credit. 
C)  Purchasing goods and services from suppliers on credit. 
D)  All of these.

Question 16

The noncurrent liability, Noncontrolling Interest, arises if:

Accepted Answer

A)  A firm owns less than 50% of another entity. 
B)  A firm owns more than 50%, but less than 100%, of another entity. 
C)  A firm owns 100% of another entity. 
D)  Noncontrolling Interest is accounted for as an equity item. 
A)  A firm owns less than 50% of another entity. 
B)  A firm owns more than 50%, but less than 100%, of another entity. 
C)  A firm owns 100% of another entity. 
D)  Noncontrolling Interest is accounted for as an equity item.

Question 17

Claudette, Inc., provides warranties for many of its products. The January 1, 2014, balance of the Estimated Warranty Liability account was $38,500. Based on an analysis of warranty claims during the past several years, this year's warranty provision was estimated to be 0.8 percent of sales. During 2014, the actual costs of servicing products under warranty were $51,000, and sales were $5,300,000.
(a.) What amount of Warranty Expense will appear on the income statement for 2014?
(b.) What amount will be reported in the Estimated Warranty Liability account on the December 31, 2014, balance sheet?

Accepted Answer

The answer of Claudette, Inc., provides warranties for many of...

Question 18

Southern Company's accountant failed to accrue as of 12/31/13 some employee fringe benefit program expenses that were incurred in 2013 and that will be paid in 2014. The result of this omission is to:

Accepted Answer

A)  overstate 2013 net income and understate noncurrent liabilities at 12/31/13. 
B)  understate 2013 expenses and understate current liabilities at 12/31/13. 
C)  understate 2013 expenses and overstate current liabilities at 12/31/13. 
D)  understate 2013 net income and overstate assets at 12/31/13. 
A)  overstate 2013 net income and understate noncurrent liabilities at 12/31/13. 
B)  understate 2013 expenses and understate current liabilities at 12/31/13. 
C)  understate 2013 expenses and overstate current liabilities at 12/31/13. 
D)  understate 2013 net income and overstate assets at 12/31/13.

Question 19

The purpose of reporting Current Maturities of Long-Term debt is to:

Accepted Answer

A)  report any portion of a long-term borrowing that is to be paid in the upcoming accounting period as a current liability. 
B)  reclassify a portion of debt from the noncurrent section of the balance sheet to the current section of the balance sheet. 
C)  properly classify liabilities. 
D)  all of these. 
A)  report any portion of a long-term borrowing that is to be paid in the upcoming accounting period as a current liability. 
B)  reclassify a portion of debt from the noncurrent section of the balance sheet to the current section of the balance sheet. 
C)  properly classify liabilities. 
D)  all of these.

Question 20

The noncurrent Deferred Tax Liability account arises because:

Accepted Answer

A)  some book income will never be subject to income tax. 
B)  some expenses are deducted for tax purposes before they are deducted for book purposes. 
C)  income tax rates change from year to year. 
D)  the company has not paid income taxes currently due. 
A)  some book income will never be subject to income tax. 
B)  some expenses are deducted for tax purposes before they are deducted for book purposes. 
C)  income tax rates change from year to year. 
D)  the company has not paid income taxes currently due.

When a supplier makes a downward adjustment in the amount owed by a creditor, the creditor will:

The current liability for Wages Payable (or Accrued Payroll) represents the:

A transaction that is likely to cause an increase in a current liability is:

Many current liabilities are affected by accrual accounting entries. This happens because:

The largest item of the Deferred Tax Liability for most companies is caused by:

A working capital loan will generally:

Which of the following is not sometimes associated with bonds?

Interest on a Note Payable is most appropriately accrued:

The amortization of bond discount:

The liability for product warranty claims is an example of a liability that:

An Accounts Payable normally results from which of the following transactions?

The noncurrent liability, Noncontrolling Interest, arises if:

Southern Company's accountant failed to accrue as of 12/31/13 some employee fringe benefit program expenses that were incurred in 2013 and that will be paid in 2014. The result of this omission is to:

The purpose of reporting Current Maturities of Long-Term debt is to:

The noncurrent Deferred Tax Liability account arises because:

Accountingpresent and Past

Financial Statements and Accounting Conceptsprinciples

Fundamental Interpretations Made From Financial Statement Data

The Bookkeeping Process and Transaction Analysis

Accounting for and Presentation of Current Assets

Accounting for and Presentation of Property, Plant and Equipment,and Other Noncurrent Assets

Accounting for and Presentation of Stockholders Equity

The Income Statement and the Statement of Cash Flows

Corporate Governance, Notes to the Financial Statements and Other Disclosures

Financial Statement Analysis

Managerial Accounting and Costvolumeprofit Analysis

Cost Accounting and Reporting

Cost Planning

Cost Control

Costs for Decision Making

Filters

Exam 7: Accounting for and Presentation of Liabilities

When a supplier makes a downward adjustment in the amount owed by a creditor, the creditor will:

The current liability for Wages Payable (or Accrued Payroll) represents the:

A transaction that is likely to cause an increase in a current liability is:

Many current liabilities are affected by accrual accounting entries. This happens because:

The largest item of the Deferred Tax Liability for most companies is caused by:

A working capital loan will generally:

Which of the following is not sometimes associated with bonds?

Interest on a Note Payable is most appropriately accrued:

The amortization of bond discount:

The liability for product warranty claims is an example of a liability that:

An Accounts Payable normally results from which of the following transactions?

The noncurrent liability, Noncontrolling Interest, arises if:

Southern Company's accountant failed to accrue as of 12/31/13 some employee fringe benefit program expenses that were incurred in 2013 and that will be paid in 2014. The result of this omission is to:

The purpose of reporting Current Maturities of Long-Term debt is to:

The noncurrent Deferred Tax Liability account arises because:

Accountingpresent and Past

Financial Statements and Accounting Conceptsprinciples

Fundamental Interpretations Made From Financial Statement Data

The Bookkeeping Process and Transaction Analysis

Accounting for and Presentation of Current Assets

Accounting for and Presentation of Property, Plant and Equipment,and Other Noncurrent Assets

Accounting for and Presentation of Stockholders Equity

The Income Statement and the Statement of Cash Flows

Corporate Governance, Notes to the Financial Statements and Other Disclosures

Financial Statement Analysis

Managerial Accounting and Costvolumeprofit Analysis

Cost Accounting and Reporting

Cost Planning

Cost Control

Costs for Decision Making

Filters