Question 1

Generally, convertible bonds do not pay interest.

Accepted Answer

A) True 
 B)False

Question 2

Ervay Company has $875,000 of bonds outstanding. The unamortized premium is $12,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

Accepted Answer

A)  $3,850 gain 
B)  $3,850 loss 
C)  $8,750 gain 
D)  $8,750 loss 
A)  $3,850 gain 
B)  $3,850 loss 
C)  $8,750 gain 
D)  $8,750 loss

Question 3

The relationship between current assets and current liabilities is

Accepted Answer

A)  useful in determining income. 
B)  useful in evaluating a company's liquidity. 
C)  called the matching principle. 
D)  useful in determining the amount of a company's long-term debt. 
A)  useful in determining income. 
B)  useful in evaluating a company's liquidity. 
C)  called the matching principle. 
D)  useful in determining the amount of a company's long-term debt.

Question 4

Foley Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Accepted Answer

A)  $240,000 
B)  $256,000 
C)  $224,000 
D)  $232,000 
A)  $240,000 
B)  $256,000 
C)  $224,000 
D)  $232,000

Question 5

Four thousand bonds with a face value of $1,000 each, are sold at 102. The entry to record the issuance is

Accepted Answer

The answer of Four thousand bonds with a face value...

Question 6

Don's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Don's Pharmacy make to show the March remittance?

Accepted Answer

The answer of Don's Pharmacy has collected $600 in sales...

Question 7

The adjusted trial balance for Beneteau Corporation at the end of the 2014 included the following accounts:   The total non-current liabilities reported on the statement of financial position at December 31, 2014 are

Accepted Answer

A)  €9,880,000 
B)  €10,030,000 
C)  €10,120,000 
D)  €10,360,000 
A)  €9,880,000 
B)  €10,030,000 
C)  €10,120,000 
D)  €10,360,000

Question 8

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

Accepted Answer

A)  callable bonds. 
B)  early retirement bonds. 
C)  options. 
D)  debentures. 
A)  callable bonds. 
B)  early retirement bonds. 
C)  options. 
D)  debentures.

Question 9

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

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

Question 10

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. The entry made by Drake Builders Company on January 1 to record the proceeds and issuance of the note is

Accepted Answer

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

Question 11

If bonds have been issued at a discount, then over the life of the bonds the

Accepted Answer

A)  carrying value of the bonds will decrease. 
B)  carrying value of the bonds will increase. 
C)  interest expense will increase, if the discount is being amortized on a straight-line basis. 
D)  unamortized discount will increase. 
A)  carrying value of the bonds will decrease. 
B)  carrying value of the bonds will increase. 
C)  interest expense will increase, if the discount is being amortized on a straight-line basis. 
D)  unamortized discount will increase.

Question 12

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 13

The debt to assets ratio measures the percentage of the total assets provided by creditors.

Accepted Answer

A) True 
 B)False

Question 14

When bonds are retired before maturity,

Accepted Answer

A)  only a loss on redemption can be recorded. 
B)  only a gain on redemption can be recorded. 
C)  either a gain or a loss on redemption can be recorded. 
D)  neither a gain nor a loss on redemption can be recorded. 
A)  only a loss on redemption can be recorded. 
B)  only a gain on redemption can be recorded. 
C)  either a gain or a loss on redemption can be recorded. 
D)  neither a gain nor a loss on redemption can be recorded.

Question 15

Neither corporate bond interest nor dividends are deductible for tax purposes.

Accepted Answer

A) True 
 B)False

Question 16

Thayer Company purchased a building on January 2 by signing a long-term $2,520,000 mortgage with monthly payments of $23,100. The mortgage carries an interest rate of 10 percent. The entry to record the mortgage will include a

Accepted Answer

A)  debit to the Cash account for $2,520,000. 
B)  credit to the Cash account for $2,520,000. 
C)  debit to the Mortgage Payable account for $2,520,000. 
D)  credit to the Mortgage Payable account for $2,520,000. 
A)  debit to the Cash account for $2,520,000. 
B)  credit to the Cash account for $2,520,000. 
C)  debit to the Mortgage Payable account for $2,520,000. 
D)  credit to the Mortgage Payable account for $2,520,000.

Question 17

A company whose current liabilities exceed its current assets may have a liquidity problem.

Accepted Answer

A) True 
 B)False

Question 18

(Communication)
Susan Jones works for Trend Press, a fairly large book publishing firm. Her best friend and rival, Diane Nilson, works for Lifeline Books, a smaller publisher. Both companies issue $100,000 in bonds on July 1. Trend's bonds were issued at a discount, while Lifeline's were issued at a premium. Diane sent Susan a fax the next day. She told Susan that it was obvious who the better publisher was and the market had shown its preference! She reminded Susan again of her recent increase in salary as further proof of the superiority of Lifeline Books.
Required:
Draft a short note for Susan to send to Diane. Explain how such a result could occur.

Accepted Answer

Many answers are possible. The format sh

Question 19

The adjusted trial balance for Hamilton Corp. at the end of the current year, 2014, contained the following accounts.   The total long-term liabilities reported on the balance sheet are

Accepted Answer

A)  $1,565,000 
B)  $1,550,000 
C)  $1,665,000 
D)  $1,650,000 
A)  $1,565,000 
B)  $1,550,000 
C)  $1,665,000 
D)  $1,650,000

Question 20

If bonds are originally sold at a discount using the straight-line amortization method

Accepted Answer

A)  interest expense in the earlier years of the bond's life will be less that the interest to be paid. 
B)  interest expense in the earlier years of the bond's life will be the same as interest to be paid. 
C)  unamortized discount is subtracted from the face value of the bond to determine its carrying value. 
D)  unamortized discount is added to the face value of the bond to determine its carrying value. 
A)  interest expense in the earlier years of the bond's life will be less that the interest to be paid. 
B)  interest expense in the earlier years of the bond's life will be the same as interest to be paid. 
C)  unamortized discount is subtracted from the face value of the bond to determine its carrying value. 
D)  unamortized discount is added to the face value of the bond to determine its carrying value.

Generally, convertible bonds do not pay interest.

Ervay Company has $875,000 of bonds outstanding. The unamortized premium is $12,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

The relationship between current assets and current liabilities is

Foley Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Four thousand bonds with a face value of $1,000 each, are sold at 102. The entry to record the issuance is

Don's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Don's Pharmacy make to show the March remittance?

The adjusted trial balance for Beneteau Corporation at the end of the 2014 included the following accounts: The total non-current liabilities reported on the statement of financial position at December 31, 2014 are

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

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?

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. The entry made by Drake Builders Company on January 1 to record the proceeds and issuance of the note is

If bonds have been issued at a discount, then over the life of the bonds the

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 debt to assets ratio measures the percentage of the total assets provided by creditors.

When bonds are retired before maturity,

Neither corporate bond interest nor dividends are deductible for tax purposes.

Thayer Company purchased a building on January 2 by signing a long-term $2,520,000 mortgage with monthly payments of $23,100. The mortgage carries an interest rate of 10 percent. The entry to record the mortgage will include a

A company whose current liabilities exceed its current assets may have a liquidity problem.

The adjusted trial balance for Hamilton Corp. at the end of the current year, 2014, contained the following accounts. The total long-term liabilities reported on the balance sheet are

If bonds are originally sold at a discount using the straight-line amortization method

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

Time Value of Money

Filters

Exam 10: Reporting and Analyzing Liabilities

Generally, convertible bonds do not pay interest.

Ervay Company has $875,000 of bonds outstanding. The unamortized premium is $12,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

The relationship between current assets and current liabilities is

Foley Company issued $800,000 of 6%, 5-year bonds at 98, which pays interest annually. Assuming straight-line amortization, what is the total interest cost of the bonds?

Four thousand bonds with a face value of $1,000 each, are sold at 102. The entry to record the issuance is

Don's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Don's Pharmacy make to show the March remittance?

The adjusted trial balance for Beneteau Corporation at the end of the 2014 included the following accounts: The total non-current liabilities reported on the statement of financial position at December 31, 2014 are

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

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?

West County Bank agrees to lend Drake Builders Company $200,000 on January 1. Drake Builders Company signs a $200,000, 6%, 6-month note. The entry made by Drake Builders Company on January 1 to record the proceeds and issuance of the note is

If bonds have been issued at a discount, then over the life of the bonds the

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 debt to assets ratio measures the percentage of the total assets provided by creditors.

When bonds are retired before maturity,

Neither corporate bond interest nor dividends are deductible for tax purposes.

Thayer Company purchased a building on January 2 by signing a long-term $2,520,000 mortgage with monthly payments of $23,100. The mortgage carries an interest rate of 10 percent. The entry to record the mortgage will include a

A company whose current liabilities exceed its current assets may have a liquidity problem.

The adjusted trial balance for Hamilton Corp. at the end of the current year, 2014, contained the following accounts. The total long-term liabilities reported on the balance sheet are

If bonds are originally sold at a discount using the straight-line amortization method

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

Time Value of Money

Filters