Question 1

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 2

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

Accepted Answer

A)  revenue. 
B)  asset conversion. 
C)  footnote. 
D)  expense. 
A)  revenue. 
B)  asset conversion. 
C)  footnote. 
D)  expense.

Question 3

Collins Company borrowed $750,000 from BankTwo on January 1, 2013 in order to expand its mining capabilities. The five-year note required annual payments of $195,327 and carried an annual interest rate of 9.5%. What is the balance in the notes payable account at December 31, 2014?
A) $750,000
B) $490,059
C) $625,923
D) $607,500

Accepted Answer

The answer of Collins Company borrowed $750,000 from BankTwo on...

Question 4

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount

Accepted Answer

A)  less than face value. 
B)  equal to face value. 
C)  greater than face value. 
D)  that cannot be determined. 
A)  less than face value. 
B)  equal to face value. 
C)  greater than face value. 
D)  that cannot be determined.

Question 5

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 6

Unearned Rent Revenue is

Accepted Answer

A)  a contra account to Rent Revenue. 
B)  a revenue account. 
C)  reported as a current liability. 
D)  debited when rent is received in advance. 
A)  a contra account to Rent Revenue. 
B)  a revenue account. 
C)  reported as a current liability. 
D)  debited when rent is received in advance.

Question 7

On March 1, Cooper Company borrows $80,000 from New National Bank by signing a 6-month, 6%, interest-bearing note.
Instructions
Prepare the necessary entries below associated with the note payable on the books of Cooper Company.
(a) Prepare the entry on March 1 when the note was issued.
(b) Prepare any adjusting entries necessary on June 30 in order to prepare the semiannual financial statements. Assume no other interest accrual entries have been made.
(c) Prepare the entry to record payment of the note at maturity.

Accepted Answer

The answer of On March 1, Cooper Company borrows $80,000...

Question 8

If bonds are issued at a premium, the stated interest rate is

Accepted Answer

A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest. 
A)  higher than the market rate of interest. 
B)  lower than the market rate of interest. 
C)  too low to attract investors. 
D)  adjusted to a higher rate of interest.

Question 9

The present value of a bond is also known as its

Accepted Answer

A)  face value. 
B)  market price. 
C)  future value. 
D)  deferred value. 
A)  face value. 
B)  market price. 
C)  future value. 
D)  deferred value.

Question 10

Bond discount should be amortized to comply with

Accepted Answer

A)  the historical cost principle. 
B)  the expense recognition principle. 
C)  the revenue recognition principle. 
D)  conservatism. 
A)  the historical cost principle. 
B)  the expense recognition principle. 
C)  the revenue recognition principle. 
D)  conservatism.

Question 11

An installment note calling for equal total payments each period will result in a principal portion that decreases in each successive period.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  financial strength of the issuer is suspect. 
B)  market interest rate is higher than the contractual interest rate. 
C)  market interest rate is lower than the contractual interest rate. 
D)  bondholder will receive effectively less interest than the contractual rate of interest. 
A)  financial strength of the issuer is suspect. 
B)  market interest rate is higher than the contractual interest rate. 
C)  market interest rate is lower than the contractual interest rate. 
D)  bondholder will receive effectively less interest than the contractual rate of interest.

Question 13

The face value is the amount of principal and interest due at the maturity date.

Accepted Answer

A) True 
 B)False

Question 14

On June 1, Huntley Company borrows $50,000 from the bank by signing a 60-day, 6%, interest-bearing note.
Instructions
Prepare the necessary entries below associated with the note payable on the books of Huntley Company.
(a) Prepare the entry on June 1 when the note was issued.
(b) Prepare any adjusting entries necessary on June 30 in order to prepare the monthly financial statements. Assume no other interest accrual entries have been made.
(c) Prepare the entry to record payment of the note at maturity.

Accepted Answer

The answer of On June 1, Huntley Company borrows $50,000...

Question 15

The following totals for the month of March were taken from the payroll records of Kern Company.   The entry to record accrual of employer's payroll taxes would include a

Accepted Answer

A)  debit to Payroll Tax Expense for $7,263 
B)  debit to Payroll Tax Expense for $19,143 
C)  credit to FICA Taxes Payable for $4,131. 
D)  credit to Payroll Tax Expense for $7,263. 
A)  debit to Payroll Tax Expense for $7,263 
B)  debit to Payroll Tax Expense for $19,143 
C)  credit to FICA Taxes Payable for $4,131. 
D)  credit to Payroll Tax Expense for $7,263.

Question 16

Sales taxes collected by a retailer are recorded by

Accepted Answer

A)  crediting Sales Tax Revenue. 
B)  debiting Sales Tax Expense. 
C)  crediting Sales Taxes Payable. 
D)  debiting Sales Taxes Payable. 
A)  crediting Sales Tax Revenue. 
B)  debiting Sales Tax Expense. 
C)  crediting Sales Taxes Payable. 
D)  debiting Sales Taxes Payable.

Question 17

The carrying value of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

Accepted Answer

A) True 
 B)False

Question 18

If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.

Accepted Answer

A) True 
 B)False

Question 19

Hogan Company has $1,000,000 of bonds outstanding. The unamortized premium is $14,400. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

Accepted Answer

A)  $4,400 gain 
B)  $4,400 loss 
C)  $10,000 gain 
D)  $10,000 loss 
A)  $4,400 gain 
B)  $4,400 loss 
C)  $10,000 gain 
D)  $10,000 loss

Question 20

Wittebury Corporation retires its £3,000,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $3,112,350. The entry to record the redemption will include

Accepted Answer

A)  a credit of £37,650 to Gain on Bond Redemption. 
B)  a debit of £37,650 to Loss on Bond Redemption. 
C)  a credit of £15,000 to Bonds Payable. 
D)  a credit of £37,650 to Bonds Payable. 
A)  a credit of £37,650 to Gain on Bond Redemption. 
B)  a debit of £37,650 to Loss on Bond Redemption. 
C)  a credit of £15,000 to Bonds Payable. 
D)  a credit of £37,650 to Bonds Payable.

Most companies pay current liabilities

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

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount

Corporations are granted the power to issue bonds through

Unearned Rent Revenue is

If bonds are issued at a premium, the stated interest rate is

The present value of a bond is also known as its

Bond discount should be amortized to comply with

An installment note calling for equal total payments each period will result in a principal portion that decreases in each successive period.

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

The face value is the amount of principal and interest due at the maturity date.

The following totals for the month of March were taken from the payroll records of Kern Company. The entry to record accrual of employer's payroll taxes would include a

Sales taxes collected by a retailer are recorded by

The carrying value of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.

Hogan Company has $1,000,000 of bonds outstanding. The unamortized premium is $14,400. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

Wittebury Corporation retires its £3,000,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $3,112,350. The entry to record the redemption will include

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

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Exam 10: Reporting and Analyzing Liabilities

Most companies pay current liabilities

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

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount

Corporations are granted the power to issue bonds through

Unearned Rent Revenue is

If bonds are issued at a premium, the stated interest rate is

The present value of a bond is also known as its

Bond discount should be amortized to comply with

An installment note calling for equal total payments each period will result in a principal portion that decreases in each successive period.

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

The face value is the amount of principal and interest due at the maturity date.

The following totals for the month of March were taken from the payroll records of Kern Company. The entry to record accrual of employer's payroll taxes would include a

Sales taxes collected by a retailer are recorded by

The carrying value of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date.

Hogan Company has $1,000,000 of bonds outstanding. The unamortized premium is $14,400. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

Wittebury Corporation retires its £3,000,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $3,112,350. The entry to record the redemption will include

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