Question 1

Which of the following is true concerning contingency reporting?

Accepted Answer

A)  IFRS uses the term "provisions" to refer to contingent liabilities that are accrued and reported on the balance sheet while an obligation that is disclosed in the notes is labeled "contingent liability." 
B)  IFRS allows companies to report contingent gains if a present obligation exists and the sacrifice of resources is probable. 
C)  A key difference in reporting contingent liabilities under U.S. GAAP compared to IFRS is that only IFRS requires that the obligation is probable and the amount estimable to recognize the obligation. 
D)  U.S. GAAP requires that a contingent liability be recognized instead of a contingent loss, whereas IFRS requires both. 
A)  IFRS uses the term "provisions" to refer to contingent liabilities that are accrued and reported on the balance sheet while an obligation that is disclosed in the notes is labeled "contingent liability." 
B)  IFRS allows companies to report contingent gains if a present obligation exists and the sacrifice of resources is probable. 
C)  A key difference in reporting contingent liabilities under U.S. GAAP compared to IFRS is that only IFRS requires that the obligation is probable and the amount estimable to recognize the obligation. 
D)  U.S. GAAP requires that a contingent liability be recognized instead of a contingent loss, whereas IFRS requires both.

Question 2

Market prices of bonds fluctuate because the company's obligation (in the form of principal and interest payments) remains fixed.

Accepted Answer

A) True 
 B)False

Question 3

Cat Chow Corp. recently issued bonds with a face value of $4,000,000 and a coupon rate of 6% for 10 years. The market rate of interest is 4% and the bonds pay interest semi-annually.
A. Compute the market value of the bond using a financial calculator or Excel.
B. How much is the premium at the bond issuance date?
C. Assume the market rate remains the same after one year and Cat Chow Corp decides to retire this bond issuance at a cost of $ 4,480,000. Will there be a gain or loss on the retirement and what amount? How is this transaction recorded?

Accepted Answer

A. Interest payment = $4,000,000 × 6% ×

Question 4

Flower Mart borrows $240,000 on July 1 with a short-term loan that has an annual interest rate of 5% which is payable on the first day of each subsequent quarter.
What will Flower Mart need to accrue on August 31, assuming that no accrual had been made since the last interest payment?

Accepted Answer

A)  $6,000; Decrease liabilities and decrease cash 
B)  $2,000; Increase liabilities, increase expenses 
C)  $1,500; Decrease liabilities, decrease cash 
D)  $1,000; Increase expenses 
A)  $6,000; Decrease liabilities and decrease cash 
B)  $2,000; Increase liabilities, increase expenses 
C)  $1,500; Decrease liabilities, decrease cash 
D)  $1,000; Increase expenses

Question 5

Middle Earth Company gave a creditor a 90-day, 6% note payable for $56,000 on December 1, 2016. What amount of interest will be accrued as of December 31, 2016? Where will this amount be reported in the company's financial statements?

Accepted Answer

$56,000 × 6% × 1/12 = $280 rep

Question 6

IFRS and U.S. GAAP are the same with reporting contingencies.

Accepted Answer

A) True 
 B)False

Question 7

For what is the coupon rate used to compute?

Accepted Answer

A)  Rate that investors expect to earn on this investment 
B)  Interest payments paid to bondholders during the life of the bond issue 
C)  Bond issue price 
D)  Fee paid to an underwriter for determining the bond price 
A)  Rate that investors expect to earn on this investment 
B)  Interest payments paid to bondholders during the life of the bond issue 
C)  Bond issue price 
D)  Fee paid to an underwriter for determining the bond price

Question 8

Select the following items with each of the following:
-Short-term loans from a financial institution

Accepted Answer

A)  Current operating liability 
B)  Current non-operating liability 
A)  Current operating liability 
B)  Current non-operating liability

Question 9

On January 1, 2016, Lumos Maxima, Inc. issued $800,000, 10-year, 10% bonds for $750,000. The bonds pay interest on June 30 and December 31. The market rate is 12%.
How much is the interest expense on the bonds for the first interest payment on June 30, 2016?

Accepted Answer

A)  $36,000 
B)  $45,000 
C)  $86,400 
D)  $43,200 
A)  $36,000 
B)  $45,000 
C)  $86,400 
D)  $43,200

Question 10

Calculate the interest accrued for each of the following notes payable owed by Four Square Company as of December 31, 2016:

Accepted Answer

The answer of Calculate the interest accrued for each of...

Question 11

Companies typically delay paying accounts payable as it represents an inexpensive form of financing.

Accepted Answer

A) True 
 B)False

Question 12

What are the requirements for determining the financial reporting of a contingent liability? Why would a company want to keep its contingent liability as low as possible? How could a company manipulate contingent liability to its advantage?

Accepted Answer

A contingent liability is an uncertain a

Question 13

Wheat Inc. issued a 120-day note in the amount of $300,000 on October 31, 2016 with an annual rate of 6%. What amount of interest has accrued as of December 31, 2016?

Accepted Answer

A)  $3,000 
B)  $2,250 
C)  $9,000 
D)  $1,500 
E)  Zero. The interest is accrued at the end of the 120 day period. 
A)  $3,000 
B)  $2,250 
C)  $9,000 
D)  $1,500 
E)  Zero. The interest is accrued at the end of the 120 day period.

Question 14

On June 30, one year before maturity, Tennis Shoes, Inc. retired $720,000 of its 10% bonds payable at 96. The bond's book value on June 30 is $660,000. Bond interest is presently paid up to the date of retirement.
How much is the gain or loss on the retirement of these bonds?

Accepted Answer

Cash for retirement = $720,000

Question 15

If bonds are issued at 102.25, this means that:

Accepted Answer

A)  A $2,000 bond sold for $204.50 
B)  The bonds sold at a discount 
C)  The bond rate of interest is 10.22% of the market rate of interest 
D)  A $2,000 bond sold for $2,045.00 
A)  A $2,000 bond sold for $204.50 
B)  The bonds sold at a discount 
C)  The bond rate of interest is 10.22% of the market rate of interest 
D)  A $2,000 bond sold for $2,045.00

Question 16

Indicate the proper financial classification (balance sheet or income statement) for each of the following accounts:
A. Loss on bond retirement
B. Bonds payable
C. Mortgage interest expense
D. Gift certificates sold to customers
E. Bonds due to be paid within 12 months

Accepted Answer

A. Shown in the income statement, typica

Question 17

Imagination Industries plans to issue 8-year, 8%, $400,000 bonds paying interest on an annual basis, at a $5,760 premium. Which one of the following statements is true?

Accepted Answer

A)  The cash paid to bondholders will be $5,760 each interest period 
B)  Imagination will receive $394,240 as the issue price 
C)  Imagination's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year 
D)  Imagination's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year 
A)  The cash paid to bondholders will be $5,760 each interest period 
B)  Imagination will receive $394,240 as the issue price 
C)  Imagination's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year 
D)  Imagination's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year

Question 18

Which of the following transactions that impact current liabilities has a corresponding entry on the income statement?

Accepted Answer

A)  Purchase inventory on credit from Company XYZ on January 1 
B)  Payment to XYZ on February 1 for a January 1 purchase 
C)  Interest accrued on a note payable 
D)  Payment to employees in March for wages earned in February 
A)  Purchase inventory on credit from Company XYZ on January 1 
B)  Payment to XYZ on February 1 for a January 1 purchase 
C)  Interest accrued on a note payable 
D)  Payment to employees in March for wages earned in February

Which of the following is true concerning contingency reporting?

Market prices of bonds fluctuate because the company's obligation (in the form of principal and interest payments) remains fixed.

Flower Mart borrows $240,000 on July 1 with a short-term loan that has an annual interest rate of 5% which is payable on the first day of each subsequent quarter. What will Flower Mart need to accrue on August 31, assuming that no accrual had been made since the last interest payment?

Middle Earth Company gave a creditor a 90-day, 6% note payable for $56,000 on December 1, 2016. What amount of interest will be accrued as of December 31, 2016? Where will this amount be reported in the company's financial statements?

IFRS and U.S. GAAP are the same with reporting contingencies.

For what is the coupon rate used to compute?

Select the following items with each of the following: -Short-term loans from a financial institution

On January 1, 2016, Lumos Maxima, Inc. issued $800,000, 10-year, 10% bonds for $750,000. The bonds pay interest on June 30 and December 31. The market rate is 12%. How much is the interest expense on the bonds for the first interest payment on June 30, 2016?

Calculate the interest accrued for each of the following notes payable owed by Four Square Company as of December 31, 2016:

Companies typically delay paying accounts payable as it represents an inexpensive form of financing.

What are the requirements for determining the financial reporting of a contingent liability? Why would a company want to keep its contingent liability as low as possible? How could a company manipulate contingent liability to its advantage?

Wheat Inc. issued a 120-day note in the amount of $300,000 on October 31, 2016 with an annual rate of 6%. What amount of interest has accrued as of December 31, 2016?

On June 30, one year before maturity, Tennis Shoes, Inc. retired $720,000 of its 10% bonds payable at 96. The bond's book value on June 30 is $660,000. Bond interest is presently paid up to the date of retirement. How much is the gain or loss on the retirement of these bonds?

If bonds are issued at 102.25, this means that:

Indicate the proper financial classification (balance sheet or income statement) for each of the following accounts: A. Loss on bond retirement B. Bonds payable C. Mortgage interest expense D. Gift certificates sold to customers E. Bonds due to be paid within 12 months

Imagination Industries plans to issue 8-year, 8%, $400,000 bonds paying interest on an annual basis, at a $5,760 premium. Which one of the following statements is true?

Which of the following transactions that impact current liabilities has a corresponding entry on the income statement?

Introducing Financial Accounting

Constructing Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Reporting and Analyzing Revenues and Receivables

Reporting and Analyzing Inventory

Reporting and Analyzing Long-Term Operating Assets

Reporting and Analyzing Leases, Pensions, and Income Taxes

Reporting and Analyzing Stockholders Equity

Reporting and Analyzing Financial Investments

Appendix : Compound Interest and the Time-Value of Money

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Exam 9: Reporting and Analyzing Liabilities

Which of the following is true concerning contingency reporting?

Market prices of bonds fluctuate because the company's obligation (in the form of principal and interest payments) remains fixed.

Flower Mart borrows $240,000 on July 1 with a short-term loan that has an annual interest rate of 5% which is payable on the first day of each subsequent quarter. What will Flower Mart need to accrue on August 31, assuming that no accrual had been made since the last interest payment?

Middle Earth Company gave a creditor a 90-day, 6% note payable for $56,000 on December 1, 2016. What amount of interest will be accrued as of December 31, 2016? Where will this amount be reported in the company's financial statements?

IFRS and U.S. GAAP are the same with reporting contingencies.

For what is the coupon rate used to compute?

Select the following items with each of the following: -Short-term loans from a financial institution

On January 1, 2016, Lumos Maxima, Inc. issued $800,000, 10-year, 10% bonds for $750,000. The bonds pay interest on June 30 and December 31. The market rate is 12%. How much is the interest expense on the bonds for the first interest payment on June 30, 2016?

Calculate the interest accrued for each of the following notes payable owed by Four Square Company as of December 31, 2016:

Companies typically delay paying accounts payable as it represents an inexpensive form of financing.

What are the requirements for determining the financial reporting of a contingent liability? Why would a company want to keep its contingent liability as low as possible? How could a company manipulate contingent liability to its advantage?

Wheat Inc. issued a 120-day note in the amount of $300,000 on October 31, 2016 with an annual rate of 6%. What amount of interest has accrued as of December 31, 2016?

On June 30, one year before maturity, Tennis Shoes, Inc. retired $720,000 of its 10% bonds payable at 96. The bond's book value on June 30 is $660,000. Bond interest is presently paid up to the date of retirement. How much is the gain or loss on the retirement of these bonds?

If bonds are issued at 102.25, this means that:

Indicate the proper financial classification (balance sheet or income statement) for each of the following accounts: A. Loss on bond retirement B. Bonds payable C. Mortgage interest expense D. Gift certificates sold to customers E. Bonds due to be paid within 12 months

Imagination Industries plans to issue 8-year, 8%, $400,000 bonds paying interest on an annual basis, at a $5,760 premium. Which one of the following statements is true?

Which of the following transactions that impact current liabilities has a corresponding entry on the income statement?

Introducing Financial Accounting

Constructing Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Reporting and Analyzing Revenues and Receivables

Reporting and Analyzing Inventory

Reporting and Analyzing Long-Term Operating Assets

Reporting and Analyzing Leases, Pensions, and Income Taxes

Reporting and Analyzing Stockholders Equity

Reporting and Analyzing Financial Investments

Appendix : Compound Interest and the Time-Value of Money

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