Question 1

Because of the matching principle, businesses recognize the cost of employee vacation pay each payroll period as a current liability.

Accepted Answer

A) True 
 B)False  True

Question 2

If a bond issue is called by an issuing company, the bond indenture usually requires that bondholders be paid a call premium.

Accepted Answer

A) True 
 B)False  True

Question 3

A 120-day note dated July 2 matures on October 30.

Accepted Answer

A) True 
 B)False  True

Question 4

Use the following information to answer questions 
On September 30, 2010, Payne Industries bought a new automobile for $16,189. Payne made a $2,000 down payment and financed the rest at 6.5% interest over the next 60 months. Payne's monthly payment is $277.62. The first payment is due on October 31, 2010.
-What is Payne's interest expense relative to this note for October 2010? (Round to the nearest cent.)

Accepted Answer

A)  $ 0 
B)  $ 76.86 
C)  $ 87.69 
D)  $277.62 
E)  none of the above 
A)  $ 0 
B)  $ 76.86 
C)  $ 87.69 
D)  $277.62 
E)  none of the above

Question 5

On May 1, Romo Corp. issued $600,000, 8%, 10-year bonds. Interest is payable semi-annually on January 1 and July 1. Proceeds from the issue amounted to $616,000. An explanation of the selling price of the bonds is that they were sold at

Accepted Answer

A)  a discount. 
B)  a premium. 
C)  face plus accrued interest. 
D)  a higher effective interest rate. 
E)  b or c. 
A)  a discount. 
B)  a premium. 
C)  face plus accrued interest. 
D)  a higher effective interest rate. 
E)  b or c.

Question 6

The time value of money concept

Accepted Answer

A)  states that a dollar received (or paid) currently is worth less than a dollar received (or paid) in the future. 
B)  is not related to present value concepts. 
C)  states that a dollar received (or paid) currently is worth more than a dollar received (or paid) in the future. 
D)  is not related to discounting. 
E)  is directly related to the historical cost concept. 
A)  states that a dollar received (or paid) currently is worth less than a dollar received (or paid) in the future. 
B)  is not related to present value concepts. 
C)  states that a dollar received (or paid) currently is worth more than a dollar received (or paid) in the future. 
D)  is not related to discounting. 
E)  is directly related to the historical cost concept.

Question 7

Under the effective interest method, interest expense is computed using the coupon rate of interest.

Accepted Answer

A) True 
 B)False

Question 8

If the market rate of interest is

Accepted Answer

A)  less than the stated rate, interest expense will be equal to interest paid. 
B)  greater than the stated rate, interest expense will be equal to interest paid. 
C)  less than the stated rate, interest expense will be less than interest paid. 
D)  equal to the stated rate, interest expense will be less than interest paid. 
E)  less than the stated rate, interest expense will be greater than interest paid. 
A)  less than the stated rate, interest expense will be equal to interest paid. 
B)  greater than the stated rate, interest expense will be equal to interest paid. 
C)  less than the stated rate, interest expense will be less than interest paid. 
D)  equal to the stated rate, interest expense will be less than interest paid. 
E)  less than the stated rate, interest expense will be greater than interest paid.

Question 9

Postretirement benefit liabilities are generally significant amounts on most publicly held companies' financial statements.

Accepted Answer

A) True 
 B)False

Question 10

The stated rate of interest represents the yield to maturity on a bond.

Accepted Answer

A) True 
 B)False

Question 11

Jefferson Airways, started in 2010, has a frequent flyer program. During 2010, Jefferson's customers earned 200,000,000 miles and redeemed 120,000,000 of those miles for free tickets. The program's terms require customers to exchange 40,000 miles for one free ticket. Jefferson Airways' average free ticket cost is $175. What is Jefferson's total liability relative to its frequent flyer program at December 31, 2010?

Accepted Answer

A)  $ 0 
B)  $350,000 
C)  $525,000 
D)  $875,000 
E)  none of the above 
A)  $ 0 
B)  $350,000 
C)  $525,000 
D)  $875,000 
E)  none of the above

Question 12

Total vacation pay accumulated by employees is paid to employees in future periods.

Accepted Answer

A) True 
 B)False

Question 13

Use the following information to answer questions 
During 2009, Eversharp Co. introduced a high-quality exercise product that has a guaranteed replacement product warranty. The company expects that 2% of the products sold will need to be repaired or replaced at an average cost of $25 per unit. The company sold 300,000 units in 2010.
-Related to the sale of the products in 2010, Eversharp Co. would record

Accepted Answer

A)  a debit to Warranty Expense of $6,000. 
B)  a credit to Warranty Liability of $6,000. 
C)  a debit to Warranty Expense of $150,000. 
D)  a credit to Warranty Liability of $300,000. 
E)  none of the above. 
A)  a debit to Warranty Expense of $6,000. 
B)  a credit to Warranty Liability of $6,000. 
C)  a debit to Warranty Expense of $150,000. 
D)  a credit to Warranty Liability of $300,000. 
E)  none of the above.

Question 14

Accrued payments related to lawsuits that have been filed will be shown as current liabilities.

Accepted Answer

A) True 
 B)False

Question 15

Amounts owed by a business to its suppliers of inventory and debts documented by a promissory obligations are termed, respectively,

Accepted Answer

A)  Accounts Receivable and Notes Receivable 
B)  Accounts Payable and Notes Payable 
C)  Accounts Payable and Notes Receivable 
D)  Notes Receivable and Accounts Receivable 
E)  Notes Payable and Accounts PayableUse the following information to answer questions 6 - 9:The Niven Law Firm signed a $25,000, 120-day, 10% note payable to Eastlake Bank on October 15, 2010. 
A)  Accounts Receivable and Notes Receivable 
B)  Accounts Payable and Notes Payable 
C)  Accounts Payable and Notes Receivable 
D)  Notes Receivable and Accounts Receivable 
E)  Notes Payable and Accounts PayableUse the following information to answer questions 6 - 9:The Niven Law Firm signed a $25,000, 120-day, 10% note payable to Eastlake Bank on October 15, 2010.

Question 16

In the most common type of pension plan, employees make specified percentage-of-earnings to the plan.

Accepted Answer

A) True 
 B)False

Question 17

Employers contribute twice the FICA amount paid by their employees because the employers' contributions cover both Social Security and unemployment programs.

Accepted Answer

A) True 
 B)False

Question 18

Off-balance sheet financing

Accepted Answer

A)  requires a company to disclose information about the debt in the financial statement footnotes and include the debt in the stockholders' equity (rather than the liability) section of the balance sheet. 
B)  makes a company's financial position appear to be of higher quality than it actually is. 
C)  is in violation of generally accepted accounting principles. 
D)  confines all debt information to the income statement and statement of cash flows. 
E)  refers to debt that is non-interest-bearing. 
A)  requires a company to disclose information about the debt in the financial statement footnotes and include the debt in the stockholders' equity (rather than the liability) section of the balance sheet. 
B)  makes a company's financial position appear to be of higher quality than it actually is. 
C)  is in violation of generally accepted accounting principles. 
D)  confines all debt information to the income statement and statement of cash flows. 
E)  refers to debt that is non-interest-bearing.

Question 19

Alpha Corporation sold 100, $1,000 bonds at 96. What is the appropriate journal entry to record the sale of these bonds?

Accepted Answer

A)    
B)    
C)    
D)    
E)   
A)    
B)    
C)    
D)    
E)

Question 20

Because of the complexity of determining amounts, companies do not disclose the underlying assumptions made related to pension obligations.

Accepted Answer

A) True 
 B)False

Because of the matching principle, businesses recognize the cost of employee vacation pay each payroll period as a current liability.

If a bond issue is called by an issuing company, the bond indenture usually requires that bondholders be paid a call premium.

A 120-day note dated July 2 matures on October 30.

On May 1, Romo Corp. issued $600,000, 8%, 10-year bonds. Interest is payable semi-annually on January 1 and July 1. Proceeds from the issue amounted to $616,000. An explanation of the selling price of the bonds is that they were sold at

The time value of money concept

Under the effective interest method, interest expense is computed using the coupon rate of interest.

If the market rate of interest is

Postretirement benefit liabilities are generally significant amounts on most publicly held companies' financial statements.

The stated rate of interest represents the yield to maturity on a bond.

Total vacation pay accumulated by employees is paid to employees in future periods.

Accrued payments related to lawsuits that have been filed will be shown as current liabilities.

Amounts owed by a business to its suppliers of inventory and debts documented by a promissory obligations are termed, respectively,

In the most common type of pension plan, employees make specified percentage-of-earnings to the plan.

Employers contribute twice the FICA amount paid by their employees because the employers' contributions cover both Social Security and unemployment programs.

Off-balance sheet financing

Alpha Corporation sold 100, $1,000 bonds at 96. What is the appropriate journal entry to record the sale of these bonds?

Because of the complexity of determining amounts, companies do not disclose the underlying assumptions made related to pension obligations.

An Introduction to the Role of Accounting in the Business World

Concepts and Elements Underlying Accounting

The Mechanics of Double-Entry Bookkeeping

Cash, Short-Term Investments and Accounts Receivable

Inventory

Long-Term Assets: Property, Plant Equipment and Intangibles

Stockholders Equity

The Corporate Income Statement and Financial Analysis

Statement of Cash Flows

Managerial Accounting

Cost-Volume-Profit Analysis

The Master Budget

Activity-Based Management and Performance Measurementreward

Filters

Exam 7: Liabilities

Because of the matching principle, businesses recognize the cost of employee vacation pay each payroll period as a current liability.

If a bond issue is called by an issuing company, the bond indenture usually requires that bondholders be paid a call premium.

A 120-day note dated July 2 matures on October 30.

On May 1, Romo Corp. issued $600,000, 8%, 10-year bonds. Interest is payable semi-annually on January 1 and July 1. Proceeds from the issue amounted to $616,000. An explanation of the selling price of the bonds is that they were sold at

The time value of money concept

Under the effective interest method, interest expense is computed using the coupon rate of interest.

If the market rate of interest is

Postretirement benefit liabilities are generally significant amounts on most publicly held companies' financial statements.

The stated rate of interest represents the yield to maturity on a bond.

Total vacation pay accumulated by employees is paid to employees in future periods.

Accrued payments related to lawsuits that have been filed will be shown as current liabilities.

Amounts owed by a business to its suppliers of inventory and debts documented by a promissory obligations are termed, respectively,

In the most common type of pension plan, employees make specified percentage-of-earnings to the plan.

Employers contribute twice the FICA amount paid by their employees because the employers' contributions cover both Social Security and unemployment programs.

Off-balance sheet financing

Alpha Corporation sold 100, $1,000 bonds at 96. What is the appropriate journal entry to record the sale of these bonds?

Because of the complexity of determining amounts, companies do not disclose the underlying assumptions made related to pension obligations.

An Introduction to the Role of Accounting in the Business World

Concepts and Elements Underlying Accounting

The Mechanics of Double-Entry Bookkeeping

Cash, Short-Term Investments and Accounts Receivable

Inventory

Long-Term Assets: Property, Plant Equipment and Intangibles

Stockholders Equity

The Corporate Income Statement and Financial Analysis

Statement of Cash Flows

Managerial Accounting

Cost-Volume-Profit Analysis

The Master Budget

Activity-Based Management and Performance Measurementreward

Filters