Question 1

The principal of a loan does not include any interest charges.

Accepted Answer

A) True 
 B)False  True

Question 2

If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets ratio of 0.45,which of the following statements is correct?

Accepted Answer

A)  Stockholders own a smaller proportion of Company A than Company B. 
B)  Company A must make less profit than Company B. 
C)  Creditors own a smaller proportion of Company A than Company B. 
D)  Company A must have fewer assets than Company B. 
A)  Stockholders own a smaller proportion of Company A than Company B. 
B)  Company A must make less profit than Company B. 
C)  Creditors own a smaller proportion of Company A than Company B. 
D)  Company A must have fewer assets than Company B. A

Question 3

When bonds are retired at their maturity date,the balance in the Bonds Payable account is equal to the bond's:

Accepted Answer

A)  face value minus any premium amortized. 
B)  face value plus interest to be paid. 
C)  face value plus any discount amortized. 
D)  face value. 
A)  face value minus any premium amortized. 
B)  face value plus interest to be paid. 
C)  face value plus any discount amortized. 
D)  face value. D

Question 4

If ABC Company issues 100 of its $1,000 bonds at a price of 110,the journal entry to record the transaction includes a:

Accepted Answer

A)  debit to Cash of $100,000. 
B)  credit to Premium on Bonds Payable of $10,000. 
C)  debit to Cash of $90,000. 
D)  debit to Discount on Bonds Payable of $10,000. 
A)  debit to Cash of $100,000. 
B)  credit to Premium on Bonds Payable of $10,000. 
C)  debit to Cash of $90,000. 
D)  debit to Discount on Bonds Payable of $10,000.

Question 5

The debt-to-assets ratio indicates financing risk by computing the proportion of total assets financed by debt.

Accepted Answer

A) True 
 B)False

Question 6

A company has bonds outstanding with a face value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the journal entry to record this retirement includes a debit to:

Accepted Answer

A)  Bonds Payable for $100,000, a debit to Premium on Bonds Payable for $2,700, a credit to Cash for $99,000, and a credit to Gain on Bond Retirement for $3,700. 
B)  Bonds Payable for $100,000, a debit to Loss on Bond Retirement for $1,700, a credit to Cash for $99,000, and a credit to Premium on Bonds Payable for $2,700. 
C)  Bonds Payable for $100,000, credit to Cash for $99,000, and a credit to Gain on Bond Retirement for $1,000. 
D)  Bonds Payable for $100,000, a debit to Loss on Bond Retirement for $1,673, and a credit to Cash for $101,673. 
A)  Bonds Payable for $100,000, a debit to Premium on Bonds Payable for $2,700, a credit to Cash for $99,000, and a credit to Gain on Bond Retirement for $3,700. 
B)  Bonds Payable for $100,000, a debit to Loss on Bond Retirement for $1,700, a credit to Cash for $99,000, and a credit to Premium on Bonds Payable for $2,700. 
C)  Bonds Payable for $100,000, credit to Cash for $99,000, and a credit to Gain on Bond Retirement for $1,000. 
D)  Bonds Payable for $100,000, a debit to Loss on Bond Retirement for $1,673, and a credit to Cash for $101,673.

Question 7

The following information is available from the most recent financial statements of the Attaché Corporation:
 
What is the debt-to-asset ratio?

Accepted Answer

A)  57.1% 
B)  62.5% 
C)  160% 
D)  175% 
A)  57.1% 
B)  62.5% 
C)  160% 
D)  175%

Question 8

Bonds that are backed by a company's assets are referred to as "secured" bonds.

Accepted Answer

A) True 
 B)False

Question 9

Liabilities are classified as current if they:

Accepted Answer

A)  will be paid within the company's operating cycle or within 1 year, whichever is longer. 
B)  will be paid using current assets. 
C)  are less than the current assets. 
D)  are greater than the current assets. 
A)  will be paid within the company's operating cycle or within 1 year, whichever is longer. 
B)  will be paid using current assets. 
C)  are less than the current assets. 
D)  are greater than the current assets.

Question 10

Obligations due to be paid within one year or the company's operating cycle,whichever is longer,are classified as:

Accepted Answer

A)  current assets. 
B)  current liabilities. 
C)  earned revenues. 
D)  noncurrent liabilities. 
A)  current assets. 
B)  current liabilities. 
C)  earned revenues. 
D)  noncurrent liabilities.

Question 11

A typical classified balance sheet provides no information about which of the following items?

Accepted Answer

A)  To whom the company owes money 
B)  For what the company owes money 
C)  How much the company owes 
D)  The proportion of the company's debts that will be paid in the short-term 
A)  To whom the company owes money 
B)  For what the company owes money 
C)  How much the company owes 
D)  The proportion of the company's debts that will be paid in the short-term

Question 12

A company typically records the amount owed to suppliers for goods or services when:

Accepted Answer

A)  they are ordered. 
B)  a verbal commitment to purchase the goods or services has first been made. 
C)  payment is made. 
D)  the goods or services are received. 
A)  they are ordered. 
B)  a verbal commitment to purchase the goods or services has first been made. 
C)  payment is made. 
D)  the goods or services are received.

Question 13

On January 1,2016,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 5%,the company receives $52,723 for the bonds.
Required:
Part a.Determine the interest expense,the cash payment for interest,and the amount of the premium that will be amortized during the year ending December 31,2016.
Part b.Prepare the journal entry to record the first interest payment on December 31,2016.

Accepted Answer

Part a
Interest expense = Carrying value

Question 14

On September 1,ABC Company borrowed $50,000 on a 6%,9month note payable to XYZ National Bank.Given no previous adjusting entries have been recorded,ABC's adjusting entry four months later at December 31 would include a:

Accepted Answer

A)  debit to Interest Expense of $750. 
B)  debit to Interest Expense of $1,000. 
C)  debit to Interest Expense of $3,000. 
D)  debit to Interest Expense of $2,250. 
A)  debit to Interest Expense of $750. 
B)  debit to Interest Expense of $1,000. 
C)  debit to Interest Expense of $3,000. 
D)  debit to Interest Expense of $2,250.

Question 15

On January 1,2016,a company issues 3-year bonds with a face value of $200,000 and a stated interest rate of 8%.Because the market interest rate is lower than the stated interest rate,the company receives $209,000 for the bond.The company uses straight-line bond amortization.
Required:
Part a.Determine the amount of the premium that will be amortized during the year ending December 31,2016.
Part b.Prepare the journal entry to record the first interest payment on December 31,2016.

Accepted Answer

Part a
Premium on bonds payabl

Question 16

A company sells a bond with a face value of $10,000 and receives a premium of $800.Using simplified effective-interest amortization,what journal entry is used to record the issuance of the bonds?

Accepted Answer

A)  Debit Cash for $10,800 and credit Bonds Payable, Net for $10,800 
B)  Debit Cash for $10,800, credit Bonds Payable, Net for $10,000, and credit Premium on Bond Payable for $800 
C)  Debit Cash for $10,000, debit Interest Expense for $800, credit Bonds Payable, Net for $10,000, and credit Premium on Bonds Payable for $800 
D)  Debit Cash for $10,000, debit Interest Expense for $800, credit Bonds Payable for $10,000, and credit Premium on Bonds Payable for $800 
A)  Debit Cash for $10,800 and credit Bonds Payable, Net for $10,800 
B)  Debit Cash for $10,800, credit Bonds Payable, Net for $10,000, and credit Premium on Bond Payable for $800 
C)  Debit Cash for $10,000, debit Interest Expense for $800, credit Bonds Payable, Net for $10,000, and credit Premium on Bonds Payable for $800 
D)  Debit Cash for $10,000, debit Interest Expense for $800, credit Bonds Payable for $10,000, and credit Premium on Bonds Payable for $800

Question 17

The entry to record a bond retirement at maturity usually involves:

Accepted Answer

A)  no gain or loss. 
B)  a credit to Gain on Bond Retirement. 
C)  a debit to Loss on Bond Retirement. 
D)  a credit to Bonds Payable. 
A)  no gain or loss. 
B)  a credit to Gain on Bond Retirement. 
C)  a debit to Loss on Bond Retirement. 
D)  a credit to Bonds Payable.

Question 18

Interest on an obligation is recorded:

Accepted Answer

A)  as time passes. 
B)  when goods are purchased on account. 
C)  at maturity. 
D)  when a bank loan is obtained. 
A)  as time passes. 
B)  when goods are purchased on account. 
C)  at maturity. 
D)  when a bank loan is obtained.

Question 19

Wade Industries reported the following information in its accounting records on December 31,2015:
   
The employees were paid $5,680 on December 31,2015,but the withholdings have not yet been remitted nor have the matching employer FICA contributions.
Required:
Part a.Compute the total payroll costs relating to the period from December 29-31.(Assume $560 in total unemployment taxes.)
Part b.Show the accounting equation effects and give the journal entries on December 31 to adjust for salaries and wages relating to December 29-31,2015.
Part c.Show the accounting equation effects and give the journal entries on December 31 to adjust for payroll taxes relating to December 29-31,2105.

Accepted Answer

Part a
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Question 20

When interest is accrued on a note payable,but not paid,the

Accepted Answer

A)  Interest Expense account is increased; the Interest Payable account is increased. 
B)  Interest Expense account is decreased; the Interest Payable account is increased. 
C)  Notes Payable account is increased; the Interest Payable account is increased. 
D)  Interest Expense account is increased; the Interest Payable account is decreased. 
A)  Interest Expense account is increased; the Interest Payable account is increased. 
B)  Interest Expense account is decreased; the Interest Payable account is increased. 
C)  Notes Payable account is increased; the Interest Payable account is increased. 
D)  Interest Expense account is increased; the Interest Payable account is decreased.

The principal of a loan does not include any interest charges.

If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets ratio of 0.45,which of the following statements is correct?

When bonds are retired at their maturity date,the balance in the Bonds Payable account is equal to the bond's:

If ABC Company issues 100 of its $1,000 bonds at a price of 110,the journal entry to record the transaction includes a:

The debt-to-assets ratio indicates financing risk by computing the proportion of total assets financed by debt.

A company has bonds outstanding with a face value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the journal entry to record this retirement includes a debit to:

The following information is available from the most recent financial statements of the Attaché Corporation: What is the debt-to-asset ratio?

Bonds that are backed by a company's assets are referred to as "secured" bonds.

Liabilities are classified as current if they:

Obligations due to be paid within one year or the company's operating cycle,whichever is longer,are classified as:

A typical classified balance sheet provides no information about which of the following items?

A company typically records the amount owed to suppliers for goods or services when:

On September 1,ABC Company borrowed $50,000 on a 6%,9month note payable to XYZ National Bank.Given no previous adjusting entries have been recorded,ABC's adjusting entry four months later at December 31 would include a:

A company sells a bond with a face value of $10,000 and receives a premium of $800.Using simplified effective-interest amortization,what journal entry is used to record the issuance of the bonds?

The entry to record a bond retirement at maturity usually involves:

Interest on an obligation is recorded:

When interest is accrued on a note payable,but not paid,the

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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Exam 10: Reporting and Interpreting Liabilities

The principal of a loan does not include any interest charges.

If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets ratio of 0.45,which of the following statements is correct?

When bonds are retired at their maturity date,the balance in the Bonds Payable account is equal to the bond's:

If ABC Company issues 100 of its $1,000 bonds at a price of 110,the journal entry to record the transaction includes a:

The debt-to-assets ratio indicates financing risk by computing the proportion of total assets financed by debt.

A company has bonds outstanding with a face value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the journal entry to record this retirement includes a debit to:

The following information is available from the most recent financial statements of the Attaché Corporation: What is the debt-to-asset ratio?

Bonds that are backed by a company's assets are referred to as "secured" bonds.

Liabilities are classified as current if they:

Obligations due to be paid within one year or the company's operating cycle,whichever is longer,are classified as:

A typical classified balance sheet provides no information about which of the following items?

A company typically records the amount owed to suppliers for goods or services when:

On September 1,ABC Company borrowed $50,000 on a 6%,9month note payable to XYZ National Bank.Given no previous adjusting entries have been recorded,ABC's adjusting entry four months later at December 31 would include a:

A company sells a bond with a face value of $10,000 and receives a premium of $800.Using simplified effective-interest amortization,what journal entry is used to record the issuance of the bonds?

The entry to record a bond retirement at maturity usually involves:

Interest on an obligation is recorded:

When interest is accrued on a note payable,but not paid,the

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Measuring and Evaluating Financial Performance

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