Question 1

In general it is better to use current liabilities to finance current assets and long-term debt to finance long-term assets.

Accepted Answer

A) True 
 B)False

Question 2

A mortgage is a special type of long-term note payable.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is NOT a requirement of a capital lease?

Accepted Answer

A) Ownership does not transfer at lease end. 
B) The agreement has a bargain purchase option. 
C) The lease must cover at least 75% of asset's useful life. 
D) The present value of lease payments must be 90% or more of market value of asset. 
A) Ownership does not transfer at lease end. 
B) The agreement has a bargain purchase option. 
C) The lease must cover at least 75% of asset's useful life. 
D) The present value of lease payments must be 90% or more of market value of asset.

Question 4

Bonds from the same bond issue that mature at different times are called:

Accepted Answer

A) unsecured bonds. 
B) term bonds. 
C) convertible bonds. 
D) serial bonds. 
A) unsecured bonds. 
B) term bonds. 
C) convertible bonds. 
D) serial bonds.

Question 5

Cypress Corp.had sales on account of $16,500 which were subject to state sales tax of 8%.The entry to record the sales would be to:

Accepted Answer

A) debit Accounts Receivable $16,500;debit Sales Tax Payable $1,320;credit Sales Revenue $17,820. 
B) debit Accounts Receivable $17,820;credit Sales Revenue $16,500;credit Sales Tax Payable $1,320. 
C) debit Accounts Receivable $16,500;credit Sales Revenue $16,500. 
D) debit Accounts Receivable $17,820;credit Sales Revenue $17,820. 
A) debit Accounts Receivable $16,500;debit Sales Tax Payable $1,320;credit Sales Revenue $17,820. 
B) debit Accounts Receivable $17,820;credit Sales Revenue $16,500;credit Sales Tax Payable $1,320. 
C) debit Accounts Receivable $16,500;credit Sales Revenue $16,500. 
D) debit Accounts Receivable $17,820;credit Sales Revenue $17,820.

Question 6

S&C Roofing had sales on account of $28,500 which were subject to state sales tax of 9%.The entry to record the sales would be to:

Accepted Answer

A) debit Accounts Receivable,$28,500;credit Sales revenue,$28,500. 
B) debit Accounts Receivable,$31,065;credit Sale revenue,$31,065. 
C) debit Accounts Receivable,$28,500;debit Sales tax payable,$2,565;credit Sales revenue,$31,065. 
D) debit Accounts Receivable,$31,065;credit Sales revenue,$28,500;credit Sales tax payable,$2,565. 
A) debit Accounts Receivable,$28,500;credit Sales revenue,$28,500. 
B) debit Accounts Receivable,$31,065;credit Sale revenue,$31,065. 
C) debit Accounts Receivable,$28,500;debit Sales tax payable,$2,565;credit Sales revenue,$31,065. 
D) debit Accounts Receivable,$31,065;credit Sales revenue,$28,500;credit Sales tax payable,$2,565.

Question 7

The interest coverage ratio equals interest expense divided by EBIT.

Accepted Answer

A) True 
 B)False

Question 8

The journal entry to record $300,000 of bonds that were issued at 95 would be to:

Accepted Answer

A) debit Cash,$300,000;credit Bonds payable,$285,000;credit Premium on bonds payable,$15,000. 
B) debit Cash,$285,000;credit Bonds payable,$285,000. 
C) debit Cash,$300,000;credit Bonds payable,$300,000. 
D) debit Cash,$285,000;debit Discount on bonds payable,$15,000;credit Bonds payable,$300,000. 
A) debit Cash,$300,000;credit Bonds payable,$285,000;credit Premium on bonds payable,$15,000. 
B) debit Cash,$285,000;credit Bonds payable,$285,000. 
C) debit Cash,$300,000;credit Bonds payable,$300,000. 
D) debit Cash,$285,000;debit Discount on bonds payable,$15,000;credit Bonds payable,$300,000.

Question 9

Mackey Company has a 5-year mortgage for $100,000 which requires 5 equal payments of principal plus interest.In the first year of the mortgage,Mackey will report this liability as a:

Accepted Answer

A) current liability of $100,000. 
B) long-term liability of $100,000. 
C) current liability of $80,000 and a long-term liability of $20,000. 
D) current liability of $20,000 and a long-term liability of $80,000. 
A) current liability of $100,000. 
B) long-term liability of $100,000. 
C) current liability of $80,000 and a long-term liability of $20,000. 
D) current liability of $20,000 and a long-term liability of $80,000.

Question 10

$500,000 of 8%,10-year bonds were sold for $530,000 on January 1.The bonds require semiannual interest payments on June 30 and December 31.The entry to record the June 30 interest payment on the bonds would be to:

Accepted Answer

A) debit Interest Expense $18,500;debit Premium on bonds payable,$1,500;credit Cash,$20,000. 
B) debit Interest Expense $18,500;credit Cash,$18,500. 
C) debit Interest Expense $21,500;credit Premium on bonds payable,$1,500;credit Cash,$20,000. 
D) debit Interest Expense $20,000;credit Cash,$20,000. 
A) debit Interest Expense $18,500;debit Premium on bonds payable,$1,500;credit Cash,$20,000. 
B) debit Interest Expense $18,500;credit Cash,$18,500. 
C) debit Interest Expense $21,500;credit Premium on bonds payable,$1,500;credit Cash,$20,000. 
D) debit Interest Expense $20,000;credit Cash,$20,000.

Question 11

The disclosure of a contingent liability only in the footnotes designates that the possibility of an actual obligation occurring is:

Accepted Answer

A) remote. 
B) possible. 
C) probable. 
D) certain. 
A) remote. 
B) possible. 
C) probable. 
D) certain.

Question 12

A transaction such as a utility bill to be paid in 30 days would be journalized with a debit to Utilities expense and a credit to Notes payable.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following would NOT be considered a contingent liability?

Accepted Answer

A) Pending legal action 
B) Potential fines from the EPA 
C) Mortgage Payable 
D) Cosigning a loan 
A) Pending legal action 
B) Potential fines from the EPA 
C) Mortgage Payable 
D) Cosigning a loan

Question 14

Sales tax liabilities are classified as long-term payables.

Accepted Answer

A) True 
 B)False

Question 15

On October 31,2014,Aspen Inc.recorded their semi-annual bond interest expense that contained a credit to Discount on bonds payable of $1,200.The adjusting entry on December 31,2014 will show a credit to Discount on bonds payable of:

Accepted Answer

A) $1,200. 
B) $800. 
C) $600. 
D) $400. 
A) $1,200. 
B) $800. 
C) $600. 
D) $400.

Question 16

Withheld payroll deductions become:

Accepted Answer

A) assets of the employer. 
B) liabilities of the employer. 
C) revenues of the employer. 
D) liabilities of the employee. 
A) assets of the employer. 
B) liabilities of the employer. 
C) revenues of the employer. 
D) liabilities of the employee.

Question 17

Why are contingent liabilities considered unique and different from all other liabilities?

Accepted Answer

A) Whether or not a company has an obligation depends on the result of a future event. 
B) Whether or not a company has an obligation depends on the result of a past event. 
C) The company knows the amount of the obligation. 
D) Both B and C are unique to contingent liabilities. 
A) Whether or not a company has an obligation depends on the result of a future event. 
B) Whether or not a company has an obligation depends on the result of a past event. 
C) The company knows the amount of the obligation. 
D) Both B and C are unique to contingent liabilities.

Question 18

Estimated liabilities are generally classified as long-term liabilities.

Accepted Answer

A) True 
 B)False

Question 19

$400,000 of 12%,10-year bonds were sold for $380,000 on January 1.The bonds require semiannual interest payments on June 30 and December 31.The entry to record the June 30 interest payment on the bonds would be to:

Accepted Answer

A) debit Interest Expense $24,000;credit Cash,$24,000. 
B) debit Interest Expense $23,000;debit Discount on bonds payable,$1,000;credit Cash,$24,000. 
C) debit Interest Expense $25,000;credit Cash,$25,000. 
D) debit Interest Expense $25,000;credit Discount on bonds payable,$1,000;credit Cash,$24,000. 
A) debit Interest Expense $24,000;credit Cash,$24,000. 
B) debit Interest Expense $23,000;debit Discount on bonds payable,$1,000;credit Cash,$24,000. 
C) debit Interest Expense $25,000;credit Cash,$25,000. 
D) debit Interest Expense $25,000;credit Discount on bonds payable,$1,000;credit Cash,$24,000.

Question 20

A company that cosigns a loan with another company could incur a contingent liability.

Accepted Answer

A) True 
 B)False

In general it is better to use current liabilities to finance current assets and long-term debt to finance long-term assets.

A mortgage is a special type of long-term note payable.

Which of the following is NOT a requirement of a capital lease?

Bonds from the same bond issue that mature at different times are called:

Cypress Corp.had sales on account of $16,500 which were subject to state sales tax of 8%.The entry to record the sales would be to:

S&C Roofing had sales on account of $28,500 which were subject to state sales tax of 9%.The entry to record the sales would be to:

The interest coverage ratio equals interest expense divided by EBIT.

The journal entry to record $300,000 of bonds that were issued at 95 would be to:

Mackey Company has a 5-year mortgage for $100,000 which requires 5 equal payments of principal plus interest.In the first year of the mortgage,Mackey will report this liability as a:

$500,000 of 8%,10-year bonds were sold for $530,000 on January 1.The bonds require semiannual interest payments on June 30 and December 31.The entry to record the June 30 interest payment on the bonds would be to:

The disclosure of a contingent liability only in the footnotes designates that the possibility of an actual obligation occurring is:

A transaction such as a utility bill to be paid in 30 days would be journalized with a debit to Utilities expense and a credit to Notes payable.

Which of the following would NOT be considered a contingent liability?

Sales tax liabilities are classified as long-term payables.

On October 31,2014,Aspen Inc.recorded their semi-annual bond interest expense that contained a credit to Discount on bonds payable of $1,200.The adjusting entry on December 31,2014 will show a credit to Discount on bonds payable of:

Withheld payroll deductions become:

Why are contingent liabilities considered unique and different from all other liabilities?

Estimated liabilities are generally classified as long-term liabilities.

$400,000 of 12%,10-year bonds were sold for $380,000 on January 1.The bonds require semiannual interest payments on June 30 and December 31.The entry to record the June 30 interest payment on the bonds would be to:

A company that cosigns a loan with another company could incur a contingent liability.

Business, Accounting, and You

Analyzing and Recording Business Transactions

Adjusting and Closing Entries

Accounting for a Merchandising Business

Inventory

The Challenges of Accounting: Standards, internal Control, audits, fraud, and Ethics

Cash and Receivables

Long-Term and Other Assets

Corporations: Paid-In Capital and Retained Earnings

The Statement of Cash Flows

Financial Statement Analysis

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Exam 9: Current Liabilities and Long-Term Debt

In general it is better to use current liabilities to finance current assets and long-term debt to finance long-term assets.

A mortgage is a special type of long-term note payable.

Which of the following is NOT a requirement of a capital lease?

Bonds from the same bond issue that mature at different times are called:

Cypress Corp.had sales on account of $16,500 which were subject to state sales tax of 8%.The entry to record the sales would be to:

S&C Roofing had sales on account of $28,500 which were subject to state sales tax of 9%.The entry to record the sales would be to:

The interest coverage ratio equals interest expense divided by EBIT.

The journal entry to record $300,000 of bonds that were issued at 95 would be to:

Mackey Company has a 5-year mortgage for $100,000 which requires 5 equal payments of principal plus interest.In the first year of the mortgage,Mackey will report this liability as a:

$500,000 of 8%,10-year bonds were sold for $530,000 on January 1.The bonds require semiannual interest payments on June 30 and December 31.The entry to record the June 30 interest payment on the bonds would be to:

The disclosure of a contingent liability only in the footnotes designates that the possibility of an actual obligation occurring is:

A transaction such as a utility bill to be paid in 30 days would be journalized with a debit to Utilities expense and a credit to Notes payable.

Which of the following would NOT be considered a contingent liability?

Sales tax liabilities are classified as long-term payables.

On October 31,2014,Aspen Inc.recorded their semi-annual bond interest expense that contained a credit to Discount on bonds payable of $1,200.The adjusting entry on December 31,2014 will show a credit to Discount on bonds payable of:

Withheld payroll deductions become:

Why are contingent liabilities considered unique and different from all other liabilities?

Estimated liabilities are generally classified as long-term liabilities.

$400,000 of 12%,10-year bonds were sold for $380,000 on January 1.The bonds require semiannual interest payments on June 30 and December 31.The entry to record the June 30 interest payment on the bonds would be to:

A company that cosigns a loan with another company could incur a contingent liability.

Business, Accounting, and You

Analyzing and Recording Business Transactions

Adjusting and Closing Entries

Accounting for a Merchandising Business

Inventory

The Challenges of Accounting: Standards, internal Control, audits, fraud, and Ethics

Cash and Receivables

Long-Term and Other Assets

Corporations: Paid-In Capital and Retained Earnings

The Statement of Cash Flows

Financial Statement Analysis

Filters