Question 1

On January 1, 2017, Keisler Company, a calendar-year company, issued $900,000 of notes payable, of which $225,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2017, is

Accepted Answer

A) Current liabilities, $900,000. 
B) Long-term debt, $900,000. 
C) Current liabilities, $225,000; Long-term Debt, $675,000. 
D) Current liabilities, $675,000; Long-term Debt, $225,000.

Question 2

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

Accepted Answer

A) adding the amount of discount amortized for that period to the amount of cash paid for interest during the period. 
B) subtracting the amount of discount amortized for that period from the amount of cash paid for interest during the period. 
C) multiplying the face value of the bonds by the stated interest rate. 
D) multiplying the face value of the bonds by the market interest rate.

Question 3

Material gains or losses on bond redemption are reported as an extraordinary item on the income statement.

Accepted Answer

A) True 
 B)False

Question 4

On January 1, Weatherholt Inc. issued $5,000,000, 9% bonds for $4,695,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Jean Weatherholt uses the effective-interest method of amortizing bond discount. At the end of the first year, Weatherholt should report unamortized bond discount of

Accepted Answer

A) $274,500. 
B) $285,500. 
C) $258,050. 
D) $255,000.

Question 5

On January 1, 2017, Ermler Company, a calendar-year company, issued $2,000,000 of notes payable, of which $500,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2017, is

Accepted Answer

A) Current liabilities, $2,000,000. 
B) Long-term debt , $2,000,000. 
C) Current liabilities, $500,000; Long-term Debt, $1,000,000. 
D) Current liabilities, $500,000; Long-term Debt, $1,500,000.

Question 6

The following totals for the month of April were taken from the payroll records of Metz Company. $$\begin{array} { l r } 
\text { Salaries } & \$ 90,000 \
\text { FlCA taxes withheld } & 6,885 \
\text { Income taxes withheld } & 19,800 \
\text { Medical insurance deductions } & 3,600 \
\text { Federal unemployment taxes } & 720 \
\text { State unemployment taxes } & 4,500
\end{array}$$ The journal entry to record the monthly payroll on April 30 would include a

Accepted Answer

A) debit to Salaries and Wages Expense for $90,000. 
B) credit to Salaries and Wages Payable for $90,000. 
C) debit to Salaries and Wages Payable for $90,000. 
D) debit to Salaries and Wages Expense for $59,715.

Question 7

Fornelli Corporation borrowed $800,000 from Central Bank on May 31, 2016. The three-year, 7% note required annual payments of $304,840 beginning May 31, 2017. Interest expense for the year ended December 31, 2016 was

Accepted Answer

A) $32,667. 
B) $37,333. 
C) $56,000. 
D) $0.

Question 8

Unearned revenues should be classified as Other Revenues and Gains on the income statement.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not an advantage of issuing bonds instead of common stock?

Accepted Answer

A) Stockholder control is not affected 
B) Earnings per share on common stock may be lower 
C) Tax savings result 
D) Each of these answer choices is an advantage.

Question 10

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Accepted Answer

A) The proportion of interest expense to payment of principal remains the same. 
B) Interest expense increases and payment of principal decreases. 
C) Payment of principal increases and interest expense decreases. 
D) Both payment of principal and interest expense decrease.

Question 11

The following totals for the month of April were taken from the payroll records of Noll Company. $$\begin{array} { l r } 
\text { Salaries } & \$ 120,000 \
\text { FICA taxes withheld } & 9,180 \
\text { Income taxes withheld } & 25,000 \
\text { Medical insurance deductions } & 4,500 \
\text { Federal unemployment taxes } & 320 \
\text { State unemployment taxes } & 2,160
\end{array}$$ The entry to record the accrual of federal unemployment tax would include a

Accepted Answer

A) credit to Federal Unemployment Taxes Payable for $320. 
B) debit to Federal Unemployment Taxes Expense for $320. 
C) credit to Payroll Tax Expense for $320. 
D) debit to Federal Unemployment Taxes Payable for $320.

Question 12

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

Accepted Answer

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

Question 13

The following totals for the month of April were taken from the payroll records of Metz Company. $$\begin{array} { l r } 
\text { Salaries } & \$ 90,000 \
\text { FlCA taxes withheld } & 6,885 \
\text { Income taxes withheld } & 19,800 \
\text { Medical insurance deductions } & 3,600 \
\text { Federal unemployment taxes } & 720 \
\text { State unemployment taxes } & 4,500
\end{array}$$ The entry to record the accrual of federal unemployment tax would include a

Accepted Answer

A) credit to Federal Unemployment Taxes Payable for $720. 
B) credit to Federal Unemployment Taxes Expense for $720. 
C) credit to Payroll Tax Expense for $720. 
D) debit to Federal Unemployment Taxes Payable for $720.

Question 14

The current portion of long-term debt should

Accepted Answer

A) be paid immediately. 
B) be reclassified as a current liability. 
C) be classified as a long-term liability. 
D) not be separated from the long-term portion of debt.

Question 15

Dominic's Salon has total receipts for the month of $40,280 including sales taxes. If the sales tax rate is 6%, what are Dominic's sales for the month?

Accepted Answer

A) $37,864.40 
B) $42,697.60 
C) $38,000.00 
D) It cannot be determined.

Question 16

When a business sells an item and collects a state sales tax on it, a current liability arises.

Accepted Answer

A) True 
 B)False

Question 17

A company receives $348, of which $28 is for sales tax. The journal entry to record the sale would include a
A debit to Sales Taxes Expense for $28.
B)debit to Sales Taxes Payable for $28.
C)debit to Sales Revenue for $348.
D)debit to Cash for $348.

Accepted Answer

The answer of A company receives $348, of which $28...

Question 18

Convertible bonds are often called callable bonds.

Accepted Answer

A) True 
 B)False

Question 19

Morales Company issued $800,000 of 8%, 5-year bonds at 106, which pay interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Accepted Answer

A) $848,000 
B) $843,200 
C) $838,400 
D) $852,800

Question 20

The journal entry to record the issuance of bonds at a discount will include a

Accepted Answer

A) debit to Cash for the face amount of the bonds. 
B) debit to Cash for the face amount of the bonds plus the amount of the discount. 
C) debit to Cash for the face amount of the bonds minus the amount of the discount. 
D) credit to Cash for the face amount of the bonds.

Exam 9: Reporting and Analyzing Liabilities

On January 1, 2017, Keisler Company, a calendar-year company, issued $900,000 of notes payable, of which $225,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2017, is

When the straight-line method of amortization is used for a bond discount, the amount of interest expense for an interest period is calculated by

Material gains or losses on bond redemption are reported as an extraordinary item on the income statement.

On January 1, 2017, Ermler Company, a calendar-year company, issued $2,000,000 of notes payable, of which $500,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2017, is

Fornelli Corporation borrowed $800,000 from Central Bank on May 31, 2016. The three-year, 7% note required annual payments of $304,840 beginning May 31, 2017. Interest expense for the year ended December 31, 2016 was

Unearned revenues should be classified as Other Revenues and Gains on the income statement.

Which of the following is not an advantage of issuing bonds instead of common stock?

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

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

The current portion of long-term debt should

Dominic's Salon has total receipts for the month of $40,280 including sales taxes. If the sales tax rate is 6%, what are Dominic's sales for the month?

When a business sells an item and collects a state sales tax on it, a current liability arises.

A company receives $348, of which $28 is for sales tax. The journal entry to record the sale would include a A debit to Sales Taxes Expense for $28. B)debit to Sales Taxes Payable for $28. C)debit to Sales Revenue for $348. D)debit to Cash for $348.

Convertible bonds are often called callable bonds.

Morales Company issued $800,000 of 8%, 5-year bonds at 106, which pay interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

The journal entry to record the issuance of bonds at a discount will include a