Question 1

For bond amortization, private companies reporting under ASPE

Accepted Answer

A) must use the effective-interest method. 
B) are not allowed to use the effective-interest method. 
C) may use any amortization method they wish, as long as the results do not differ materially from the effective-interest method. 
D) may use any amortization method they wish, regardless of the results.

Question 2

If bonds are issued at a premium, the coupon interest rate is

Accepted Answer

A) higher than the market interest rate. 
B) lower than the market interest rate. 
C) too low to attract investors. 
D) the same as the market interest rate.

Question 3

Property tax payable is classified as a non-current liability because it is related to property, which is a non-current asset.

Accepted Answer

A) True 
 B)False

Question 4

When a bond is issued at a premium, the amount of interest expense for an interest period is calculated by

Accepted Answer

A) multiplying the carrying amount times the coupon interest rate. 
B) multiplying the carrying amount times the market interest rate. 
C) multiplying the face amount of the bonds by the coupon interest rate. 
D) multiplying the face amount of the bonds by the market interest rate.

Question 5

On March 1, Broke Corp. issues a 5 year 8%, $60,000 note payable. The terms of the note include monthly blended principal and interest payments of $1,217. The entry to record the second instalment payment will include a

Accepted Answer

A) debit to Notes Payable of $822. 
B) debit to Cash of $1,217. 
C) debit to Interest Expense of $400. 
D) credit to Interest Expense of $395.

Question 6

Use the following information for questions 
On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity.
-The entry made by Tilbury Corp on January 1 to record the receipt of the loan is

Accepted Answer

The answer of Use the following information for questions 
On...

Question 7

"Current maturities of non-current debt" refers to the amount of interest on notes payable that must be paid in the current year.

Accepted Answer

A) True 
 B)False

Question 8

Current liabilities are

Accepted Answer

A) not receivable for more than one year. 
B) not payable for more than two years. 
C) receivable within one year. 
D) payable within one year.

Question 9

Over the term of a bond, if it is issued at a discount, the balance in the Bonds Payable account will

Accepted Answer

A) increase. 
B) decrease. 
C) fluctuate up and down depending on the market rate. 
D) be unaffected until the bonds mature.

Question 10

The total interest cost for a bond issued at a premium equals the total of the periodic interest payments minus the premium.

Accepted Answer

A) True 
 B)False

Question 11

GST (goods and services tax) collected by a retailer is recorded by

Accepted Answer

A) crediting Sales Tax Revenue. 
B) debiting Sales Tax Expense. 
C) crediting Sales Tax Payable. 
D) debiting Sales Tax Payable.

Question 12

Use the following information for questions 
On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity.
-What is the adjusting entry required if Tilbury Corp prepares financial statements on June 30?

Accepted Answer

The answer of Use the following information for questions 
On...

Question 13

The issue of bonds at a discount usually means the market has doubts about the financial strength of the issuer.

Accepted Answer

A) True 
 B)False

Question 14

The present value of a $5,000, 10-year bond, will be less than $5,000 if the

Accepted Answer

A) coupon interest rate is less than the market interest rate. 
B) coupon interest rate is higher than the market interest rate. 
C) bond is convertible. 
D) coupon interest rate is equal to the market interest rate.

Question 15

If drawing on an operating line of credit results in a negative cash balance, a current liability known as bank indebtedness results.

Accepted Answer

A) True 
 B)False

Question 16

Provincial sales taxes (PST) collected by a retailer are reported as

Accepted Answer

A) non-current liabilities. 
B) revenues. 
C) expenses. 
D) current liabilities.

Question 17

The statement that "Bond prices vary inversely with changes in the market interest rate" means that if the

Accepted Answer

A) market interest rate increases, the coupon interest rate will decrease. 
B) coupon interest rate increases, then bond prices will go down. 
C) market interest rate decreases, then bond prices will go up. 
D) coupon interest rate increases, the market interest rate will decrease.

Question 18

How much bond interest will be paid to the bond holders on each interest date?

Accepted Answer

A) $16,000 
B) $12,000 
C) $ 8,000 
D) $ 6,000

Question 19

To the nearest dollar, how much bond interest expense will be recorded on the first interest payment date?

Accepted Answer

A) $6,512 
B) $6,883 
C) $7,535 
D) $8,000

Question 20

Under the effective-interest method, the interest paid each year is the same but the interest expense recorded is different.

Accepted Answer

A) True 
 B)False

Exam 10: Reporting and Analyzing Liabilities

For bond amortization, private companies reporting under ASPE

If bonds are issued at a premium, the coupon interest rate is

Property tax payable is classified as a non-current liability because it is related to property, which is a non-current asset.

When a bond is issued at a premium, the amount of interest expense for an interest period is calculated by

On March 1, Broke Corp. issues a 5 year 8%, $60,000 note payable. The terms of the note include monthly blended principal and interest payments of $1,217. The entry to record the second instalment payment will include a

Use the following information for questions On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity. -The entry made by Tilbury Corp on January 1 to record the receipt of the loan is

"Current maturities of non-current debt" refers to the amount of interest on notes payable that must be paid in the current year.

Current liabilities are

Over the term of a bond, if it is issued at a discount, the balance in the Bonds Payable account will

The total interest cost for a bond issued at a premium equals the total of the periodic interest payments minus the premium.

GST (goods and services tax) collected by a retailer is recorded by

Use the following information for questions On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity. -What is the adjusting entry required if Tilbury Corp prepares financial statements on June 30?

The issue of bonds at a discount usually means the market has doubts about the financial strength of the issuer.

The present value of a $5,000, 10-year bond, will be less than $5,000 if the

If drawing on an operating line of credit results in a negative cash balance, a current liability known as bank indebtedness results.

Provincial sales taxes (PST) collected by a retailer are reported as

The statement that "Bond prices vary inversely with changes in the market interest rate" means that if the

How much bond interest will be paid to the bond holders on each interest date?

To the nearest dollar, how much bond interest expense will be recorded on the first interest payment date?

Under the effective-interest method, the interest paid each year is the same but the interest expense recorded is different.