Question 1

Southern Company's accountant failed to accrue as of 12/31/16 some employee fringe benefit program expenses that were incurred in 2016 and that will be paid in 2017. The result of this omission is to:

Accepted Answer

A)  overstate the current ratio at 12/31/16 and overstate ROI and ROE for the year ended 12/31/16. 
B)  overstate the current ratio at 12/31/16 and understate ROI and ROE for the year ended 12/31/16. 
C)  understate the current ratio at 12/31/16 and understate ROI and ROE for the year ended 12/31/16. 
D) not affect the current ratio at 12/31/16 but to overstate ROI and ROE for the year ended 12/31/16.

Question 2

On July 1, 2016, $8 million face amount of 6%, 10-year bonds were issued. The bonds pay interest on an annual basis on June 30 each year. The market interest rates were slightly lower than 6% when the bonds were sold.Required:
(a.) How much interest will be paid annually on these bonds?
(b.) Were the bonds issued at a premium or discount? Explain.(c.) Will the annual interest expense on these bonds be more than, equal to, or less than the amount of interest paid each year? Explain your answer.

Accepted Answer

The answer of On July 1, 2016, $8 million face...

Question 3

If the market price of a bond exceeds its face amount:

Accepted Answer

A)  the coupon rate is less than the market interest rate. 
B)  the coupon rate is more than the market interest rate. 
C)  the company's ROI and working capital have been increasing over time. 
D) the maturity rate has been declining.

Question 4

Which of the following is not usually associated with bonds?

Accepted Answer

A)  Coupon rate. 
B)  Maturity value. 
C)  Face amount. 
D) Maturity rate.

Question 5

The market value of a bond is the sum of the present value of future interest payments and the present value of the amount to be repaid at maturity, discounted at:

Accepted Answer

A)  the market rate. 
B)  the coupon rate. 
C)  the dividend rate. 
D) the prime rate.

Question 6

When a supplier makes a downward adjustment in the amount owed by a creditor, the creditor will:

Accepted Answer

A)  reduce the amount of the account payable to the supplier, and decrease an asset such as inventory. 
B)  increase the amount of the account payable to the supplier, and decrease an asset such as inventory. 
C)  reduce the amount of the account payable to the supplier, and increase cash. 
D) reduce the amount of the account payable to the supplier, and decrease cash.

Question 7

The adjusting entry to accrue Interest Expense results in:

Accepted Answer

A)  an increase in Interest Expense. 
B)  a decrease in Interest Expense. 
C)  a decrease in Cash. 
D) a decrease in Interest Payable.

Question 8

Which of the following is(are) a true statement(s) pertaining to bonds?

Accepted Answer

A)  Bonds can be sold at a discount, par, or payable. 
B)  Bonds can be sold at a discount, par, or premium. 
C)  The SEC sets the market price of a bond. 
D) The issuing firm sets the price of a bond.

Question 9

Which of the following is a true statement regarding interest calculation methods?

Accepted Answer

A)  Interest is calculated on either a straight-basis or a delayed-basis. 
B)  Interest is calculated on either a straight-basis or an undiscounted-basis. 
C)  If a borrower receives a loan on a discount-basis, the APR will be less than the simple interest. 
D) If a borrower receives a loan on a discount-basis, the APR will be more than the simple interest rate.

Question 10

The Defiance College sells season tickets for four home football games at a price of $60. For the 2017 season, 5,000 season tickets were sold.(a.) Write the journal entry or use the horizontal model to show the effect of the sale of the season tickets.(b.) Write the journal entry or use the horizontal model to show the effect of hosting a home football game.(c.) Where on the balance sheet would the account balance representing funds Received for games not yet played be classified? Assume that The Defiance College follows the same accounting and financial reporting procedures that are used in business.

Accepted Answer

The answer of The Defiance College sells season tickets for...

Question 11

Which of the following is true regarding bond discounts and/or premiums?

Accepted Answer

A)  Bond discount is amortized but bond premium is not. 
B)  Bond premium is amortized but bond discount is not. 
C)  Neither bond discount nor premium is amortized. 
D) Both bond discount and premium are amortized.

Exam 7: Accounting for and Presentation of Liabilities