Question 1

Bonds that are not backed by collateral are referred to as "debentures."

Accepted Answer

A) True 
 B)False

Question 2

At the beginning of the year,your company borrows $20,000 by signing a four-year promissory note that states an annual interest rate of 8% plus principal repayments of $5,000 each year.Interest is paid at the end of the second and fourth quarters,whereas principal payments are due at the end of each year.How does this new promissory note affect the current and non-current liability amounts reported on the classified balance sheet prepared at the end of the first quarter?

Accepted Answer

A)  Increase current liabilities by $400;increase non-current liabilities by $20,000.
B)  Increase current liabilities by $1,600;increase non-current liabilities by $20,000.
C)  Increase current liabilities by $5,400;increase non-current liabilities by $20,000.
D)  Increase current liabilities by $5,400;increase non-current liabilities by $15,000.E) B) and C)
F) All of the above

Question 3

Wool Co.makes a sale and collects a total of $756,which includes an 8% sales tax.What is the amount that will be credited to the Sales Revenue account?

Accepted Answer

A)  $756
B)  $700
C)  $812
D)  $696E) All of the above
F) A) and C) B

Question 4

Zorn Inc.makes a sale for $300.The company is required to collect sales taxes amounting to 9%.What is the amount that will be credited to the Sales Tax Payable account?

Accepted Answer

A)  $27
B)  $273
C)  $300
D)  $327E) All of the above
F) C) and D)

Question 5

Match each term with the appropriate definition.Not all definitions will be used.
-Present value

Accepted Answer

A)  Liquid assets divided by current liabilities.
B)  A calculation that determines what some future payments are worth today.
C)  The ability to pay current obligations.
D)  These are liabilities that have to be paid in one year or less.
E)  A bond feature that puts a creditor ahead of other creditors in order of payment.F) Net income before taxes and interest expense divided by interest expense.G) Where interest expense is the market interest rate times the bond's carrying value.H) Current liabilities divided by current assets.I) These are liabilities that do not have to be paid within the upcoming year.J) Net income after taxes and interest expense divided by interest expense.K) Spreads a bond discount or premium evenly over the lifetime of the bond.L) The amount of all the liabilities currently on the balance sheet at the close of the period.M) A) and B)
N) All of the above

Question 6

Callable bonds can be converted to stock.

Accepted Answer

A) True 
 B)False  False

Question 7

When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable,the company should:

Accepted Answer

A)  include a description in the notes to the financial statements.
B)  record the amount of the liability times the probability of its occurrence.
C)  record the amount of the liability as a long-term liability on the balance sheet.
D)  exclude the information about the contingent liability from its financial statements and footnotes.E) A) and B)
F) A) and C)

Question 8

Match each term with the appropriate definition.Not all definitions will be used.
-Premium

Accepted Answer

A)  When a bond is issued for a price greater than its face value.
B)  Also known as the face value or par value of a bond.
C)  Rate of interest that investors demand from a bond.
D)  A bond with the feature that allows creditors to exchange the bond for company stock.
E)  The amount a company receives when it sells a bond;also known as issue price.F) The interest rate printed on the bond certificate.G) The time at which the face value of a bond must be paid to the lender.H) Is multiplied by the market interest rate to calculate the (effective) interest expense on a bond.I) A bond feature that changes the interest rate on the bond with market conditions.J) When a bond is issued for a price less than its face value.K) A bond with the feature that allows the borrowing company to pay off a bond whenever it wishes.L) A bond with the feature that lets creditors examine financial data and demand new loan conditions.M) F) and L)
N) I) and J)

Question 9

On January 2,2018,AAA Publishing,Inc.received a one-year subscription for $100 to one of the magazines that it publishes.At that time,it debited cash for $100 and credited Deferred Revenue for $100.After all the magazines have been delivered through December 31,2018,what journal entry needs to be recorded?

Accepted Answer

A)  Debit Cash for $100 and credit Deferred Revenue for $100
B)  Debit Accounts Receivable for $100 and credit Subscription Revenue for $100
C)  Debit Accounts Receivable for $100 and credit Deferred Revenue for $100
D)  Debit Deferred Revenue for $100 and credit Subscription Revenue for $100E) B) and C)
F) A) and D) D

Question 10

Some bonds allow the borrower to repay the bond by issuing stock.These bonds are known as:

Accepted Answer

A)  convertible bonds.
B)  debenture bonds.
C)  callable bonds.
D)  coupon bonds.E) A) and D)
F) B) and C)

Question 11

A company retires its bonds with a face value of $100,000 at 105.The carrying value of the bonds at the retirement date is $103,745.The journal entry to record this retirement will include a:

Accepted Answer

A)  debit to Premium on Bonds Payable.
B)  credit to Gain on Bond Retirement.
C)  credit to Bonds Payable.
D)  debit to Discount on Bonds Payable.E) C) and D)
F) B) and C)

Question 12

The following information was obtained from Quayle Company's income statement:   Income before Interest and Income Tax Expense $685,000 Interest Expense 75,000 Income before Income Tax Expense 610,000 Income Tax Expense 213,500 Net Income $396,500\begin{array}{lr}	ext { Income before Interest and Income Tax Expense } & \$ 685,000 \	ext { Interest Expense } & 75,000 \	ext { Income before Income Tax Expense } & 610,000 \	ext { Income Tax Expense } & 213,500 \	ext { Net Income } & \$ 396,500\end{array} Income before Interest and Income Tax Expense  Interest Expense  Income before Income Tax Expense  Income Tax Expense  Net Income ​$685,00075,000610,000213,500$396,500​  What is the times interest earned ratio?

Accepted Answer

A)  5.29
B)  8.13
C)  9.13
D)  1.73 E) B) and C)
F) None of the above

Question 13

Match each term with the appropriate definition.Not all definitions will be used.
-Accrued liability

Accepted Answer

A)  The total amount of money that a company owes in debt.
B)  This item is reported as a contra asset account.
C)  A bond feature that allows a creditor to seize assets if debt is not properly repaid.
D)  A prearranged agreement that allows a company to borrow at will up to a limit.
E)  The amount that the lender actually pays for a bond.F) The amount a company must repay creditors when a bond matures.G) When a company borrows money by issuing bonds in the financial markets.H) Debt features that,if violated,allow the lender to revise loan terms.I) The cost of issuing a bond.J) Total liabilities divided by total assets.K) Bond features that allow the issuer to repay the loan early.L) These are liabilities that have been incurred during the period but not yet paid.M) This type of liability is uncertain;it exists only if some other condition occurs.N) B) and G)
O) A) and E)

Question 14

Match each term with the appropriate definition.Not all definitions will be used.
-Convertible

Accepted Answer

A)  When a bond is issued for a price greater than its face value.
B)  Also known as the face value or par value of a bond.
C)  Rate of interest that investors demand from a bond.
D)  A bond with the feature that allows creditors to exchange the bond for company stock.
E)  The amount a company receives when it sells a bond;also known as issue price.F) The interest rate printed on the bond certificate.G) The time at which the face value of a bond must be paid to the lender.H) Is multiplied by the market interest rate to calculate the (effective) interest expense on a bond.I) A bond feature that changes the interest rate on the bond with market conditions.J) When a bond is issued for a price less than its face value.K) A bond with the feature that allows the borrowing company to pay off a bond whenever it wishes.L) A bond with the feature that lets creditors examine financial data and demand new loan conditions.M) I) and J)
N) C) and L)

Question 15

Thomas Longbow is the only employee of Presido,Inc.During the first week of January,Longbow earned $1,600 and had federal and state income tax withholdings of $80 and $30,respectively.FICA taxes are 7.65% on earnings up to $127,200.State and federal unemployment taxes for the period are $100 and $16,respectively. What is Presido's payroll tax expense for the week?

Accepted Answer

A)  $226.00
B)  $238.40
C)  $348.40
D)  $470.80E) A) and D)
F) None of the above

Question 16

Which of the following events does not create a liability?

Accepted Answer

A)  Buying goods and services on credit
B)  Obtaining a short-term loan
C)  Issuing long-term debt
D)  Remitting sales tax to the governmentE) A) and D)
F) A) and C)

Question 17

Match each term with the appropriate definition.Not all definitions will be used.
-Line of credit

Accepted Answer

A)  The total amount of money that a company owes in debt.
B)  This item is reported as a contra asset account.
C)  A bond feature that allows a creditor to seize assets if debt is not properly repaid.
D)  A prearranged agreement that allows a company to borrow at will up to a limit.
E)  The amount that the lender actually pays for a bond.F) The amount a company must repay creditors when a bond matures.G) When a company borrows money by issuing bonds in the financial markets.H) Debt features that,if violated,allow the lender to revise loan terms.I) The cost of issuing a bond.J) Total liabilities divided by total assets.K) Bond features that allow the issuer to repay the loan early.L) These are liabilities that have been incurred during the period but not yet paid.M) This type of liability is uncertain;it exists only if some other condition occurs.N) B) and E)
O) H) and I)

Question 18

Hardtack Industries borrowed $336,000 from its bank in return for an installment note with 8% interest.Hardtack will make 6 annual payments of $72,682.At the end of the first period,Hardtack will report a note payable on its balance sheet of:

Accepted Answer

A)  $336,000.
B)  $263,318.
C)  $290,198.
D)  $240,732.E) A) and B)
F) A) and C)

Question 19

Which of the following accounts could have a non-zero balance on a post-closing trial balance?

Accepted Answer

A)  Salaries and Wages Expense
B)  Premium on Bonds Payable
C)  Income Tax Expense
D)  Interest ExpenseE) B) and C)
F) A) and D)

Question 20

The entry to record a bond retirement at maturity usually involves recording a gain or loss.

Accepted Answer

A) True 
 B)False

Exam 10: Liabilities

Bonds that are not backed by collateral are referred to as "debentures."

Correct Answer
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Correct Answer
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Wool Co.makes a sale and collects a total of $756,which includes an 8% sales tax.What is the amount that will be credited to the Sales Revenue account?

Correct Answer
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B

Zorn Inc.makes a sale for $300.The company is required to collect sales taxes amounting to 9%.What is the amount that will be credited to the Sales Tax Payable account?

Correct Answer
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Match each term with the appropriate definition.Not all definitions will be used. -Present value

Correct Answer
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Callable bonds can be converted to stock.

Correct Answer
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False

When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable,the company should:

Correct Answer
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Match each term with the appropriate definition.Not all definitions will be used. -Premium

Correct Answer
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D

Some bonds allow the borrower to repay the bond by issuing stock.These bonds are known as:

Correct Answer
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A company retires its bonds with a face value of $100,000 at 105.The carrying value of the bonds at the retirement date is $103,745.The journal entry to record this retirement will include a:

Correct Answer
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Match each term with the appropriate definition.Not all definitions will be used. -Accrued liability

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Match each term with the appropriate definition.Not all definitions will be used. -Convertible

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Which of the following events does not create a liability?

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Match each term with the appropriate definition.Not all definitions will be used. -Line of credit

Correct Answer
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Hardtack Industries borrowed $336,000 from its bank in return for an installment note with 8% interest.Hardtack will make 6 annual payments of $72,682.At the end of the first period,Hardtack will report a note payable on its balance sheet of:

Correct Answer
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Which of the following accounts could have a non-zero balance on a post-closing trial balance?

Correct Answer
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The entry to record a bond retirement at maturity usually involves recording a gain or loss.

Correct Answer
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Exam 10: Liabilities

Bonds that are not backed by collateral are referred to as "debentures."

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Wool Co.makes a sale and collects a total of $756,which includes an 8% sales tax.What is the amount that will be credited to the Sales Revenue account?

Correct AnswerverifiedB

Zorn Inc.makes a sale for $300.The company is required to collect sales taxes amounting to 9%.What is the amount that will be credited to the Sales Tax Payable account?

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Present value

Correct AnswerverifiedShow Answer

Callable bonds can be converted to stock.

Correct AnswerverifiedFalse

When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable,the company should:

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Premium

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

Some bonds allow the borrower to repay the bond by issuing stock.These bonds are known as:

Correct AnswerverifiedShow Answer

A company retires its bonds with a face value of $100,000 at 105.The carrying value of the bonds at the retirement date is $103,745.The journal entry to record this retirement will include a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Accrued liability

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Convertible

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following events does not create a liability?

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Line of credit

Correct AnswerverifiedShow Answer

Hardtack Industries borrowed $336,000 from its bank in return for an installment note with 8% interest.Hardtack will make 6 annual payments of $72,682.At the end of the first period,Hardtack will report a note payable on its balance sheet of:

Correct AnswerverifiedShow Answer

Which of the following accounts could have a non-zero balance on a post-closing trial balance?

Correct AnswerverifiedShow Answer

The entry to record a bond retirement at maturity usually involves recording a gain or loss.

Correct AnswerverifiedShow Answer

Correct Answer
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B

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False

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D

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