Question 1

A company purchased equipment by issuing a $200,000,one-year,8% note payable.The transaction would be recorded in the accounting records with a credit to Notes Payable for:

Accepted Answer

A)  $200,000.
B)  $216,000.
C)  $184,000.
D)  $208,000.E) C) and D)
F) All of the above

Question 2

At the maturity date,the carrying value of a bond should always be equal to the face value.

Accepted Answer

A) True 
 B)False

Question 3

The issuance price of a bond does not depend on the:

Accepted Answer

A)  face value of the bond.
B)  market rate of interest.
C)  perceived risk associated with the bond.
D)  method used to amortize the discount or premium.E) C) and D)
F) A) and C)

Question 4

Payroll taxes paid by employees include which of the following?

Accepted Answer

A)  Federal income tax,federal unemployment tax,and Medicare
B)  Social security,federal unemployment tax,and state unemployment tax
C)  Social security,federal income tax,and federal unemployment tax
D)  Federal income tax withheld,state income tax withheld,and MedicareE) B) and C)
F) None of the above

Question 5

On January 1,2018,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 5%,the company receives $52,723 for the bonds.
Required:
Fill in the table assuming the company uses effective-interest bond amortization.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> * Carryin...

Question 6

A contingent liability is:

Accepted Answer

A)  always a specific amount.
B)  an obligation arising from the purchase of goods or services on credit.
C)  an obligation not requiring a future payment.
D)  a potential obligation that depends on a future event.E) A) and B)
F) A) and D)

Question 7

Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1.Brickyard signs a $200,000,4%,9-month note.Interest is due at maturity on September 30.The company's fiscal year ends June 30 and adjusting entries are recorded at that time only. What journal entry will Brickyard make when paying the interest at maturity?

Accepted Answer

A)  Debit Notes Payable and credit Cash for $206,000.
B)  Debit Interest Expense for $4,000,and credit Cash for $4,000.
C)  Debit Interest Expense for $6,000 and Cash for $206,000.
D)  Debit Interest Payable for $4,000,debit Interest Expense for $2,000,and credit Cash for $6,000.E) A) and C)
F) A) and B)

Question 8

Disco World began its business on November 1 and sold contracts to twelve students for dance lessons that day.The lessons cost $375 per person for a three-month period and the students are required to pay in advance. The journal entry to record this transaction would include the receipt of cash on November 1 a credit to:

Accepted Answer

A)  Cash.
B)  Deferred Revenue.
C)  Dance Lessons Revenue.
D)  Dance Lessons Payable.E) A) and B)
F) A) and C)

Question 9

Match each term with the appropriate definition.Not all definitions will be used.
-Debt-to-assets ratio

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) D) and I)
O) B) and J)

Question 10

Bonds with a stated interest rate of 9% and a face value totaling $600,000 were issued for $624,000 on January 1,2018,when the market interest rate was 8%.The company uses effective-interest bond amortization.
Required:
Determine the carrying value of the bonds at December 31,2019.

Accepted Answer

The answer of Bonds with a stated interest rate of...

Question 11

Which type of contingent liability would most likely be reported on a balance sheet prepared in accordance with GAAP?

Accepted Answer

A)  Remote contingent liability
B)  Reasonably possible contingent liability
C)  Probable contingent liability that can be estimated
D)  Quite likely contingent liabilityE) All of the above
F) C) and D)

Question 12

Using straight-line amortization,when a bond is sold at a discount:

Accepted Answer

A)  Bonds Payable declines by a constant amount each year.
B)  Interest Expense declines by a constant amount each year.
C)  the carrying value of the bonds declines by a constant amount each year.
D)  Interest Expense is a constant amount each year.E) B) and D)
F) B) and C)

Question 13

A company receives $102,000 when it issues a bond with a face value of $100,000 and a stated interest rate of 7%.Which of the following statements is correct?

Accepted Answer

A)  The entry to record the issuance will include a credit to Bonds Payable for $102,000.
B)  The market interest rate is 7%.
C)  The annual interest expense is $7,000.
D)  The carrying value of the bonds will be $100,000 at maturity.E) All of the above
F) C) and D)

Question 14

On January 1,2018,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 9%,the company receives $47,469 for the bond.
Required:
Part a.Determine the interest expense,the cash payment for interest,and the amount of the premium that will be amortized during the year ending December 31,2018.
Part b.Prepare the journal entry to record the first interest payment on December 31,2018.

Accepted Answer

Part a
Interest expense = Carrying value...

Question 15

Burlingame Co.is purchasing a new forklift to be used in its warehousing operations.Burlingame borrowed $120,000 from its bank in return for an installment note with 8% interest.Burlingame will make 6 equal annual payments of $25,958.Interest expense for the first period equals:

Accepted Answer

A)  $16,358.
B)  $7,523.
C)  $9,600.
D)  $25,958.E) All of the above
F) B) and D)

Question 16

A bond discount is:

Accepted Answer

A)  a result of the interest payments being less than the cost of borrowing.
B)  essentially free money.
C)  a result of the interest payments being more than the cost of borrowing.
D)  reported on the income statement as a loss on the issuance of a bond.E) None of the above
F) A) and D)

Question 17

Sales taxes are recorded by the retailer as:

Accepted Answer

A)  Sales Tax Expense.
B)  Sales Tax Payable.
C)  Sales Revenue.
D)  Sales Returns and Allowances.E) A) and B)
F) None of the above

Question 18

Which of the following statements about bond premiums or discounts is correct?

Accepted Answer

A)  A discount on a bond reduces the amount that the issuer has to repay to the lenders.
B)  A premium on a bond increases the interest expense of the loan to the issuer.
C)  A premium on a bond increases the amount that the issuer has to repay to the lenders.
D)  A discount on a bond increases the interest expense of the loan to the issuer.E) A) and B)
F) C) and D)

Question 19

Using the simplified effective-interest amortization,the credit to Cash each interest payment is calculated as:

Accepted Answer

A)  Bonds Payable,Net × Market Interest Rate × Time.
B)  Bonds Payable,Net × Stated Interest Rate × Time.
C)  Face Value × Stated Interest Rate × Time.
D)  Face Value × Market Interest Rate × Time.E) A) and B)
F) B) and C)

Question 20

Your company is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,your company will:

Accepted Answer

A)  not be able to issue the bonds because no one will buy them.
B)  receive a higher issue price as buyers compete for the bonds.
C)  have to accept a lower issue price to attract buyers.
D)  have to reprint the bond certificates to change stated interest rate to 5%.E) A) and B)
F) A) and C)

Exam 10: Liabilities

The issuance price of a bond does not depend on the:

Correct Answer
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A bond discount is:

Correct Answer
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Correct Answer
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A company purchased equipment by issuing a $200,000,one-year,8% note payable.The transaction would be recorded in the accounting records with a credit to Notes Payable for:

Correct Answer
verified

Payroll taxes paid by employees include which of the following?

Correct Answer
verified

Using the simplified effective-interest amortization,the credit to Cash each interest payment is calculated as:

Correct Answer
verified

Sales taxes are recorded by the retailer as:

Correct Answer
verified

Which of the following statements about bond premiums or discounts is correct?

Correct Answer
verified

Bonds with a stated interest rate of 9% and a face value totaling $600,000 were issued for $624,000 on January 1,2018,when the market interest rate was 8%.The company uses effective-interest bond amortization. Required: Determine the carrying value of the bonds at December 31,2019.

Correct Answer
verified

A contingent liability is:

Correct Answer
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Correct Answer
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Correct Answer
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Part a
Interest expense = Carrying value...
View Answer

Which type of contingent liability would most likely be reported on a balance sheet prepared in accordance with GAAP?

Correct Answer
verified

Your company is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,your company will:

Correct Answer
verified

A company receives $102,000 when it issues a bond with a face value of $100,000 and a stated interest rate of 7%.Which of the following statements is correct?

Correct Answer
verified

Burlingame Co.is purchasing a new forklift to be used in its warehousing operations.Burlingame borrowed $120,000 from its bank in return for an installment note with 8% interest.Burlingame will make 6 equal annual payments of $25,958.Interest expense for the first period equals:

Correct Answer
verified

At the maturity date,the carrying value of a bond should always be equal to the face value.

Correct Answer
verified

Match each term with the appropriate definition.Not all definitions will be used. -Debt-to-assets ratio

Correct Answer
verified

On January 1,2018,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 5%,the company receives $52,723 for the bonds. Required: Fill in the table assuming the company uses effective-interest bond amortization.

Correct Answer
verified
* Carryin...
View Answer

Using straight-line amortization,when a bond is sold at a discount:

Correct Answer
verified

Exam 10: Liabilities

The issuance price of a bond does not depend on the:

Correct AnswerverifiedShow Answer

A bond discount is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A company purchased equipment by issuing a $200,000,one-year,8% note payable.The transaction would be recorded in the accounting records with a credit to Notes Payable for:

Correct AnswerverifiedShow Answer

Payroll taxes paid by employees include which of the following?

Correct AnswerverifiedShow Answer

Using the simplified effective-interest amortization,the credit to Cash each interest payment is calculated as:

Correct AnswerverifiedShow Answer

Sales taxes are recorded by the retailer as:

Correct AnswerverifiedShow Answer

Which of the following statements about bond premiums or discounts is correct?

Correct AnswerverifiedShow Answer

Bonds with a stated interest rate of 9% and a face value totaling $600,000 were issued for $624,000 on January 1,2018,when the market interest rate was 8%.The company uses effective-interest bond amortization. Required: Determine the carrying value of the bonds at December 31,2019.

Correct AnswerverifiedShow Answer

A contingent liability is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart aInterest expense = Carrying value...View AnswerShow Answer

Which type of contingent liability would most likely be reported on a balance sheet prepared in accordance with GAAP?

Correct AnswerverifiedShow Answer

Your company is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,your company will:

Correct AnswerverifiedShow Answer

A company receives $102,000 when it issues a bond with a face value of $100,000 and a stated interest rate of 7%.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Burlingame Co.is purchasing a new forklift to be used in its warehousing operations.Burlingame borrowed $120,000 from its bank in return for an installment note with 8% interest.Burlingame will make 6 equal annual payments of $25,958.Interest expense for the first period equals:

Correct AnswerverifiedShow Answer

At the maturity date,the carrying value of a bond should always be equal to the face value.

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Debt-to-assets ratio

Correct AnswerverifiedShow Answer

On January 1,2018,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 5%,the company receives $52,723 for the bonds. Required: Fill in the table assuming the company uses effective-interest bond amortization.

Correct Answerverified * Carryin...View AnswerShow Answer

Using straight-line amortization,when a bond is sold at a discount:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Part a
Interest expense = Carrying value...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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* Carryin...
View Answer

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