Question 1

A company receives $265, of which $15 is for sales tax. The journal entry to record the sale would include a

Accepted Answer

A) debit to Sales Tax Expense for $15. 
B) credit to Sales Taxes Payable for $15. 
C) debit to Sales Revenue for $265. 
D) debit to Cash for $250. 
A) debit to Sales Tax Expense for $15. 
B) credit to Sales Taxes Payable for $15. 
C) debit to Sales Revenue for $265. 
D) debit to Cash for $250.

Question 2

The current ratio permits analysts to compare the liquidity of different sized companies.

Accepted Answer

A) True 
 B)False

Question 3

215. Which of the following statements regarding the effective-interest method of accounting for bonds characteristics is false?

Accepted Answer

A) GAAP always requires use of the effective interest method. 
B) The amount of periodic interest expense decreases over the life of a discounted bond issue when the effective-interest method is used. 
C) Over the life of the bonds, the carrying value increases for discounted bonds when using the effective-interest method. 
D) The effective-interest method applies a constant percentage to the bond carrying value to compute interest expense. 
A) GAAP always requires use of the effective interest method. 
B) The amount of periodic interest expense decreases over the life of a discounted bond issue when the effective-interest method is used. 
C) Over the life of the bonds, the carrying value increases for discounted bonds when using the effective-interest method. 
D) The effective-interest method applies a constant percentage to the bond carrying value to compute interest expense.

Question 4

If bonds can be converted into common stock,

Accepted Answer

A) they will sell at a lower price than comparable bonds without a conversion feature. 
B) they will carry a higher interest rate than comparable bonds without the conversion feature. 
C) they will be converted only if the issuer calls them in for conversion. 
D) the bondholder may benefit if the market price of the common stock increases substantially. 
A) they will sell at a lower price than comparable bonds without a conversion feature. 
B) they will carry a higher interest rate than comparable bonds without the conversion feature. 
C) they will be converted only if the issuer calls them in for conversion. 
D) the bondholder may benefit if the market price of the common stock increases substantially.

Question 5

Corporations are granted the power to issue bonds through

Accepted Answer

A) tax laws. 
B) state laws. 
C) federal security laws. 
D) bond debentures. 
A) tax laws. 
B) state laws. 
C) federal security laws. 
D) bond debentures.

Question 6

A bond trustee does not

Accepted Answer

A) issue the bonds. 
B) keep a record of each bondholder. 
C) hold conditional title to pledged property. 
D) maintain custody of unsold bonds. 
A) issue the bonds. 
B) keep a record of each bondholder. 
C) hold conditional title to pledged property. 
D) maintain custody of unsold bonds.

Question 7

The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be

Accepted Answer

A) $3,000. 
B) $1,667. 
C) $750. 
D) $500. 
A) $3,000. 
B) $1,667. 
C) $750. 
D) $500.

Question 8

FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.

Accepted Answer

A) True 
 B)False

Question 9

If bonds sell at a premium, the interest expense recognized each year will be greater than the contractual interest rate.

Accepted Answer

A) True 
 B)False

Question 10

Premium on Bonds Payable is a contra account to Bonds Payable.

Accepted Answer

A) True 
 B)False

Question 11

Neither corporate bond interest nor dividends are deductible for tax purposes.

Accepted Answer

A) True 
 B)False

Question 12

218. Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual straight-line amortization.   Which of the following amounts should be shown in cell (i)?

Accepted Answer

A) $31,200 
B) $32,400 
C) $30,000 
D) $6,000 
A) $31,200 
B) $32,400 
C) $30,000 
D) $6,000

Question 13

When current liabilities are presented under IFRS, they are generally shown

Accepted Answer

A) alphabetically. 
B) in order of magnitude. 
C) in order of the dates they become due. 
D) in order of liquidity. 
A) alphabetically. 
B) in order of magnitude. 
C) in order of the dates they become due. 
D) in order of liquidity.

Question 14

Most companies pay current liabilities

Accepted Answer

A) out of current assets. 
B) by issuing interest-bearing notes payable. 
C) by issuing stock. 
D) by creating long-term liabilities. 
A) out of current assets. 
B) by issuing interest-bearing notes payable. 
C) by issuing stock. 
D) by creating long-term liabilities.

Question 15

Sales taxes collected by a retailer are expenses

Accepted Answer

A) of the retailer. 
B) of the customers. 
C) of the government. 
D) that are not recognized by the retailer until they are submitted to the government. 
A) of the retailer. 
B) of the customers. 
C) of the government. 
D) that are not recognized by the retailer until they are submitted to the government.

Question 16

205. A bond discount must

Accepted Answer

A) always be amortized using straight-line amortization. 
B) always be amortized using the effective-interest method. 
C) be amortized using the effective-interest method if it yields annual amounts that are materially different than the straight-line method. 
D) be amortized using the straight-line method if it yields annual amounts that are materially different than the effective-interest method. 
A) always be amortized using straight-line amortization. 
B) always be amortized using the effective-interest method. 
C) be amortized using the effective-interest method if it yields annual amounts that are materially different than the straight-line method. 
D) be amortized using the straight-line method if it yields annual amounts that are materially different than the effective-interest method.

Question 17

If the market interest rate is greater than the contractual interest rate, bonds will sell

Accepted Answer

A) at a premium. 
B) at face value. 
C) at a discount. 
D) only after the stated interest rate is increased. 
A) at a premium. 
B) at face value. 
C) at a discount. 
D) only after the stated interest rate is increased.

Question 18

Which one of the following is shown first under current liabilities by many companies as a matter of custom?

Accepted Answer

A) Accrued expenses 
B) Current maturities of long-term debt 
C) Sales taxes payable 
D) Notes payable 
A) Accrued expenses 
B) Current maturities of long-term debt 
C) Sales taxes payable 
D) Notes payable

Question 19

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revene at December 31?

Accepted Answer

A) $0. 
B) $12,000. 
C) $24,000. 
D) $36,000. 
A) $0. 
B) $12,000. 
C) $24,000. 
D) $36,000.

Question 20

Which one of the following amounts increases each period when accounting for long-term notes payable?

Accepted Answer

A) Cash payment 
B) Interest expense 
C) Principal balance 
D) Reduction of principal 
A) Cash payment 
B) Interest expense 
C) Principal balance 
D) Reduction of principal

A company receives $265, of which $15 is for sales tax. The journal entry to record the sale would include a

The current ratio permits analysts to compare the liquidity of different sized companies.

215. Which of the following statements regarding the effective-interest method of accounting for bonds characteristics is false?

If bonds can be converted into common stock,

Corporations are granted the power to issue bonds through

A bond trustee does not

The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be

FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.

If bonds sell at a premium, the interest expense recognized each year will be greater than the contractual interest rate.

Premium on Bonds Payable is a contra account to Bonds Payable.

Neither corporate bond interest nor dividends are deductible for tax purposes.

218. Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (i)?

When current liabilities are presented under IFRS, they are generally shown

Most companies pay current liabilities

Sales taxes collected by a retailer are expenses

205. A bond discount must

If the market interest rate is greater than the contractual interest rate, bonds will sell

Which one of the following is shown first under current liabilities by many companies as a matter of custom?

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revene at December 31?

Which one of the following amounts increases each period when accounting for long-term notes payable?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

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Exam 10: Liabilities

A company receives $265, of which $15 is for sales tax. The journal entry to record the sale would include a

The current ratio permits analysts to compare the liquidity of different sized companies.

215. Which of the following statements regarding the effective-interest method of accounting for bonds characteristics is false?

If bonds can be converted into common stock,

Corporations are granted the power to issue bonds through

A bond trustee does not

The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be

FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.

If bonds sell at a premium, the interest expense recognized each year will be greater than the contractual interest rate.

Premium on Bonds Payable is a contra account to Bonds Payable.

Neither corporate bond interest nor dividends are deductible for tax purposes.

218. Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (i)?

When current liabilities are presented under IFRS, they are generally shown

Most companies pay current liabilities

Sales taxes collected by a retailer are expenses

205. A bond discount must

If the market interest rate is greater than the contractual interest rate, bonds will sell

Which one of the following is shown first under current liabilities by many companies as a matter of custom?

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revene at December 31?

Which one of the following amounts increases each period when accounting for long-term notes payable?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Filters