Question 1

Each of the following is correct regarding bonds except they are

Accepted Answer

A) a form of interest-bearing notes payable. 
B) attractive to many investors. 
C) issued by corporations and governmental agencies. 
D) sold in large denominations. 
A) a form of interest-bearing notes payable. 
B) attractive to many investors. 
C) issued by corporations and governmental agencies. 
D) sold in large denominations.

Question 2

The 2015 financial statements of Marker Co. contain the following selected data (in millions). The debt to assets ratio is

Accepted Answer

A) 64.3%. 
B) 53.3%. 
C) 28.6%. 
D) 147.4%. 
A) 64.3%. 
B) 53.3%. 
C) 28.6%. 
D) 147.4%.

Question 3

Working capital is current assets divided by current liabilities.

Accepted Answer

A) True 
 B)False

Question 4

Interest expense on a note payable is only recorded at maturity.

Accepted Answer

A) True 
 B)False

Question 5

Companies with good credit ratings use _________________ bonds extensively.

Accepted Answer

A) callable bonds. 
B) convertible bonds. 
C) mortgage bonds. 
D) debenture bonds. 
A) callable bonds. 
B) convertible bonds. 
C) mortgage bonds. 
D) debenture bonds.

Question 6

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $630,000, what is the amount of the sales taxes owed to the taxing agency?

Accepted Answer

A) $600,000 
B) $630,000 
C) $31,500 
D) $30,000 
A) $600,000 
B) $630,000 
C) $31,500 
D) $30,000

Question 7

If $800,000, 6% bonds are issued on January 1, and pay interest semiannually, the amount of interest paid on July 1 will be $24,000.

Accepted Answer

A) True 
 B)False

Question 8

If bonds are issued at a discount, it means that the

Accepted Answer

A) financial strength of the issuer is suspect. 
B) market interest rate is higher than the contractual interest rate. 
C) market interest rate is lower than the contractual interest rate. 
D) bondholder will receive effectively less interest than the contractual interest rate. 
A) financial strength of the issuer is suspect. 
B) market interest rate is higher than the contractual interest rate. 
C) market interest rate is lower than the contractual interest rate. 
D) bondholder will receive effectively less interest than the contractual interest rate.

Question 9

223. On January 1, Health Corporation issues $3,000,000, 5-year, 8% bonds at 96 with interest payable on July 1 and January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

Accepted Answer

A) debit to Interest Expense, $120,000. 
B) debit to Interest Expense, $240,000. 
C) credit to Discount on Bonds Payable, $12,000. 
D) credit to Discount on Bonds Payable, $24,000. 
A) debit to Interest Expense, $120,000. 
B) debit to Interest Expense, $240,000. 
C) credit to Discount on Bonds Payable, $12,000. 
D) credit to Discount on Bonds Payable, $24,000.

Question 10

Bonds issued against the general credit of the borrower are called

Accepted Answer

A) callable bonds. 
B) debenture bonds. 
C) mortgage bonds. 
D) a sinking fund bond. 
A) callable bonds. 
B) debenture bonds. 
C) mortgage bonds. 
D) a sinking fund bond.

Question 11

A company whose current liabilities exceed its current assets may have a liquidity problem.

Accepted Answer

A) True 
 B)False

Question 12

The sale of bonds above face value

Accepted Answer

A) is a rare occurrence. 
B) will cause the total cost of borrowing to be less than the bond interest paid. 
C) will cause the total cost of borrowing to be more than the bond interest paid. 
D) will have no net effect on Interest Expense by the time the bonds mature. 
A) is a rare occurrence. 
B) will cause the total cost of borrowing to be less than the bond interest paid. 
C) will cause the total cost of borrowing to be more than the bond interest paid. 
D) will have no net effect on Interest Expense by the time the bonds mature.

Question 13

206. When the effective-interest method of bond discount amortization is used,

Accepted Answer

A) the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date. 
B) the carrying value of the bonds will decrease each period. 
C) interest expense will not be a constant dollar amount over the life of the bond. 
D) interest paid to bondholders will be a function of the effective-interest rate on the date the bonds are issued. 
A) the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date. 
B) the carrying value of the bonds will decrease each period. 
C) interest expense will not be a constant dollar amount over the life of the bond. 
D) interest paid to bondholders will be a function of the effective-interest rate on the date the bonds are issued.

Question 14

A 10% stock dividend is the equivalent of a $1,000 par value bond paying annual interest of 10%.

Accepted Answer

A) True 
 B)False

Question 15

Bonds that are secured by real estate are termed

Accepted Answer

A) mortgage bonds. 
B) convertible bonds. 
C) debentures. 
D) bearer bonds. 
A) mortgage bonds. 
B) convertible bonds. 
C) debentures. 
D) bearer bonds.

Question 16

A major disadvantage resulting from the use of bonds is that

Accepted Answer

A) earnings per share may be lowered. 
B) interest must be paid on a periodic basis. 
C) bondholders have voting rights. 
D) taxes may increase. 
A) earnings per share may be lowered. 
B) interest must be paid on a periodic basis. 
C) bondholders have voting rights. 
D) taxes may increase.

Question 17

The loss on bond redemption is the difference between the cash paid and the carrying value of the bonds.

Accepted Answer

A) True 
 B)False

Question 18

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is:

Accepted Answer

A) $7,155. 
B) $6,726. 
C) $7,584. 
D) $6,750. 
A) $7,155. 
B) $6,726. 
C) $7,584. 
D) $6,750.

Question 19

Current maturities of long-term debt are often identified as long-term debt due within one year on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about liabilities in incorrect? Under IFRS, companies sometimes show

Accepted Answer

A) liabilities before assets. 
B) long-term liabilities before current assets. 
C) current liabilities netted against current assets. 
D) liabilities in order of magnitude. 
A) liabilities before assets. 
B) long-term liabilities before current assets. 
C) current liabilities netted against current assets. 
D) liabilities in order of magnitude.

Each of the following is correct regarding bonds except they are

The 2015 financial statements of Marker Co. contain the following selected data (in millions). The debt to assets ratio is

Working capital is current assets divided by current liabilities.

Interest expense on a note payable is only recorded at maturity.

Companies with good credit ratings use _________________ bonds extensively.

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $630,000, what is the amount of the sales taxes owed to the taxing agency?

If $800,000, 6% bonds are issued on January 1, and pay interest semiannually, the amount of interest paid on July 1 will be $24,000.

If bonds are issued at a discount, it means that the

223. On January 1, Health Corporation issues $3,000,000, 5-year, 8% bonds at 96 with interest payable on July 1 and January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

Bonds issued against the general credit of the borrower are called

A company whose current liabilities exceed its current assets may have a liquidity problem.

The sale of bonds above face value

206. When the effective-interest method of bond discount amortization is used,

A 10% stock dividend is the equivalent of a $1,000 par value bond paying annual interest of 10%.

Bonds that are secured by real estate are termed

A major disadvantage resulting from the use of bonds is that

The loss on bond redemption is the difference between the cash paid and the carrying value of the bonds.

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is:

Current maturities of long-term debt are often identified as long-term debt due within one year on the balance sheet.

Which of the following statements about liabilities in incorrect? Under IFRS, companies sometimes show

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

Each of the following is correct regarding bonds except they are

The 2015 financial statements of Marker Co. contain the following selected data (in millions). The debt to assets ratio is

Working capital is current assets divided by current liabilities.

Interest expense on a note payable is only recorded at maturity.

Companies with good credit ratings use _________________ bonds extensively.

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $630,000, what is the amount of the sales taxes owed to the taxing agency?

If $800,000, 6% bonds are issued on January 1, and pay interest semiannually, the amount of interest paid on July 1 will be $24,000.

If bonds are issued at a discount, it means that the

223. On January 1, Health Corporation issues $3,000,000, 5-year, 8% bonds at 96 with interest payable on July 1 and January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line method will include a

Bonds issued against the general credit of the borrower are called

A company whose current liabilities exceed its current assets may have a liquidity problem.

The sale of bonds above face value

206. When the effective-interest method of bond discount amortization is used,

A 10% stock dividend is the equivalent of a $1,000 par value bond paying annual interest of 10%.

Bonds that are secured by real estate are termed

A major disadvantage resulting from the use of bonds is that

The loss on bond redemption is the difference between the cash paid and the carrying value of the bonds.

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is:

Current maturities of long-term debt are often identified as long-term debt due within one year on the balance sheet.

Which of the following statements about liabilities in incorrect? Under IFRS, companies sometimes show

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