Question 1

The law requires ________ to pay FICA taxes.

Accepted Answer

A) both employee and employer 
B) the employee 
C) the employer 
D) only retailers 
A) both employee and employer 
B) the employee 
C) the employer 
D) only retailers

Question 2

Issuing a note payable for cash immediately results in a(n):

Accepted Answer

A) increase in assets and an increase in liabilities. 
B) decrease in assets and an increase in liabilities. 
C) decrease in assets and a decrease liabilities. 
D) increase in liabilities and a decrease in stockholders' equity. 
A) increase in assets and an increase in liabilities. 
B) decrease in assets and an increase in liabilities. 
C) decrease in assets and a decrease liabilities. 
D) increase in liabilities and a decrease in stockholders' equity.

Question 3

On October 1,2018,Allen Emig borrowed $306,000 from the West Coast Bank on a 6-month,6% note.Assuming no interest has been recorded yet,what is the amount of accrued interest as of December 31,2018?

Accepted Answer

A) $9,180 
B) $4,590 
C) $18,360 
D) $13,770 
A) $9,180 
B) $4,590 
C) $18,360 
D) $13,770

Question 4

During the year,the company recorded services provided to customers on account.What effect will this transaction have on the debt-to-assets and times interest earned ratios?

Accepted Answer

A) The debt-to-assets ratio will decrease and the times interest earned will increase. 
B) The debt-to-assets ratio will increase and the times interest earned will not change. 
C) Both ratios will decrease. 
D) Both ratios will increase. 
A) The debt-to-assets ratio will decrease and the times interest earned will increase. 
B) The debt-to-assets ratio will increase and the times interest earned will not change. 
C) Both ratios will decrease. 
D) Both ratios will increase.

Question 5

Bonds that are backed by a company's assets are referred to as "secured" bonds.

Accepted Answer

A) True 
 B)False

Question 6

Using the simplified effective-interest amortization,interest expense 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. 
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.

Question 7

Selected financial information presented below was obtained from the financial statements of Terripin Industries: $\begin{array}{lr}
\text { Current Assets } & \$ 80,000 \
\text { Property and Equipment, net } & 120,000 \
\text { Current Liabilities } & 90,000 \
\text { Noncurrent Liabilities } & 70,000 \
\text { Stockholder's Equity } & 40,000 \
\text { Sales Revenue } & 100,000 \
\text { Net Income } & 36,000
\end{array}$ What is the debt-to-assets ratio?

Accepted Answer

A) 0.35 
B) 0.80 
C) 0.20 
D) 1.00 
A) 0.35 
B) 0.80 
C) 0.20 
D) 1.00

Question 8

Odessa Co.has current assets of $10 million and net income of $20 million.Current liabilities total $5 million,interest expense is $4 million,and income tax expense is $6 million.What is the times interest earned ratio for this company?

Accepted Answer

A) 0.5 
B) 7.5 
C) 0.3 
D) 2.0 
A) 0.5 
B) 7.5 
C) 0.3 
D) 2.0

Question 9

If a company forgets to record the journal entry to accrue interest expense,then its net income is too ________ and its liabilities are too ________.

Accepted Answer

A) high;high 
B) low;high 
C) low;low 
D) high;low 
A) high;high 
B) low;high 
C) low;low 
D) high;low

Question 10

Amortizing a bond premium will ________ the premium balance and ________ the carrying value of the bond so that when the bond matures the carrying value will ________ the face value.

Accepted Answer

A) decrease;increase;be greater than 
B) increase;decrease;be greater than 
C) decrease;increase;equal 
D) decrease;decrease;equal 
A) decrease;increase;be greater than 
B) increase;decrease;be greater than 
C) decrease;increase;equal 
D) decrease;decrease;equal

Question 11

Deferred Revenues are liabilities because:

Accepted Answer

A) no cash has changed hands. 
B) goods or services have been paid for,but not yet provided to the customer. 
C) the company is transferring them to another period for tax reasons. 
D) the customer may someday return items purchased for a refund. 
A) no cash has changed hands. 
B) goods or services have been paid for,but not yet provided to the customer. 
C) the company is transferring them to another period for tax reasons. 
D) the customer may someday return items purchased for a refund.

Question 12

Match each term with the appropriate definition.Not all definitions will be used.
-Stated interest rate

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. 
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.

Question 13

If the likelihood of a loss is reasonably possible,a contingent liability is recorded by making an appropriate journal entry.

Accepted Answer

A) True 
 B)False

Question 14

Obligations due to be paid within one year or the company's operating cycle,whichever is longer,are classified as:

Accepted Answer

A) current assets. 
B) current liabilities. 
C) earned revenues. 
D) noncurrent liabilities. 
A) current assets. 
B) current liabilities. 
C) earned revenues. 
D) noncurrent liabilities.

Question 15

When bonds are retired at their maturity date,the balance in the Bonds Payable account is equal to the bond's:

Accepted Answer

A) face value minus any premium amortized. 
B) face value plus interest to be paid. 
C) face value plus any discount amortized. 
D) face value. 
A) face value minus any premium amortized. 
B) face value plus interest to be paid. 
C) face value plus any discount amortized. 
D) face value.

Question 16

The gross earnings for all employees is credited to Salaries and Wages Payable.

Accepted Answer

A) True 
 B)False

Question 17

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. Assuming Disco World adjusts its accounts only at its December 31 year-end,what entry must Disco World make to account for the services provided through that date?

Accepted Answer

A) Debit Cash and credit Dance Lessons Revenue for $3,000. 
B) Debit Deferred Revenue and credit Dance Lessons Revenue for $4,500. 
C) Debit Deferred Revenue and credit Dance Lessons Revenue for $3,000. 
D) Debit Dance Lessons Revenue and credit Deferred Revenue for $3,000. 
A) Debit Cash and credit Dance Lessons Revenue for $3,000. 
B) Debit Deferred Revenue and credit Dance Lessons Revenue for $4,500. 
C) Debit Deferred Revenue and credit Dance Lessons Revenue for $3,000. 
D) Debit Dance Lessons Revenue and credit Deferred Revenue for $3,000.

Question 18

The entry to record the borrowing of cash by issuing a note was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:

Accepted Answer

A) assets to be understated. 
B) liabilities to be overstated. 
C) stockholders' equity to be understated. 
D) stockholders' equity to be overstated. 
A) assets to be understated. 
B) liabilities to be overstated. 
C) stockholders' equity to be understated. 
D) stockholders' equity to be overstated.

Question 19

Company A has liabilities of $6,773,000 and stockholders' equity of $3,647,000 at the end of the current year,and sales revenue of $9,800,000 and net income of $899,080 for the year.Company B has assets of $1,680,000 and stockholders' equity of $978,750 at the end of the current year,and sales revenue of $1,950,000 and net income of $351,000 for the year.
Required:
Part a.P1P1_0.95Calculate the debt-to-assets ratio for each company.P1P1_E
Part b.Identify the company that has greater financing risk and explain why.

Accepted Answer

Part a
Debt-to-assets ratio = Total Liab

Question 20

A negative times interest earned ratio suggests that the company:

Accepted Answer

A) is using resources very efficiently. 
B) has a serious financial problem. 
C) has a very high interest expense. 
D) has a high level of sales revenue. 
A) is using resources very efficiently. 
B) has a serious financial problem. 
C) has a very high interest expense. 
D) has a high level of sales revenue.

The law requires ________ to pay FICA taxes.

Issuing a note payable for cash immediately results in a(n):

On October 1,2018,Allen Emig borrowed $306,000 from the West Coast Bank on a 6-month,6% note.Assuming no interest has been recorded yet,what is the amount of accrued interest as of December 31,2018?

During the year,the company recorded services provided to customers on account.What effect will this transaction have on the debt-to-assets and times interest earned ratios?

Bonds that are backed by a company's assets are referred to as "secured" bonds.

Using the simplified effective-interest amortization,interest expense is calculated as:

Odessa Co.has current assets of $10 million and net income of $20 million.Current liabilities total $5 million,interest expense is $4 million,and income tax expense is $6 million.What is the times interest earned ratio for this company?

If a company forgets to record the journal entry to accrue interest expense,then its net income is too and its liabilities are too .

Amortizing a bond premium will the premium balance and the carrying value of the bond so that when the bond matures the carrying value will the face value.

Deferred Revenues are liabilities because:

Match each term with the appropriate definition.Not all definitions will be used. -Stated interest rate

If the likelihood of a loss is reasonably possible,a contingent liability is recorded by making an appropriate journal entry.

Obligations due to be paid within one year or the company's operating cycle,whichever is longer,are classified as:

When bonds are retired at their maturity date,the balance in the Bonds Payable account is equal to the bond's:

The gross earnings for all employees is credited to Salaries and Wages Payable.

The entry to record the borrowing of cash by issuing a note was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:

A negative times interest earned ratio suggests that the company:

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments,Financial Statements,and Financial Results

Fraud,Internal Control,and Cash

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Receivables,Bad Debt Expense,and Interest Revenue

Long-Lived Tangible and Intangible Assets

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 10: Liabilities

The law requires ________ to pay FICA taxes.

Issuing a note payable for cash immediately results in a(n):

On October 1,2018,Allen Emig borrowed $306,000 from the West Coast Bank on a 6-month,6% note.Assuming no interest has been recorded yet,what is the amount of accrued interest as of December 31,2018?

During the year,the company recorded services provided to customers on account.What effect will this transaction have on the debt-to-assets and times interest earned ratios?

Bonds that are backed by a company's assets are referred to as "secured" bonds.

Using the simplified effective-interest amortization,interest expense is calculated as:

Odessa Co.has current assets of $10 million and net income of $20 million.Current liabilities total $5 million,interest expense is $4 million,and income tax expense is $6 million.What is the times interest earned ratio for this company?

If a company forgets to record the journal entry to accrue interest expense,then its net income is too ________ and its liabilities are too ________.

Amortizing a bond premium will ________ the premium balance and ________ the carrying value of the bond so that when the bond matures the carrying value will ________ the face value.

Deferred Revenues are liabilities because:

Match each term with the appropriate definition.Not all definitions will be used. -Stated interest rate

If the likelihood of a loss is reasonably possible,a contingent liability is recorded by making an appropriate journal entry.

Obligations due to be paid within one year or the company's operating cycle,whichever is longer,are classified as:

When bonds are retired at their maturity date,the balance in the Bonds Payable account is equal to the bond's:

The gross earnings for all employees is credited to Salaries and Wages Payable.

The entry to record the borrowing of cash by issuing a note was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:

A negative times interest earned ratio suggests that the company:

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments,Financial Statements,and Financial Results

Fraud,Internal Control,and Cash

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Receivables,Bad Debt Expense,and Interest Revenue

Long-Lived Tangible and Intangible Assets

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

If a company forgets to record the journal entry to accrue interest expense,then its net income is too and its liabilities are too .

Amortizing a bond premium will the premium balance and the carrying value of the bond so that when the bond matures the carrying value will the face value.