Question 1

FICA payments consist of Social Security taxes and Medicare taxes.

Accepted Answer

A) True 
 B)False

Question 2

Your company issues $50,000 of one-year,10% bonds at face value.The journal entry to record this transaction will include a debit to:

Accepted Answer

A) Cash and a credit to Bonds Payable for $50,000. 
B) Cash and a credit to Bonds Payable for $55,000. 
C) Cash for $55,000,a credit to Bonds Payable for $50,000,and a credit to Interest Payable for $5,000. 
D) Cash for $50,000,a debit to Interest Expense for $5,000,and a credit to Bonds Payable for $55,000. 
A) Cash and a credit to Bonds Payable for $50,000. 
B) Cash and a credit to Bonds Payable for $55,000. 
C) Cash for $55,000,a credit to Bonds Payable for $50,000,and a credit to Interest Payable for $5,000. 
D) Cash for $50,000,a debit to Interest Expense for $5,000,and a credit to Bonds Payable for $55,000.

Question 3

Red Mountain,Inc.has the following information from its payroll records:   The employer amount of FICA taxes that Red Mountain is required to pay is equal to the amount that it withholds from its employees.Assume no other payroll taxes are incurred at this time.What is Red Mountain's total expense with regards to this payroll?

Accepted Answer

A) $144,000 
B) $153,000 
C) $180,000 
D) $189,000 
A) $144,000 
B) $153,000 
C) $180,000 
D) $189,000

Question 4

Maxwell Manufacturing issued $750,000,10-year,10% bonds at 105. What is the issue price of these bonds?

Accepted Answer

A) $750,000 
B) $712,500 
C) $787,500 
D) $825,000 
A) $750,000 
B) $712,500 
C) $787,500 
D) $825,000

Question 5

Which of the following are generally recorded as liabilities on the balance sheet if the loss can be reasonably estimated?

Accepted Answer

A) Remote likelihood liabilities 
B) Possible contingent liabilities 
C) Probable contingent liabilities 
D) Immaterial contingent liabilities 
A) Remote likelihood liabilities 
B) Possible contingent liabilities 
C) Probable contingent liabilities 
D) Immaterial contingent liabilities

Question 6

Which of the following statements about a 10-year bond issued at a discount is not correct?

Accepted Answer

A) At the end of ten years,the balance in the Discount on Bonds Payable account will equal zero. 
B) At the end of ten years,the carrying value will equal the face value. 
C) At the end of ten years,the total interest expense will reflect the market rate of interest. 
D) At the end of ten years,the total interest expense will equal the total interest paid. 
A) At the end of ten years,the balance in the Discount on Bonds Payable account will equal zero. 
B) At the end of ten years,the carrying value will equal the face value. 
C) At the end of ten years,the total interest expense will reflect the market rate of interest. 
D) At the end of ten years,the total interest expense will equal the total interest paid.

Question 7

A one-year,$15,000,6% note is signed on April 1.If the note is repaid on September 1 of the same year,how much interest expense is incurred?

Accepted Answer

A) $900 
B) $450 
C) $375 
D) $300 
A) $900 
B) $450 
C) $375 
D) $300

Question 8

Liabilities are classified as current if they:

Accepted Answer

A) will be paid within the company's operating cycle or within 1 year,whichever is longer. 
B) will be paid using current assets. 
C) are less than the current assets. 
D) are greater than the current assets. 
A) will be paid within the company's operating cycle or within 1 year,whichever is longer. 
B) will be paid using current assets. 
C) are less than the current assets. 
D) are greater than the current assets.

Question 9

The Payroll records of Oregon Mist contained the following information for the month of November:   The journal entry to record the monthly Payroll Tax Expense would include a:

Accepted Answer

A) debit to Payroll Tax Expense of $25,200. 
B) credit to FICA Taxes Payable of $43,400. 
C) debit to Payroll Tax Expense of $48,650. 
D) debit to Payroll Tax Expense of $26,950. 
A) debit to Payroll Tax Expense of $25,200. 
B) credit to FICA Taxes Payable of $43,400. 
C) debit to Payroll Tax Expense of $48,650. 
D) debit to Payroll Tax Expense of $26,950.

Question 10

The entry to record a bond retirement at maturity usually involves:

Accepted Answer

A) no gain or loss. 
B) a credit to Gain on Bond Retirement. 
C) a debit to Loss on Bond Retirement. 
D) a credit to Bonds Payable. 
A) no gain or loss. 
B) a credit to Gain on Bond Retirement. 
C) a debit to Loss on Bond Retirement. 
D) a credit to Bonds Payable.

Question 11

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

Accepted Answer

A) the amortized premium is added to the interest payable to calculate interest expense. 
B) Bonds Payable rises by a constant amount each year. 
C) interest expense is calculated by subtracting the amortized premium from the interest payment that is to be made. 
D) interest expense rises each year. 
A) the amortized premium is added to the interest payable to calculate interest expense. 
B) Bonds Payable rises by a constant amount each year. 
C) interest expense is calculated by subtracting the amortized premium from the interest payment that is to be made. 
D) interest expense rises each year.

Question 12

At the beginning of the year,Norwood Pass Industries had $240,000 in total assets and a debt-to-assets ratio of 0.5 or 50%.During the year,Norwood's assets increased by $80,000,and its liabilities increased by $72,000.What is the debt-to-assets ratio at the end of the year?

Accepted Answer

A) 0.6 or 60% 
B) 0.4 or 40% 
C) 0.9 or 90% 
D) 1.7 or 170% 
A) 0.6 or 60% 
B) 0.4 or 40% 
C) 0.9 or 90% 
D) 1.7 or 170%

Question 13

If the stated interest rate exceeds the market interest rate,a bond will sell at a premium.

Accepted Answer

A) True 
 B)False

Question 14

Which one of the following accounts would not necessarily be classified as a current liability?

Accepted Answer

A) Accounts payable 
B) Accrued liabilities 
C) Contingent liabilities 
D) Current portion of long-term debt 
A) Accounts payable 
B) Accrued liabilities 
C) Contingent liabilities 
D) Current portion of long-term debt

Question 15

During one pay period,Star Valley Company distributes $234,900 to employees as net pay.The income tax withholdings were $34,200 and the FICA withholdings were $9,000.Total payroll costs to the company for this pay period,excluding any unemployment taxes,was:

Accepted Answer

A) $269,100. 
B) $234,900. 
C) $278,100. 
D) $287,100. 
A) $269,100. 
B) $234,900. 
C) $278,100. 
D) $287,100.

Question 16

An entertainment company received $6 million in cash for advance season ticket sales.Prior to the beginning of the season,these sales should be recorded as a liability.

Accepted Answer

A) True 
 B)False

Question 17

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements.This feature is known as a:

Accepted Answer

A) bond certificate. 
B) loan covenant. 
C) renegotiation. 
D) contingent liability. 
A) bond certificate. 
B) loan covenant. 
C) renegotiation. 
D) contingent liability.

Question 18

If total assets decrease but total liabilities remain the same,what is the impact on the debt-to-assets ratio?

Accepted Answer

A) It decreases. 
B) It remains the same. 
C) It cannot be determined without additional information. 
D) It increases. 
A) It decreases. 
B) It remains the same. 
C) It cannot be determined without additional information. 
D) It increases.

Question 19

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:
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 20

Which one of the following statements about amortization of discounts and premiums is not correct?

Accepted Answer

A) Under straight-line amortization,when a bond is sold at a premium,the annual premium amortization is the total premium divided by the number of years until bond maturity. 
B) When a bond is sold at a discount,interest expense recorded using the effective-interest method is less than the interest paid on the bond. 
C) The effective-interest method of amortization is considered to be conceptually superior to straight-line amortization. 
D) When a bond discount is amortized using the effective-interest method,the promised interest payment is less than the interest expense,so the bond liability will increase as a result of the contra-liability account decreasing. 
A) Under straight-line amortization,when a bond is sold at a premium,the annual premium amortization is the total premium divided by the number of years until bond maturity. 
B) When a bond is sold at a discount,interest expense recorded using the effective-interest method is less than the interest paid on the bond. 
C) The effective-interest method of amortization is considered to be conceptually superior to straight-line amortization. 
D) When a bond discount is amortized using the effective-interest method,the promised interest payment is less than the interest expense,so the bond liability will increase as a result of the contra-liability account decreasing.

FICA payments consist of Social Security taxes and Medicare taxes.

Your company issues $50,000 of one-year,10% bonds at face value.The journal entry to record this transaction will include a debit to:

Maxwell Manufacturing issued $750,000,10-year,10% bonds at 105. What is the issue price of these bonds?

Which of the following are generally recorded as liabilities on the balance sheet if the loss can be reasonably estimated?

Which of the following statements about a 10-year bond issued at a discount is not correct?

A one-year,$15,000,6% note is signed on April 1.If the note is repaid on September 1 of the same year,how much interest expense is incurred?

Liabilities are classified as current if they:

The Payroll records of Oregon Mist contained the following information for the month of November: The journal entry to record the monthly Payroll Tax Expense would include a:

The entry to record a bond retirement at maturity usually involves:

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

At the beginning of the year,Norwood Pass Industries had $240,000 in total assets and a debt-to-assets ratio of 0.5 or 50%.During the year,Norwood's assets increased by $80,000,and its liabilities increased by $72,000.What is the debt-to-assets ratio at the end of the year?

If the stated interest rate exceeds the market interest rate,a bond will sell at a premium.

Which one of the following accounts would not necessarily be classified as a current liability?

During one pay period,Star Valley Company distributes $234,900 to employees as net pay.The income tax withholdings were $34,200 and the FICA withholdings were $9,000.Total payroll costs to the company for this pay period,excluding any unemployment taxes,was:

An entertainment company received $6 million in cash for advance season ticket sales.Prior to the beginning of the season,these sales should be recorded as a liability.

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements.This feature is known as a:

If total assets decrease but total liabilities remain the same,what is the impact on the debt-to-assets ratio?

Which one of the following statements about amortization of discounts and premiums is not correct?

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

FICA payments consist of Social Security taxes and Medicare taxes.

Your company issues $50,000 of one-year,10% bonds at face value.The journal entry to record this transaction will include a debit to:

Maxwell Manufacturing issued $750,000,10-year,10% bonds at 105. What is the issue price of these bonds?

Which of the following are generally recorded as liabilities on the balance sheet if the loss can be reasonably estimated?

Which of the following statements about a 10-year bond issued at a discount is not correct?

A one-year,$15,000,6% note is signed on April 1.If the note is repaid on September 1 of the same year,how much interest expense is incurred?

Liabilities are classified as current if they:

The Payroll records of Oregon Mist contained the following information for the month of November: The journal entry to record the monthly Payroll Tax Expense would include a:

The entry to record a bond retirement at maturity usually involves:

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

At the beginning of the year,Norwood Pass Industries had $240,000 in total assets and a debt-to-assets ratio of 0.5 or 50%.During the year,Norwood's assets increased by $80,000,and its liabilities increased by $72,000.What is the debt-to-assets ratio at the end of the year?

If the stated interest rate exceeds the market interest rate,a bond will sell at a premium.

Which one of the following accounts would not necessarily be classified as a current liability?

During one pay period,Star Valley Company distributes $234,900 to employees as net pay.The income tax withholdings were $34,200 and the FICA withholdings were $9,000.Total payroll costs to the company for this pay period,excluding any unemployment taxes,was:

An entertainment company received $6 million in cash for advance season ticket sales.Prior to the beginning of the season,these sales should be recorded as a liability.

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements.This feature is known as a:

If total assets decrease but total liabilities remain the same,what is the impact on the debt-to-assets ratio?

Which one of the following statements about amortization of discounts and premiums is not correct?

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