Question 1

Which of the following statements about bonds and notes is not correct?

Accepted Answer

A) A company can borrow the funds necessary to finance its activities using bonds or promissory notes. 
B) Borrowings using bonds or notes are initially recorded with a journal entry that debits Cash and credits the relevant liability account. 
C) The journal entry that records interest owed on bonds and notes includes a debit to Interest Expense and a credit to Interest Payable. 
D) Bonds Payable and Notes Payable are always classified as noncurrent liability accounts. 
A) A company can borrow the funds necessary to finance its activities using bonds or promissory notes. 
B) Borrowings using bonds or notes are initially recorded with a journal entry that debits Cash and credits the relevant liability account. 
C) The journal entry that records interest owed on bonds and notes includes a debit to Interest Expense and a credit to Interest Payable. 
D) Bonds Payable and Notes Payable are always classified as noncurrent liability accounts.

Question 2

The journal entry to record employer payroll taxes affects:

Accepted Answer

A) assets only. 
B) liabilities only. 
C) liabilities and stockholders' equity. 
D) assets and liabilities. 
A) assets only. 
B) liabilities only. 
C) liabilities and stockholders' equity. 
D) assets and liabilities.

Question 3

When interest is accrued on a note payable,but not paid,the

Accepted Answer

A) Interest Expense account is increased;the Interest Payable account is increased. 
B) Interest Expense account is decreased;the Interest Payable account is increased. 
C) Notes Payable account is increased;the Interest Payable account is increased. 
D) Interest Expense account is increased;the Interest Payable account is decreased. 
A) Interest Expense account is increased;the Interest Payable account is increased. 
B) Interest Expense account is decreased;the Interest Payable account is increased. 
C) Notes Payable account is increased;the Interest Payable account is increased. 
D) Interest Expense account is increased;the Interest Payable account is decreased.

Question 4

The issue price of a bond is:

Accepted Answer

A) always equal to $1,000. 
B) based on a present value calculation. 
C) determined by the company issuing the bonds. 
D) determined by the financial advisers. 
A) always equal to $1,000. 
B) based on a present value calculation. 
C) determined by the company issuing the bonds. 
D) determined by the financial advisers.

Question 5

Which of the following would not be considered a contingent liability?

Accepted Answer

A) Products sold with a warranty 
B) Pending lawsuits 
C) Frequent flyer miles earned by passengers 
D) Cash received from advance ticket sales 
A) Products sold with a warranty 
B) Pending lawsuits 
C) Frequent flyer miles earned by passengers 
D) Cash received from advance ticket sales

Question 6

Bonds that are backed with a pledge of the company's assets are called:

Accepted Answer

A) debenture bonds. 
B) convertible bonds. 
C) secured bonds. 
D) registered bonds. 
A) debenture bonds. 
B) convertible bonds. 
C) secured bonds. 
D) registered bonds.

Question 7

The effective-interest method of amortization is considered a conceptually superior method of accounting for bonds.

Accepted Answer

A) True 
 B)False

Question 8

A 6-month note is issued on October 1.If no previous accruals have been made,how many months of interest should be accrued at December 31?

Accepted Answer

A) Six 
B) Three 
C) Four 
D) Two 
A) Six 
B) Three 
C) Four 
D) Two

Question 9

The premium on a bond is ________ and ________ each period.

Accepted Answer

A) depreciated;increases 
B) expensed;increases 
C) increased;credited 
D) amortized;decreases 
A) depreciated;increases 
B) expensed;increases 
C) increased;credited 
D) amortized;decreases

Question 10

A company has bonds outstanding with a face value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the journal entry to record this retirement includes a debit to:

Accepted Answer

A) Bonds Payable for $100,000,a debit to Premium on Bonds Payable for $2,700,a credit to Cash for $99,000,and a credit to Gain on Bond Retirement for $3,700. 
B) Bonds Payable for $100,000,a debit to Loss on Bond Retirement for $1,700,a credit to Cash for $99,000,and a credit to Premium on Bonds Payable for $2,700. 
C) Bonds Payable for $100,000,credit to Cash for $99,000,and a credit to Gain on Bond Retirement for $1,000. 
D) Bonds Payable for $100,000,a debit to Loss on Bond Retirement for $1,673,and a credit to Cash for $101,673. 
A) Bonds Payable for $100,000,a debit to Premium on Bonds Payable for $2,700,a credit to Cash for $99,000,and a credit to Gain on Bond Retirement for $3,700. 
B) Bonds Payable for $100,000,a debit to Loss on Bond Retirement for $1,700,a credit to Cash for $99,000,and a credit to Premium on Bonds Payable for $2,700. 
C) Bonds Payable for $100,000,credit to Cash for $99,000,and a credit to Gain on Bond Retirement for $1,000. 
D) Bonds Payable for $100,000,a debit to Loss on Bond Retirement for $1,673,and a credit to Cash for $101,673.

Question 11

Sun Ridge,Inc.reported the following information in its accounting records on December 31,2018:
$\begin{array}{lr}
\text { Gross salaries earned by employees (December 29-31) } & \$ 12,960 \
\text { Income taxes withheld from employees (December 29-31) } & 1,980 \
\text { FICA taxes withheld from employees (December 29-31) } & \underline{756} \
\text { Net payment to employees (made on December 31) } & \$ 10,224
\end{array}$
The employees were paid $10,224 on December 31,2018,but the withholdings have not yet been remitted nor have the matching employer FICA contributions.
Required:
Part a.Compute the total payroll costs relating to the period from December 29-31.(Assume $1,008 in total unemployment taxes. )
Part b.Provide the journal entries on December 31 to adjust for salaries and wages relating to December 29-31,2018.
Part c.Provide the journal entries on December 31 to adjust for payroll taxes relating to December 29-31,2018.

Accepted Answer

Part a
@#IMG-DLM&
Pa

Question 12

Sales tax collected by a company is normally reported as:

Accepted Answer

A) a current liability. 
B) income tax expense. 
C) an asset. 
D) an operating expense. 
A) a current liability. 
B) income tax expense. 
C) an asset. 
D) an operating expense.

Question 13

On October 1,2018,Highview Company borrows $360,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30.On December 31,2018,the adjusting entry to accrue interest on the note should debit:

Accepted Answer

A) Interest Expense and credit Interest Payable for $5,400. 
B) Interest Payable and credit Interest Expense for $5,400. 
C) Interest Expense and credit Cash for $10,800. 
D) Interest Expense and credit Interest Payable for $10,800. 
A) Interest Expense and credit Interest Payable for $5,400. 
B) Interest Payable and credit Interest Expense for $5,400. 
C) Interest Expense and credit Cash for $10,800. 
D) Interest Expense and credit Interest Payable for $10,800.

Question 14

Your company sells $50,000 of bonds for an issue price of $52,000.Which of the following statements is correct?

Accepted Answer

A) The bond sold at a price of 52,implying a premium of $2,000. 
B) The bond sold at a price of 104,implying a discount of $2,000. 
C) The bond sold at a price of 52,implying a discount of $2,000. 
D) The bond sold at a price of 104,implying a premium of $2,000. 
A) The bond sold at a price of 52,implying a premium of $2,000. 
B) The bond sold at a price of 104,implying a discount of $2,000. 
C) The bond sold at a price of 52,implying a discount of $2,000. 
D) The bond sold at a price of 104,implying a premium of $2,000.

Question 15

Oasis Company received $391,800 for bonds having a total face value of $400,000. What journal entry would be made to record this bond issuance?

Accepted Answer

A) Debit Cash for $391,800,debit Discount on Bonds Payable for $8,200,and credit Bonds Payable for $400,000 
B) Debit Cash for $400,000,credit Discount on Bonds Payable for $8,200,and credit Bonds Payable for $391,800 
C) Debit Cash for $400,000 and credit Bonds Payable for $400,000 
D) Debit Cash for $400,000,credit Bonds Payable for $391,800,and credit Interest Payable for $8,200 
A) Debit Cash for $391,800,debit Discount on Bonds Payable for $8,200,and credit Bonds Payable for $400,000 
B) Debit Cash for $400,000,credit Discount on Bonds Payable for $8,200,and credit Bonds Payable for $391,800 
C) Debit Cash for $400,000 and credit Bonds Payable for $400,000 
D) Debit Cash for $400,000,credit Bonds Payable for $391,800,and credit Interest Payable for $8,200

Question 16

Your company issues $500,000 in bonds at a price of 98.The journal entry used to record the issuance will include a debit to:

Accepted Answer

A) Cash for $490,000,a debit to Discount on Bonds Payable for $10,000,and a credit to Bonds Payable for $500,000. 
B) Cash for $490,000,a credit to Discount on Bonds Payable for $10,000,and a credit to Bonds Payable for $500,000. 
C) Bonds Payable for $500,000,a credit to Discount on Bonds Payable for $10,000,and a credit to Cash for $490,000. 
D) Bonds Payable for $490,000,a debit to Discount on Bonds Payable for $10,000,and a credit to Cash for $500,000. 
A) Cash for $490,000,a debit to Discount on Bonds Payable for $10,000,and a credit to Bonds Payable for $500,000. 
B) Cash for $490,000,a credit to Discount on Bonds Payable for $10,000,and a credit to Bonds Payable for $500,000. 
C) Bonds Payable for $500,000,a credit to Discount on Bonds Payable for $10,000,and a credit to Cash for $490,000. 
D) Bonds Payable for $490,000,a debit to Discount on Bonds Payable for $10,000,and a credit to Cash for $500,000.

Question 17

The principal of a loan does not include any interest charges.

Accepted Answer

A) True 
 B)False

Question 18

Worthington Co.issues $500,000 of 5-year,6% bonds on January 1,2018.
Required:
Prepare the journal entry to record the issuance of the bonds under each of the following assumptions:
Part a.The bonds are sold at 100.
Part b.The bonds are sold at 102.
Part c.The bonds are sold at 96.

Accepted Answer

Part a
 @#IMG-DLM&

Question 19

On January 1,2018,a company issues 3-year bonds with a face value of $560,000 and a stated interest rate of 8%.Because the market interest rate is higher than the stated interest rate,the company receives $543,200 for the bond.
Required:
Part a.Determine the amount of the discount 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
Discount on bonds payab

Question 20

When preparing the balance sheet for Papago Co.for December 31,2018,which item would not be classified as a current liability?

Accepted Answer

A) Note payable due March 1,2020 
B) Accounts payable 
C) Income taxes due on September 15,2019 
D) The current portion of a 30-year mortgage 
A) Note payable due March 1,2020 
B) Accounts payable 
C) Income taxes due on September 15,2019 
D) The current portion of a 30-year mortgage

Which of the following statements about bonds and notes is not correct?

The journal entry to record employer payroll taxes affects:

When interest is accrued on a note payable,but not paid,the

The issue price of a bond is:

Which of the following would not be considered a contingent liability?

Bonds that are backed with a pledge of the company's assets are called:

The effective-interest method of amortization is considered a conceptually superior method of accounting for bonds.

A 6-month note is issued on October 1.If no previous accruals have been made,how many months of interest should be accrued at December 31?

The premium on a bond is and each period.

A company has bonds outstanding with a face value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the journal entry to record this retirement includes a debit to:

Sales tax collected by a company is normally reported as:

On October 1,2018,Highview Company borrows $360,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30.On December 31,2018,the adjusting entry to accrue interest on the note should debit:

Your company sells $50,000 of bonds for an issue price of $52,000.Which of the following statements is correct?

Oasis Company received $391,800 for bonds having a total face value of $400,000. What journal entry would be made to record this bond issuance?

Your company issues $500,000 in bonds at a price of 98.The journal entry used to record the issuance will include a debit to:

The principal of a loan does not include any interest charges.

Worthington Co.issues $500,000 of 5-year,6% bonds on January 1,2018. Required: Prepare the journal entry to record the issuance of the bonds under each of the following assumptions: Part a.The bonds are sold at 100. Part b.The bonds are sold at 102. Part c.The bonds are sold at 96.

When preparing the balance sheet for Papago Co.for December 31,2018,which item would not be classified as a current liability?

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

Which of the following statements about bonds and notes is not correct?

The journal entry to record employer payroll taxes affects:

When interest is accrued on a note payable,but not paid,the

The issue price of a bond is:

Which of the following would not be considered a contingent liability?

Bonds that are backed with a pledge of the company's assets are called:

The effective-interest method of amortization is considered a conceptually superior method of accounting for bonds.

A 6-month note is issued on October 1.If no previous accruals have been made,how many months of interest should be accrued at December 31?

The premium on a bond is ________ and ________ each period.

A company has bonds outstanding with a face value of $100,000.The unamortized premium on these bonds is $2,700.If the company retired these bonds at a call price of 99,the journal entry to record this retirement includes a debit to:

Sales tax collected by a company is normally reported as:

On October 1,2018,Highview Company borrows $360,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30.On December 31,2018,the adjusting entry to accrue interest on the note should debit:

Your company sells $50,000 of bonds for an issue price of $52,000.Which of the following statements is correct?

Oasis Company received $391,800 for bonds having a total face value of $400,000. What journal entry would be made to record this bond issuance?

Your company issues $500,000 in bonds at a price of 98.The journal entry used to record the issuance will include a debit to:

The principal of a loan does not include any interest charges.

Worthington Co.issues $500,000 of 5-year,6% bonds on January 1,2018. Required: Prepare the journal entry to record the issuance of the bonds under each of the following assumptions: Part a.The bonds are sold at 100. Part b.The bonds are sold at 102. Part c.The bonds are sold at 96.

When preparing the balance sheet for Papago Co.for December 31,2018,which item would not be classified as a current liability?

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

The premium on a bond is and each period.