Question 1

Current liabilities could include all of the following except:

Accepted Answer

A) an accounts payable due in 30 days. 
B) a notes payable due in 9 months. 
C) a bank loan due in 18 months. 
D) any part of long-term debt due during the current period. 
A) an accounts payable due in 30 days. 
B) a notes payable due in 9 months. 
C) a bank loan due in 18 months. 
D) any part of long-term debt due during the current period.

Question 2

A company pays $9,000 in interest on notes consisting of $6,000 of interest that was accrued during the last accounting period and $3,000 of interest that accumulated during the current accounting period but has not yet been accrued on the books.The journal entry for the interest payment should include a:

Accepted Answer

A) debit to Interest Expense for $9,000 and a credit to Cash for $9,000. 
B) debit to Cash for $9,000 and a credit to Interest Payable for $9,000. 
C) debit to Interest Expense for $3,000,a debit to Interest Payable for $6,000,and a credit to Cash for $9,000. 
D) debit to Interest Payable for $6,000,a debit to Accrued Interest for $3,000,and a credit to Cash for $9,000. 
A) debit to Interest Expense for $9,000 and a credit to Cash for $9,000. 
B) debit to Cash for $9,000 and a credit to Interest Payable for $9,000. 
C) debit to Interest Expense for $3,000,a debit to Interest Payable for $6,000,and a credit to Cash for $9,000. 
D) debit to Interest Payable for $6,000,a debit to Accrued Interest for $3,000,and a credit to Cash for $9,000.

Question 3

Hubbard Street Dance Company sells subscriptions for its monthly dance performances.The company received annual subscription payments on November 15,2018 for performances that will take place during 2019 in the amount of $120,000.The subscription payments will be earned equally throughout each month.
Required:
Part a.Describe how the subscription payments should be reported in the balance sheet and income statement on December 31,2018
Part b.Describe how the subscription payments should be reported in the balance sheet and income statement on January 31,2019.
Part c.Prepare the journal entry for the receipt of annual subscription payments on November 15,2018.
Part d.Prepare the required adjusting entry for the subscription payments on January 31,2019.

Accepted Answer

Part a
On December 31,2018,the $120,000

Question 4

Which of the following statements about bonds payable net of a discount or premium is not correct?

Accepted Answer

A) If a company records a discount or premium with the bonds payable in a single account called Bonds Payable,Net,it is using simplified effective-interest amortization. 
B) When bonds payable are accounted for net of a discount,the initial amount recorded in the Bonds Payable,Net account is the issue price of the bond. 
C) When simplified effective-interest amortization is used for bonds issued at a premium,the balance in the Bonds Payable,Net account will increase as the bond approaches the maturity date. 
D) If a company issued bonds at their face value,the balance of Bonds Payable,Net account will always be equal to the face value of the bonds as long as the bonds are outstanding. 
A) If a company records a discount or premium with the bonds payable in a single account called Bonds Payable,Net,it is using simplified effective-interest amortization. 
B) When bonds payable are accounted for net of a discount,the initial amount recorded in the Bonds Payable,Net account is the issue price of the bond. 
C) When simplified effective-interest amortization is used for bonds issued at a premium,the balance in the Bonds Payable,Net account will increase as the bond approaches the maturity date. 
D) If a company issued bonds at their face value,the balance of Bonds Payable,Net account will always be equal to the face value of the bonds as long as the bonds are outstanding.

Question 5

A company typically records the amount owed to suppliers for goods or services when:

Accepted Answer

A) they are ordered. 
B) a verbal commitment to purchase the goods or services has first been made. 
C) payment is made. 
D) the goods or services are received. 
A) they are ordered. 
B) a verbal commitment to purchase the goods or services has first been made. 
C) payment is made. 
D) the goods or services are received.

Question 6

Thomas Longbow is the only employee of Presido,Inc.During the first week of January,Longbow earned $1,600 and had federal and state income tax withholdings of $80 and $30,respectively.FICA taxes are 7.65% on earnings up to $127,200.State and federal unemployment taxes for the period are $100 and $16,respectively. What would be the amount of Longbow's payroll check for the first week of January?

Accepted Answer

A) $1,367.60 
B) $1,483.60 
C) $1,257.60 
D) $1,251.60 
A) $1,367.60 
B) $1,483.60 
C) $1,257.60 
D) $1,251.60

Question 7

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n):

Accepted Answer

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

Question 8

During the year,a $1,000,000 lawsuit was filed against a US company for unsafe working conditions.Management and the attorneys feel that it is not likely that the company will lose the case.The plaintiff who filed the lawsuit has offered to settle for $600,000.Management estimates that lawsuits for unsafe working conditions are generally settled for $300,000.What amount of contingent liability would be recorded for this lawsuit on the current balance sheet?

Accepted Answer

A) $100,000 
B) $600,000 
C) $300,000 
D) $0 
A) $100,000 
B) $600,000 
C) $300,000 
D) $0

Question 9

The following 6%,$1,000 notes were issued on November 1.Which of the following is the correct method of calculation for the interest accrued as of December 31 of the same year on each of the notes described?

Accepted Answer

A) Interest on a 4-month note is calculated as: $1,000 × 6% × 2 / 12. 
B) Interest on a 3-month note is calculated as: $1,000 × 6% × 2 / 3. 
C) Interest on a 4-month note is calculated as: $1,000 × 6% × 2 / 4. 
D) Interest on a 2-year note is calculated as: $1,000 × 6% × 2 / 24. 
A) Interest on a 4-month note is calculated as: $1,000 × 6% × 2 / 12. 
B) Interest on a 3-month note is calculated as: $1,000 × 6% × 2 / 3. 
C) Interest on a 4-month note is calculated as: $1,000 × 6% × 2 / 4. 
D) Interest on a 2-year note is calculated as: $1,000 × 6% × 2 / 24.

Question 10

On November 1,2018,Sky Mountain Co.borrowed $200,000 cash on a 1-year,6% note payable that requires Sky Mountain to pay both principal and interest on October 31,2019.Given no prior adjusting entries have been recorded,the adjusting journal entry on December 31,2018,Sky Mountain's year-end,would include a:

Accepted Answer

A) credit to Cash of $2,000. 
B) debit to Interest Expense of $12,000. 
C) credit to Interest Payable of $2,000. 
D) credit to Note Payable of $2,000. 
A) credit to Cash of $2,000. 
B) debit to Interest Expense of $12,000. 
C) credit to Interest Payable of $2,000. 
D) credit to Note Payable of $2,000.

Question 11

The stated rate is the rate used to determine the:

Accepted Answer

A) interest expense. 
B) face value. 
C) present value. 
D) interest payment. 
A) interest expense. 
B) face value. 
C) present value. 
D) interest payment.

Question 12

Current liabilities are due:

Accepted Answer

A) but not receivable for more than one year or the current operating cycle,whichever is longer. 
B) but not payable for more than one year or the current operating cycle,whichever is longer. 
C) and receivable within the current operating cycle or one year,whichever is longer. 
D) and payable within the current operating cycle or one year,whichever is longer. 
A) but not receivable for more than one year or the current operating cycle,whichever is longer. 
B) but not payable for more than one year or the current operating cycle,whichever is longer. 
C) and receivable within the current operating cycle or one year,whichever is longer. 
D) and payable within the current operating cycle or one year,whichever is longer.

Question 13

Which of the following statements about the issuance of bonds at a discount is not correct?

Accepted Answer

A) The contra liability account,Discount on Bonds Payable,is amortized each year by shifting part of its balance to interest expense. 
B) As the current date approaches the maturity date,the carrying value of the bond approaches the face value of the bond. 
C) At the date of issuance,the market interest rate was higher than the stated interest rate. 
D) The account used to record the discount is a normal credit balance account. 
A) The contra liability account,Discount on Bonds Payable,is amortized each year by shifting part of its balance to interest expense. 
B) As the current date approaches the maturity date,the carrying value of the bond approaches the face value of the bond. 
C) At the date of issuance,the market interest rate was higher than the stated interest rate. 
D) The account used to record the discount is a normal credit balance account.

Question 14

When the amount of a contingent liability can be reasonably estimated and its likelihood is possible but not probable,the company should:

Accepted Answer

A) include a description in the notes to the financial statements. 
B) record the amount of the liability times the probability of its occurrence. 
C) accrue the amount of the liability as a long-term liability. 
D) exclude any information about the contingent liability from its financial statements and notes. 
A) include a description in the notes to the financial statements. 
B) record the amount of the liability times the probability of its occurrence. 
C) accrue the amount of the liability as a long-term liability. 
D) exclude any information about the contingent liability from its financial statements and notes.

Question 15

If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets ratio of 0.45,which of the following statements is correct?

Accepted Answer

A) Stockholders own a smaller proportion of Company A than Company B. 
B) Company A must make less profit than Company B. 
C) Creditors own a smaller proportion of Company A than Company B. 
D) Company A must have fewer assets than Company B. 
A) Stockholders own a smaller proportion of Company A than Company B. 
B) Company A must make less profit than Company B. 
C) Creditors own a smaller proportion of Company A than Company B. 
D) Company A must have fewer assets than Company B.

Question 16

For the employee,net pay is equal to gross earnings minus:

Accepted Answer

A) only Federal income tax withholdings. 
B) payroll deductions. 
C) only Social Security withholdings. 
D) only medical insurance premiums. 
A) only Federal income tax withholdings. 
B) payroll deductions. 
C) only Social Security withholdings. 
D) only medical insurance premiums.

Question 17

Match each term with the appropriate definition.Not all definitions will be used.
-Maturity

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 18

A company issues a 5-year bond with a $7,500 discount.Using straight-line amortization,the company should:

Accepted Answer

A) debit Discount on Bonds Payable for $1,500 per year. 
B) credit Discount on Bonds Payable for $1,500 per year. 
C) debit Interest Payable for $1,500 per year. 
D) credit Interest Expense for $1,500 per year. 
A) debit Discount on Bonds Payable for $1,500 per year. 
B) credit Discount on Bonds Payable for $1,500 per year. 
C) debit Interest Payable for $1,500 per year. 
D) credit Interest Expense for $1,500 per year.

Question 19

Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1.Brickyard signs a $200,000,4%,9-month note.Interest is due at maturity on September 30.The company's fiscal year ends June 30 and adjusting entries are recorded at that time only. On January 1,which of the following journal entries will be made by Brickyard to record the issuance of the note?

Accepted Answer

A) Debit Interest Expense for $6,000,debit Cash $194,000,and credit Notes Payable for $200,000. 
B) Debit Cash and credit Notes Payable for $200,000. 
C) Debit Cash for $200,000,debit Interest Expense for $6,000,and credit Notes Payable for $206,000. 
D) Debit Cash for $200,000,debit Interest Expense for $6,000,credit Notes Payable for $200,000,and credit Interest Payable for $6,000. 
A) Debit Interest Expense for $6,000,debit Cash $194,000,and credit Notes Payable for $200,000. 
B) Debit Cash and credit Notes Payable for $200,000. 
C) Debit Cash for $200,000,debit Interest Expense for $6,000,and credit Notes Payable for $206,000. 
D) Debit Cash for $200,000,debit Interest Expense for $6,000,credit Notes Payable for $200,000,and credit Interest Payable for $6,000.

Question 20

In 2008,Morena Manufacturing issued $180,000 of 20-year bonds at face value.Ten years later,in 2018,the company retired the bonds early by purchasing them in the open market at $181,800.The entry to record this transaction includes a:

Accepted Answer

A) credit to Gain on Bond Retirement of $1,800. 
B) debit to Loss on Bond Retirement of $1,800. 
C) debit to Bonds Payable of $181,800. 
D) credit to Cash of $180,000. 
A) credit to Gain on Bond Retirement of $1,800. 
B) debit to Loss on Bond Retirement of $1,800. 
C) debit to Bonds Payable of $181,800. 
D) credit to Cash of $180,000.

Current liabilities could include all of the following except:

Which of the following statements about bonds payable net of a discount or premium is not correct?

A company typically records the amount owed to suppliers for goods or services when:

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n):

The following 6%,$1,000 notes were issued on November 1.Which of the following is the correct method of calculation for the interest accrued as of December 31 of the same year on each of the notes described?

The stated rate is the rate used to determine the:

Current liabilities are due:

Which of the following statements about the issuance of bonds at a discount is not correct?

When the amount of a contingent liability can be reasonably estimated and its likelihood is possible but not probable,the company should:

If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets ratio of 0.45,which of the following statements is correct?

For the employee,net pay is equal to gross earnings minus:

Match each term with the appropriate definition.Not all definitions will be used. -Maturity

A company issues a 5-year bond with a $7,500 discount.Using straight-line amortization,the company should:

In 2008,Morena Manufacturing issued $180,000 of 20-year bonds at face value.Ten years later,in 2018,the company retired the bonds early by purchasing them in the open market at $181,800.The entry to record this transaction includes a:

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

Current liabilities could include all of the following except:

Which of the following statements about bonds payable net of a discount or premium is not correct?

A company typically records the amount owed to suppliers for goods or services when:

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n):

The following 6%,$1,000 notes were issued on November 1.Which of the following is the correct method of calculation for the interest accrued as of December 31 of the same year on each of the notes described?

The stated rate is the rate used to determine the:

Current liabilities are due:

Which of the following statements about the issuance of bonds at a discount is not correct?

When the amount of a contingent liability can be reasonably estimated and its likelihood is possible but not probable,the company should:

If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets ratio of 0.45,which of the following statements is correct?

For the employee,net pay is equal to gross earnings minus:

Match each term with the appropriate definition.Not all definitions will be used. -Maturity

A company issues a 5-year bond with a $7,500 discount.Using straight-line amortization,the company should:

In 2008,Morena Manufacturing issued $180,000 of 20-year bonds at face value.Ten years later,in 2018,the company retired the bonds early by purchasing them in the open market at $181,800.The entry to record this transaction includes a:

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