Question 1

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-Which of the following statements is FALSE?

Accepted Answer

A)  A liability is an item that involves a future transfer of resources. 
B)  A liability is an item that is measurable in monetary terms. 
C)  A liability is an item that represents an obligation of an enterprise. 
D)  A liability is an item that must be paid in cash. 
A)  A liability is an item that involves a future transfer of resources. 
B)  A liability is an item that is measurable in monetary terms. 
C)  A liability is an item that represents an obligation of an enterprise. 
D)  A liability is an item that must be paid in cash.

Question 2

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-If a gain occurs on the early retirement of bonds, it is

Accepted Answer

A)  Not reported in the financial statements 
B)  Reported on the income statement 
C)  Only reported in the notes to the financial statements 
D)  Reported on the balance sheet 
A)  Not reported in the financial statements 
B)  Reported on the income statement 
C)  Only reported in the notes to the financial statements 
D)  Reported on the balance sheet

Question 3

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-On January 1, Cromwell Corp. leased a mainframe computer from Fairview Company for $42,000 per year (payable on each December 31) for 10 years. The lease is a capital lease, and the current market rate of interest is 12 percent. The market value of the computer is $237,300, which is equal to its discounted present value at 12 percent. Given this data, the amount of the lease obligation at the end of the first year is

Accepted Answer

A)  $237,300 
B)  $420,000 
C)  $208,824 
D)  $223,776 
A)  $237,300 
B)  $420,000 
C)  $208,824 
D)  $223,776

Question 4

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Assuming an annual interest rate of 10 percent, what factor from the tables would be used to calculate the present value of a specified payment to be received nine years from today?

Accepted Answer

A)  0.4241 
B)  0.4224 
C)  2.3579 
D)  2.3674 
A)  0.4241 
B)  0.4224 
C)  2.3579 
D)  2.3674

Question 5

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-A bond retired before maturity usually involves a

Accepted Answer

A)  Debit to Gain on Retirement of Bond 
B)  Credit to Bond Interest Expense 
C)  Debit to Cash 
D)  Debit to Bonds Payable 
A)  Debit to Gain on Retirement of Bond 
B)  Credit to Bond Interest Expense 
C)  Debit to Cash 
D)  Debit to Bonds Payable

Question 6

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Assuming an annual interest rate of 8 percent, what factor from the tables would be used to calculate the amount that should be deposited in a bank today to grow to a specified amount nine years from today?

Accepted Answer

A)  0.5002 
B)  0.5019 
C)  1.9926 
D)  1.9990 
A)  0.5002 
B)  0.5019 
C)  1.9926 
D)  1.9990

Question 7

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- If equipment is purchased by issuing a 10-year, $200,000 interest bearing note at a stated rate of 8 percent (payable annually), the first interest payment, assuming it has not been previously accrued, would be entered in the accounting records by

Accepted Answer

A)  Crediting interest expense for $16,000 
B)  Debiting notes payable for $16,000 
C)  Debiting cash for $16,000 
D)  Debiting interest expense for $16,000 
A)  Crediting interest expense for $16,000 
B)  Debiting notes payable for $16,000 
C)  Debiting cash for $16,000 
D)  Debiting interest expense for $16,000

Question 8

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-On January 1, 2012, Santos Hospital issued a $250,000, 10 percent, 5-year bond for $231,601. Interest is payable on June 30 and December 31. Santos uses the effective-interest method to amortize all premiums and discounts. Assuming an effective interest rate of 12 percent, approximately how much discount will be amortized on December 31, 2012?

Accepted Answer

A)  $2,230 
B)  $1,480 
C)  $1,396 
D)  $987 
A)  $2,230 
B)  $1,480 
C)  $1,396 
D)  $987

Question 9

On March 1, 2012, Lloyd Corporation sold $400,000 of 12 percent, 5-year bonds at a yield of 10 percent compounded semiannually. Interest is payable on March 1 and September 1 of each year. The corporation is a calendar-year corporation. Bond premiums and discounts are amortized on interest-paying dates and at year-end.
Prepare the journal entries that are appropriate to account for these bonds on the following dates (Round amounts to the nearest dollar.): March 1, 2012; September 1, 2012; and December 31, 2012. Use the effective-interest method of amortization.

Accepted Answer

The answer of On March 1, 2012, Lloyd Corporation sold...

Question 10

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Assuming an interest rate of 12 percent, an ordinary annuity of eight annual $30,000 payments will grow to

Accepted Answer

A)  $74,279 
B)  $149,029 
C)  $368,991 
D)  $569,314 
A)  $74,279 
B)  $149,029 
C)  $368,991 
D)  $569,314

Question 11

On January 1, 2011, Geary Corporation leased equipment under a capital lease. The lease agreement specified payments of $37,000 per year (payable each year on December 31, starting at the end of 2011) for 8 years. The market rate of interest for lease transactions of this type is 8 percent compounded annually.

Accepted Answer

The answer of On January 1, 2011, Geary Corporation leased...

Question 12

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- The present value of $2,500 to be received in 4 years when interest is 12 percent compounded quarterly is computed by discounting at

Accepted Answer

A)  12 percent for 4 periods 
B)  6 percent for 8 periods 
C)  4 percent for 12 periods 
D)  3 percent for 16 periods 
A)  12 percent for 4 periods 
B)  6 percent for 8 periods 
C)  4 percent for 12 periods 
D)  3 percent for 16 periods

Question 13

Shidler Corporation reported the following data in its financial statements for 2011:
  
Compute the following:

Accepted Answer

Compute th

Question 14

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-A bond discount is reported on the financial statements in the

Accepted Answer

A)  Liabilities section of the balance sheet 
B)  Expenses section of the income statement 
C)  Asset section of the balance sheet 
D)  Revenues section of the income statement 
A)  Liabilities section of the balance sheet 
B)  Expenses section of the income statement 
C)  Asset section of the balance sheet 
D)  Revenues section of the income statement

Question 15

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-When do bonds usually sell at a premium?

Accepted Answer

A)  When the market rate of interest is greater than the stated rate of interest on the bonds 
B)  When the stated rate of interest on the bonds is greater than the market rate of interest 
C)  When the price of the bonds is less than their maturity value 
D)  When the market rate of interest is equal to the stated rate of interest on the bonds 
A)  When the market rate of interest is greater than the stated rate of interest on the bonds 
B)  When the stated rate of interest on the bonds is greater than the market rate of interest 
C)  When the price of the bonds is less than their maturity value 
D)  When the market rate of interest is equal to the stated rate of interest on the bonds

Question 16

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-Callable bonds

Accepted Answer

A)  Can be redeemed by the issuer at any time at a specified price 
B)  Can be converted to stock 
C)  Mature in a series of payments 
D)  Mature in one single sum on a specified future date 
A)  Can be redeemed by the issuer at any time at a specified price 
B)  Can be converted to stock 
C)  Mature in a series of payments 
D)  Mature in one single sum on a specified future date

Question 17

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-A 4-month, $6,500 note payable at 9 percent incurs interest (rounded to nearest dollar) of

Accepted Answer

A)  $195 
B)  $146 
C)  $292 
D)  $585 
A)  $195 
B)  $146 
C)  $292 
D)  $585

Question 18

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Interest expense on a 6-month, 8 percent, $6,000 note payable would be approximately

Accepted Answer

A)  $360 
B)  $120 
C)  $480 
D)  $240 
A)  $360 
B)  $120 
C)  $480 
D)  $240

Question 19

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-Which of the following is prepared to identify how much of each mortgage payment is interest and how much is principle reduction?

Accepted Answer

A)  Mortgage depreciation schedule 
B)  Mortgage amortization schedule 
C)  Mortgage depletion schedule 
D)  Mortgage reduction schedule 
A)  Mortgage depreciation schedule 
B)  Mortgage amortization schedule 
C)  Mortgage depletion schedule 
D)  Mortgage reduction schedule

Question 20

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-On January 1, 2012, $50,000 of 20-year, 6 percent debentures were issued for $56,275.20. Interest payment dates on the bonds are January 1 and July 1. When using the straight-line method, the amount of premium to be amortized on July 1, 2012 is

Accepted Answer

A)  $313.76 
B)  $156.88 
C)  $776.50 
D)  $93.11 
A)  $313.76 
B)  $156.88 
C)  $776.50 
D)  $93.11

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Which of the following statements is FALSE?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -If a gain occurs on the early retirement of bonds, it is

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - Assuming an annual interest rate of 10 percent, what factor from the tables would be used to calculate the present value of a specified payment to be received nine years from today?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -A bond retired before maturity usually involves a

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - Assuming an interest rate of 12 percent, an ordinary annuity of eight annual $30,000 payments will grow to

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - The present value of $2,500 to be received in 4 years when interest is 12 percent compounded quarterly is computed by discounting at

Shidler Corporation reported the following data in its financial statements for 2011: Compute the following:

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -A bond discount is reported on the financial statements in the

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -When do bonds usually sell at a premium?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Callable bonds

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -A 4-month, $6,500 note payable at 9 percent incurs interest (rounded to nearest dollar) of

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - Interest expense on a 6-month, 8 percent, $6,000 note payable would be approximately

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Which of the following is prepared to identify how much of each mortgage payment is interest and how much is principle reduction?

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

Filters

Exam 10: Financing: Long-Term Liabilities